Have we talked about GM wanting to cancel warranties on flipped cars?

I've seen this various places over the last few days, but not much chat about it on automotive forums or here.  It's entirely possible I missed it, but I just went through the last three pages of latest topics and didn't see it.  Basically in an attempt to prevent flippers making massive $$'s on flipping highly desirable new cars like Z06, Hummer EV etc.  GM are talking about canceling the warranty on cars sold within the first 12 months.  I've got mixed feelings.  They are trying to stop professional flippers, but it also hurts the person who got lucky and got a car early and has the opportunity to make a chunk of change.  I'm also not sure of the legality of it, but my guess is GM's lawyers are smarter than my almost non existent knowledge.  

I'd rather they put efforts into stopping dealers putting massive mark ups on popular vehicles. 

I'm really not sure how I feel about it.  On one hand real consumers are suffering both at the hands of dealer mark ups, but also high flipping prices.  On the other, the market should be allowed to find it's own level, but it can't as it's not really an open playing field.  One of the few things I support Elon Musk in, is taking on the dealer lobby and selling direct.  Once manufacturers are allowed to sell direct in all states, then you can let the market set the price.  Until that's the case, I don't want one dealer crying about the free market.

Articles

https://gmauthority.com/blog/2022/07/gm-to-limit-warranty-transfers-on-corvette-z06-hummer-ev-escalade-v/

https://jalopnik.com/gm-will-cancel-your-warranty-if-you-buy-your-z06-from-a-1849350024

Adrian_Thompson (Forum Supporter) said:

 

I'd rather they put efforts into stopping dealers putting massive mark ups on popular vehicles. 

 

That is exactly what this move seeks to accomplish.

GM sez:  Dealers are prohibited from jacking the price well over MSRP...

Dealer sez:  Hmmm, I will make sweetheart deal with my cousin Oscar - sell Oscar the car at MSRP and we can then jack the price to the eventual customer.

This is GM's way of trying to discourage that practice.

In reply to bludroptop :

Then sign me up for it.

Actually, if I were GM (or Ford, Stellantis, BMW, whoever).  I'd just tell dealers they can sell anything they like for whatever they like, but the first time they sell over MSRP, then are off the list for high end vehicles for five years.  Yeah, that's proberl more illegal than this deal.

I buy a new car and keep it 10-15 years. My wife is almost 60 years old and is on car #5.  We are weirdos. 

There are people that buy new cars and three months later hate it and go get a different car.  

How is that handled by the General? 

In a Free Market everything not prohibited is permitted.    GM can set its rules and the dealers can set their rules.   If there is more money to be made because a product is in high demand and scarce ( supply and demand)  then that is what will be done. 

Scarcity drives prices of things in high demand.   Micro-economics 101.     GM has contracts with dealers and can set the terms of the contracts.  Their leverage after the sale to the dealer is the warranty.  They want to use the warranty as a blunt instrument to control the dealers by invoking the dealers self interest.  (Never appeal to a person's better nature, they may not have one.  Appealing to their self interest gives you more leverage. Robert Heinlein.)   

Look at what DeBeers has managed to do with diamonds.   They have been stock piling diamonds for 100 years and keeping them just scarce enough that they, and jewelers, can sell at a high price because women want a diamond ring and men want women.   

Look at Ticketmaster.   People make a living on arbitraging concert tickets.  Buying tickets early and selling at a higher price to people who desperately need to see Brittany Spears, etc.

Some people want a new Corvette , will pay whatever it takes to get it, because they want a status symbol and want to get women.   

jharry3 said:

In a Free Market everything not prohibited is permitted.    GM can set its rules and the dealers can set their rules.   If there is more money to be made because a product is in high demand and scarce ( supply and demand)  then that is what will be done. 

No, it's not a free market or the manufacturers could sell direct to the public.  The dealer lobby groups all over the country work constantly to stop that.  Free market rules don't apply here. 

jharry3 said:

Some people want a new Corvette , will pay whatever it takes to get it, because they want a status symbol and want to get women.   

