The sticker price on cars isn’t sticking. In some cases, it’s going up.
Auto makers typically set what is known as the manufacturer’s suggested retail price, or MSRP, a figure that appears on the window sticker of a new model. But with inventory tight and customers clamoring for cars and trucks, auto dealers are charging more, increasing the price above sticker and in some cases requiring customers buy certain add-ons, such as protective coatings and accessories, as part of the increase.
Some buyers say they have encountered dealerships asking for thousands of dollars above MSRP. And analysts and dealers say the practice is becoming more widespread and occurring on a wider range of vehicles, including more mainstream models that typically wouldn’t be targeted for such price increases.
“I was shocked,” said Ken Baird, a 61-year-old Boca Raton, Fla., resident who was recently shopping for a Kia Telluride. The window sticker on the particular model he was looking at read $45,000, and he said he offered to pay $3,000 over that knowing the vehicle was in high demand.But the dealership wanted $10,000 above the original sticker. “They said, ‘I’ll get the $55,000 from someone else,’” Mr. Baird said.
He ended up buying a Toyota Highlander from another dealership, paying the manufacturer’s suggested retail price but no more. A Kia spokesman said the company’s dealers are independent franchisees and react to market demand.
The U.S. car business has sharply shifted to a seller’s market within the past year. A preference for personal transportation during the Covid-19 pandemic boosted vehicle demand; meanwhile, vehicle production faltered. Auto makers have pulled back on discounts, and customers are paying record prices for both new and used cars. The higher auto costs have contributed to broader concerns about inflation as consumer prices rise in other sectors too.
In mid-June, about three-quarters of all vehicles sold in the U.S. went for the sticker price or above, according to research firm J.D. Power. That is up from 67% at the end of May and higher than the average of around 36% before the pandemic, the firm’s data shows.
“That percentage of people paying above sticker for a vehicle has been going up and up and up,” said Ivan Drury, an automotive analyst for car-shopping website Edmunds.com. “There’s no end in sight because there’s fewer and fewer cars on dealer lots.”
Car companies are still trying to recoup vehicle production lost to last year’s pandemic-related shutdowns. A global computer-chip shortage that slammed the auto industry this year has only further crimped factory output, making it difficult to fully restock sales lots.
Sam Pack, a Texas dealer with six stores in the Dallas area, said he is selling most of his inventory at MSRP, and in very few cases above sticker for certain limited-run, specialized models.
“We’re not negotiating like we used to,” Mr. Pack said. “There’s no room to budge when you don’t know what is coming in.”
A dealer charging above MSRP isn’t anything new. But for the most part it would happen with hard-to-find models, such as specialized sports cars or newly redesigned vehicles that are in high-demand upon their debut, dealers and analysts say.
Because dealers own the vehicles—purchasing them directly from the factory—they determine the final price. Generally, the manufacturer’s suggested retail price is intended as a starting point for negotiations, with buyers in the end paying less than sticker.