If you’re in the market for a new car right now, you’ve seen the absolutely insane prices. I wouldn’t have believed it myself if I didn’t see how much the dealer markups are on some of the cars. With inflation in the market, what will come of the auto industry in the coming years? I’ve got my prediction. Do you?
Buying a New Car
At the end of 2021, I was in the market for a new car. While shopping around, I noticed most dealership markups were charging way over the MSRP value. Now, lucky for me, I did find a pretty good deal because I happened to know people in the industry.
However, I was not prepared to pay such a significant markup over MSRP. The bad part? The average consumer doesn’t usually have these connections and will pay much more than the MSRP value of the car.
“If all consumers are paying inflated markups, how does this affect the service drive?”
Inflated Dealer Markups
It was inevitable that consumers would start looking to the internet to buy a car. Websites like Autotrader or Cars.com have been big contenders in the market, along with dealership websites.
One exciting thing that came up while car shopping was that dealers have not been listing vehicle prices on their websites. When searching on sites like Auto Trader or dealership websites, you’re now prompted to call the dealership for the price. Why? Because the dealership markups on new cars have risen to insanely high levels.
Would you believe me if I told you that we found a $100,000.00 markup on a 2021 Mustang GT Premium? Or a $30,000.00 dealership markup on a Toyota Tundra? How about a $44,000.00 markup on a full-size Bronco? Well, they’re real!
Check out this week’s episode of Service Drive Revolution, we’ve listed these and more dealership markups we found in the description on YouTube.)
But what could be causing this inflation? This could be because there are currently enough customers and traffic living in a post-pandemic world. Dealerships don’t need the extra advertising or the expenses that come along with it. But, it also means that the customers are going into the dealership for their cars; they’re less likely to look up the MSRP values online before going in.
So what will happen in a year or two after every consumer that buys a car ends up paying these marked-up prices?
I’ve got quite the idea of what will happen with these insane dealer markups and our economy in the near future. I think our economy is going to slow down and, in the next year, manufacturers are going to adjust their production to match the slower pace. Some manufacturers might say they like having more demand than they do supply. But the truth is, hey want the volume.
As consumers buy cars marked up over the MSRP, their payments will be high, and they will want to get their money’s worth from the vehicle. In turn, they’ll be keeping these cars for longer. Instead of selling the car and losing money, they’ll spend the money to make the fixes to get their money’s worth.
Do these dealership markups make sense from an industry perspective? We may be creating a situation where the buyers are unable to trade in or buy a new vehicle for a more extended period of time.
How Would Dealership Markups Over MSRP Impact the Industry?
I feel there is an excellent opportunity for the service industry.
Because the consumers have invested a lot more into their purchase and most likely plan to keep the vehicle longer, we can assume they are willing to do what it takes to retain its value. With consumers feeling more enthusiastic about keeping their cars in good condition, the service industry will be given a great opportunity. In order to maintain their vehicles, customers will be coming into the dealership for maintenance and services to keep their cars in excellent shape. If the service industry sees the opportunity this brings, they’ll be ready to serve the needs of these customers and retain their trust and loyalty.