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Published: Feb 18, 2022 5 min read
Mother and son examining a car in dealership
Money; Getty Images

Looking to buy a new car? Chances are high that you’ll need to shell out hundreds — in some cases, thousands — of dollars above the sticker price. You won’t find much relief in the used-car market, either.

Data from automotive research firm Edmunds show that an unprecedented 82% of new car buyers paid more than the manufacturer suggested retail price (MSRP) in January, largely due to vehicle shortages and increased consumer demand. Buyers spent a record-high $728 above MSRP last month, on average.

“This is beyond abnormal and has never happened pre-pandemic,” says Ivan Drury, senior manager of insights at Edmunds.

Not long ago, dealerships often sold cars for $2,000 or more below the MSRP. But the latest sales data shows that it's routine for buyers to pay thousands over the sticker price for their cars.

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For example, in January, buyers of new Cadillacs spent an average of $4,048 above MSRP. Prices for several other brands exceeded $1,000 above sticker price, and not all of them were from luxury manufacturers:

  • Land Rover: $2,565 above MSRP
  • Kia: $2,289 above MSRP
  • Porsche: $1,721 above MSRP
  • Acura: $1,701 above MSRP
  • Genesis: $1,603 above MSRP

A few outliers — including BMW, Mini and Volvo — sold at a discount, meaning the average sales prices were below the sticker price. Consumers got the largest discount from Italian luxury automaker Alfa Romeo, which sold $3,421 below MSRP on average.

According to data Edmunds shared with Money, January marks the sixth consecutive month that average sales prices for new cars exceeded the MSRP. Just one year prior, new vehicles were selling for an average of $2,152 below sticker price, which is in line with the typical discount consumer saw in pre-pandemic times.

From January 2021 onward, new car discounts shrunk, eventually flipping in August 2021 to across-the-board sales prices above the MSRP.

Naturally, the prices people are paying for new cars are increasing as well. Overall, the average new car in January cost $45,717, according to Edmunds data, up nearly $6,000 from the previous year.

"This is in part driven by affluent consumers being willing to shell out more cash to get the vehicles that they want,” Jessica Caldwell, executive director of insights at Edmunds, said in a Feb. 15 news release. “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."

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What about used car prices?

Mayhem in the new vehicle market is pushing more folks to consider used cars, according to Drury. And this increased demand for used cars is driving those prices up as well.

In other words, a pandemic-related shortage for new vehicles has sent consumers and retailers alike into a frenzy over used cars — ultimately leading to a shortage of used vehicles as well.

This shortage has the average price for used vehicles approaching $30,000 and is pushing some online car retailers like Carvana to buy up used cars at prices above what the owners paid for them brand new.

Average used car prices have soared roughly $9,000 compared to their pre-pandemic levels, according to Edmunds data.

Meanwhile, Labor Department data show that the astronomical prices of used vehicles (up 40.5% from last year) is contributing to the 40-year-high inflation rate of 7.5%.

Simply put: Amid bidding wars and shortages, now is a particularly bad time to buy a car — new or used. But if you’re looking to sell, this might be as good as it gets.

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