Joe Barhoumi “Joe’s Easy Autos”— October 13, 2022
If you’ve been shopping for a hot new car recently, you’ve probably found two things true. One, there aren’t many New Cars on the lot to choose from, if any. Two, some dealerships are going bonkers on marking up their prices. Come on; we have all seen the memes that have set social media ablaze, showing dealers charging $10,000, $20,000, or as high as $100,000 over MSRP.
You might ask yourself, how can they get away with such insane price adjustments? Well, the answer is simple. Many dealerships are looking to cash in big during supply shortages, and these vast, sometimes outrageous markups are creating quite a buzz.
I promise you that by the end of your reading, you will be 100% prepared while shopping in today’s New Car Market and that you will get a much better deal than before finding this article. There is no reason to fear shopping for just the right vehicle if you are well-prepared for the journey.
Table of Contents:
Where to Find Mark Ups When At The Dealership
Manufacturers Warn Dealers About Markups
Electric Vehicles Have Huge Dealer Markups
Shop Around to Avoid Dealership Markups
Know Your Vehicles Trade-In Value and Resale Value
Order or Reserve a Car Before Hand
Watch for Dealer Added Accessories and Add-Ons
There’s Now a Website That Tracks Dealer Markups
Have Patience and Do Your Research
What is Dealer Markup?
Car dealer markup is a tool used to impact a new car’s total price directly. In short, it is an addition to the price so that the dealership can increase profits. While some dealers have used this strategy in the past for some specialty cars, it is becoming more and more prevalent in today’s marketplace.
When a hot car hits the showroom at your favorite dealership, you will likely see some form of a dealership markup on the vehicle’s overall price. With the recent supply chain issues, we are seeing dealers use this tactic to boost profits across the board.
While it used to be only in exceptional cases, you would see this added dealer markup fee; you are now more likely to see markups on average-looking vehicles. Some dealers have priced markups across all inventory classes.
Where to Find Mark Ups When At The Dealership
To locate a dealer markup, look at the windows of any new vehicle on the dealer lot. You should see an extra sheet of paper near the manufacturer’s window sticker. This additional paper is called an addendum or supplemental window sticker, and it is usually a rectangular paper. This addendum isn’t an official factory sticker, but you aren’t necessarily able to ask the dealer to remove the additional markup.
Manufacturers Warn Dealers About Markups
Early this year, Ford’s VP of Sales for the U.S. and Canada warned dealers about the excessive reservation deposit fees they were charging customers. Usually, Ford dealers charge just $100 to reserve a vehicle at the dealership. It seems some dealerships were turning the long wait times and customer angst to turn a profit with higher fees.
According to Automotive News, in early February of 2022, Hyundai Genesis warned dealers about price markups “way above” Sticker prices.
Later in February of 2022, Subaru warned one of its dealers in Orange County, CA, about their dealer markup practices. According to Jalopnik, Irvine Subaru had about 57 Outbacks in stock they marked up to the same price. Subaru shared a letter with the dealer that they received from an unhappy customer.
Worst Offenders
The top 5 cars with the highest dealer markups are the Jeep Wrangler, Porsche Macan, Genesis GV70, Lexus RX 450h, and Ford Bronco; this news comes from Gear Patrol.
Gear Patrol states the Jeep Wrangler has an average price above the MSRP of $8,433 and an average percentage above the MSRP of 24.4%. CDJR dealerships are raking in some serious dough with Wrangler sales. For now, Jeeps are being manufactured on time, so the markups seem more excessive, considering they are more prevalent. That doesn’t mean they are any less in demand at this point, so Jeep dealers are taking full advantage.
The Porsche Macan has an average price above the MSRP of $14,221 and an average percentage above the MSRP of 23.1%. When you think of Porsche, you undoubtedly think of luxury. With that in mind, it’s easy to see why Porsche dealers can pull in such high markups with this model.
