I’ve heard countless horrible stories from people trying to buy lately. We all know that this market is a seller’s heaven and a buyer’s hell, but when you’re in desperate need for a vehicle, those concerns kind of move to the wayside, leaving people dealing with a network of so-called “stealerships.”
The catchy portmanteau refers to dealerships that sell vehicles or perform maintenance for exorbitant fees. Yes, dealers need to make a profit to stay in business, but what differentiates a dealership from a stealership is the stealership’s insistence on adding thousands of dollars of markups at every possible opportunity. You’ll also usually find fast-talking sales folk who are adept at gauging your willingness to pay a lot of money just to get out the door with a vehicle.
NPR’s Greg Rosalsky is currently facing this issue as he searches for a vehicle after his truck was stolen. After going through a frankly exhausting search for a vehicle only to have it topped off by duplicitous sales tactics, he decided to look into the rise of the stealership.
These sales tactics usually target a certain type of person. From the story:
A slew of economic studies has found patterns in who bears the brunt of this pricing strategy. It’s not pretty. For example, a number of studies find that dealerships tend to charge people of color more than white folks. Another study finds that older people tend to be charged higher prices than younger people, and that older women tend to be charged the highest price of all.
One study found that dealerships tend to treat a buyer’s decision to trade in their used car like a neon sign on their foreheads, flashing, “Charge me more!” That’s because trading in your used car, while easier than selling it directly, also fetches less money. Dealerships apparently see this as an indicator that you’re either unsavvy or willing to burn cash — so they jack up the price of the car they sell to you. The type of car you trade in also offers a wealth of information on how much they can charge.
As we’ve noted here before, dealership inventories are extremely low. People scooped up cars at every possible opportunity during the COVID-19 pandemic, but plant closures and supply chain hiccups mean automakers are still struggling to build enough cars to satisfy that hunger. NPR chatted with Cox Automotive executive analyst Michelle Krebs, who noted that this is the first time in her career that most dealerships are charging exactly or more than MSRP.
In the past, so-called stealerships were a little bit more difficult to come by. If you felt like you got screwed over by a dealership, you wouldn’t come back, and you’d tell your friends not to go there. Shady sales tactics had repercussions.
Now, though, just about everyone knows they can get away with charging a ton of extra money, so just about everyone is happy to do so. After all, if you’re not getting enough vehicles to satisfy customer demand, you’re probably going to want to make up for those lost funds somewhere.
The full NPR story is worth a read. It digs into the traditional automaker-to-dealership pipeline and also shows how some automakers like Tesla and Rivian are trying to skirt those rules. It also explains how lobbying groups like the National Automobile Dealers Association are hesitant to change a status quo that benefits the dealerships it represents. There’s a whole slew of political and financial reasons these stealerships are able to do what they do — and the first step to countering their tactics is to know about them.