We are in an environment where goods are scarce, and where, because of inflation, people sort of expect prices to go up anyway, and so in some corners, there’s a little bit of padding going on.Įven in a moment like this, with inflation on the rise, the point of companies is to make money. In an environment where goods are scarce, intermediaries can push up the prices to pocket the money. “I think they’re doing exactly what anyone else would if they were selling something too.” This is capitalism. “Are they taking advantage of the situation? Yeah,” Drury said with regard to dealers. But it’s hard not to recognize that in some corners, businesses and CEOs and salespeople are likely looking at the current economic landscape and thinking, “Eh, why not bump that price tag up a little more?” And who can blame them? That’s capitalism. I am not going to litigate whether profiteering - which is generally legal in the US - is driving up inflation. After all, corporate greed wasn’t invented in the pandemic. Other economists have dismissed this, saying it’s a flimsy excuse, and that other factors, among them supply chain problems, increased demand, and commodity prices, have much more of an impact. Some Democrats and economists argue that corporate greed is playing a role, basically saying that companies are taking advantage of the moment to boost their profits even when it’s not necessary, and contributing to higher inflation overall. “It comes down to if someone’s willing to pay it, and they can sell it and keep selling it, I think they’re going to ride that train as long as they can,” Iglar said.Īmid the current inflationary environment, there’s a broader debate going on about what’s causing prices to rise. How much are dealer markups contributing to this average price increase? The answer is certainly not all of it, or maybe even most of it. ( Used car prices are up a ton, too, but for this story, we’re focusing on new ones.) Going by the Consumer Price Index, which measures what consumers pay for goods and services, new vehicle prices are up 12.4 percent over the past year. “If there are five people raising their hand to buy the exact same product, you just go with whoever is bidding the highest.”Īccording to Kelley Blue Book, the average new car price in the United States was $46,085 in February, $5,000 more than it was a year ago. “At the end of the day, it’s saying, ‘Look, if you don’t buy this, the guy right behind you or the gal three people behind you is going to, and they’re going to pay me $1,000, $2,000 more than you’re willing to, so I have to go with them.’ It’s one of the first times in history where the dealer has so much demand that they can actually do that,” said Ivan Drury, senior manager of insights at Edmunds, a consumer research company. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply. New car dealers have the upper hand at the moment, and some of them are willing to use it.īy submitting your email, you agree to our Terms and Privacy Notice. Tens of thousands of dollars over the sticker is something of an outlier, but across the country, people on the hunt for a new vehicle are being met with significant dealer markups, thanks to supply shortages and high consumer demand. “I can’t justify spending that much over sticker.” Iglar emailed another dealer trying to get a sense of what their markups were, and a week later they responded they were adding on $15,000. “We were both shocked and politely declined, saying while we would like to have the car, we can’t justify over-spending for it,” he said. The dealership wanted to charge them $20,000 over the manufacturer’s suggested retail price (or MSRP). The salesman was “super nice” throughout most of the process, Iglar explained … until it came to the price. In the fall, he and his wife were in the market for an SUV and made an appointment at a Mercedes dealer in New Jersey. Wild in a less good way if you’re a consumer looking to buy, which is the spot Richie Iglar recently found himself in. Wild in a good way if you’re a car dealer trying to sell a car. It’s a wild time out there in the car market.
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