Cars Are Selling for Far Above the Sticker Price
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Here's your Money Briefing for Tuesday, June 29th. I'm J.R. Whalen for The Wall Street Journal. If you've been shopping for a car lately, you felt a little extra shock in that sticker shock. The auto industry has turned into a seller's market with dealers asking for prices well above, often thousands of dollars above, the manufacturer's suggested price.
There is a pretty significant vehicle shortage right now, and that's caused by some compounding factors. It started as the pandemic. Now there's a chip shortage. So it's just a very simple supply and demand equation.
Coming up, we'll talk with our auto industry reporter, Nora Naughton, about these sky-high car prices and options that you've got to avoid dealer markups. That's after the break.
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Why are car prices currently spiking above sticker price?
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Want to experience that new car smell? Be prepared to pay for it. The research firm J.D. Powers says that this month about 75% of all vehicles sold in the U.S. went for at or above sticker price. So what's behind the surge in prices, and what can you do about it? Nora Naughton covers the automobile industry for the WSJ, and she's with me now to discuss. Nora, thanks for being with us.
Thanks for having me.
So Nora, the idea of car dealers charging above the suggested retail price, is this common?
Not really. Typically, when you go shopping for a car, you expect to get a bargain. And that's sort of the unique experience of car shopping in general is that you get to haggle. You don't get to do that for, you know, the bag of Tostitos at the grocery store.
Yeah, that's for sure. So why are car dealers charging above MSRP? And how much money are we talking about?
There is a pretty significant vehicle shortage right now, and that's caused by some compounding factors. It started as the pandemic. Now there's a chip shortage. So it's just a very simple supply and demand equation. And, you know, in terms of markups, we're talking anywhere from a few hundred dollars to ten thousand dollars, depending on how popular your vehicle is.
Wow.
What pandemic and supply-chain factors caused the vehicle shortage?
A ten thousand dollar markup. What kind of car would command that much over the original price?
Well, most commonly it's been the Kia Telluride. That's been in short supply basically since it launched a couple years ago, and that's only been made worse by the shortage and by production issues due to COVID.
And of course, it's not just Kias. So let's back up just a bit. Maybe you can help us understand something about the car industry. Who actually sets the prices? Is it the dealer or the manufacturer?
Yeah, so the dealer buys the car from the manufacturer and that's when the car company books revenue is when it goes to the dealer. And then the dealer owns the cars and can sell it for whatever price they want to. So it's actually not unlike most retail. The factory does set a suggested price. But what's different in the automotive world is that the retailer is up front about that suggested price. So you know where you're starting from. So the factory sets a price.
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