One thing I’ve read a lot about on social media over the past few years is that dealers benefit a lot from new products and later delivery issues. With more customers and fewer cars, dealers can sometimes ask for what they want, and there’s little in the way of law. As long as at least some people are willing to pay obscene prices, the dealers have no reason to turn it down.
What are ‘market adjustments’?
A “market adjustment” is really just the dealer charging you more because they think people will pay it, and so they can get away with it. In normal times, paying the manufacturer’s recommended retail price probably meant you weren’t getting a good deal, but now it’s common for dealers to pay customers for thousands above that price.
Before the coronavirus outbreak, this usually happened with new exotic cars. Something like a new generation Corvette often faced steep “market adjustments” from the dealer for the first few months until demand waned and there were enough cars to go to more buyers. When EVs hit the streets, some of these got the same treatment at car dealerships. We all saw obscene prices, sometimes doubling the price, for example on Mustang Mach-Es. Now we see it happening with the F-150 Lightning.
I’m excited to see the . to see @ford #lightning EV took to the streets. I saw one for sale with a $70k market adjustment. Unfortunately I didn’t get a call @GaudinFord on how I’d like to build the one I ordered over a year ago. pic.twitter.com/8zN19WhcfS
— Bye king👑 | @ Bally’s WSOP (@dmoravec) June 27, 2022
But with the pandemic and then chip shortages and other supply chain problems, dealers ended up in the driver’s seat for all kinds of vehicles. The “market adjustments” and crappy/overpriced “protection plans” (which offer things like free oil changes for EVs) became commonplace for almost everything. They usually don’t do anything obscene like double the MSRP, but they raise it about as much as banks let them get away with (and this is with 84 month loans).
One place I looked at buying a replacement for my Nissan LEAF wanted $5,000 above MSRP for a “market adjustment” and also wanted huge “document costs” and a “protection plan” that was more like the kind of “protection” you would have get from the crowd. I told them this was excessive and out of my budget, so they went back to just a $3,000 “modification” and a “cheaper protection plan” that was supposedly already “installed” on the vehicle.
If you’re car shopping, dealers generally don’t shy away from doing it now. There are enough customers willing and willing to come in and pay for it that there is little to no reason to give you a better price.
Why you shouldn’t just cough up the dough
While the need or desire to get a car as soon as possible rather than wait for the market drives many customers to just go ahead and pay extra, there are important reasons not to.
The biggest is debt. While you can fund it longer and get lower interest rates if your credit is reasonable, you are looking for a much higher payment or payments for much longer. The chance that something major will go wrong during the term of the loan (illness, job loss, accident) is much greater and the consequences more disastrous. If you buy at insane prices today, you’ll regret it in a few months or a few years when the prices level out and you still owe more money than the cheaper cars being advertised.
A related issue is being “upside down” or “underwater.” The long-term value of your car will not be greater because you paid an extra arm and an extra leg for it today. When things get back to normal and people generally pay below the suggested retail price again, your used car will be worth a lot less. So if you find yourself in a position where you owe more than the new cars are being sold for and your car is worth 30% or more below that value, then you would have a great time selling the car or trading it in later. .
It can take years longer to reach the break-even point, meaning you’ll be stuck with the car longer than you’d hoped if you want to switch cars like most people do.
The good news: you don’t have to
For traditional car manufacturers, everything goes through dealers. Most states simply don’t allow direct sales, and if they do, it’s usually only for companies that only sell EVs. So if you want an EV that comes from established automakers, you’re stuck buying from a dealer. Worse, the manufacturer can’t legally force dealers to stop charging too much for the cars.
But that doesn’t mean you’re stuck with your local dealer’s “market adjustments” in most cases. There are two ways the manufacturer can help you get around the ridiculously high prices, but only if you call or email the manufacturer.
First, sometimes the manufacturer politely asks the dealer to give you the suggested retail price and the dealer will do it for you. Although they cannot legally force the dealer to do so, the dealer does want to have a good relationship with the manufacturer. After all, the manufacturer can do things to make life difficult for a troublesome dealer if they want to, such as not letting them in on limited edition vehicles, or making them wait for an exciting new product. Or they could just send that dealer fewer cars.
In the worst case scenario, a dealer could lose their franchise, but that would require something out of the ordinary, such as breach of contract or serious misconduct that would bring state law enforcement down to the dealer. A shady dealer who lives on the edge certainly doesn’t want the proverbial straw to come down on an already heavily loaded back.
If a dealer just doesn’t want to play, the manufacturer has another way to help you: put you in touch with a better dealer. In some cases, a dealer in another part of a metropolitan area or a dealer in another city will be willing to help you and give you a better price. Some dealers are just nicer than others. Others want to play with the manufacturer more because they know this will lead to an edge over the other dealers when it comes to getting first prizes on the coolest and most profitable vehicles later on. Others simply want to build long-term relationships with customers rather than trying to bring in as much cash as they can today.
Whatever the reasons, none of this can work for you if you don’t call the manufacturer and ask them for help with the situation. They have people ready to talk to the dealer or point you in the direction of a better deal. Be sure to take advantage of that.
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