Disaster in Japan leads some auto dealers to raise prices

Associated Press

DETROIT

The disaster in Japan could slow shipments of popular cars such as Toyota’s Prius to auto lots. And many dealers already are taking advantage of expected shortages by raising prices.

Buyers now will have to pay sticker prices typically, instead of enjoying discounts that had been the norm for small cars and hybrids imported from Japan. Besides the Prius, models that suddenly cost more include Honda’s Insight, Fit and CR-V; Toyota’s Yaris; and several Acuras and Infinitis.

Small cars such as the Yaris, with a $12,955 sticker price for a base model, and the Honda Insight, priced at $18,200, are losing their typical discounts of 5 percent to 10 percent.

The price increases “will last weeks, if not months,” says Jesse Toprak, vice president of industry trends and insights for TrueCar.com, a website that tracks what cars sell for at dealerships.

Dealers are acting on the possibility that disruptions in car deliveries from Japan will cause a shortage of higher-demand vehicles. Demand will exceed supply.

So they won’t cut deals on those cars, Toprak says.

Car buyers rarely pay sticker price, also known as the MSRP or Manufacturer’s Suggested Retail Price. Companies typically offer discounts of a few hundred to a few thousand dollars off the MSRP. Many also provide low-rate financing.

On top of all that, there’s typically room for further negotiation. Toyota, for example, had been offering a $500 rebate on the Prius, plus zero-percent financing. And it offered a $1,000 rebate on the Yaris.

Many smaller cars and hybrids are built in Japan, where car manufacturing mostly has stopped in the aftermath of the earthquake, tsunami and nuclear crisis.

Toyota says it’s shut down production until Tuesday. Honda remains closed and hasn’t said when its plants will restart. A shipment of more than 1,000 Nissan and Infiniti cars that was headed to the United States was destroyed in the tsunami. At least one hybrid-battery maker is shut down, threatening supplies of hybrid cars.

“Prices have firmed up, and the tsunami is only going to help that,” says John Hawkins, a Los Angeles-area dealer who runs three Honda dealerships.

Even before the disaster, dealers were reporting a shortage of hybrids such as the Prius, which had been in demand because of higher gas prices. The Prius uses a combination of electric and gasoline power and gets 51 mpg.

A month ago, Dave Conant said his Toyota dealership in San Diego had 57 Prius hybrids for sale. Today, he has three or four. Priuses carry a sticker price of $23,050 for a base model.

“We’re going to run out of cars,” he says.

So he’s no longer willing to make a deal.

The disaster in Japan changed everything. Before last week, Toyota had been stepping up production of Priuses. Dealers wanted to sell as many as they could. But now, Conant says he and other dealers no longer are willing to sell their fuel-efficient cars for less than sticker price.

“We had five on the ground yesterday, and I don’t know when I’ll get another,” he says. “The market has shifted pretty quickly and dramatically.”

Some critics argue that dealers are using the Japan disaster and the threat of car shortages as an excuse to raise prices. Eric Ibara, director of residual price consulting for Kelley Blue Book, says any price increases in the market now are “pure speculation” that some models will face shortages.

Toyota declined to comment.

Honda spokesman Jeffrey Smith says the automaker is still assessing the impact of the Japan crisis on its supply of cars. But for now, dealers have enough Japanese imports on hand, and more are on the way, he said.

Infiniti announced price increases Monday for about half its models. Buyers will pay between $400 and $950 more per model. But Infiniti spokeswoman Paula Angelo says the price increases are unrelated to the Japan disaster.

“It’s our normal practice to make mid-model-year price adjustments,” Angelo says.

Used cars may be affected, too. Higher prices on new cars will mean higher prices on used ones, says Tim Jackson, president of the Colorado Automobile Dealers Association.

Once supplies of small cars and hybrids tighten and dealers stop negotiating on price, many customers lower their sights. Cheaper used cars become more appealing.

That higher demand drives prices up.

“Dealers will pay more at auction or for trade-ins, and it will result in a higher price for consumers,” Jackson says.