Car reservation

Ford warns dealers and buyers to avoid F-150 Lightning tags

Ford’s 2022 F-150 Lightning electric truck was a runaway commercial success long before the first one reached a customer. An electric version of the popular F-150 (the best-selling vehicle in the United States for 44 years), the Lightning can travel up to 300 miles on one charge and can carry up to 2,000 pounds of payload.

Ford sold so many reservations for the truck that it had to double production before reviewers even had a chance to test the vehicle.

Such success – sustained sales even before a vehicle is built – upsets the normal sales model of the auto industry. It’s not entirely clear that anyone knows how this works. Early reports suggest that some dealers are trying to collect fees and markups that have surprised customers. Now the Detroit Free Press reports, Ford itself is cracking down on this practice.

Ford warns its own dealers to stop

In a letter to dealers, Ford Vice President of Sales Andrew Frick wrote: “It has come to our attention that a limited number of dealers interact with customers in a way that negatively impacts customer satisfaction and hurts the Ford Motor Company brand and Dealer Body Reputation.

Buyers go through a two-step process to order the truck. They must first purchase a refundable reservation of $ 100 which entitles them to order a truck. Ford later sends an invitation to place an order.

Ford sells reservations directly. Buyers then place an order online but must designate a local dealership to deliver the vehicle.

In anecdotal reports on enthusiast forums, Lightning reservation holders have reported that resellers ask them to pay extra fees to hold their reservation or be among the first to place an order, as well as charge reseller markups a once the customer places a final order for a Lightning. .

“These actions are seen as a threat to customers by denying them the ability to convert reservations into orders,” says Frick’s letter. “This behavior is not allowed.”

A patchwork of state laws

Relations between automobile manufacturers and their dealers are governed by state law. The laws of one state are not necessarily the same as those of other states. In many cases, Ford has a limited ability to prevent its dealers from charging markups. But the company appears to be trying to restrict the practice.

Frick’s letter threatened to redirect orders from dealers who engage in questionable practices. Certain increases in sales, it seems, could cause the dealers to lose the right to sell the truck.

It should help. But we don’t expect the problem to go away anytime soon.

New expectations, old sales practices

These are new sales models that shake up traditional operating methods.

Traditionally, automakers sold cars only through dealer networks, which the company does not own. In the early days of the auto industry, working with partner dealer networks helped spread the risk of an unsuccessful model. It has also helped businesses faraway to leverage trusted local business relationships to build loyal fan bases. In many states, laws prohibit automakers from selling cars without the assistance of third-party-owned dealerships.

But Tesla has spent nearly two decades reworking the traditional model of car sales. The company sought to change state laws that allowed it to operate its own dealerships in certain states. In others, it has opened “galleries” where Tesla employees can display the cars, but customers must order them directly from Tesla online.

Other electric car startups, like Rivian and Lucid Motors, follow a similar sales model. This may have created an expectation for many buyers – electric cars are something you order from a website, not something you buy from a local dealership.

Ford takes control, but with a traditional dealer network

Ford has made no secret of its intention to move to an order-based model. The automaker could save millions by ending its multi-generational practice of building up a huge stockpile of finished cars for sale before anyone says they want one.

It is not alone. Several automakers have suggested they will keep lower inventories after the COVID-19 pandemic than before. Ford’s rival GM has said it will never “go back” to large inventories.

But Ford was the only one to suggest it would switch to a priority-order model.

With its small Mustang Mach-E, F-150 Lightning and Maverick trucks, the move started to work. All three vehicles sold well through orders rather than traditional showroom sales. Ford is facing back orders for all three. But it’s a much better problem than a backlog of unsold cars.

Ford, however, is not a startup taking orders online. It has a nationwide network of resellers and an ordering process that involves working with them. These dealerships must capitalize on sales to stay in business.

Until everyone in the transaction gets used to how this process works, it is going to be complicated.

The best advice: get a written, signed price

Ford’s North American director of product communications Mike Levine also took to Twitter to offer advice on how to avoid questionable dealer markups.

Levine’s advice is solid. Buyers should always get a signed purchase contract to protect them from any subsequent attempts to change the price of a popular vehicle.