More car shoppers than ever are paying above sticker price amid inventory shortages and elevated consumer demand. According to the car shopping experts at Edmunds, buyers paid above MSRP in a record 82.2% of all new vehicle purchases, compared to 2.8% in January 2021 and 0.3% in January 2020. Edmunds data reveals that the average transaction price for a new vehicle climbed to $728 above MSRP in January 2022, compared to $2,152 below MSRP in January 2021 and $2,648 below MSRP in January 2020.
“The fact that an overwhelming majority of consumers are paying above sticker price would have been unthinkable even just a year ago,” said Jessica Caldwell, Edmunds’ executive director of insights. “This is in part driven by affluent consumers being willing to shell out more cash to get the vehicles that they want, but there’s also a vast population of individuals who are being forced to do so simply because they need transportation and have no other choice.”
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Edmunds analysts took a look at the difference in new vehicle average transaction prices and compared them to the average MSRP across automakers to identify the brands commanding the largest amounts above sticker price and the brands yielding the greatest discounts. Cadillac topped the list of brands that commanded above-sticker price, with an average markup of $4,048 in January, followed by Land Rover, with an average markup of $2,565, and Kia, with an average markup of $2,289. Alfa Romeo topped the list of brands that brought below-sticker price, with an average discount of $3,421 in January, followed by Volvo with an average discount of $869 and Lincoln with an average discount of $510. The table below is the full list of brands.
“All eyes have been on Ford and GM since they both publicly called for their dealers to stop charging over MSRP for vehicles. Of all automakers, they might be in the most precarious position since they have very high-profile launches in the near future that appeal to a new type of customer. But looking at the numbers, there are clearly some other automakers who might want to follow suit,” said Caldwell. “Savvy dealers, though, are conducting business during this wave of inflation in a way that’s mindful of the possible adverse reaction of their customers.”
Edmunds’ experts say that holding off on a new car purchase would be the most pragmatic move for consumers in this market, but they also note that this course of action might be unrealistic for some individuals given that prices aren’t expected to normalize for quite some time.
“Consumers might be waiting up to a year or longer if they want to hold off until the market resembles anything close to the pre-pandemic normal, but some buyers simply cannot wait,” said Ivan Drury, Edmunds’ senior manager of insights. “If you know you need a new vehicle soon—or if you have a vehicle coming off lease and its term can’t be extended —doing extra research is critical to get an advantage, and using the list set forth below is a decent starting point if you’re looking out for price discrepancies among different brands.”
Drury advises that car shoppers can get ahead by:
Being flexible. Consider alternative vehicle types, brands and colors and be willing to compromise on features.
Expanding your search. Widen your geographic search for more selection if you’re in a market with lower inventory. But before you hop on a plane, make sure to lock down as much of the deal as possible.
Reevaluating before jumping straight into another lease. Lease incentives are becoming increasingly difficult to find, but APR specials are still available. If you prefer leasing, use a car lease calculator like this one on Edmunds to make sure it is going to provide you the value you’re looking for.
Negotiating for more value. If you’re facing markups above MSRP, try to negotiate the adjustment to include add-ons such as warranties, service contracts, protection packages or dealer-installed accessories.
Leveraging your greatest asset: your current vehicle. Your car’s value is one of your biggest negotiating tools in offsetting the purchase price of your next vehicle. Use it wisely and shop around for appraisals, including on edmunds.com/appraisal/.
Acting quickly. If you find a vehicle that meets all your needs, don’t wait to immediately reach out and communicate your interest to your local dealer to maximize your chances of driving it home.