This week's community question hits close to home, as I spent 10 years in the car business. And let me tell you, it's serious business with pressures coming from everywhere: bankers, manufacturers, city/state/federal rules, customers, and everything else that can go wrong when you own a lot of cars and have to keep them safe and ready for delivery.
That said, I have no love lost for dealer markup. An example is below:
$5000 worth of markup on a Chevrolet Bolt? No way. (not crazy about the $1579.00 charge on the example above, either.) Maybe this is acceptable on a C8 Corvette, because we live in a free market and sometimes supply is 100% unable to meet demand. I love the free market and I love the internet, because you can easily find a dealership that won't mark up their inventory...either out of principle or because they have too many of the damn things in their parking lot. (And the bank note on their inventory is coming soon!).
So my short answer: I can't imagine a time when I would pay dealer markup, but if I was in a rush and what I wanted was unavailable anywhere else for less...
Sajeev, I agree 100% with your short answer. I will give you the flip side of dealer mark up. When I was ordering my C7 Corvette, the dealer just received their first 2019 ZR1, which was on their showroom floor. I asked the sales manager, “what’s it going for?” He replied, “sticker price, we never mark up our cars, customer loyalty is worth way more to us than any mark up.” So there still are honest dealerships out there.
I appreciate your insight, and I am not surprised to hear it. Good dealers run their businesses ethically, and truly know that long term moves (i.e. customer retention) are more important than short term gains (one upset customer you fleeced who will tell everyone).
I refuse to pay mark on any car.
It is puzzling why they are marking up a Bolt. Could they be preparing for insurance fraud with a burning battery?
Even with my love of a C8 I will not buy one unless it is below sticker.
My last purchase was a battle. I found what we needed and we sat down to deal. This deal too 4 plus hours and my standing 4 times to walk out. In the end I was able to get my deal of near $7,000 off sticker and an additional $2500 on my trade they tried to short me from true trade value.
In the end I got my price and added another $1500 in GM card money.
I assume the Bolt was marked up because it's unique and they were hoping someone would jump at the chance to have something different from their neighbors. Who knows, maybe there was a run on Bolts in the region that dealer operated in???
At least they could’ve put something like $4998.00 to make it a little more psychologically acceptable. But geez, they must’ve been confident it would move off the lot.
Sure seems like they risk alienating past and potential future customers though. Simply put, that would just piss me off. I’d walk, aware that if I went through with the deal it would haunt me…forever.
Now that you mention it, I don't know if I've ever seen dealer markup "marked up" in that more psychologically acceptable manner! Which kinda makes me wonder if the OEMs force them to do that.
I have not paid more than dealer invoice on any of my cars for 20 years. If you don't want to sell to me at dealer invoice I walk and find someone who will.
It is called "capitalism". A few (very few) are in such low production and high demand that Just maybe a dealer can get away with this. At his risk of sitting on it as a longterm NOSALE.
The timing for this topic couldn't have been any better for me, as I just bought a 2021 Jeep Rubicon 392. At this point I've had it for less than a week. Anyway, the markup on all of the cars in their lot was $5000. For this monster, it was $15,000. Some folks think I'm an idiot for doing that, and maybe I am, but it's what I wanted and it's my first new vehicle I've ever owned (I'm 50-something). So what does a $15K markup do for me? It bought me joy.
Hey, it's only money. What the heck - it ain't good for anything except spending. Let me repeat: money is only good for one thing. You can't eat it, drink it, or breathe it. You can save it, but that only keeps it tucked away until you can - what? SPEND IT, that's what (or your heirs can, but still the same argument). As far as I know, we only get to live once. And trust me, during that "once", life can be pretty wicked and knock you around a lot. So if you've got the dough, and spending it makes you happy for awhile to spend it, why not? @thebrave might not get to read this for awhile. Why? Because he's likely out enjoying the heck outta his new Rubicon!
I bought a new 2021 Bronco Sport las December . It was likely the first one to be sent to NYC. I had to pay $2500 over sticker. I wasn't going to get it if I did not. A few weeks later, we had a 22 inch snowstorm. It performed like a charm and got me to work every day. I would have had some trouble without it. In the words of Yogi Berra; " If U gotta have it; that means U need it. If U need it, that means U gotta have it.".....
