Why Car Dealers Are Charging as Much as $10,000 Over Sticker Price
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Here's your money briefing for Wednesday, February 9th. I'm J.R. Whelan for The Wall Street Journal. They say there's nothing like the smell of a new car. But prices that are well above sticker price? Well, they're raising a stink with buyers.
Buyers are outraged and surprised if my inbox is any indication. I mean, I've just received a flurry of notes from buyers saying we've tried dealer after dealer and we're just aghast at what they're charging us.
So why are dealers doing this and what are the car makers doing about it? We'll get to the bottom of it with our auto industry reporter Nora Eckert after the break.
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Hey, Nora, thanks for being here. Thank you for having me, J.R. So Nora, can you give us a little car sales 101 here? You know, help us understand the usual process. Who typically sets the price of a car we'd see in a showroom?
So for a new car that you're seeing on a showroom lot, the sticker price, or the MSRP it's called, is set by the manufacturer. So MSRP stands for manufacturer's suggested retail price. But, you know, it's just that.
What is causing dealers to charge thousands above sticker price?
It's a suggestion. And in a typical market, that suggestion holds quite a bit of weight. It's very rare that a dealer would sell a at or above MSRP. In fact, most sell below. But in this topsy-turvy market we're in right now, that pillar has been thrown out the window. And we're seeing a huge increase in dealers charging above sticker price.
And so how are dealers actually going about this? How do we get from the MSRP to these much higher amounts?
So some dealers are just increasing the price and affixing what's called an addendum of a market price adjustment to the vehicle. So that's basically saying we're charging this much, this is a market price adjustment, end of story. But others are justifying it by saying we're charging more and we're throwing in these extra options for you. So things like winter mats, rooftop rails, extra warranties, add-ons like that to justify the price hike.
Oh, okay. So just how common is it for dealers to be doing this?
We don't have a precise number across the board of how many dealers are charging above MSRP. What I can talk about is the trend we're seeing in terms of new vehicles sold. So in January of 2021, just about 2% of new vehicle sales were above MSRP. Right now, that percentage is about 80% of new vehicles sold are over the sticker price. Ford specifically has talked about this phenomenon.
Well, hold on. Did you just say that 80% of cars are being sold above MSRP?
Yeah, it's a really striking change, JR. And it's escalated through the second half of the year. So to think that this time last year in 2021, we were at 2% and now we're at 80%. It's an incredible increase. So Ford specifically has addressed this trend and said, Chief Executive Jim Farley said that about 10% of their dealerships in the US, and they have about 3,000 dealerships, are charging above sticker price. And he's issued a warning to those dealers that if they're doing this, if they're charging above sticker price, that Ford could withhold future sought-after models from those dealers.
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