Dealer Markups Are Hurting Brand and Dealership Loyalty

Photo: Spencer Platt (Getty Images)

Brand and dealership loyalty is continuing its steady decline, and it’s all because of high vehicle prices. Research done by Growth from Knowledge AutoMobility confirms this trend. It turns out asking people to pay above retail price for a Toyota RAV4 could hurt repeat customers. Who knew?

Automotive News reports that in May and June, 80 percent of car buyers paid at or above sticker for a new vehicle. 31 percent of those buyers said they would tell others not to go to the dealership they used. 27 percent of the buyers said they would not return to the dealership for service.

Julie Kenar, senior vice president at GfK AutoMobility, gave a bit of a warning to dealers who are charging customers well over MSRP. While it might be more than beneficial in the short term – it could damage their reputation and affect sales for the long term.

“I think what dealerships need to do is realize that they’re forgoing a long-term relationship with customers when they charge over the MSRP. Consumers can tell which dealers are in it for the long term versus the short term,” Kenar said. “I really think that it’s incumbent upon the dealers to take that long-term view as opposed to just taking their money and likely never seeing them again.”

It’s the same issue when it comes to automotive brand loyalty. 27 percent of respondents said that they would not buy from the same brand if they were charged more than sticker price. A further 23 percent said it negatively impacted their brand opinion in its entirety.

“It’s not that brands aren’t doing anything; a lot of brands have communicated with their dealers that ‘You’re potentially damaging the equity that you’ve built up in your dealership and we’ve built up in our brand,” Kenar said. “But from a legal perspective, there’s not a whole lot that brands can do. We’re hoping that with releasing this research, this will provide brands and dealers with some data points to say that this is not anecdotal.”

Kenar doesn’t believe that the risk is worth the reward for dealerships who are charging well over MSRP.

So, will any of these dealerships stop charging over MSRP because their brand doesn’t like it? Probably not, but hey it’s worth a shot.