The Genesis GV70 has an average price above the MSRP of $10,278 and an average percent above the MSRP of 22.4%. Customers of the Genesis GV70 can expect to wait upwards of 10 months on average to pick up their new ride. For this reason, Genesis dealers feel they can add large markups to the GV70.
The Lexus RX 450h has an average price above MSRP of $10,847 and an average percentage above MSRP of 21.9%. This midsized luxury SUV has been a highly sought-after model for Lexus since hitting the streets in the late 2000s. With all that Toyota and Lexus are facing with model shortages, it’s no wonder the dealers are pricing them up severely.
The Ford Bronco has an average price above the MSRP of $8,697 and an average percentage above the MSRP of 21.6%. This rounds out the top 5. Jeep’s number one competitor since coming back to the market in 2020, the Bronco, has been a hot commodity. It’s no wonder dealers are making extra profits on this well-engineered marvel.
Electric Vehicles Have Huge Dealer Markups
Average EV Dealer Markups
Electric vehicles are also seeing hefty dealer markups in 2022. According to Bloomberg, The top 3 EVs with the highest average markup are the Mercedes EQS, Hyundai Ioniq 5, and Audi e-tron. On average, consumers can expect to pay $4600 over the sticker price for the EQS. For the Ioniq 5, consumers are paying close to $3000 over MSRP. For the e-tron, expect to pay close to $2000 over. Paying large dealer markups is no surprise, as EVs are tough to find in most states.
EV Dealer Markup Tracker
There is one great tool I found for tracking EV Dealer Markups. The EV Dealer Markup Tracker is a crowdsourced app designed for checking which EV dealers are charging over MSRP and those who are not overcharging. This tool can search specific models, a date range for the reported pricing information, and a markup amount range.
Ford Plans to Stop EV Markups
According to Automotive News, Ford gives dealers until October 31st to decide if they want to sell electric cars in their stores. Ford is telling dealers that if they want to sell cars and trucks like the Lightning and Mustang Mach-E, they will need to be committed to a fixed pricing model, which means they won’t be able to markup any of their vehicles.
This could prove to be a winning strategy for consumers looking for EVs with no markups. You will need to call around once this is implemented in Ford stores to see if they still have fixed pricing or are marking up pricing. Those dealers that don’t have fixed pricing will not have EVs in stock.
Shop Around to Avoid Dealership Markups
Shopping around is the key to finding the best deal in today’s New Car Market. With dealerships taking a wild west approach to the current market conditions, it is a crapshoot as to what kind of deal you will get overall. If you ask dealers near you what their dealer markup policy is for any vehicle, you should get an easy answer.
My dealership Bommarito Toyota in Hazelwood, MO, has slight markups compared to most other Toyota Dealers local to us. These below-average markups give us a clear advantage in our market, and we feel it’s a good idea to have a fair price to ensure a great customer experience. Our local customers can save on markups just for being local to us; this assures that our cars stay within our dealer radius, and they continue to service and shop with us for years to come. We play the long game.
To shop around, you will need to make a quick phone call, ask for a salesperson, and then have them explain their dealer markup to you. Find a dealer that is fair and willing to earn your business. Good deals are still out there but locating them will take some work. Also, make sure what the reservation policy is. Once you find the right combination for you, go for it.
Know Your Vehicles Trade-In Value and Resale Value
Trade-In Value and Why It’s Important to Understand Before You Buy
If your goal is to walk away with a New Car with the best deal possible, and I assume it is because you are reading this article, then you need a proper understanding of your Trade-In value. It’s essential to understand this because if you don’t, you are leaving yourself open to losing money, and nobody wants to lose on their trade-in when you already have an uphill battle. Think about it this way; if you trade in your current car for less than what you should be able to bring in, you now may need to try to negotiate the price with the dealership. Most dealers are unlikely to move on their overall sales price in 2022.
