Navigating Car Price Increases: How to Mitigate or Avoid Dealer Markups
Throughout 2022, new car buyers paid an average of about $700 more than the manufacturer’s suggested retail price, according to Edmunds data. Those looking for a new vehicle today may be in for a shock after seeing that a dealer has priced the vehicle they want well above the MSRP.
Dealers have leverage to set prices through added accessories and price increases. These so-called market adjustments and, by extension, accessories added by dealers on new cars were once reserved for highly anticipated vehicles or limited-edition models. But now they are commonplace and part of the cost of doing business in today’s market of low inventory and inflated prices.
Edmunds explains what you can expect from dealerships for the rest of 2022 and offers tips for getting the best deal.
WHAT ARE THEY?
You can find these markups on new vehicle glass at a dealership or, in rare cases, on the dealership’s website. You’ll want to look for a rectangular sheet of paper, often displayed near the official window sticker of a new car or sometimes on the windshield. This is officially an addendum or extra window sticker. The addendum will contain a number of dealer installed accessories, a market fit or a combination of both.
Although this is not an official factory sticker, it does not mean that you can ask the dealership to waive the charge. What makes it difficult for a buyer today is that if you don’t want to pay for those items, the dealer will happily wait for the next customer who will.
A market adjustment or markup is essentially a fee that the dealer has designed to reflect a low supply, high demand situation. It can range from a few thousand dollars on common vehicles to over $50,000 on high end or limited production vehicles.
DEALER INSTALLED ACCESSORIES
Common add-ons can include anti-theft devices costing around $800 to $1500, door edge guards which can range from $400 to $800, and nitrogen filled tires which can range from $90 to more $700 if included with a warranty. When combined, these elements can add thousands to the price of a new car.
For those who aren’t interested in these extras, it’s not as easy as asking for them to be removed since they’ve already been installed. For example, you cannot remove a ceramic paint coating once it has been sprayed on the vehicle. The matter becomes more complicated because you are now negotiating on several fronts: the accessories, the price of the car and perhaps also your trade-in.
TIPS FOR DEALING WITH ADD-ONS OR MARGINS
Check for price increases: If you’ve identified a car you’re interested in, call ahead and ask if it has a markup or comes equipped with dealer accessories. If so, inquire specifically about the items and their cost.
Cast a Wider Net: Not all dealers will buy into this “market fit” philosophy. Your goal is to find these dealers and shop with them. You may need to expand your net to an out-of-town or neighboring county dealership. To find them, try searching online with terms such as “no markup (brand) dealers in (city or state)” or “above MSRP dealers in (city or state)”. Look for threads where people are discussing this topic.
If you want the accessories: there’s some value to many added items, the convenience of installing them already, and the ability to fold the cost into your car loan. But it’s important to note that you’ll likely pay more – the dealership likely priced the accessories up 40% to 50% over what they paid for them.
Don’t be afraid to bargain: dealers don’t always expect people to pay the full markup, so if the vehicle you really want has a market fit, try offering half its cost . The dealership may counter, but it can be a win-win for both parties – you could save thousands of dollars and the dealership still sells the vehicle above MSRP.
Order the car: This option requires patience and planning, but in most cases a vehicle ordered from the factory will probably not have been marked. You can get the exact car you want at MSRP as long as you’re willing to wait. If a dealer insists on adding accessories to a factory-ordered vehicle, we suggest shopping elsewhere.
EDMUNDS SAYS: At a time when vehicles are scarce, dealers want to maximize profit on each unit given that margins are already low on new cars. While market adjustments and add-ons can be frustrating and costly for consumers, they are within a dealer’s rights. After all, the “S” in MSRP stands for “suggested.”
This story was provided to The Associated Press by automotive website Edmunds. Ronald Montoya is Consumer Advice Editor at Edmunds.