To me, this is the crux of the issue.  If people weren't willing to pay market adjustment fees, then dealers wouldn't be using them.  As is, if a dealer can mark a car up 50% and someone is willing to pay for it, why wouldn't they?  Sure, it hurts the average buyer, but most of the time, we're talking high end rare cars that the average person isn't purchasing, anyway*.  You could call it price gouging, but with a new car purchase, it's not difficult to shop other dealers to find one that doesn't gouge. 

If I put up a car for sale at $1000 and someone offers me $2000 for it, why wouldn't I take $2000? 

*The currently climate stinks.  Low supply and high demand across the board is causing higher prices on everything, not just new cars.  Used car prices are through the roof too.  I believe there are few folks here on the board who have sold a car in the past two years for more than they paid for it (or owe on it), and definitely higher than the expected value.  All because supply is low.  For non-halo cars with a markup, I'm pretty sure that market will stabilize at some point and you'll see less and less of it.  Granted, there are always those dealers that will have a market adjustment, but chances are they're also the ones that have non-optional paint protection, VIN etching, pinstripes, interior protection, etc.  Dealers that most of us would never buy from, but apparently some people do because they're still in business.

-Rob

Another point of view, it does hurt sales.  How often has a new hot affordable car come out and all we hear of are dealers asking 25-50-100% mark up on $30-40K vehicles.  I know there are more than once when we've discussed stupid dealer mark ups hurting demand for semi hot cars.

In reply to rob_lewis :

Even regular non-highend cars are getting marked up. Ford Maverick XL are a prime example. Or any pickup truck for that matter.

Adrian_Thompson (Forum Supporter) said:

In reply to bludroptop :

Then sign me up for it.

Actually, if I were GM (or Ford, Stellantis, BMW, whoever).  I'd just tell dealers they can sell anything they like for whatever they like, but the first time they sell over MSRP, then are off the list for high end vehicles for five years.  Yeah, that's proberl more illegal than this deal.

If you want to say they can't sell above MSRP, you gotta be ok with them not selling under MSRP. To me, that's the easy solution but the public won't go for it.  If the manufacturers ever go direct, you know they will charge MSRP right?

In reply to Steve_Jones :

I didn't say get rid of dealers.  I said allow actual competition.

In reply to Adrian_Thompson (Forum Supporter) :

Ford has done something similar with special mustangs. Not deny warrantee, just sign a no sell by X contract. Or force a competition license. 

bludroptop said:

Adrian_Thompson (Forum Supporter) said:

 

I'd rather they put efforts into stopping dealers putting massive mark ups on popular vehicles. 

 

That is exactly what this move seeks to accomplish.

GM sez:  Dealers are prohibited from jacking the price well over MSRP...

Dealer sez:  Hmmm, I will make sweetheart deal with my cousin Oscar - sell Oscar the car at MSRP and we can then jack the price to the eventual customer.

This is GM's way of trying to discourage that practice.

 

I think it would be too complex for the dealer to get the money back from Oscar and give him a cut.

What keeps the dealer from marking it up themselves and be the ones that provide the warranty? Some of the market adjustments would definitely allow the dealer to absorb any repairs during the warranty period.

In reply to Steve_Jones :

I'd pay MSRP on a vehicle all day. MSRP's, to me, are reasonable when I'm looking at a vehicle. But, when I go to look at a $23k MSRP Maverick and the dealer wants $37k, I get lost in the logic.

yupididit said:

In reply to Steve_Jones :

I'd pay MSRP on a vehicle all day. MSRP's, to me, are reasonable when I'm looking at a vehicle. But, when I go to look at a $23k MSRP Maverick and the dealer wants $37k, I get lost in the logic.

I agree, but no one complained when the MSRP was $25k and you could buy it for $22k.  That's the problem with market based pricing (or competition as some call it), when the market swings the opposite way, people get upset. Market based pricing goes both ways.

Adrian_Thompson (Forum Supporter) said:

Another point of view, it does hurt sales.  How often has a new hot affordable car come out and all we hear of are dealers asking 25-50-100% mark up on $30-40K vehicles.  I know there are more than once when we've discussed stupid dealer mark ups hurting demand for semi hot cars.