Best Place To Find Your Cars Trade-In Value
My top 3 websites to get your vehicle’s Trade-In value quickly are www.kbb.com, www.nada.com, and www.edmunds.com. When you use these sites, you will see a few different values once you go through the steps to add your vehicle info. You will use Rough Trade-In to Clean Trade-in for the average value. It all comes down to the quality of your trade. These websites will give you a close estimate of what the dealer will value your trade-in for on their used car appraisal.
Why Knowing Your Trade-In Value Gives You the Upper Hand
Knowing your trade-in value before setting foot in the dealership gives you an idea of what to look for when selling your car to the dealer. I would highly recommend printing out a few different values from different sites so that you can use that leverage when talking to the dealer. When you have 2–3 quotes, you can easily back up your claims to what you want in value for the car you are trading. Knowing the value of your vehicle ahead of time is a much better option than just going in blind and asking for a price because the dealer will print values off to show you at that point why your value is too high.
Why Dealers Don’t Want You To Know Your Trade-In Value
When you trade in your vehicle at the dealership, they want to pay as little as possible to make the most overall profit from the deal. Usually, this will mean that the dealership will hit you with an insufficient number, and it will be your job to prove the dealer wrong. Your goal is to get the best deal possible to come out ahead. You need to be just as prepared, if not more than the dealer, to win.
Negotiating Trade-In Values at the Car Dealership
Now that you have done your homework and you are working to close on your new car, it’s time to negotiate the best terms in your favor. Remember that you may need to stick to your guns on this one. If they lowball you, you will need to say you want what your car is worth according to multiple value estimations. Having your documents in hand makes all the difference, and it should be a win for your deal.
Where to Check Resale Values for the Car You are Interested In
Kbb.com and Edmunds.com also have “cost to own” tools that you can use to estimate the costs of vehicle ownership over five years. They also include depreciation estimates. You can find the cost-to-own calculator for Edmunds here: https://www.edmunds.com/tco.html. I especially like the Edmunds tool because it’s quick and easy to use.
Top 3 Makes for Resale Value for 2022
For 2022 the makes with the most top 10 vehicles according to KBB are Toyota, Ford, and in a three-way tie for 3rd, Tesla, GMC, Chevy, and Jeep. Look at the chart below for more on this. It’s easy to see that Toyota is the clear front-runner in 2022 for resale value. When making the best deal at a car dealer, keep resale value in mind.
Order or Reserve a Car Before Hand
The most intelligent way to buy a new car in 2022 is by ordering or reserving before you buy. If you can be patient with your new car purchase, this method can save you hundreds or even thousands of dollars. You’ll save on dealer markups that you would typically see if you just walked in and bought a car off the showroom floor.
Here’s how new car buyers save thousands by ordering or reserving their cars ahead of time.
Configure Your Vehicle Online First
Before stepping foot into a dealership, make sure to check the manufacturer’s website first. You will usually be able to build out exactly what you are looking for, and most will allow you to see the upfront MSRP for the model and trim you build. This information can save you money on your new car purchase.
Think about it this way; if you already know how much the specific car is before entering the dealership, you should have no problem getting that price inside the dealership. If you don’t do this upfront, you leave yourself open to paying what the dealer wants to charge you.
Negotiate Price Upfront with the Dealer
Now that you have a good idea of what you should pay based on the manufacturer’s build-out, it’s time to head into the dealership. You’ll want to present your build requirements to the sales professional and confirm that your numbers match theirs.
If for some reason, they don’t, then it’s time to find out exactly why? Are they overcharging or adding a dealer markup to the vehicle? If so, ask them why. You should be able to pinpoint if the car you are seeking to purchase is a rare find in the 2022 market or if they are being greedy.
Next, you will want to negotiate the price you are willing to pay the dealer for the car. If they don’t budge, you can always go to the dealership down the street since you are patient and ordering ahead. They will likely understand what you are doing and will commit to selling you the car at an affordable price without the additional markups.
Don’t Buy Accessories When You Order
Now that you have the price figured out, make sure that the dealership isn’t going to add on accessories you don’t want. Make it clear to them that you only want the car you built on the manufacturer’s website. If you let them know up front and they add them to the vehicle anyway, you will need to hold them accountable when your car comes in.
