Eighty Percent of New Car Buyers Paid Over MSRP in January

Buying a new car in January hurt wallets more than ever.

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Eighty Percent of New Car Buyers Paid Over MSRP in January © Eighty Percent of New Car Buyers Paid Over MSRP in January

It's no secret that the new car market is currently an utter mess. Coronavirus has hamstrung factories across the globe, shipping is an absolute nightmare, and manufacturers cannot build anywhere near enough cars to meet demand. This has manifested a terrible situation for consumers, but an incredibly lucrative one for anyone selling four wheels and a set of keys, as dealer markups skyrocket and the used market continues to defy the laws of depreciation. And unfortunately, for anyone hoping for a new set of wheels, the market shows no signs of slowing any time soon. A staggering 82.2 percent of new cars sold in January went for more than MSRP, which is a new record, Edmunds reports.

The average new-car buyer in January spent $728 more than MSRP on their purchase, but that average varied widely by brand. Buyers shopping for a Cadillac—whose cars already MSRPed at an average of nearly $77,000—paid an average of $4,048 over MSRP to take home their new cars, the steepest premium in the industry. Following Cadillac was Land Rover, which shook buyers out to an average of $2,565 over MSRP, and Kia with an average of $2,289. Thanks to Kia's relatively low average MSRP, that $2,289 upcharge represents the highest markup bump in the industry, at 7.1 percent over sticker price.

Yet, Cadillac is not a massive outlier in any regard; out of the 33 brands that Edmunds tracked, only six—Mini, BMW, Ram, Lincoln, Volvo, and Alfa Romeo—actually sold their January inventory below MSRP more often than not. Alfa Romeo was the sole manufacturer surveyed that had four-digit average discounts compared to 11 manufacturers that sold cars for an average four-digit markup. And all of this is historically absurd for the month of January, which is in normal times a slow sales month. Pre-COVID, only 0.3 percent of new cars sold in January 2020 left the lot for over MSRP.

But these are not normal times and dealers know it, which explains the elevated pricing. Most OEMs have been silent on the matter of absurd dealer markups, choosing instead to let their dealer networks determine the best course for themselves, but Ford and General Motors have commented openly about tamping down or ending the practice

While GM's Cadillac still leads the market in markups, Ford managed to average only $163 over MSRP, despite the continuing gulf between supply and demand for its most popular models. Perhaps the days of needing to pre-order a Bronco to walk out the door with one at the advertised price are finally ending? Regardless of what brands buyers are shopping for, though, it's likely that it'll be a while before they're paying sticker again. 

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