Buying a car in 2022: Paying for stickers is the new normal – Forbes | Car Plazas

Honda dealer NJ
Five out of six cars will sell for more than list price in early 2022. Covid-19 and chip shortages were blamed for this. Now the war in Ukraine is crippling parts suppliers who supply components to factories in Europe. Some of these cars, including Volkswagen electric vehicles, were scheduled to be shipped to the United States Bill Howard

The high demand for rare new cars has changed the script from “Nobody pays sticker price” to “Everyone pays sticker price”. Or more.”

What can consumers do to avoid high prices, which auto industry analysts now expect will last all year and into 2023?

How buyers can avoid paying via stickers

Here’s how buyers can deal with it. First, the only safe bet is to put off buying a new vehicle.

Lease customers may be able to renew their current leases instead of rerunning the lease-versus-purchase calculations. And many people interested in new cars are switching to cheaper used cars, even though the percentage of used car prices is rising even faster than new car prices.

Certified used cars will be relatively readily available in 2022. The most common CPO cars are models built and sold in 2019, before Covid-19 brought production to a standstill. Walk into a dealer showroom and many of the new cars on the floor are really 2019 CPO cars. Click here for background on buying CPO.

For someone who can’t wait a year or more to buy a new vehicle, the best advice is still to shop online in a larger area than usual, be willing to compromise on features and options, and be ready to move fast to act.

Visit the dealers regularly. Sometimes a buyer refuses a delivery and a desired car in a color you can live with is available for a day or two.

If stock car selection is a problem, consider a Build-to-Order (BTO) car that’s outfitted exactly how you want it. Lead time is just four weeks for a car built in North America and 8-12 weeks for a car from Europe or Asia.

One last option: Buy an electric car from Tesla, which has no dealer network and no additional surcharges. Tesla has raised prices over the past year, but the sticker price is what the buyer pays. The Tesla Model Y crossover and Tesla Model 3 sedan are the best-selling EVs in the US. A few other EV startups will follow Tesla’s example and will sell directly to customers.

Five out of every six new cars are on the sell-off list

Today’s new car buyers should be aware that they are running into a marketing buzz saw. In January, 82.2% of all new car purchases were over the manufacturer’s suggested retail price, and the average purchase was $728 over the MSRP, according to researchers at Edmunds, the auto shopping and advice site.

What types of cars charge more than the sticker price? “It’s almost everything,” both cars and trucks, said Ivan Drury, senior manager of insights at Edmunds. “Body styles we thought were dead” like minivans and subcompact sedans are selling above the sticker price.

“People think they can avoid it by buying the minivan instead of the SUV, but other people have the same idea and the price goes up,” he said.

Drury said customers might have to grit their teeth and pay above the sticker price, but he encouraged shoppers to try to negotiate some type of sweetener, e.g. B. Getting the dealer to include accessories or add-on products like an extended service contract.

“You should definitely ask her,” he said. “You might end up paying too much, but you can say, ‘Fine, but can you give me some more?’ They still have the edge, but at least you get something,” he said.

Volkswagen ID.3 Dresden
Volkswagen ID.3 EV at the company’s factory in Dresden, Germany. VW is ending production at its East German plants in Dresden and Zwickau this week. The reason: unavailable wiring harnesses for VW in the Ukraine in the wake of the Russian invasion. This will add to the shortage of cars in the US and around the world. Volkswagen

Latest Threat to Auto Accessories: War in Ukraine

Of course, what has changed since then is the Covid-19 pandemic, followed by the shortage of semiconductors (chips). As of December 2021, the chip shortage cost North American car factories more than 2.3 million production units, according to AutoForecast Solutions. Some analysts say the chip shortage will ease later this year. Others say it will extend to 2023.

Now the Russian invasion has shut down auto parts factories in Ukraine. They supply factories in Ukraine and Eastern Europe. VW said shortages of wiring harnesses from Ukraine will halt car production at its plants in Dresden and Zwickau, Germany, for much of this week. The largest electric vehicle factory in Europe is located in Zwickau. Some of these electric vehicles are destined for US dealers.

Individuals compete for cars with corporate fleet buyers

Individual buyers and fleet customers are now competing for new cars, says David Hult, president and CEO of Asbury Automotive Group, a chain dealership in Duluth, Georgia. “To me the demand seems so high right now, even if they’re able to start catching up between the rental car companies and fleet companies and everything else, I just don’t see demand calming down until sometime in ’23 will,” he said.

As for markups, “Everything goes,” said Ford and Porsche dealer Gary Ackerman in Las Vegas, dealership chief of Gaudin Motor Co. “It’s a classic case of supply and demand; none of us expected that,” he said.

For certain high-demand versions of the Ford Bronco, Ackerman said that in the recent past he has gone to collector car auctions where customers have resold vehicles they had just bought new. Like the dealers they bought from, collectors sell cars for well in excess of what they paid for.

Cadillac dealer NJ
In the past, a dealer had vehicles on the property for more than two months. That can be halved. Dealers have to pay interest on unsold cars in the parking lot (“floor planning”), even though they have received temporary factory support. While floor planning assistance has declined according to industry data, it has increased per car. In the past, when it didn’t cost them more cars in the lot, dealers were fine with higher inventory levels. Bill Howard

Are the high prices here to stay?

Traders are encouraging manufacturers to permanently establish lower inventories and higher prices. To be fair, dealers argue that pre-pandemic new car margins were too low. Historically, dealerships made most of their profits from used cars, service and parts, and finance and insurance, while margins on new cars were slim. For retail sales, merchants in states that don’t limit these fees can charge $500 to $1,000 in paperwork, processing, and computer fees. Dealers say the cost is stated in the documentation; Customers say they are not mentioned until they see the documentation.

“We are very committed to them [factories] to avoid bringing stocks back to pre-pandemic levels. And so margins will remain high. Pre-pandemic margins are slim. We should sell cars at MSRP,” said Jeff Dyke, president of another dealership, Sonic Automotive, Charlotte, NC

Sonic Automotive CEO David Smith said customers are less surprised to pay a higher sticker price now. “For most people, this is common knowledge [now] We’re having vehicle supply issues,” Smith said. “People have to wait to get what they want, for many different products.”

From Factory to Dealership: Don’t Overload or… We’ll Huff and We’ll Blow?

Publicly and privately, several automakers have asked their dealers not to overcharge customers, but ultimately manufacturers are bound by contracts that allow dealers to set the final price. But there is a limit to what factories can do.

“Hyundai dealers are independent companies that ultimately work with customers to decide the final vehicle price. However, Hyundai consistently reminds its dealers of the need for complete transparency with our customers,” Hyundai Motor America said in a statement.

“We strongly affirm that prices published on websites should match in-store prices and we strongly discourage our retailers from charging above MSRP as this can negatively impact customer experience and brand loyalty,” said the enterprise.

In an internal memo that was later widely shared online, General Motors warned its dealers not to overprice high-demand vehicles not yet for sale that consumers can reserve online, such as the Chevrolet Silverado EV, the GMC Hummer EV, the GMC Sierra EV and the Cadillac Lyriq. (Ford has sent similar warnings to its dealers.)

“To the small minority of bad actors who engage in the above conduct, this letter serves as a reminder that GM reserves the right to redirect our vehicle allocation or take other recourse as required by the Dealer Sales and Service Agreement,” says the memo. signed by Steve Carlisle, President of GM North America.

Whether automakers can bite their dealer warnings remains to be seen.

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