GM gets its car prices wrong
A few weeks ago, General Motors quietly added a price hike on a number of GMC and Buick models, but in a way that allows the automaker to pretend the price of the vehicle is lower than it is. in reality. It’s not about dealer profit margins – that’s a separate issue, because it’s set at the dealer level – or even a year-on-year price increase necessitated by rising production costs (as has been cited by other manufacturers to justify higher MSRPs). Rather, it’s GM breaking a previously standard feature, then adding it back as an expensive “option” that can’t be removed.
What’s the benefit for GM? This allows him to advertise his vehicles at a lower price than he ultimately charges the customer. And this isn’t the first time General Motors has played pricing games with buyers.
GM introduces a sneaky price increase
On August 9, the Detroit Free Press noted that OnStar — a previously standard package on all new GM vehicles that came with a three-month trial of the basic connected services suite — is now optional on most new GMC and Buick vehicles, as well as the Cadillac Escalade. The story notes that Chevrolet is currently finalizing plans to implement this change to its lineup as well.
However, the OnStar system is not really optional. New GMC, Buick, and Escalade vehicles (and presumably future Cadillac and Chevrolet models) have OnStar listed as a $1,500 line item that cannot be removed. This means that buyers have no choice in the matter. Each of the aforementioned vehicles comes loaded with OnStar from the factory – although it’s advertised as an option – and customers will need to pay the extra if they activate or use the OnStar system.
You can see the changes yourself by using the brand’s website configurators and comparing a vehicle built for the 2022 model year to one built for 2023.
Vehicle production has been volatile over the past two years, from manufacturing shutdowns to the ongoing shortage of microchips. On some vehicles, we’ve seen automakers make multiple price increases per model year or remove certain features. But this is the first time we remember an automaker imposing an option and announcing a price that is just plain wrong.
What you get for your mandatory $1,500 OnStar option
OnStar is a subscription-based telematics service that began appearing in a number of Cadillac models beginning with the 1997 model year. It has since evolved from a simple emergency and safety notification system and it now offers a host of features, such as vehicle diagnostic checks, vehicle location and the ability to send commands to your vehicle via Amazon Alexa.
This new OnStar program includes a three-year subscription to the Ultimate Premium level, which includes all of OnStar’s services and is typically priced at $49.99/month. So you get something. But our problem is that buyers who don’t need or want OnStar’s full list of services are forced to pay for them anyway.
We’ve seen misleading pricing from GM before
Let us tell you a story of General Motors’ entry-level L and SLE trims. For years, GM’s economy models (think Chevrolet Cruze or GMC Terrain) have offered a base price more or less in line with that of their competitors.
Take the 2018 Chevrolet Traverse, for example. The MSRP of its launch L trim was priced at $30,875 including destination charges. At first glance, this made the Traverse an attractive choice for price-sensitive buyers who were also considering the entry-level Honda Pilot LX ($31,875) or base Ford Explorer ($33,135). The Traverse also came with tech features, including a touchscreen and Apple CarPlay and Android Auto smartphone compatibility, none of which were standard on the Pilot or Explorer.
However, there was something funny about the Traverse’s range of trim. The top-level LS added an additional $2,120 to the sticker, but the only added item was tinted windows. A closer look at the command guide reveals what was going on. The Traverse L was a special retail order-only model, which meant you had to go to the dealership, specifically order the L (which was only available in white and didn’t give buyers the option to specify options, accessories or even all-wheel-drive) then wait for their car to be built and shipped. Buyers who had seen the advertised starting price of $30,875 and expected to find one at a dealership were greeted instead with LS models starting at $32,995.
That’s still less than a Pilot or Explorer with a touchscreen and smartphone compatibility – though more expensive than a $31,800 Android Auto/Apple CarPlay-equipped Hyundai Santa Fe – but it doesn’t. wasn’t as cheap as a Chevrolet buyer might expect. Meanwhile, although entry-level Pilots, Explorers, and Santa Fe were harder to find than higher-performance models, buyers could still purchase one directly from the dealership. No hidden hoops to jump through.
This pricing game was common for GM vehicles in the mid to late 2010s. The special-order-only 2016 Cruze L started at $17,495, while the top-tier LS ($18,995) you might find at a dealer only added a center armrest and floor mats. The 2018 GMC Acadia SL had an MSRP of $29,995 (it was advertised on The GCM website starting at $29,000, not including destination charges), but it was also a special order vehicle. The most common SLE-1 was priced at $33,555 and only added LED daytime running lights, satellite radio, and rear floor mats. You could also get the SLE-1 in colors other than white or silver, add all-wheel drive, and choose from a number of dealer-installed add-ons, but these were all extra.
Chevrolet and GMC have removed these special order vehicles from their lineups for 2022, but the prices of some vehicles have changed dramatically in this model year. The 2022 Tahoe LS, for example, initially started at $51,395 but later increased to $53,795 (note that this price does not reflect the current $50 credit as the Tahoe does not have front parking sensors and rear). Its GMC Yukon twin suffered a similar fate, starting at $53,295 at the start of the 2022 model year before hitting its current starting price of $55,795. Uh, do that $57,245 (plus $1,500 for the OnStar package, minus $50 for the lack of a steering column lock).
For more than half a decade, GM has played pricing games by announcing affordable models that are hard, but not impossible, to get. We thought that stopped when those models were discontinued in 2022, but recent OnStar news seems more or less similar.