Why Dodge & Ram Execs Don’t Ban Dealer Markups
Dodge and Ram vehicles are marked up because the automaker has no direct control on pricing.
Over the past six years, Dodge and Ram have rolled out a great many vehicles that proved to be insanely popular with consumers. Starting back in late 2014 through early 2015, the Hellcat Challenger and Charger were the hottest cars in North America. In 2018, the Challenger Demon stole the show, followed by the Challenger Redeye, the Charger Redeye and eventually, the Ram 1500 TRX.
These vehicles are all powered by a supercharged Hemi, but more importantly for this discussion, these are all vehicles which were subject to the dreaded additional dealer markup. Between the early Hellcat cars, the Demon, the Redeye models and the TRX, we have seen these high performance monsters marked up anywhere from $5,000 to $25,000.
That added cost creates a frenzy in social media groups, where commenters demand to know why the Dodge or Ram corporate leaders don’t do something to prevent dealer markups. Ultimately, Dodge and Ram don’t mandate pricing because it is against federal trade laws for any manufacturer of any product to require specific pricing.
What is MSRP?
Whenever Dodge or Ram introduces a new model, the price is standard in MSRP or Manufacturer Suggested Retail Pricing. This is the pricing that we see in television and internet commercials and as the name states, this is the retail price suggested by the manufacturer. Retailers are not, in any way, bound to sell vehicles at MSRP.
It is against federal regulations for a manufacturer to do anything more than suggest the price to the retailer. After that, the retailer can literally charge whatever they want. If a dealership wanted, they could sell all of the vehicles for $250, but since they pay far more than that, the dealership would go broke in a hurry.
This is why if you buy something like a new-old stock 2020 Charger R/T, you go into the dealership expecting to pay less than MSRP. There is “wiggle room” built into the MSRP for dealerships to make money, but if they drop below MSRP, they can still make money – they just make less money on that vehicle.
Dealers don’t pay MSRP, they pay the invoice price, and the difference between those two numbers is the dealership’s gross profit. In some cases, they do sell at or below invoice, in which case the dealership doesn’t make any money.
While the dealership model relative to MSRP is great when it comes to getting lower prices, that gate swings both ways. When dealerships can charge over MSRP on popular models that are in limited supply, some do so.
This is where the hated “ADM” comes into play with vehicles like the 2018 Demon and, more recently, the Ram 1500 TRX. However, since the dealership is free to charge whatever they want for those vehicles as the retailer, Stellantis cannot legally do anything to mandate a specific price.
Dodge Tried with the Demon
While manufacturers cannot mandate pricing, they can do things to try to encourage MSRP from their dealerships and the 2018 Dodge Challenger SRT Demon is a good example. Dodge told dealerships that orders at or below MSRP would have the highest build priority, so those buyers would get their Demons first.
Mind you, Dodge didn’t tell dealers that they couldn’t charge over MSRP; they said that cars built over MSRP would inconveniently be built later on in the production run. There was even a form that buyers signed which acknowledged that they didn’t pay over MSRP, but we have spoken with Demon owners who signed that form while still paying a markup of five or ten thousand dollars.
In some cases, dealerships came up with inventive ways to make a few thousand extra on the 2018 Demon without actually adding to the bottom line. Some buyers were required to buy a special $10,000 oil change package. Others purchased another vehicle along with the Demon and on that other vehicle, there was a dealer markup of $10,000 applied. In other cases, the buyer paid a normal markup, but still signed that form to ensure that they got their car sooner than later.
The bottom line here is that even when the automaker basically tells dealers not to charge over MSRP, and even when owners have to sign a form stating that they didn’t pay over MSRP, dealers still charge extra and people still pay extra.
In the end, so long as there are people willing to pay over MSRP, some dealerships will charge large markups and under current federal regulations, Dodge and Ram cannot do anything about it.
Photos: Stellantis
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