Put Down A Deposit
Now that you have all this done at the dealership, it’s time to move forward with securing your new car. You’ll want to put down a deposit of anywhere between $500-$1000. The deposit shows the dealer you have skin in the game and that you are committed to buying the car you want once it arrives.
Some dealerships may cash your check up front, but most likely, they will hold a deposit check until your vehicle arrives. Once it does, they will return the deposit check to you and proceed with the purchase.
Sign A Buyers Order Upfront
You should sign a buyer’s order upfront if the dealer allows it. The buyer’s order gives you something in writing that shows the price out the door so that you can match up the final costs to your buyer’s order when your new car arrives. Again, if they won’t give you this, you can find another dealership that will.
Have Patience
The most important thing to remember through the new car buying process is to remain patient. You’ll need patience with the current wait times and for any negotiation that takes place. You may also need to speak to several dealers to ensure you get the best deal. Many people go in and buy a new car the same day they walk into the dealer, and they end up with the worst possible pricing. They will pay full dealer markup because they failed to do their homework. Don’t be that buyer; you will end up getting burned in the end.
Track Your Vehicle Periodically
Be sure to track your vehicle from time to time and make phone calls each month to your sales professional. I have seen instances where a customer had a reserved car, and it was sold out from under them. As a result, the customer ended up waiting much longer than they should have.
If you stay in contact with the dealership, it’s much more likely that you don’t run into this situation. The dealer will know you are serious about buying your new car the day it arrives, and this will motivate them to stick with you because it will be a guaranteed sale in their minds.
Act Fast Once Your Car Arrives
Once your car arrives, remember to act as fast as possible to get in and make your purchase. I have also seen situations where a customer’s car comes in, and it takes weeks to get the customer in to close on the vehicle. You don’t want to be this customer because it will mean that your car could be sold to the next available customer on the waiting list.
If you follow my recommendations here, you will get the dealership’s best deal and exactly what you want. It’s going to fall on you to get this done but remember, even in a sellers’ market, dealerships still need customers willing to buy. If you show intent and follow through, you will be sure to make this process much easier for everyone. When that happens, we all win.
Watch for Dealer Added Accessories and Add-Ons
If you genuinely want to get the best deal possible when buying a new car, you must understand dealer add-ons and accessories. Many say this is a scam run by car dealerships; the truth is that these accessories and add-ons are a way to upsell for car dealers. Dealers use these accessories and add-ons to increase profits, but they are not mandatory to purchase. Don’t get fooled by the dealer and walk away, spending hundreds more of your hard-earned dollars on accessories you may not truly need.
Types of Dealer Add-Ons
When it comes to dealer add-ons, there are many different variations and combinations. I’ll talk about the most common here but remember that anything added to the vehicle or the overall contract is an upsell for the car dealership. The main thing to keep in mind is that these additional options are optional. If a dealer makes them mandatory, you have the right to question them before buying the car.
Most Common Add-ons:
Paint and Fabric Protection
GAP Insurance
Key Protection
Extended Warranties
Maintenance Packages
Nitrogen for your Tires
Window Tint
Smart Insurance (Dent, Tire, and Wheel Protection)
Interior and Exterior Accessories
Finance Office Add-Ons
When you have worked out the final overall deal, it’s time to enter the finance office to close on your new car. While discussing what lender has an approved loan for you or the terms for payment of the new vehicle, you will also be discussing additional add-on products and services. The items listed below are what you will expect to talk about with the car dealership’s finance manager.
Paint and Fabric Protection
GAP Insurance
Key Protection
Extended Warranties
Maintenance Packages
Smart Insurance (Dent, Tire, and Wheel Protection)
Factory-Installed Options vs Dealer-Installed Accessories
Most other add-ons happen either at the factory or are installed by the dealer before you commit to purchasing. When the factory installs certain options to the vehicle, you are pretty much at the mercy of purchasing these options. This is why, as discussed earlier, it is essential to come into the dealership and order or reserve the exact vehicle you want ahead of time.
