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Image credit above: It’s now common to pay more than list price for new cars. Buyers paid above MSRP in 82.2% of all new vehicle purchases in January 2022, up from 2.8% in January 2021. (Photo | Getty)
Kyla Moles has bought many cars in her life, but her latest quest for a vehicle felt more like a competition than a shopping expedition.
“It was a heartbreaking experience,” says the 53-year-old office manager and mother of three. Her more than seven-month attempt to purchase a new 2022 Hyundai Palisade finally came to an end in March when she drove off a dealership lot more than two hours from her home in Dallas.
The distress took many forms.
Although she was known for her haggling skills, Moles found she had little influence. Dealers of another brand pressured her to buy a used vehicle at a higher price than a new vehicle. She spent hours searching online inventories for Texas and Oklahoma dealerships.
Moles’ frustrating trip can be traced to a domestic problem: demand for automobiles is outstripping supply, which is being strained by the global shortage of semiconductor chips. New vehicle sales in the first quarter of 2022 were the weakest in a decade, according to research firm Cox Automotive.
As Moles and so many other buyers have learned, buying a new vehicle today takes ingenuity, patience and flexibility. Good doses of luck and digital knowledge also go a long way.
If you haven’t purchased a vehicle recently, there are some things you need to know to prepare for the upside down road ahead.
Fewer cars to choose from
You may be able to go to a dealership and find the exact car you want. If so, consider yourself extremely lucky.
“Customers looking for a new vehicle should not expect to see rows of vehicles and all the trim lines on the lots like in the past,” said Marc Cannon, executive vice president and director of customer experience at automotive retailer AutoNation.
Cars arriving at dealer lots are usually moving quickly. Consultants JD Power and LMC Automotive predicted that 56% of vehicles would sell within 10 days of arriving at a dealership in April.
Making a buying decision quickly is important, as is being ready to move.
“I tell people the more flexibility you have in terms of colors and bells and whistles, the better our chances of getting you something this year,” says LeeAnn Shattuck, who helps customers choose and buy vehicles. and is called “The Car Chick.
Thin inventories also mean thin opportunities for test drives.
Since buying a car without driving it first isn’t something Shattuck recommends, she had to get creative. She may suggest customers test drive a car in a trim level or even a used car to find out the ride quality, for example, and the feel of the seats. Renting from a resource like car-sharing marketplace Turo could also be a solution, she says.
A third option is to borrow a friend or relative’s car – which is how Moles was able to test out a palisade.
Learn more about “Factory Order” and “In Transit”
Many people who can potentially wait months for a new car buy through alternative means.
Some manufacturers allow customers to order from the factory, for example. Dealerships usually handle factory orders, and many handle a lot.
“AutoNation’s inventory of new incoming vehicles, for the most part, has been pre-ordered,” Cannon said.
Another strategy is to put a deposit on a specific vehicle that is “in transit” from the factory to a dealership. You can find this status attached to cars that are advertised on manufacturers’ and dealerships’ websites.
If you see a car in transit that you like, contact the dealer it’s headed to and ask if it’s still available for purchase and if you can put a deposit on it. Dealerships have different rules regarding deposits, and many will require non-refundable deposits which must be paid in person.
Some resellers may offer a third alternative which Shattuck does not recommend. You can pay a refundable deposit to reserve a car that dealerships hope they will be assigned – as opposed to a specific one with a vehicle identification number (VIN).
“They take your money without a car to associate your money with,” Shattuck says. “You should never post a deposit on a car they don’t have a VIN for.”
Stuck with the sticker price, or more
It is now common to pay more than the list price, also known as the Manufacturer’s Suggested Retail Price (MSRP).
Buyers paid above MSRP in 82.2% of all new vehicle purchases in January 2022, down from 2.8% in January 2021 and 0.3% in January 2020, according to research firm Edmunds.
“These days, I feel like if you get to the list price, it’s a bargain,” says Ronald Montoya, consumer advice editor at Edmunds.
One way to pay more than MSRP is if you’re charged for “dealer add-ons,” extras that dealerships install, such as window tinting, paint protection, and tire filling with nitrogen. instead of air.
“In the past, I’ve refused to pay for those,” Shattuck says. “Now it’s more about trying to minimize it or at least make it into useful things for (my specific client), like, ‘Can we have this instead?'”
Some dealers are also betting on a “market adjustment” which can increase the price by thousands of dollars. “You don’t get anything back – they just charge you extra because they can,” Montoya says.
Knowing that there is likely another buyer around the corner, dealers may not want to negotiate these additional costs. However, you may find a better deal if you expand your search radius.
“Some dealerships don’t brand their vehicles and will just charge you the MSRP,” Montoya says. “I’d love to shop at these even if it means driving an hour or two.” The crowdsourced Markups.org website can help you see which dealers are covering the extra costs.
“The good news is that trade-in values are at record highs, so you can get a lot more than you ever imagined for your car,” Montoya says.
Indeed, Moles was thrilled that the dealership offered her a trade-in offer close to what she originally paid for her “beloved” 2017 Honda Pilot.
The moles had been looking for trade offers from more than one source, a strategy Shattuck recommended.
“There is absolutely room for negotiation on the value of your trade,” says Shattuck.
The market won’t change anytime soon
Rising gas prices and interest rates could dampen demand for new cars in the short term.
What is more predictable is that the supply side of the equation will remain messy.
“Improved inventory conditions are unlikely to occur in 2022 as many customers are now waiting for their already reserved vehicles to be built,” according to a statement from Cox Automotive senior economist Charlie Chesbrough.
Still, Montoya speculates car buying may not return to pre-pandemic levels.
“Dealers realized they could get away with having fewer vehicles on site and charging more for them,” he says. “We may see a reduced level of inventory even when things are going well due to how dealers have adjusted to selling in these times.”
Moles, meanwhile, is now a happy driver.
Mindy Charski is a Dallas-based business journalist, content writer, and ghostwriter currently covering marketing, personal finance, and small business.