Dealer markups, or market adjustments, happen when demand outstrips supply. At times like this, which we're experiencing now, it's common to pay at least MSRP for a car, and often much more. Here's a look at how much the average markup fee is and what this means for car buyers right now.
According to a study from iSeeCars, the average new vehicle is going for 9.9% above MSRP or around $3,753 more than MSRP. Some popular models though are commanding much higher prices – the Ford Maverick Hybrid, a relatively affordable vehicle on paper, is going for 25% over MSRP.
The Jeep Wrangler tops the list of the top 15 cars with the highest price increases, getting 26.7% more than the suggested retail price. This is $8,925 more than MSRP. Some luxury vehicles that made the list are garnering over $10,000 more than MSRP.
“As demand continues to exceed supply for these popular vehicles, dealers are tacking on market adjustments generally ranging from $2,000 to $10,000 on top of their MSRPs,” said iSeeCars Executive Analyst Karl Brauer.
Dealer markups are common but they're not the rule, so you may find a dealership that doesn't charge markups. Dealers vary in their practices concerning markups, so it pays to do your research before signing on the dotted line.
Look for telltale signs of markups such as a sale price that's higher than the manufacturer's suggested retail price, or an unusually high advertised price. Market adjustments can really add to the cost of car buying, especially now with inventory tight due to supply chain and chip shortage issues, as well as recent world events.
If you can't avoid a markup, it could ultimately mean paying more than the vehicle is worth, potentially putting you in a negative equity position for longer, and costing you more for the car in the long run. This is especially true as a bad credit borrower, since you're likely only to qualify for higher interest rates as it is, it's important to be able to negotiate the lowest sales price possible.
Dealer markups are something you can dicker over by negotiating the vehicle's selling price. Other things you should try to minimize cost on or skip paying for all together are dealer doc fees, advertising costs, customization fees, and VIN etching.
Remember though, that the more popular a vehicle is, the more consumers are generally willing to pay. This means you may end up paying more to get what you want, especially in today's market.