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Chrysler LLC dealers being dropped by the auto maker have been selling vehicles for substantially less than those slated to remain, according to retail specialist Edmunds.com.

The company announced plans last week to drop a quarter of its U.S. dealers who, according to Edmunds, had been selling vehicles at lower prices for months.

However, expectation of the closure plans saw the pricing gap widen substantially for Chrysler and Jeep brand dealers in May, though those at Dodge outlets didn't change significantly.

Chrysler is embroiled in legal challenges with many dealers unhappy at being dropped, and the Edmunds data suggest the market could be vulnerable to price wars between surviving dealers and those earmarked for closure.

Edmunds sampled transaction prices at dozens of Chrysler dealers around the country. They found soon-to-be closed Chrysler brand stores sold vehicles for $2,672 less than the average dealer in May. Jeep dealers faced with closure had prices $1,204 below the average.

Before May, the differences ranged from around $100 to $1,000.

The Edmunds data comes amid anecdotal evidence of severe price cuts as dealers race to clear out inventory before being dropped by Chrysler.

U.S. auto makers have argued that an oversaturation of dealerships drives down profitability, in part because dealers get into price wars that drive down revenue.

General Motors Corp. (GM) this week sent letters to 1,100 of its dealers, notifying them of its plans to terminate their franchise agreements by October 2010.

-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.