Mustang Parts
   Carrying Saleen wheels and Bullitt wheels.

Wednesday, May 11, 2005

Price Gouging

Some shoppers get upset when a dealer adds a "market adjustment" to the MSRP of a hot new car, such as the Toyota Prius or Ford GT. I don't see a problem with it--it isn't "gouging", it is basic economics. The price of something will go up as long as someone is willing to pay more, until demand recedes and balances against the supply of the product, or the amount of product increases and balances the demand. Early adopters pay handsomely for the chance.

Here is an interesting web page, put up to explain the pricing environment for the Ford GT: Currently, dealers are marking up the sticker price by as much as $45,000. However, the web page believes that the prices will fall at a rate of about $25,000/quarter, based on the first 244 cars sold, and that the prices will decay until they are nearly at MSRP. (I'm bummed that this is, for me, an academic topic!)

For the Prius example, this article states that 7% of Prius buyers paid more than MSRP, and 68% paid no more than MSRP. That tells me that 68% of Prius buyers are firmly committed environmentalists, and 7% of them are greenie wingnuts. But comfortably middle class ones.


Dublin Saab said...

Thanks for the link to the 40mpg site. I always enjoy a good laugh.

Ray said...

"Skimming" is a well known marketing technique used to maximize seller profit as prices are adjusted down to bring in each incremental group of customers desiring a unique, new or high demand item.

Stop and think of it for a while. Do you really need that pile of scrap iron that bad? By next year or even next month, there will be something equally "hot". Could it be that human beings just enjoy competing against each other in almost everything they do on this planet?