This caused the average transaction price to hit $45,717 in January, or $728 above MSRP.
It was up nearly $6,000, or 15%, from January a year ago, and about $7,500 more than the average price paid in January 2020, just before the pandemic started to rock the ‘automobile industry.
Only 2% of buyers paid above MSRP a year ago, with buyers paying an average of around $2,150 less than the sticker at that time.
“Demand is at an all-time high and supplies are historically tight,” said Ivan Drury, chief information officer at Edmunds. He said if a buyer is unwilling to pay above the list price, the dealership can be sure there will soon be another buyer who will.
“We only speak a 10 to 11 days on average for the time the vehicles are in the field,” he said. “We have never seen this.
Part of the price increase is explained by the fact that consumers are increasingly buy more SUVs and pickups and fewer sedans, which are generally less expensive. They also choose more expensive options, such as automatic braking and lane departure warnings designed to make cars safer.
But the main factor behind the price increases is the shortage of cars.
The dealers are the big winners
So while automakers are benefiting from not having to offer some of the cashback offers or other incentives to drive demand, auto dealers are seeing booming profits that come from higher prices.
But many car buyers resent paying more than the list price. And their worries worry the some of the automakers themselves.
“It has come to our attention that in connection with some of these announcements and launches, a small number of dealerships have engaged in practices that do not promote a positive sales experience for our customers,” reads a letter that Steve Carlisle, president of GM North America, sent to dealers. “Specifically, it has come to our attention that some dealerships have attempted to demand money beyond the reservation amounts set out in GM’s program rules and/or have asked customers to pay amounts well above MSRP to purchase or lease a vehicle.
Ford spokesman Said Deep said Ford has informed dealers of similar concerns about the Lightning, which is expected to begin production in the spring; customers with reservations could start completing their orders from January 4. He added that the company was also considering the big bounties for other flagship models, including the Mustang Mach-E and the gasoline-powered Bronco.
But neither automaker has said it outright prohibits the widespread use of pricing against list price by dealers, only when the price is “well above” that benchmark.
AutoNation CEO Michael Manley, who was formerly CEO of Fiat Chrysler before it merged with French group PSA to form Stellantis, said he doesn’t think sticker pricing is a problem for the company. industry reputation. He says prices should be close to MSRP, and he hopes and expects prices to be closer to that level even once vehicle supply is no longer limited.
“The levels of profitability of the two [automaker] and dealerships clearly show the benefits of selling vehicles at MSRP. And what a concept, isn’t it? Sell at MSRP,” he said. told investors. “I think it’s equally clear that deep discounts and high incentives can also harm a brand, which is another reason for our industry to appropriately balance supply and demand.”
If he’s right, that means the days of paying thousands of dollars under the sticker are over.
Paying MSRP isn’t going away anytime soon, according to Edmunds’ Drury. With projections that vehicle supply could remain tight in the second half of this year, it could be 2023 before paying the list price becomes scarce again.