Dealer profit margins, or market adjustments, occur when demand exceeds supply. In times like these, which we are currently experiencing, it is common to pay at least the MSRP for a car, and often much more. Here’s a look at the average markup fee and what that means for car buyers right now.
According to a study by iSeeCars, the average new vehicle is 9.9% above MSRP, or about $3,753 above MSRP. However, some popular models command much higher prices – the Ford Maverick Hybrid, a relatively affordable vehicle on paper, costs 25% more than the MSRP.
The Jeep Wrangler tops the list of the 15 most expensive cars, getting 26.7% more than the suggested retail price. That’s $8,925 more than the MSRP. Some luxury vehicles that were on the list fetch more than $10,000 above MSRP.
“As demand continues to outstrip supply for these popular vehicles, dealers are tackling market adjustments typically ranging from $2,000 to $10,000 on top of their MSRPs,” said iSeeCars Executive Analyst Karl Brauer.
Dealer mark-ups are common, but they’re not the rule. So you can find a dealership that doesn’t charge markups. Dealerships vary in their practices regarding markups, so it pays to do your research before signing on the dotted line.
Look for telltale signs of markups, such as a selling price above the manufacturer’s suggested retail price or an abnormally high advertised price. Market adjustments can really increase the cost of buying a car, especially now that inventory is tight due to supply chain issues and chip shortages, as well as recent world events.
If you can’t avoid a markup, it could ultimately mean paying more than the value of the vehicle, potentially putting you in a negative equity position for longer, and costing you more for the car in the long run. This is especially true as a borrower with bad credit, since you’re only likely to qualify for higher interest rates as-is, it’s important to be able to negotiate the lowest selling price possible.
Dealership profit margins are something you can discuss when negotiating the selling price of the vehicle. Other things you should try to minimize costs or not pay are dealer literature fees, advertising fees, customization fees, and VIN engraving.
Remember, however, that the more popular a vehicle, the more consumers are generally willing to pay. That means you might end up paying more to get what you want, especially in today’s market.