New car buyers are still paying over MSRP. Here’s how to pay less

With demand for new cars still exceeding supply at many dealerships, buyers may be wondering if they have to pay more than the manufacturer’s suggested retail price or sticker price to get the car they want.

September marked the sixteenth straight month in which average transaction prices for new vehicles, or what the buyer actually paid, was higher than the sticker price, according to Kelley Blue Book data.

Automakers have faced significant inventory shortages over the past year due to the impact of computer chip shortages and other supply chain issues, driving up prices paid as buyers compete for the few cars available on the lot. While the average price paid for a new vehicle in the U.S. in September fell 0.3%, or about $146, from August, that number is still up significantly over the past year. In September, the average price for a new car was $48,094, up 6.1% or $2,775.

Automakers say demand will remain steady, and Cox Automotive forecast third-quarter new car sales of 3.4 million, down less than 1% year-on-year. General Motors said vehicle sales rose 24% year-on-year in the third quarter, while BMW and Hyundai also reported increases in sales over the same period.

But there are signs that new cars are back in stock, and many consumers are choosing to spend less and save more as they cope with inflation and a possible looming recession. Does this mean that new car buyers should stop paying above MSRP?

Brian Moody, editor-in-chief of Kelley Blue Book, said while any potential new car buyer should continue to be happy paying at least MSRP, consumers concerned about sticker shock at the car dealership should consider the following steps to maximize potential savings to find.

Moody said that one of the best places to find out what you’re going to pay for the new car you want is to shop around and check prices at local dealerships.

If everyone has the car you want within $500 or close to that, that’s probably about the price you’ll have to pay, he said. However, there could be instances where thousands of dollars separate those prices, a situation Moody said should cause you to “call the cheap one up and say, ‘What’s the story here, how can I get that price ?’”

Moody said that even if you’re considering a car that’s currently selling for above MSRP, it’s still worth checking the price at a variety of dealerships. For example, he said he recently visited a Los Angeles car dealership that was selling ford Broncos at MSRP starting at about $31,300 for a 2022 model. From July 1 through September 7, a new Ford Bronco cost an average of 21.6% over MSRP, or nearly $8,700 more, according to data from iSeeCars.

One of the main reasons for these high new car prices is the purchase of luxury vehicles. In September, luxury car buyers paid an average of $65,775, down only slightly from August’s record $65,835. Additionally, luxury car buyers tend to pay more than the MSRP. For example, Mercedes Benz buyers paid between 2% and 4% more than the sticker price.

Moody said being open to other automakers, even within the same vehicle category, could save buyers money. Buyers of luxury cars from Audi and Lexus, for example, paid almost 1% below the MSRP in September.

That was also the case for non-luxury makers Ford, Honda and Toyota, which also sold about 1% below MSRP on average in September.

“If you drive model after model, car after car, you might have an opportunity to save money,” Moody said.

If saving is a top priority, prospective car buyers should look into the used car market, where supply and demand are very different than for new cars.

While there are about 1.2 million new vehicles in the U.S. inventory, the used-car inventory is more than double that, Moody said.

In addition, the average price for used cars has been falling steadily, albeit from a very high level. In August, the average used car sold for $28,061, down 4% year-on-year but still up nearly 40% from December 2019, before the Covid-19 pandemic.

The recent drop is a function of the slowing down in used car sales, which are down 9% year over year in August, making it even more likely you can get a good deal on a used car lot.

If you’re concerned that what the sticker on the window says and what the seller says are very different, you’re not alone.

Most buyers don’t like the negotiation process when buying a new car, Moody said, and some dealers have responded by moving to a one-price model that’s more akin to buying a new TV, where the advertised price is the same equal to what any buyer would pay.

“You wouldn’t go to Target and see a TV that’s listed for $900 and bring it to the checkout and ask for $750,” Moody said. “We’re seeing greater adoption of the one-price model as there are more buyers who prefer it or are even willing to pay more to eliminate the negotiation process.”

Moody said if you enjoy haggling over prices you can certainly still try, but he noted that with supply still relatively low and demand still relatively high, many sellers “don’t have time to chat” .

“They want to sell as many cars as possible, so maybe they just go to the next customer,” he said.

But if you choose a Jeep Wrangler or Ford Bronco, two of today’s best-selling car models, you may have to accept that you’ll have to top the sticker price.

“If you want to go out and buy what everyone wants, pay more,” Moody said. “You won’t be able to ask for the price to be $1,000 below MSRP; that won’t work because there are 10 people waiting to buy this car at a price above MSRP.”

Ultimately, the trick to finding a deal for a new-car buyer now is to “look for the less popular things,” Moody said.