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Old 10-06-2008, 11:42 AM   #1
XDCX
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Default The return of Two-Tier Pricing?

I think the main reason Chrysler's VPA program will go down in history as one of the most hated Dealer Incentives ever is because it created two-tier pricing in most metro markets.

At any given time you could bet that there would be one or two dealers in a marketplace that had easy VPA objectives allowing them to have pricing power over the other dealerships. Eventually the VPA objectives caught up and their sales dropped back to normal levels.

Well, it looks like it's happening again.

With Chrysler's recently announced Retail/Wholesale program if you step up and order extra inventory you'll have a pricing advantage in your market. If you don't step up, your customers will be able to go across town and essentially buy their new car for less money than you could buy it from the Factory.

Is Chrysler's current program just a short-term incentive or is this going to be the new way of doing business?
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Old 10-06-2008, 05:26 PM   #2
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The side effect is increased flooring expense. I'm not sure it would be worth it.
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Old 10-07-2008, 06:54 AM   #3
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Not worth it at our store. Our sales objectives for the fourth quarter are 9/9/10 and our allocation for Nov. Dec. which we MUST order to compete at the highest level of VPA Payout is 17+17 total 34 units. 34 units of which 15 are vehicles that do NOT sale in our market.
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Old 10-07-2008, 09:14 AM   #4
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Not worth it at our store. Our sales objectives for the fourth quarter are 9/9/10 and our allocation for Nov. Dec. which we MUST order to compete at the highest level of VPA Payout is 17+17 total 34 units. 34 units of which 15 are vehicles that do NOT sale in our market.
I think that's the exact same calculation that every other Chrysler Dealer in the nation has been doing this week. "If I take this extra inventory can I earn enough in extra incentives to offset my added flooring expense."

It will be very interesting to see what the "take rate" is for this program.

I'll send a FAX out to the Chrysler Dealers this afternoon and see if I can get some addtional feedback.
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Old 10-08-2008, 01:02 PM   #5
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chrysler is going to kill their dealers with 1. the new awful floorplan program. 2. new vpa type two-tier pricing 3. not buying paper on their own autos unless buyer is gold . 4. lack of new product. I think the final straw is when an 2009 unit is a year old and the dealer has to payoff 50% of invoice. I am a B level dealer and i checked the other day to see what i would pay on my inventory if the program was in now and i would to take $137500.00 out of working capital just for this month.
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Old 10-09-2008, 10:47 AM   #6
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chrysler is going to kill their dealers with 1. the new awful floorplan program. 2. new vpa type two-tier pricing 3. not buying paper on their own autos unless buyer is gold . 4. lack of new product. I think the final straw is when an 2009 unit is a year old and the dealer has to payoff 50% of invoice. I am a B level dealer and i checked the other day to see what i would pay on my inventory if the program was in now and i would to take $137500.00 out of working capital just for this month.
s32741b - Excellent post - Welcome to DealershipForum.com

I share your concern - unless Chrysler Finance makes some concessions I think a number of dealers will be forced out of business once they have to start paying down aged units in January.

Using your example, how many struggling stores could just write a check for $137,500 to pay down aged units? What's worse is that given the tight credit markets it's not likely that a dealer would be able to get a Capital Loan to bolster his cash position.

There's a large dealer on the West Coast that stepped-up and ordered 80 Dodge Sprinters and based on what I can see I don't think they're selling. How would you like to be the dealer that has to payoff 10% of that bill every month once those vehicles become a year old?

