Edmunds: 8 out of 10 consumers paid above MSRP for new models in January

If an individual with a less than prime credit background still somehow secured financing for a new vehicle in January, there’s a notable possibility that the installment contract will be underwater for some time, based on record-breaking data Edmunds shared on Tuesday.

Edmunds said more consumers than ever are paying above sticker price for a new car amid inventory shortages and elevated consumer demand.

In fact, Edmunds reported that buyers paid above MSRP in a record 82.2% of all new-vehicle purchases last month, compared to 2.8% in January 2021 and 0.3% in January 2020.

Edmunds data also showed that the average transaction price for a new vehicle climbed to $728 above MSRP in January, compared to $2,152 below MSRP last January and $2,648 below MSRP in January 2020.

“The fact that an overwhelming majority of consumers are paying above sticker price would have been unthinkable even just a year ago,” Edmunds executive director of insights Jessica Caldwell said in a news release.

“This is in part driven by affluent consumers being willing to shell out more cash to get the vehicles that they want, but there’s also a vast population of individuals who are being forced to do so simply because they need transportation and have no other choice,” Caldwell continued.

Edmunds analysts took a look at the difference in new vehicle average transaction prices and compared them to the average MSRP across automakers to identify the brands commanding the largest amounts above sticker price and the brands yielding the greatest discounts.

Analysts discovered Cadillac topped the list of brands that commanded above-sticker price, with an average markup of $4,048 in January, followed by Land Rover, with an average markup of $2,565, and Kia, with an average markup of $2,289.

Edmunds noted that Alfa Romeo topped the list of brands that brought below-sticker price, with an average discount of $3,421 in January, followed by Volvo with an average discount of $869 and Lincoln with an average discount of $510.

“All eyes have been on Ford and GM since they both publicly called for their dealers to stop charging over MSRP for vehicles,” Caldwell said. “Of all automakers, they might be in the most precarious position since they have very high-profile launches in the near future that appeal to a new type of customer. But looking at the numbers, there are clearly some other automakers who might want to follow suit.”

“Savvy dealers, though, are conducting business during this wave of inflation in a way that’s mindful of the possible adverse reaction of their customers,” she added.

Edmunds’ experts said that holding off on a new-vehicle purchase would be the most pragmatic move for consumers in this market, but they also note that this course of action might be unrealistic for some individuals given that prices aren’t expected to normalize for quite some time.

“Consumers might be waiting up to a year or longer if they want to hold off until the market resembles anything close to the pre-pandemic normal, but some buyers simply cannot wait,” Edmunds senior manager of insights Ivan Drury said in the news release.

“If you know you need a new vehicle soon — or if you have a vehicle coming off lease and its term can’t be extended — doing extra research is critical to get an advantage, and using the list set forth below is a decent starting point if you’re looking out for price discrepancies among different brands,” Drury went on to say.

MSRP vs ATP by Vehicle Make 

January 2022 

Source: Edmunds