Why are automobiles one of the few items sold in the United States that require a label telling you what the Manufacturers Suggest Retail Price is?
Most other goods have actual prices that are suggested by the manufacturer, but retailers are not required to post them.
I will try to give you a little history of what lead to dealers being required to have a sticker displayed.
During World War II, car companies were required to produce only things that would aid the war. Production of the personal automobile was completely halted in 1942.
New car production was restarted in 1946 shortly after the end of the war. As one might expect, demand was extremely high.
There were two primary reasons for this. One was that there had been no production for over 5 years, and secondly, returning veterans had some money that they had not been able to spend while overseas fighting the war, and they all seem to want a new car.
The number one law of economics has always been supply and demand.
There was definitely more demand than there was supply. Opportunistic car dealers who had struggled to make ends meet during the war saw an opportunity to make a lot of money. They had customers who would pay whatever they asked them to pay.
There was no consistency in pricing from one area to the next. Dealers would put people on waiting list for a car. Another customer would come in and offer more money, and they would take it. Customers would buy a car and turn around and sell it for substantially more than they paid for. Price gouging was going in all areas of the car business. At the same time manufacturers were not treating their dealers or prospective dealers fairly; they were taking bribes for additional allocations of cars and money to secure a franchise.
So guess what happens. The government decided they needed to be involved and played “Big Brother”.
In 1955 the Senate’s Interstate and Foreign Commerce Committee formed the automobile marketing practices subcommittee in response to dealer complaints of abusive treatment by automakers, particularly in the awarding of franchises.
Congress passed Dealers’ Day in Court in 1956.
In the course of the investigation, Congress began to investigate “deceptive” dealer practices. Hearings were held in 1958, and as a result, legislation was introduced to fight this abuse. Senator Almer Stillwell Monroney said as he introduced the bill, “The dealer who is honest about the so-called ‘list price’ cannot compete with the one who ‘packs’ several hundred dollars extra into it so he can pretend to give you more on your trade-in.”
The sticker then came to be called the Monroney label after him.
Now you know the rest of the story.
I have given you a history lesson because I believe history often times repeats itself.
While all dealerships are required to have an official sticker on it, some have started to have what is called an addendum label.
Basically it is car dealers adding a window sticker designed to look exactly like the federally mandated Monroney sticker.
Here dealers add accessories that they have installed and additional dealer markups over the manufacturer's suggested retail price. A lot of the add-ons are nothing but a way to increase the perceived sticker price of the vehicle. They are called by several different names: Adjusted Market Value, Additional dealer market up, and about anything you can imagine but what it actually is. Trying to deceive a customer into thinking the vehicle is more than the actual MSRP. Another way this is done is to add something that has very little value and over price it. A good example is adding nitrogen to the tires. Most manufactures do not recommend doing this as there is no real value to it. Dealers will charge as much as $1500 for this. If a customer truly wants to have nitrogen added to their tires, there are places that we can get it done for $30.
Does this sound like the same practices of 1958? Trying to get someone to believe that the product they are selling actually has an MSRP higher than what the factory actually suggests.
Honda will not allow anyone to advertise a price higher than the MSRP even if there is value added options such as spoilers, radios, and things of that nature. Honda says that is deceptive.
They can’t or won’t monitor the sales lots of dealers to see if this is going on.
If you go to a dealer and see an “addendum” sticker on the vehicle, examine it carefully.
Why do they do it? They can make it appear that they are giving your more of a discount or showing you more for your trade or yes even make more money.
We believe in offering a great product at a fair price with all proper disclosures and no deceptive practices.
Stop in and check us out.
Until next time have a Happy Honda day.
Larry
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