I very briefly looked at various new Ford products and went elsewhere because of exactly this.

FWIW, I've been spending too much time lately on BaT, running a bit of a social experiment in my head, trying to figure out how people think. That failed of course, but I did notice a strong correlation between "... seller acquired this car in 2022" and "Did not meet reserve." That strongly indicates a flipper. Less likely is that the person didn't like the car for whatever reason and wanted out, but then why have a unattainable reserve? Maybe they wanted out of the "old" model C8 Corvette because the Z06 was just announced...

Steve_Jones said:

yupididit said:

In reply to Steve_Jones :

I'd pay MSRP on a vehicle all day. MSRP's, to me, are reasonable when I'm looking at a vehicle. But, when I go to look at a $23k MSRP Maverick and the dealer wants $37k, I get lost in the logic.

I agree, but no one complained when the MSRP was $25k and you could buy it for $22k.  That's the problem with market based pricing (or competition as some call it), when the market swings the opposite way, people get upset. Market based pricing goes both ways.

Exactly this. Everyone always seems to forget what the "S" stands for in MSRP. The dealers can charge whatever they want. If you don't like it, don't buy from them. If the markup is too high, the car won't sell. Yeah, it sucks if you're desperate and need a car now, but that's generally the exception, most people can keep what they have and wait for prices to come down, or order something.

kb58 said:

FWIW, I've been spending too much time lately on BaT, running a bit of a social experiment in my head, trying to figure out how people think. That failed of course, but I did notice a strong correlation between "... seller acquired this car in 2022" and "Did not meet reserve." That strongly indicates a flipper.

I think you underestimate just how many people buy cars at auction or over the internet without ever checking them out in person. There are a lot of people out there to whom it is normal and reasonable to buy a $500K car because it seemed cool and when they are disappointed in it/ bored by it in person they just resell. 

I have a car just like that next to me. Dude bought it sight unseen from a classics dealer/resto shop, had it delivered, took it on a tour the next week and by the first day decided he didn't like it all that much and was going to resell it. No wringing of hands about the loss he could potentially take, no anger at the seller, just a "well that wasn't the one, I wonder whats next, Maybe a Jaguar SS?" attitude.

I have also had a more than a few cars through the door that were bought via auctions and the buyers upon taking delivery were livid about the poor quality and angrily put them right back up for auction. In that situation it is not in their interest to say "This thing is a POS and I am upset" The listings will say exactly what you saw. Acquired recently with a reserve of what they paid.

Trent said:

I think you underestimate just how many people buy cars at auction or over the internet without ever checking them out in person.

 

I'm one of those - trying to convince myself to buy it without looking at it.

In reply to Slippery :

That makes the $14k Market adjustment on the Telluride sitting in the Kia showroom seem downright reasonable (and it had a tag on the mirror saying it was reserved).

I really wonder what the legalities of canceling a warranty that follows the car really is? Can GM really say this one has a 3/36, this one does not?

Trent said:

kb58 said:

FWIW, I've been spending too much time lately on BaT, running a bit of a social experiment in my head, trying to figure out how people think. That failed of course, but I did notice a strong correlation between "... seller acquired this car in 2022" and "Did not meet reserve." That strongly indicates a flipper.

I think you underestimate just how many people buy cars at auction or over the internet without ever checking them out in person. There are a lot of people out there to whom it is normal and reasonable to buy a $500K car because it seemed cool and when they are disappointed in it/ bored by it in person they just resell. 

... The listings will say exactly what you saw. Acquired recently with a reserve of what they paid.

I wasn't clear. What I meant was that a lot of "acquired in 2022" cars end up well above MSRP yet still RNM. Sometimes, the seller had even bought the car on BaT, so it's easy to see what they paid for it, and again, RNM, even though it rose well above what they paid, which does suggest what's going on. I get the whole ADD-with-a-lot-of-play-money thing, and also that there's nothing wrong with taking advantage of the market situation, and if we don't like it, don't bid.

Anyway, I'm getting off topic. Flipping will continue regardless whether manufacturers try to shut it down.