Our Car-Buying Ways May Be Changing for Good

Pre-pandemic, if you paid above MSRP for a new car, you probably never admitted it to anyone else. No need to kick yourself now. Last month, per Edmunds.com, 82% of car buyers paid $728 over sticker, or 1.6% on average, and markups over $10,000 are not uncommon in the luxury market. First came pandemic-related supply chain disruptions, then a global computer-chip shortage, and now war in Ukraine. Suffice it to say, these issues will continue through 2022. Aside from the sharks, nobody within spitting distance of the car market is happy, and everyone involved is changing their habits. Per the Wall Street Journal, “The prolonged disruption is now exposing fault lines in the car business’s century-old retailing model and prompting a broader rethinking of the entrenched way Americans buy cars.”

Some dealers say they are forced to jack prices to make ends meet. Others swear they will (probably) never charge above MSRP, but they feel burned. Per the WSJ, Mike Sanford, a Ford-Lincoln dealer, described how a customer bought a Bronco one day and flipped it online the next with a $20,000 markup. “I don’t think it is right to gouge the customer,” he said, “but I don’t think it is right for customers to gouge us, either. But that’s the market today.” Used car prices are rising even faster, per CNN. Frustrated consumers are widening their searches, raising ruckuses online, and thoughtfully expressing themselves in letters to CEOs.

Automakers stand to lose customer loyalty, so they have pushed back, threatening to curtail shipments and marketing support to greedy dealers. Ford CEO Jim Farley is watching. “We have very good intelligence of who they are,” he told investors in a February conference call, per Bloomberg. Elon Musk has reaped benefits since consumers noticed Tesla has no dealerships. Rival automakers also noticed and expect more direct customer orders in the future, since preordered cars give them more control over pricing and production. Dealers will still be in the game, but they won’t need as many cars on the lot. (More supply chain stories.)