One thing I’ve been reading about a lot on social media the last couple of years is dealers taking big advantage of new products and then later supply issues. When there are more customers and fewer cars, dealers end up in a position to sometimes charge whatever they want, and legally there’s little in their way. As long as at least some people are willing to pay obscene prices, the dealers have no reason to knock it off.
What Are “Market Adjustments?”
A “market adjustment” is basically just the dealer charging you more because they figure people will pay it, and thus they can get away with it. In normal times, paying the Manufacturer’s Suggested Retail Price (MSRP) meant you probably weren’t getting a good deal, but now it’s common for dealers to hit customers up for thousands over that price.
Before the coronavirus pandemic, this usually happened to new exotic cars. Something like a new generation of Corvette would often face steep dealer “market adjustments” for the first few months until demand died down and there were enough cars to go around to more buyers. Then, when EVs started hitting the streets, some of these were given the same treatment at auto dealers. We all saw obscene prices, sometimes doubling the price, on Mustang Mach-Es, for example. Now, we’re seeing it happen to the F-150 Lightning.
I’m excited to see the @ford #lightning EV hit the streets. I spotted one for sale with a $70k market adjustment. Unfortunately, I haven’t gotten the call from @GaudinFord about how I’d like to build the one I ordered over a year ago. pic.twitter.com/8zN19WhcfS
— AdioKing👑 | @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 worthless/overpriced “protection plans” (offering things like free oil changes for EVs) became common for almost everything. They usually don’t do anything obscene like double the MSRP, but they do bump it up about as much as banks will let them get away with (and this is with 84-month loans).
One place I looked at shopping for a replacement for my Nissan LEAF wanted $5,000 over MSRP for a “market adjustment” and also wanted huge “document fees” and a “protection plan” that seemed more like the kind of “protection” you’d get from the mob. I told them this was excessive and out of my budget, so they moved down into only a $3,000 “adjustment” and a “cheaper protection plan” that was supposedly already “installed” on the vehicle.
If you’re car shopping, dealers generally don’t back down from doing this now. There are enough customers ready and willing to come in and pay it that there’s little to no reason to give you a better price.
Why You Shouldn’t Just Cough Up The Dough
While the need or want to get a car ASAP instead of waiting the market out drives many customers to just go ahead and pay extra, there are important reasons to not do this.
The biggest one is debt. While you can finance it for longer and get lower interest rates if your credit is decent, you’re on the hook for a much higher payment or payments for much longer. The chances of something big going wrong during the life of the loan (illness, losing your job, accident) are much higher, and the consequences are more catastrophic. If you end up buying at crazy prices today, you’ll regret it in a few months or a few years when prices level out and you still owe more money than the cheaper cars you’ll see advertised.
A related problem is being “upside down” or “underwater.” The long-term value of your car isn’t going to be higher because you paid an extra arm and an extra leg for it today. When things level back out and people are generally paying under MSRP again, your used car will be worth a lot less. So, if you end up in a position where you owe more than the new cars are selling for and your car is worth 30% or more below that value, you’d have a hell of a time selling the car or trading it in later .
It could take years longer for you to get to the break-even point, which means you could be stuck with the car for longer than you’d hoped if you like to switch out a car like most people do.
The Good News: You Don’t Have To
For traditional automakers, everything goes through dealers. Most states just don’t allow direct sales, and when 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 with buying at a dealer. Worse, the manufacturer legally can’t force dealers to stop overcharging 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 stupid high prices, but only if you give the manufacturer a call or send them an e-mail.
First off, sometimes the manufacturer asks the dealer politely to give you the MSRP and the dealer will do it for you. While they can’t legally force the dealer to do that, the dealer does want to have a good relationship with the manufacturer. After all, the manufacturer can do things to make life hard for a difficult dealer if they want to, like not let them in on limited edition vehicles, or make them wait to get an exciting new product. Or, they can just start sending that dealer fewer cars.
At worst, a dealer can lose its franchise, but that would take something extraordinary like a breach of contract or serious misconduct that brings state law enforcement down on the dealer. A shady dealer that lives on the edge certainly doesn’t want the proverbial straw to come down on an already heavily-leveraged back.
If a dealer just won’t play ball, the manufacturer has another way they can help you out: put you in touch with a better dealer. In some cases, a dealer in another part of a metro area or a dealer in another town will be willing to help you out and give you a better price. Some dealers are just nicer than others. Others want to play ball with the manufacturer more because they know it will lead to getting an edge on the other dealers when it comes to getting first dibs on the coolest and most profitable vehicles later. Others just want to establish long-term relationships with customers instead of trying to bag as much cash as they can today.
Whatever the reasons, none of this can work for you if you don’t give the manufacturer a call and ask them for help with the situation. They’ve got people ready to either 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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