Additional dealer add-ons/markups are the main reason that I purchased my last two new cars via a credit union sales rep. No ridiculous, hours long "negotiating", just the msrp less the discount negotiated by the credit union service. No add-ons/paying for "paint protection, glass etching, scotchguard, pin striping," etc. ; just a new vehicle as delivered from the manufacturer. If I WAS going to negotiate w/ a dealer, it would be to remove all of the add-ons, or I'd simply walk! 🙂
The majority of BMW, MB, Audi, and other higher end brands often have "regional specialists" who can and will order a car for you, brand new, and customized with exactly what you want directly from the manufacturer. I thought this was a fake thing, but after my friend bought a new M5 - $6,000 BELOW MSRP btw - I tried it myself. You can find these folks through local car clubs for those brands. Over the years I have seen one-off specialty cars that are marked up over MSRP - maybe it has some unique interior or other attribute that you can't get anywhere else - but if it says "marked up over" I just read "sucker" and move on.
This market adjustment stuff is crazy. I really like the Kia Telluride and Hyundai Palisade. But, dealers want $3-5k over MSRP and they quote wait times anywhere from three to nine months. Last week I did find a Telluride on a dealer's lot that was in a color combo I really like. They wanted $13,000 over MSRP. Non- Negotiable. I can do a lot of upkeep on my present car for that!
The sad thing about doing this (adding and showing the markup) is that they probably lose more 'invisible' customers than anyone who'd actually complain or point it out.
That is, if I'm browsing a car lot and see something like this, I immediately walk off the lot and think something negative about the dealership that would do this. I'll likely never venture near the place again, and WORSE - if someone at a 'backyard do' were to mention the place, I'll tell them why I'd never darken their door.
In other words, they lose customers they never knew they lost, and never will know about it.
It has been 47 years since the local Chevy dealer reneged on a deal for a special ordered Corvette. It was supposed to be a 1974 model but did not get built in time so it came in as a 1975. The base price went up $100 that year but the stealer wanted $1000 more. I told them what I thought about them, demanded my deposit back, and have been bad mouthing the a-holes ever since. Although I still go in for a test drive once in a while just to waste their time.
Blame the buyers who are willing to pay whatever to get what they want. As long as there are enough of those, there will be dealers tempted to grab the extra $$$.
I just ran across this on a potential replacement for my truck. They called it “market value”… with a “+ $1500”. I’m guessing someone felt that term would make it more palatable, but potato-potahtoe. Why not “bend over +$1500”?
Anyway, I looked, I saw, I thanked the salesman for his time and left. He knew without me saying anything.
Almost all of the time, paying additional dealer markup is a short-term game and a long-term loss. Only the rarest of vehicles who production is intentionally limited will be able to sustain ADM as the manufacturer has a built-in incentive to increase supply (and profits) by producing more vehicles. So, the ADM should really be named "Early adopter fee". You want to be the first guy on the block with that new vehicle? You may have to pay the price, but understand that in a year or two, someone else may have the same vehicle or even one slightly improved that they purchased at MSRP or less.
One example of countless: remember how insanely popular the Ford Shelby GT350 and GT350R were when first introduced? I inquired about acquiring a GT350 from a local dealer who responded with a $25K ADM. Conversation aborted.
In two or three years, that ADM largely disappeared, and after 4 years and that $25K ADM had turned into discounts off of MSRP.
Many people mistakenly think that dealer ADMs are recovered in resale value of their vehicles. Unfortunately, insurance companies don't recognize ADMs as part of increased value in vehicles, and once ADMs disappear from new vehicles, the worth of the corresponding used vehicles likewise plummets.
There are two situations that cause me to walk out of a dealership; one is the ridiculous dealer markup and when a salesman says "let me get my manager". Both are hot button triggers and I will literally get up if sitting and walk out without answering another
question from the salesman.
That just happened to us last week. We went to a Subaru dealer to shop for a new Crosstrek my wife wanted. They had a 2 year old Crosstrek to test drive since they didn't have any in stock. My wife liked it. So we talked to the sales person about a new one. She said they have one similar to what we want coming in, in a month. The price would be $2,000 over the MSRP, it would require $500 non-refundable down payment. I said I was a Costco member and they were the Costco dealer. She said that doesn't count since they can't get cars due to the chip shortage issue.
A friend suggested a car broker he had used. They found the exact car we wanted that would be delivered in 3 weeks (to a different dealer). Price would be MSRP, no discount, no add on. He then gave us a price on our trade-in that was within blue book range for our area. We went to Car Max and they offered us $500 less for our trade in vehicle - so we felt the broker's offer on our car was good.
Now, we have the new car; pricing was what they had told us and we saved $1800 worth of taxes as our state allows trade in value when figuring the sales tax of the new vehicle.
