New car buyers are still paying more than the MSRP. Here’s how to pay less
A couple is looking at the price of a car.
Don Mason | Image bank | Getty Images
With demand for new cars still outstripping supply at many dealerships, buyers may wonder if they need to pay more than the average MSRP or sticker price to get the car they want.
According to the Kelley Blue Book, September marked the sixteenth consecutive month in which the average new vehicle transaction price, or the amount actually paid by the buyer, exceeded the recommended price.
Automakers have faced significant inventory shortages over the past year due to shortages of computer chips and other supply chain issues, driving up prices as buyers compete for the few vehicles available on the lot. Although the average price of a new car in the US in September was down 0.3% from August, or about $146, that figure still rose significantly last year. In September, the average new car price was $48,094, up 6.1%, or $2,775.
Automakers say demand remains strong, with Cox Automotive forecasting third-quarter new car sales at 3.4 million, down 1% from last year. General Motors said its third-quarter auto sales were up 24% year-over-year, while BMW and Hyundai also reported increases in sales over the same period.
But there are signs that new cars are making a comeback, and many consumers are choosing to spend less and save more as they cope with inflation and a potentially looming recession. Does this mean new car buyers should stop paying above the MSRP?
Brian Moody, executive editor of Kelley Blue Book, said that while any potential new car buyer should still feel comfortable paying at least the MSRP, consumers concerned about decal shock at the dealership should consider the following steps. to find some potential savings.
Search for price gaps at local dealerships
Moody said one of the best ways to start figuring out how much you’re going to pay for a new car you want is to shop around and check prices at local dealerships.
If they all have the car you want, priced in the $500 range or nearly the same, he says, that’s probably about the same price you’ll have to pay. However, there can be times when thousands of dollars separate those prices, a situation that Moody says should make you “call up that low-cost store and ask, ‘What’s the story here, how can I get that price?’
Moody said that even if you’re considering a car that’s selling for more than MSRP right now, it’s still worth checking the price at various dealerships. For example, according to him, he recently visited a dealership in Los Angeles that sold Ford Broncos at MSRP starting at $31,300 for a 2022 model. From July 1 to September 7, a new Ford Bronco cost an average of 21.6% more than MSRP, or nearly $8,700 more, according to iSeeCars.
Expand your potential car selection
One of the main reasons for such high prices for new cars is the purchase of luxury cars. In September, luxury car buyers paid an average of $65,775, only slightly below August’s record high of $65,835. Also, luxury car buyers tend to pay more than the MSRP. For example, Mercedes-Benz buyers paid 2% to 4% more than the advertised price.
Moody said that being open to other automakers, even within the same vehicle category, could save buyers money. Audi and Lexus luxury car buyers, for example, paid just under 1% below the suggested retail price in September.
The same was true for non-luxury manufacturers Ford, Honda and Toyota, which also averaged about 1% below the recommended retail price in September.
“If you choose model after model, car after car, you may have a way to save money,” Moody said.
Consider a used car
If saving money is a top priority, potential car buyers may want to take a look at the used car market, where the picture of supply and demand is very different from that of new cars.
While there are about 1.2 million new cars in the U.S., Moody said inventory in the used car market is more than double that.
On top of that, the average used car price has been steadily falling, even if it’s coming down from a very high point. In August, the average used car sold for $28,061, down 4% from last year but still nearly 40% up from December 2019 before the Covid-19 pandemic.
The recent decline is due to a slowdown in used car sales, which fell 9% in August from a year earlier, making it even more likely that you can get a good deal on used car lots.
Find out if you want to bargain
If you have concerns that what is written on the sticker on the window and what the seller says are very different, you are not alone.
Most buyers don’t like the negotiation process when buying a new car, Moody said, and some dealers have responded by opting for a flat-price model that’s more like buying a new TV, which lists the price any buyer would pay.
“You don’t go to Target and see a TV listed for $900, bring it to the registry and ask for $750,” Moody said. “We are seeing a growing adoption of the one price model as more buyers prefer it or are even willing to pay more to eliminate the negotiation process.”
Moody said that if you like haggling, you can still give it a try, but he noted that with supply still relatively low and demand still relatively high, many vendors “don’t have time for fun.”
“They want to sell as many cars as possible just to move on to the next buyer,” he said.
If you want a popular car, get ready
But if you’ve set your sights on the Jeep Wrangler or Ford Bronco, two of the best-selling car models of the moment, you may just have to put up with the fact that you’ll have to pay over the asking price.
“If you want to go out and buy what everyone wants, you have to pay more,” Moody said. “You can’t go and ask $1,000 below the suggested retail price; it won’t work because 10 people are waiting to buy this car at a higher suggested retail price.”
Ultimately, the trick to finding a deal for a new car buyer right now is to “look for the less popular stuff,” Moody said.
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