How To Avoid Paying Dealer Markups

By

Senior Pricing Analyst

As CarsDirect’s resident pricing expert, Alex offers must-know analyses of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured by The Wall Street Journal, Fox Business, Motor Trend, Automobile Magazine, and more.

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, Senior Pricing Analyst - December 21, 2023

In most cases, manufacturers allow car dealers to set their prices based on local demand. Popular vehicles may command a markup, sometimes extremely large ones exceeding tens of thousands of dollars. However, there may be some steps you can take to avoid paying a dealer markup and get the best deal possible.

You can usually spot a markup by looking for a list price that's higher than MSRP. Below, you'll find an example of a new Kia Forte with an MSRP of $21,210 but a selling price of $26,205. That's a $4,995 markup, or 23% above the MSRP, on what should be one of the most affordable Kia models that you can buy today.

Kia Forte markup listing Glendale

Here are some things you should know about markups and how to avoid them.

Your Results Will Vary

First, it's important to know that every dealer may have its own policy on markups. When the C8 Corvette was introduced, online forum members crowdsourced a list of Chevy dealers that promised to not sell the car above MSRP despite overwhelming demand for the latest generation.

It's not just flashy sports cars that can command markups, either. A chip shortage resulted in manufacturing delays and fewer cars. Even though conditions have improved, even a Kia Forte can still have a market adjustment if a dealer thinks that it's justified due to supply & demand.

Toyota Corolla hatchback blue color

You may find a dealer near you willing to sell a popular car without a markup. It's usually not difficult to check prices at multiple dealers but keep in mind that your results may vary. Some important terms to be on the lookout for in online car listings or a dealer's price quote include "market adjustment" or "dealer adjustment."

Here's an example of how this market adjustment is casually worded in a listing for a new Toyota Corolla for sale.

Look Out For Dealer Add-Ons

Dealers sometimes promise to sell a car at MSRP but may have add-ons with inflated prices. One of the more traditional tactics involves a "Protection Package" or "Pro Pack" for a car's clear-coat paint or underbody protection. Be sure to ask your dealer about add-ons early in the buying process.

Some add-ons can be removed. If a dealer wants to add cargo mats at an inflated price, you may be able to opt-out. However, this may not be the case when it comes to port-installed options. These are options installed by the distributor once the car arrives and are different from dealer options.

2024 Subaru Forester SUV white color on beach

Alternatively, if the dealer added door edge guards or clear film for added protection, those are probably going to already be physically attached to the car. Having said that, even if dealer add-ons can't be removed, you may still have some room to negotiate a discount if you don't want them.

In a case that we observed first-hand, a local Subaru dealer added clear film on door edges and door handles at the cost of roughly $400 to $500 but was open to offering a $500 discount on the price of the car to help offset the add-on. As a result, you may have more flexibility than you think.

Not every dealer has costly add-ons, so we think it's worth checking with multiple dealers since your results will vary. In some cases, you may find that these add-ons have value for you. Just be sure that you understand what is and isn't included before proceeding with a particular dealer.

Look For Financing Markups

While it's tempting to focus on price, you may encounter interest rate markups when financing. At one point, Jaguar advertised 0% APR for 36 months but actually offered that rate for up to 72 months. The catch was that dealers were allowed to mark up loans over 36 months in length.

Other brands may prohibit dealers from marking up advertised rates. Interest rate deals are often available with longer terms, but companies like Subaru allow a markup of up to 1%. This lack of transparency can make it harder for shoppers to make an informed decision on a purchase.

Ask For A Discount

It may be counterintuitive, but cars with markups may have manufacturer incentives that can save you money. For example, the Ford F-150 Lightning has seen some extreme market adjustments in some parts of the country even as the manufacturer advertised up to $15,000 in savings on some versions of the EV.

You may even be able to score a deal when financing. For example, Nissan used to offer an incentive called NMAC Special APR Cash worth up to $1,000 that could be combined with 0% financing. Brands like Acura even offer conquest cash incentives worth thousands simply for coming from a competing car brand.

Try not to take a dealer's first price at face value. We've seen cases in which dealers casually waved $5,000 markups and thousands of dollars in add-ons. The key is to come prepared with other local price quotes. If you don't, you'll probably have less leverage to get the best price possible and to avoid overpaying.

Kia Telluride SUV

Consider Waiting To Buy

If you're looking to buy a popular model like the Kia Telluride, there's a good chance that you'll pay above MSRP. Our last analysis found dealers charging up to a $10,000 markup on Kia's three-row SUV. Curiously, we actually found markups on the nearly identical Hyundai Palisade crossover worth half that amount.

If you're adamant about not paying over MSRP, you may want to consider waiting. Inventory changes daily and manufacturer incentives usually change on a monthly basis. You may even have the option to place a factory order at MSRP, and some companies may have price protection programs on their cars.

Supply chain issues have kept inventory down compared to pre-pandemic norms. Whether or not dealer markups will go away in 2024 remains an open question. Sadly, used car prices remain high as U.S. shoppers seek alternatives amid the inventory shortage and after several years of reduced consumer leasing.

CarsDirect's team of experts provides monthly updates on the latest deals for buying & leasing over 200 different models. Sign up for email alerts to get the inside scoop on when prices drop (or when they go up) to make the most informed decision possible. Doing so could help you determine the best time to buy.

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, Senior Pricing Analyst

As CarsDirect’s resident pricing expert, Alex offers must-know analyses of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured by The Wall Street Journal, Fox Business, Motor Trend, Automobile Magazine, and more.

Follow On: Twitter

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