It took 20 minutes to test drive the vehicle, 40 minutes to do the paperwork.
This worked great for us.
Also, the broker told us they make about $300 to sell the new vehicle to us. The dealer treats them as a sales person and pays them that amount. The broker makes money on the trade in - which was a better deal for us than what Car Max offered us. And when you figure in the sales tax savings based on the trade in value, this was a decent deal all the way around. Especially during these chip shortage times.
I joined the queue for a C8 at a certain well known Atlantic City, NJ dealer the first week in March. I've now ordered my car and have reached that point wherein Chevrolet formally accepted my order. That portion of this took just less than 7 months. As is well known, it is an MSRP deal. I have no problem waiting for a non-market adjustment deal.
My take on “Added Dealer Markup” is this; I’ll pay it if the dealership can show me in any used vehicle price guide where it adds for additional dealer mark up because it was a “hot” car when new. You know what? They can’t. I don’t care what make or model vehicle that was mass produced has a addition for ADMU list in the options, like for leather or a sunroof or high end stereo system.
I was looking at the then new z ad Miatas and the dealer had his own ADMU “add-a-sticker” right next to the manufacturers MSRP sticker. I said, show where that shows up on the used vehicle price valuation? Oh you can’t? Well then, I’m NOT paying it! No vehicle is worth it…
With the chip shortage there are a lot of vehicles at dealers with "market adjustments". These are cars you "need" not "want". So. considering everything, If you REALLY
want it, have the $, go for it
I was in a jaguar dealership - back when they were still owned by Ford and were actually still selling cars - and they had a brand new XJ with the big super charged engine and the coolest specialty stitching I have ever seen in an automobile - it was incredible. It had a $15,000 mark up on it, in BIG red letters hanging from the mirror. The sales manager said they made a deal with the buyer of the car to leave the car in the showroom for another 30 days because it was generating that much buzz. I did see a good number of folks come in just to look at the car while I was there during a service visit. This was before cell phone pictures were ubiquitous of course...
Recently had this experience with a Nissan Frontier, a 2022. I currently have a '17 and just retired and figured this truck would be my last. Had a 5K markup on it. I told the salesman that I would start my negotiations down from MSRP. He said the 5K was not negotiable. So I said adios. They would not even consider any other offers.
If you really, really want the latest, the greatest, the whatever to impress your friends and neighbors, or maybe it is something you have lusted after then yes it is evidently worth it to you. Hey, this is still America you can pay it, or simply walk away. Isn't it nice to live in a country where we still have freedom of chose.....?
In my car buying experience there are two kinds of dealer markups. There is "market adjustment" which we now see due to the paucity of new vehicles in the market because of
the chip shortage. This is essentially extra profit over MSRP. There is also "dealer adds" which is the typical door edge guards, paint sealer, nitrogen tires, etc. The insidious part of dealer adds is that they are charging you gross amounts for features you may not want or need. I refuse to pay either one.
It pays to wait. In 2019 I wanted a C7 Corvette, looked all year, even considered a used one. Then in December of 19 my local dealer had their last one on sale for $15,000 off MSRP! Me and the wife ran down and got it, I was amazed it was still there. But, there was a catch, $4000 of the discount was, you had to be a current Vette owner and finance through GM. But we still got $11,000 off the price, and it is a great car!
I have and will never pay an ADMIN or extras charge. I also do not understand how or why anyone would pay MSRP for any new dealer vehicle. Never have and never will. Especially today, with internet and physical stores, credit unions and other services there is no need to ever pay full price or more. There may be a car colour and package I definitely want, but never the specific car at the dealer. Go to another source, you will always find someone willing to negotiate.
I bought a new Bullitt mustang a while back . I wasn't the first guy on the block to buy one and thereby saved thousands as I found a dealer marking them down by the time I decided to purchase one. They had marked it down about what the sales tax would be if you paid full price in cash so out the door it ended up just the same as paying list price but with no sales tax. Here in Georgia we pay from 7 to 8 per cent sales tax depending on county you live in . This BTW was the first time I ever paid list price even including the sales tax and the most I ever paid for a mustang. Yeah it was worth it. But that's a whole other story . lol
I guess I'm an outlier. The last time I bought a brand new car was 1970. I always find a low mileage used car. Three reasons. Number one; I do not want to sit for hours at a time in an off gassing box of toxins. That "new car smell" is carcinogenic. Number two: I'm not chasing status. Number three; I can't justify paying 20% of the price of a vehicle in depreciation on the first day.