How to Avoid Paying Above MSRP for Your Next Vehicle

According to data from Kelly Blue Book, this past September marked a record-breaking sixteen straight months that new vehicle average transaction prices (what the buyer actually paid) were higher than the sticker price. A research study by Cox Automotive found that in May and June of 2022, 80% of American car buyers paid over MSRP, including 34% who “paid fees they had never heard of before.” Perhaps the worst sting of all is that many of these customers paid more for a vehicle that wasn’t even their first choice of car.

As automakers dealt with a significant lack of inventory over the past year due to supply chain issues and computer chip shortages, prices have been pushed higher as buyers compete for the few cars available on the lot. However, inventory levels are slowly normalizing, and new cars are coming back in stock. With consumers dealing with inflation and a possible recession looming, many buyers are choosing to save more and spend less at the car dealership.

Even in the current climate, you should never pay above the Manufacturer’s Suggested Retail Price (MSRP) for a new car. Read on to discover why many dealerships are asking for more than MSRP for new cars, why you should never pay over MSRP, and what you can do to avoid paying over MSRP for a new car, truck, or SUV.

Why are Dealerships Charging More Than MSRP Right Now?

The fact that the overwhelming majority of consumers are paying above MSRP would have been unthinkable even just a year ago. This phenomenon is driven in part by affluent consumers who are willing to shell out more cash to get the vehicles that they want, as well as a vast population of consumers who are being forced to pay more simply because they need transportation.

The price increases are due in large part to the auto industry’s unusually low inventory of new cars amid a global shortage of semiconductor chips, which are used in many car parts. Auto manufacturers have been struggling with supply chain issues for months. Adding to this is the high consumer demand for new vehicles particularly as nearly 4 million cars have been due to come off lease this year.

Car dealerships appear to be benefiting from these shortages. Despite selling fewer cars, many dealerships are hiking prices to compensate – and many of them posted their highest profits ever in early 2022.

Charging over MSRP provides a short-term benefit to the dealer but is ultimately a long-term reputation killer to their community and customers.

Is it Legal for Car Dealerships to Charge More Than MSRP for New Vehicles?

Price hikes may be frustrating and costly, but they are within a dealership’s rights. Unfortunately, there’s nothing that can be done to prevent a car dealership from charging whatever price they want for their new vehicle inventory. This is evident in the expression “MSRP”, or the Manufacturer’s Suggested Retail Price. In other words, the retail price of a new vehicle is merely a suggestion.

Dealer markup has been a controversial issue for years, with some dealers claiming that it’s necessary to compensate for losses on other sales or, in the current era, to make up for a lack of inventory due to chip shortages.

Today’s unbalanced bargaining power between car dealers and consumers has attracted the attention of the Federal Trade Commission, which proposed a rule in June that, among other things, would require car dealers to disclose the full price that a consumer would pay for a car when the buyer inquires, excluding only taxes and government fees.
Some auto manufacturers, including Hyundai, Kia, GM, and Ford, have warned their dealers about applying high markups, even threatening in some cases to shift allocation to dealers who do not overcharge their buyers.

How Can Car Buyers Fight Back Against Dealer Markup and Avoid Paying Over MSRP?

Buying a new car should be an exciting event, and it’s often easy to get swept away when your heart is set on a particular model. Fortunately, there are ways that car buyers can avoid paying over MSRP. Aside from doing research to determine the market value of the vehicle you’re interested in, find a dealership without markups and pay MSRP. Not all dealerships subscribe to the “market adjustment” philosophy – make it a goal to find those dealerships and shop with them, even if you need to cast your net wider to a dealership out of town or in the next county. Be sure to ask the selling dealer for an out-the-door figure before going in. If the dealer refuses to provide this information, they are not to be trusted and will likely try to raise their pricing once you’re in the door.

Marino Chrysler Jeep Dodge Ram believes that our customers should never pay above MSRP for any Chrysler, Jeep, Dodge, or Ram. We believe that customers deserve transparent, straightforward, upfront pricing on every vehicle so that they know what to expect when it comes time to discuss a loan or lease. Our philosophy of honest pricing and an honest car buying process means that the price our customers see is the price they pay.

Are you in the market for a new vehicle? We’ll make it easy, fast, and fun – the way that car buying should be.

Check out our online inventory of new vehicles at https://www.marinochryslerjeepdodge.net/new-vehicles/ or give our sales team a call at 1-800-717-8961 to set up a test drive.