It will be very interesting to see what the "take rate" is on Chrysler's Push/Pull incentive - I'm guessing that a number of dealers will just opt-out.
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Old 10-11-2008, 11:24 AM   #7
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Originally Posted by s32741b View Post
chrysler is going to kill their dealers with 1. the new awful floorplan program. 2. new vpa type two-tier pricing 3. not buying paper on their own autos unless buyer is gold . 4. lack of new product. I think the final straw is when an 2009 unit is a year old and the dealer has to payoff 50% of invoice. I am a B level dealer and i checked the other day to see what i would pay on my inventory if the program was in now and i would to take $137500.00 out of working capital just for this month.
spot on, this is the "perfect storm" if you will pardon the pun...
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Old 10-11-2008, 04:35 PM   #8
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spot on, this is the "perfect storm" if you will pardon the pun...
If the market does not return in the next couple of months I could see a number of dealers getting taken out when it comes time to start paying off aged units in January.
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Old 10-14-2008, 05:45 AM   #9
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The clock starts ticking on a new car when it is floored, so you just need a buddy to do a floor plan swap with. then the clock restarts. floor plan swap it back the next week and the clock is reset. he does his that way and both dealers wont have to pay any off.
you would never even have to move the cars.
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Old 10-14-2008, 08:46 AM   #10
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The clock starts ticking on a new car when it is floored, so you just need a buddy to do a floor plan swap with. then the clock restarts. floor plan swap it back the next week and the clock is reset. he does his that way and both dealers wont have to pay any off.
you would never even have to move the cars.
Wow, I didn't know that - that's an interesting solution.

In fact, it answers another question that I had because I was wondering what would happen if you took an aged unit from another dealer as a dealer trade. It's nice to know that the clock resets and you wouldn't get hit with the fees that start at 180 days.
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Old 10-14-2008, 10:21 AM   #11
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Wow, I didn't know that - that's an interesting solution.

In fact, it answers another question that I had because I was wondering what would happen if you took an aged unit from another dealer as a dealer trade. It's nice to know that the clock resets and you wouldn't get hit with the fees that start at 180 days.
exactly, I almost cant believe they left that loop hole in there...
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Old 10-14-2008, 10:41 AM   #12
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Wheeling, dealing, shifting numbers, changing rules which means that the "take rate" is low.
With the general skeptical mood of the public all the incentives and deals are not going to move people into a buying mode. People are in shock (me too).
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Old 10-14-2008, 10:55 AM   #13
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Wheeling, dealing, shifting numbers, changing rules which means that the "take rate" is low.
With the general skeptical mood of the public all the incentives and deals are not going to move people into a buying mode. People are in shock (me too).
Yep, they just called me and sweetened the deal trying to get me to order cars. I think they are on the verge of having to shut down the minivan plant because they have no orders...
I had already indicated that I was not going to order ANYTHING!
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Old 10-14-2008, 11:22 AM   #14
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People are in shock (me too).
I've been thinking the same thing - people are in shock. Too much has happened too fast.

I was listening to an Internet Broadcast of my cousin's football game last week and the announcer wrapped up the program saying "I know these are tough times for everyone, but it's great that we can all still come together and enjoy High School football."

Now to put things in perspective, the announcer is a teacher at the school (no fear of job loss) and the school is in an upper-middle class community.

I remember thinking, if the people in this community are worried about the economy, then almost everyone must be worried.
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Old 10-14-2008, 12:05 PM   #15
CL Pgh
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Quote:
Originally Posted by ssdd View Post
The clock starts ticking on a new car when it is floored, so you just need a buddy to do a floor plan swap with. then the clock restarts. floor plan swap it back the next week and the clock is reset. he does his that way and both dealers wont have to pay any off.
you would never even have to move the cars.
Quote:
Originally Posted by XDCX View Post
Wow, I didn't know that - that's an interesting solution.

In fact, it answers another question that I had because I was wondering what would happen if you took an aged unit from another dealer as a dealer trade. It's nice to know that the clock resets and you wouldn't get hit with the fees that start at 180 days.
Quote:
Originally Posted by ssdd View Post
exactly, I almost cant believe they left that loop hole in there...
Better check into this folks... I don't believe this loop hole exists.
Example: CFC's current aged unit bonus cash INCLUDES units dealer traded in from other CF floorplan dealership's. I know this is true because I am looking at my aged unit bonus sheet from CF and #3 of the VIN's are on units we DT'd in and are still here.
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