Dealer-installed accessories are added before being marketed to the public. In most cases, you should be able to back out of most of these installed accessories before purchasing, but some items, like window tints or nitrogen in the tires, are not removable. That’s not to say a good negotiator can’t get them for free.
Most Common Interior Accessories
The most common interior accessories for cars in 2022 are All-Weather Floor Liners, Cargo Covers, Cargo Liners, Emergency Kits, and Carpet Floor Mats.
Most Common Exterior Accessories
Some of the most common exterior accessories for cars in 2022 are Sunroof/Moonroofs, Alloy Wheels and Wheel Locks, Trailer Hitches, Blind Spot Monitoring Systems, Body Side Moldings, Door Edge Guards, Roof Rack Cross Bars, Running Boards, and Window Tint.
Most Common Electronic Accessories
Some of the most common electronic car accessories in 2022 are Remote Start, Fog Lights, Jumper Cables, Charger Cable Packages, and Tablet Holders.
Can Add-On Accessories Be Removed If They Were Pre-Installed?
In most cases, add-on accessories can be removed or negotiated into the deal at no cost to you. It just depends on the timing.
If you are concerned about an add-on and don’t feel like it should be a cost to you or that you don’t want these additional items, then it will be on you to work to remove them from the final invoice.
One recommendation would be to ask for an itemized list of items and their respective costs so you can review them properly. Talk to the sales manager in person if you need to, or as a last resort, take your business elsewhere.
Carefully Reading The Final Invoice
Reviewing and understanding the final invoice before committing to purchasing your new car is essential. This review is really where the rubber meets the road, pun intended. The final invoice is also one of your last chances to negotiate the best terms for the new car you are buying. In rare cases, a dealer may refuse to show you the official invoice citing dealer policy. In cases like these, you’ll need to confirm that what you started with is what you should be paying.
On the final invoice, you should find the following information:
A description of the vehicle you are purchasing
Model/Options
Invoice Amounts
MSRP For any equipment or add-ons
Destination Charges
Any additional Dealer Markup
Demanding The Removal of Add-Ons, You Don’t Want
Now that you have reviewed the final invoice, now is the time to question or bring up any dealer add-ons you don’t want. It’s time to make the best deal for yourself. So have the salesperson review the final invoice with you and ask them about each item.
If you don’t want an item or didn’t agree to pay for an add-on, you’ll need to demand they either be removed entirely or negotiate the price. Either way, you’ll need to bring these up or end up paying for things you don’t want or need.
It’s important to understand that dealers aren’t usually going to make spending less an easy thing to accomplish. However, with some understanding and negotiating, you can come out ahead in purchasing your new car. Stick with my recommendations and be ready to hold your ground. You will surely get a better deal than most on your new car purchase.
There’s Now a Website That Tracks Dealer Markups
As dealerships around the country continue to add large dealer markups to new cars, one new crowdsourced website is checking up on them. Markups.org is disrupting the auto industry by crowdsourcing consumer data and making this data available to the public.
What is Markups.org?
Markups.org is a website with an eye on auto dealers. Co-founder Trey Soucie had a terrible shopping experience back in 2021. He was caught off guard by dealer markup and decided to take action so other new car buyers wouldn’t find themselves in the same predicament.
This new crowdsourced website gives consumers an edge when shopping by showing them as many dealer markups around them as possible at dealerships. The whole idea here is that consumers can sort out what dealers are not adding excessive markups so that they can purchase from them.
No More Bait and Switch
Trey got caught in a bait-and-switch offer. The dealer advertised one price, but once he made the 3-hour trip to buy the vehicle, he realized it had a marked-up price. Trey set out to find dealers that sold at or below MSRP or at least be transparent about the marked-up pricing.
