Why won't dealers discount below MSRP?

I am negotiating with a dealer here in Massachusetts to order a Prius III with the sunroof. Here are two observations based upon my limited experience:

1. The demand for these cars does not seem to be as great as originally anticipated.

2. Dealers will not go below MSRP under any circumstances. In my case, rather than knock a few hundred off the MSRP, the dealer will just tack that onto the value of my trade-in car. I am now actually getting more for my trade-in than the car is actually worth, nevertheless, on paper I am still paying MSRP.

Why won't dealers go below MSRP? Does Toyota Corporate pressure them to keep the price high thereby creating interest in the car? Does selling at MSRP maximize the dealer kick-back? Does selling a highly anticipated model below MSRP create some unfavorable PR? Any thoughts?

It's Just Prue Greed.
They Figure The Car Is Hot, and So Are The Profits.

If they start discounting 2010's now what leverage do they have 6 months or 1 year from now? Even if they have 2010's sitting on their lot for a few months they still have to get top dollar before lowering prices...common business practices.

I don't know of any company that rolls out a new product and immediately begins discounting their pricing. The Apple iPhone is an excellent example of this...start high...bring the price down over time as the product becomes saturated in the market and the initial "rush" for the product is over. The iPhone went from several hundred bucks down to a hundred bucks in a couple years...can't argue with that.

When it comes to "demand", unfortunately, the buyer is seldom the one benefiting from "lack of demand." Even if a Toyota dealer is not selling 2010's at a break-neck pace they still have their other models (both new and used) to make a profit.

Unless the dealer is a Prius-only dealer (unheard of) they have no incentive to lower prices.

Its not greed...its just business. Right now they can sell them for MSRP...so they won't sell you a car for below MSRP that they can sell to someone else for MSRP...you wouldn't either if you were them.

Just wait...the supply will get better and dealers will start to deal...once they can no longer sell the unit for MSRP.

Business is not greed, its just business.

I am not sure if 'pure greed' is entirely accurate. If you put a price on a product and then sell it for that price while at the same time consumers are free to make other choices in the marketplace, I don't see that as greed.
If they jacked up the price beyond MSRP, that is closer to greed.

As far as whether the discount shows up in the new car price or in the trade in, that is a matter of accounting for the dealer.

It probably doesn't help the price of gas is going up, up, up.

Because this is capitalism.

Toyota doesn't care one whit what the final transaction price is. Toyota got it's money when the vehicle hit the port and was put on a truck to the dealer. What happens after that is of no concern to the manufacturer.

Toyota the vehicle maker is a separate entity from the local retailer. As such one cannot dictate to the other, only 'suggest'.

Another oft-ignored issue unless one has been in the market over the last two years is that the pricing for the new 2010s is $1500 to $3000 lower than the equivalent Gen 2 Prius. It's just business.

They are already selling $250 or $500 below MSRP in some markets, not much but pretty surprising to see this early - and above in other areas.

Greed has nothing to do with it. There are other brands/models that dealers are having to sell near invoice price, even below in some cases. Is that greed on the buyers part? Should the buyer say, that price is not fair to the dealership so I'll pay a little more, I don't want to be greedy? Turn about is fair play. Calling it greed is just sour grapes, it's business, get in there and negotiate. You can out-wait the dealer until you get your price, or give up.

I completely agree! The Open Market system and Supply and Demand.

I paid MSRP with no fees or add-ons. Completely satisfied. I want Toyota and my dealer to make an appropriate profit. Heaven knows they need it to stay in business and I think you'd agree, we'd all desire that. I don't begrudge dealers from trying to make as much profit as they can for a popular new car in demand. But those that add hellacious fees and 'market adjustments' - if buyers are desperate enough to meet that cost, so be it.

Does anyone know if you can get package III with solar in CA?

While I would like to get some type of a discount below MSRP, I think that in the South Florida market it is not realistic yet. I heard of one dealership charging 7K over MSRP (crazy - at King Toyota in Delray Beach), but most of them are not about MSRP. You can either wait for them to go down in 6-12 months or buy one now and save on the rising gas prices.

I really don't think it will take that long, I'm betting on 2-4 months for discounting of $500 to $1000 to be common - but your crystal ball is probably as good as mine. Time will tell...

Same difference. If they all want to sell at $1K over MSRP and people are willing to pay it then it's not greed, it's the market value price of the product. The "S" in MSRP is suggested. You always have a choice to buy something else. If enough people do that the price will drop.

If you are negotiating with just one dealer then you are not really negotiating. The dealer is playing games with you by moving money between the trade and the new car, but put yourself in his shoes, why would he make any real concessions if he doesn't have to? The only way you can be sure of having the lowest possible price is by getting dealers to compete with each other, so you need to be talking with several.

I do agree with the earlier posters who say that a concession of much below MSRP is unlikely right now unless and until dealers get a better feel for demand and become worried about moving cars at MSRP. It may take a few months to get there, if ever. So by talking with several dealers now you might get $100-500 below MSRP at most, while if you wait a few months you might get a few hundred better. Whether that's worth it is up to you.

First, I'm not sure it's a negotiation if they are asking MSRP and you have to simply say yes or no.

As for demand, there are still people waiting in line for them. The fact that Toyota spreads them out to give all dealers an opportunity is good, even if areas without pre-salevehicles get them. I'm waiting on one and unless I take the closest match I'll have to wait longer and someone can have the one allocated to me. I live in a rural area with basically no waiting list but I have to wait on delivery. My dealer gets 5 from the ship comimg in around the 15th. (He's only had one so far). Three are already promised. Find another car beside the Camaro with that kind of demand and anticipation (and they want $5K over MSRP around here for them).

They don't need to discount, but to keep your business they worked with you on your trade to deal. If they had sold you one at $500 off but made the same deal by discounting the trade, then someone like me with no trade would come in and expect $500 off MSRP. And we all know that you would get on Prius Chat and tell every body you got the discount (I plan to as my dealer is going to discount for me)

When I bought my 2004 Prius I picked it up on Nov 3, 2003. It has JUST been released and the dealer was nice enough to give me $100 off the MSRP. I felt at that time the car was a bargain. If I were shopping today, I still think the car is fairly priced at MSRP. As mentioned above, it is S & D. Once dealers have the cars sitting on their lots, they WILL deal and perhaps you can get a decent discount. Don't forget, dealers are hurting, including Toyota. They have a relatively hot product now that they can sell at asking price. As for the dealers that add ridiculous markups, I would not give them my business. Selling at MSRP is business, selling above it is GREED. That's my opinion.

I wouldn't give them my business either. Semantics, but it's not greed if there is a buyer who is willing to pay a markup. I would never do it, but evidently some people are willing to...I don't blame the dealer for trying. I assume many of them are just fishing or planning to come down to MSRP, some (naive) buyers will think they got a deal if the markup disappears. Dealer wins...

Selling above isn't greed either if thats what the market will bear.

Supply and Demand. Nobody sets the price but the market. MSRP is just a suggestion.

I was more interested in the part of the question that asked why would they give more $$ on trade in then?? And all I can think is the same as WVgasguy said...cause then you could say you got less than MSRP on the car?! Not sure.

however, like I've said on other threads, I am really hoping mine will drop the MSRP a bit if I agree to some dealer add ons. I know they make more % on dealer add ons and I won't get them otherwise so.....