HOUSTON – For a lot of people, shopping for a new car has always been intimidating and frustrating and even more so in today’s market with higher prices. As consumers, we’ve been trained to start with the sticker price or MSRP and try to negotiate that down. But now, dealerships are adding markups on top of the MSRP. KPRC 2 Investigates explains what’s going on and how you can still negotiate the best price.
Can dealerships just charge any price they want?
If you haven’t shopped for a new vehicle in two or three years, you may be as shocked as viewer Quy Mai was. He emailed KPRC 2 Investigates asking if dealerships can just tack on as much as they want on top of the manufacturer’s suggested retail price from the carmaker.
Quy Mai’s driveway is a testament to his loyalty to Toyota. He’s got a 4Runner, a Tacoma, and now a new Highlander. But it was the search for this newest Toyota that really bothered him. Multiple dealerships told Mai he would have to pay MSRP plus an automatic 10% markup.
Amy asked, “Did they say what that extra money was for?”
Mai: “It’s just an upcharge, a 10% upcharge because of the demand.”
Amy: “Because they can charge that.”
Car makers have warned dealers to stop charging so much
Mai remembered recent news stories of car makers. For example, when Ford and GM warned dealers to stop charging so much and adding fees for new cars. So Mai contacted Toyota directly to report the mark-ups he was seeing. Toyota’s response?
“The person told me that it’s all dealer at the independent operated. They could not do anything about it,” said Mai. Mike Rumple runs Your Car Buying Advocate. He helps consumers buy vehicles at the lowest prices.
“They own that vehicle. They can sell that vehicle for whatever price they can sell it for,” said Rumple.
He says these days dealers are calling the mark-ups everything from “market adjustments” to “ADM” for additional dealer mark up.
Here’s why dealers are charging over MSRP
“The price of vehicles have nothing to do with what the manufacturers say the value of the vehicles is,” said Rumple. “They have everything to do with what the market is willing to pay for that specific vehicle.”
And because demand is high and the supply of new cars is low it’s pushing the price people are willing to pay higher.
Rumple actually believes the car makers are the problem, not the dealers. Car manufacturers are actually making more money selling fewer cars because they have increased prices so much over the last 3 years. “Why would they make more?” Rumple asked rhetorically. Now imagine local car dealers who historically have made a certain amount on every car sold. If they are have fewer cars to sell, they need to raise the price just so they can make the same amount of money they have made in the past. What’s worse? Rumple says as car makers see that consumers are willing to pay the higher prices to dealers, the manufacturers will just continue to increase the sticker price so they can keep the money, instead of dealers.
How to get the lowest price on a new car
There is good news though. By calling around Mai did finally find a dealership willing to sell him this Highlander at the manufacturer’s suggested retail price. He went to Fred Haas Toyota World of Spring.
Mai’s advice for anyone looking for the lowest price on a new car right now:
“Fight for it,” said Mai.
Rumple said you should also call the dealership. Don’t go in person to negotiate; and get the out-the-door-price in writing.
“You can’t trust what any dealership has the price listed for online. You have to get it in writing line by line item. What is the total amount? I have to pay for this car,” said Rumple.
What do car makers have to say about dealerships charging over MSRP?
We reached out to the Houston Auto Dealers Association to chime in about these mark-ups but they declined to comment. Ford, GM, Toyota, and Hyundai did send us statements. Basically, they say they can’t control what local dealers charge but Ford encourages customers to “order a new vehicle and agree to a price in advance in writing with their dealer” to avoid these mark-ups. (See full statements below.)
And if you are intrigued and want to learn more from Rumple- with Your Car Buying Advocate you don’t want to miss my Ask Amy episode that rolls out Tuesday on 2+ at 11:30 a.m. We will post the show notes here after the episode airs. He walks you through step by step how to buy a new car to make sure you are paying the lowest price.
RELATED: Price of used cars skyrocket
Statement from Ford:
“Dealers are independent franchises and ultimately set the final price with a customer. Right now, in a very supply constrained environment, dealers are more likely to price around MSRP, unlike in the past when inventory was more available. This is an overall industry issue right now, as evidenced by an Edmunds survey in January 2022. The vast majority of our Ford dealers are charging around MSRP. The Edmunds survey of automakers showed Ford dealers charging on average at $136 over MSRP. This was the lowest of the 12 automakers surveyed by Edmunds. That can obviously vary, but we do want to provide our customer a great experience. We encourage our customers to order a new vehicle and agree to a price in advance in writing with their dealer.”
Statement from Toyota:
“Toyota has established a Manufacturer’s Suggested Retail Price (MSRP) that is, as it sounds, a retail price suggested by the manufacturer. Because our dealers are independent business owners, the final transaction price will be the result of interactions between the customer and the dealer. Our sales group has consulted with our regional offices to ask them to be aware of transaction prices and consult with dealers as needed.”
Nathan Kokes, Toyota Product Communications Senior Manager
Toyota Motor North America
Statement from Hyundai:
“Hyundai and Genesis dealerships are independent businesses that ultimately decide on the final vehicle price with customers. However, Hyundai and Genesis consistently remind its dealers of the need for complete transparency with our customers.
We strongly reinforce that prices posted on websites should align with pricing in the store, and we strongly discourage our dealers from charging prices above MSRP as it can have a negative impact on the customer experience and brand loyalty.”
Statement from GM:
“We want all of our customers to have a great buying experience, the vast majority of our dealers feel the same way. We encourage any customers who have issues to always reach out to their brands customers assistance representatives.”