As you may well know, dealer markup is a painful reminder of the current new car market.
Each day, you guys send in emails calling out markup — I’m sorry, “market adjustments” — big and small on virtually every manner of new vehicle. From the Honda Civic to the Ford Bronco and (as you’d most expect) exotics like a $1.1 million Ferrari SF90, customers are still facing egregious asking prices at every corner of the market. That last one’s particularly painful, as the Ferrari’s Manufacturer Suggested Retail Price (MSRP) is $738,949 before the dealer’s $451,051 “adjustment”.
Some Hyundai and Genesis dealers too, are pushing their transaction prices northward, though obviously not as badly as the SF90 Stradale. Still, Hyundai Motor Group is following in Ford and GM’s footsteps in telling their dealers to stop the aggressive practices or face the consequences. Specifically, Automotive News obtained a letter the automaker sent out to dealers noting these markups set “way above” sticker price damage brand image, and warned of reduced allocations, advertising support and incentives if those practices continued.
One particular practice Hyundai and Genesis pointed out is advertising a certain price online, then marking up that price when a customer comes into the dealership to actually purchase the car. In doing that, those consumers are left with the choice of either paying the added cost or giving up on the vehicle — with no guarantee of another convenient option, as inventory continues to be tight in the wake of ongoing supply chain shortages.
82% of new vehicle buyers paid over sticker price in January
According to an Edmunds report published last month, the vast majority of new car buyers paid some form of markup in January 2022. Average transaction prices rose $728 above MSRP last month, compared to both January 2021 and January 2020, where buyers paid at least $2,000 below MSRP. Specifically, Edmunds’ data showed the new vehicle transaction price $2,152 below MSRP in the first month of 2021, and $2,648 below MSRP in 2020, as the market began to grapple with the COVID-19 pandemic.
“All eyes have been on Ford and GM since they both publicly called for their dealers to stop charging over MSRP for vehicles,” said director of insights Jessica Caldwell. Now, Hyundai and Genesis join a growing chorus of automakers speaking against the practices, though there is a limit to what they can legally do, as the letter reported by AutoNews also acknowledges:
“You are, as an independent business, of course free to adopt any policies, including pricing policies, that are consistent with the law and your contractual obligations. But we cannot stand idly by watching the actions of the aforementioned dealers undo all the efforts we collectively have put into making these brands what they are today.”
The letter cited both the last-minute price hikes mentioned above, as well as side stickers adding price markups to particular vehicles from the outset.
Popular models like the Hyundai Palisade and Ioniq 5 EV are in sharp focus with this particular issue — with the former commanding $10,000 in markups (and sometimes much more). Among the brands listed in the transaction price report, sister brand Kia commanded the highest premiums, thanks in no small part to the Telluride.
What can you do?
While voices condemning dealer markups seem to be growing louder, consumers hold a key position in curbing the practice, as Hyundai and Genesis also mention. Per the AutoNews report:
“Once supply and demand come into greater equilibrium, customers will feel that they were overcharged for their vehicle and thus look to other brands the next time they are shopping. we believe that the risk of losing customers and potential future customers far outweighs and short-term gains to be had from what customers describe as unfair pricing.”
Even taking into account the careful wording in that part of the letter, Hyundai Motor America’s senior vice president of national sales Randy Parker and Genesis Motor North America COO Claudia Marquez, who each signed letters representing their brand, hit on a common theme. However unfortunate it may be, customers can vote with their feet, and they will remember the dealers who engage in outrageous marking up on the vehicles they want.
2022 is a critical year for the automaker across all three of its brands, with each planning major electrified launches. All three brands fared extraordinarily well in the end-of-year sales reports, and unscrupulous dealers could, to some extent, undo that success.
