‘Out of control’: Buyers pay thousands for new cars
Looking to buy a new Kia Telluride sport utility vehicle? Expect to pay $48,509, more than $3,700 more than the manufacturer’s suggested retail price.
Luxury SUVs like the Range Rover ($117,890) and Cadillac Escalade ESV ($102,584) sell for between $3,000 and $6,000 above MSRP, according to Edmunds, which compiled a list of the top 10 vehicles with the largest market adjustments in the fourth quarter of 2021.
The markups on sports cars are even more dramatic: dealers are asking (and getting) 5% above MSRP for the Corvette Stingray ($86,511) and 8% for the Ford Mustang Shelby GT500 ($91,611).
“People are accepting these awards without complaining…they’re accepting and taking the plunge,” Jessica Caldwell, Edmunds’ executive news director, told ABC News. “Dealer profit margins happen everywhere. Manufacturers don’t really have control over that.”
The automotive industry has not been immune to price increases that have affected almost every industry. Desperate consumers are starting to surrender to the new reality: discounts, incentives, and bargaining are so 2019.
In December, consumers paid an average of $709 more than the suggested transaction price, Caldwell said, noting that the price hike really took hold in August.
“We’ve never seen this happen before on a global level,” she said.
And the markups affect nearly 90% of car buyers, by one estimate, prompting some automakers to threaten to clamp down on dealerships.
Luxury margins “out of control”
It is the Mercedes-Benz G-Class, the boxy, ultra-luxury utility driven by celebrities and socialites, that is perhaps the most extreme example of dealer profit margins. The base G-Class costs $174,650, though new owners shell out an average of $30,405 extra – if they’re lucky enough to get one. Caldwell said she knows a woman who recently paid $50,000 above MSRP for a G-Class. above MSRP, according to Caldwell.
“This woman thought she got a good deal,” Caldwell said. “Consumers feel pressured to buy right away because inventory is so low.”
And it’s not just the G-Class that gets the markup treatment. The Mercedes GLS SUV and GLC Coupe SUV are also seeing massive price increases. A Mercedes-Benz spokeswoman declined to comment when reached by ABC News.
Marc Van Hengst, brand ambassador at Jack Daniels Porsche dealership in Upper Saddle River, New Jersey, called the auto market “out of control” and said he disapproved of the exorbitant prices charged by dealers.
“I don’t like making markups. It’s bad for business and it’s going to scare people off,” he told ABC News.
Van Hengst said he sees potential customers walk into his dealership and plead with management for a 2022 911 GT3 – the hottest Porsche on the market among enthusiasts right now. The 502-hp GT3 sprints from 0 to 60 mph in 3.2 seconds and has a starting price of $161,100. A quick search on Cars.com brings up listings for $307,740 – $339,000 – even $349,900.
“You get a lot of performance [in the GT3] that a lot of people won’t use at all… but people want the performance,” Van Hengst said. “The internet makes it look like it’s the most desirable Porsche of them all.”
Tyson Jominy, vice president of data and analytics at JD Power, said 87% of consumers are currently paying above MSRP, which is already at an all-time high. The average price for new vehicles is now $45,283 from $35,000 in December 2019, according to JD Power. The global chip shortage and supply crunch has caused prices to spike, Jominy said.
“There are crazy markups and the higher the price, the crazier they are,” he told ABC News. “Automakers have never seen anything like it. But some of them are telling dealerships to cool it with markups. It’s not in their best long-term interest.”
He added: “Higher profit margins are like a tax on the rich.”
Ford and General Motors are actively trying to prevent dealers from steeply increasing the price of new vehicles.
Steve Carlisle, President of GM North America, addressed customer interest in the upcoming Corvette Z06, Chevrolet Silverado EV, GMC Hummer EV, GMC Sierra EV and Cadillac Lyriq in a letter sent to the automaker’s dealer network on January 18, writing in part:
“Unfortunately, it has come to our attention that in connection with some of these announcements and launches, a small number of dealerships have engaged in practices that do not promote a positive sales experience for our customers. This puts our interests collectives at risk and generates negative press that misrepresents GM’s brands and your dealers. Specifically, it has come to our attention that some dealers have attempted to demand money beyond the reservation amounts set out in the GM’s program rules and/or have asked customers to pay amounts well below excess MSRP to purchase or lease a vehicle…GM will be obligated to take action if it learns of any sales practices or activities unethical brokerage practices that undermine the integrity customers expect from the Chevrolet, Buick, GMC and Cadillac brands.”
A GM spokesperson confirmed the letter to ABC News, adding, “We want every customer to have a great experience. The majority of our dealerships know this, but we want everyone to be on the same page. .”
In one memo written in terse termsFord asked dealers not to increase the price of its new F-150 Lightning electric truck or require customers already on the reservation list to make additional deposits or payments.
“It has come to our attention that a limited number of dealerships are interacting with customers in a way that negatively impacts customer satisfaction and damages the Ford Motor Company brand and Dealer Body’s reputation,” indicates the memo.
A Ford spokesperson told ABC News in response to the memo, “The all-new F-150 Lightning represents a leap forward in innovation for Ford trucks and is essential for the Ford brand and our dealers as we are entering a segment that we never have We compete with others who have a direct model and we need to be very careful about how customers perceive Ford and our dealer network How our dealers treat customers customers has major implications not only on an individual dealership, but also on the reputation of Ford and our dealer network as a whole. We want to show customers how our Ford dealer network provides a better experience than anyone else. ‘other.
Automakers unhappy with excessive markups could penalize finicky dealerships in the future with fewer allowances.
“Marks can damage the relationship with the customer,” Caldwell said.
Even the unloved compact car has seen its price skyrocket as consumers frantically buy SUVs. Drivers who may have avoided sedans before are ready to buy any vehicle at this point, Jominy pointed out.
“We are seeing very limited inventory and high prices in this market for the foreseeable future,” he said.
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