The Mission Behind Markups.org
Trey and a few friends soon founded Markups.org. Their website aims to “affect positive change between consumers, retailers, manufacturers, industry professionals, and the communities they are in.”
They all have an eye on bringing people together to assure transparency amount dealers and consumers.
How to Use Markups.org
Markups.org is very simple for consumers to operate. Simply start by clicking on “Markup Listings” from the home screen. You will enter a keyword, select manufacturers, states, or a combination of the three. Click the search icon from here, then a list of dealers and vehicles will pop up.
You can also further sort additional search options on the website, but it is not needed to get a complete list.
Now that you have a list of dealers and markups, you can click on the dealer’s name to open that listing. From this listing page, you can view more details about dealer markups.
View Dealership Profiles
If you click the dealer’s name from the listing page, you can view all markups reported to Markups.org through their crowdsourced reporters. If you are looking to find the right dealer with the best possible deal on the new car you are looking for; then the listing page is where the real magic happens.
Find Dealers That Don’t Add Dealer Markups
This new website is excellent at finding the dealerships in your area that give customers the best overall experience and savings. While most dealers are marking up over MSRP, a few seem to be interested in having the best deal overall for their customers.
Markups.org is a fantastic tool for those looking to buy a new car in the next few years who don’t want to get burned by dealer markups. I recommend using this simple tool before even considering shopping for your new car. It could just save you thousands of dollars and hours of stress.
Have Patience and Do Your Research
Patience and research are the keys to buying a new car in 2022. Let’s face it, this isn’t going to be simple and easy, but you can still get a great deal if you follow my advice. Make sure you have ample time and don’t rush this; if you do, you’ll impulse buy and cost yourself thousands of dollars.
Finding The Right Dealer
Patience
Take your time and interview multiple dealers. Find out who has the best overall deals, lowest dealer markups, and who will give you a good shopping experience. It will take time, but this first step can make all the difference in finding the car you want and getting the deal you like.
Research
Use some of the previously suggested tools, like the Markups.org website. You’ll be glad you did, and this can save you some time in sorting through which dealers are playing fairer than others.
Finding The Right Car
Patience
Finding the right car will take time, but if you are focused and stay positive throughout your shopping, it will pay off in the end. Give yourself time, and don’t try to rush through this step. It’s all about getting the best deal on the best car.
Research
Be sure to compare different models in the same class while you shop. Making a proper comparison will give you some ideas to narrow things down. Find out which cars have less dealer markup overall, and then decide if these cars are suitable for what you want.
Finding The Right Price
Patience
Once you have narrowed things down, it may take a few calls and several inquiries before you find the car you are looking for without all the add-ons and dealer markups.
Research
Remember to play the long game here and consider the best price. Look to find the best price at the right dealers; you should be able to find a couple that will get you to MSRP or even better.
Waitlists
Patience
Now that you have the best deal, it’s time to get on the waitlist. How long you wait can come down to your strategy and the current market conditions. Dealers only receive so many cars per month, and the time of year can play a factor.
Research
You can again call around to dealers and find the best wait times for your chosen car. Ask them how long the wait list is, then how long it will take before you get a car once you order or reserve.
Deposits
Patience
If you can wait for your new car, it’s time to place a deposit, so you are in line and waiting. Some vehicles can take months to come in, but the best deals are at the end of that long wait period.
Research
Ask dealers how they process deposits; they are usually a bit different. I would look for a dealer that will accept and hold a check. These dealers also seem to be the ones with the lowest overall markups.
Buying a new car in 2022 will take patience and research on your part, but the reward here is considerable savings! Put in the time and effort when buying your next new car, and I promise you will benefit from doing so.
The Bottom Line
The bottom line here is that you need to do your due diligence. Manufacturers will not stop adding huge dealer markups anytime soon, so be prepared in an unstable market.
I hope you find this information helpful and feel better prepared to face off with dealers. Please take my advice and go out to find the best possible deal. After all, if you can find that diamond in the rough, you will likely win big.
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