Most New Car Buyers Pay More Than List Price

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General Motors and Ford Motor Co. have warned dealerships not to charge excessive fees above the sticker, but new data shows the trend is industry-wide – in some cases topping prices GM and Ford brands.

In January, buyers paid above the manufacturer’s suggested retail price in 82.2% of new vehicle purchases, up from 2.8% in January 2021, said Edmunds.com, a buying analyst car and data company, in a report released on Tuesday.

The high prices are due, in large part, to the industry’s unusually low new car inventory amid a global shortage of semiconductor chips, which are used in many auto parts. Added to this is strong consumer demand for new vehicles, especially as 3.9 million vehicles are to be leased this year.

Following:Everything you need to know about the chip shortage plaguing automakers

“Having an overwhelming majority of consumers pay above list price would have been unthinkable just a year ago,” said Jessica Caldwell, Edmunds’ chief insight officer. “Part of this is because affluent consumers are willing to shell out more money to get the vehicles they want, but there is also a vast population of people who are forced to do so simply because they need transportation.”

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On average, a car buyer paid $728 more than the MSRP in January.

Last year around this time a car buyer would have bought a new car at an average price rebate of $2,152. In January 2020, the average trade price was $2,648 below the sticker.

Both Ford and GM have tried to mitigate the practice of applying excessive surcharges for popular and hard-to-obtain new vehicles.

In early January, Ford warned its dealers not to resell reservations for the popular Ford Lightning F-150 EV truck. Some were charging over $10,000 extras above the sticker. The automaker also wanted customers to sign a contract preventing them from reselling it within a year.

The 2022 Ford F-150 Lightning electric pickup

Said Deep, a Ford spokesman, told the Free Press on Tuesday that the majority of Ford dealerships do not charge above MSRP.

“Ford dealerships are independent franchises and ultimately set the final price with a customer, Deep said. “Right now, in a limited supply environment, dealers are more likely to price around MSRP, unlike in the past when inventory was more available.”

Following:Ford F-150 Lightning dealership waives $10,000 markup

After Ford’s move, GM sent a January 18 letter to its dealership. In it, GM President of North America Steve Carlisle warned dealers that GM has the right to withhold allocation of the future Corvette Z06 and new electric vehicles that GM brings to market or take “other remedies” against dealers who charge money above reservation amounts. given the current shortage of new vehicles.

GM had no update Tuesday on its ongoing efforts to prevent some dealers from charging excessive markups for certain new vehicles, GM spokesman Sabin Blake said.

Following:As GM Ditches Chevy Spark, Here Are Detroit’s 3 Most Affordable Vehicles

“All eyes have been on Ford and GM since they both publicly called on their dealers to stop charging MSRP for vehicles, Caldwell said. “Of all the automakers, they might be in the most precarious position because they have high-profile launches in the near future that appeal to a new type of customer base.”

But looking at the data, Caldwell said, there are other automakers that might want to follow GM and Ford’s lead.

Stellantis declined to comment on its communications with dealers regarding pricing.

“While we remain close with our dealer network on consumer-related issues, we keep such communications with our dealers confidential,” said Diane Morgan, spokeswoman for Stellantis.

Here are the brands with the largest markups over MSRP in January, according to Edmunds analysts, who took the difference in average new-vehicle transaction prices and compared them to the average automaker MSRP:

  • Cadillac: average profit margin of $4,048.
  • Land Rover: average profit margin of $2,565.
  • Kia: average profit margin of $2,289.
  • Porsche: mid-market up $1,721.
  • Acura: average profit margin of $1,701.
  • Genesis: average profit margin of $1,603.
  • Honda: average profit margin of $1,508.
  • Hyundai: average profit margin of $1,498.
  • Audi: average profit margin of $1,325.

While Dodge is lower on the list, the markup on the sticker is higher than Mercedes-Benz, Edmunds shows. The average markup for a Dodge was $729 above the sticker, topping a Mercedes-Benz markup of $719.

Among GM brands: Chevrolet’s average profit margin was $625 off the sticker, GMC’s was $677, and Buick’s was $17.

Meanwhile, Ford’s average transaction price in January was $49,843, about $163 above the average MSRP, Edmunds said. Lincoln’s average transaction price was $61,692, a discount of $510 from the MSRP.

Here are the brands that brought the biggest discounts:

  • Alfa Romeo: average discount of $3,421.
  • Volvo: average discount of $869.
  • Lincoln: average rebate of $510.
  • Ram: average discount of $465.
  • BMW: average rebate of $199.
  • Mini: average discount of $151.

All automakers have experienced production disruptions since this time last year, with some forced to idle their factories for months as they rushed whatever chip parts they could get to their vehicles at high performance and in high demand, such as pickup trucks and large SUVs.

While most automotive experts expect the chip shortage to ease in the second half of the year, it will take several more months to fill the production pipeline and deliver new vehicles to dealerships in order to provide consumers with greater choice and better price leverage.

Edmunds experts therefore advise delaying the purchase of a new car if possible, although they realize this might be unrealistic for some people given that prices are unlikely to drop for some time.

“Consumers could wait up to a year or more if they want to wait for the market to look like anything close to pre-pandemic normal, but some buyers just can’t wait,” said Ivan Drury, director Chief Information Officer at Edmunds.

Drury said if a car buyer will need a new vehicle soon, or if a vehicle has just been leased and its term cannot be extended, do additional research on pricing and what is available. He recommends the following:

  • Be flexible and consider other vehicle types, brands and colors.
  • Expand your search to a wider geographic area for more choices. But before getting on a plane, make sure to close the deal as much as possible.
  • Reevaluate before moving directly to another lease, as rental incentives are becoming harder to find, but financing offers are always available.
  • Negotiate add-ons such as warranties, service contracts, protection packages, or dealer-installed accessories.
  • Leverage the trade-in value of your current vehicle.
  • If you find a vehicle that meets all your needs, don’t wait to contact a dealer immediately.

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Free Press writers Eric D. Lawrence and Phoebe Wall Howard contributed to this report.

Contact Jamie L. LaReau: 313-222-2149 or [email protected]. Follow her on Twitter @jlareauan. Learn more about General Engines and subscribe to our automotive newsletter. Become a subscriber.

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