Yes, we’ve all heard the same thing in this car shopping market: There are no cars to be had, inventories are super low, discounts are near impossible to find, PLAN AHEAD… I’ve told countless people these things over the past year or so. And yet, a few months ago I found myself in somewhat of a spur of the moment need of a replacement vehicle.
Started our search on all the major suspects. Cars.com, CarGurus, AutoTrader, etc. You’re likely familiar with those sites. Search by brand or by vehicle type (sedan vs coupe vs SUV), you can filter results by price, distance from you, new vs used vs certified pre-owned. You can filter colors and/or features. Car manufacturer websites sometimes have shopping inventory options as well to help you find (obviously just within their brand) vehicles in your area. And of course you can find the direct sites of the specific dealers in your area.
Dealers… oh dealers. What a difficult web they weave. Dealers traditionally need to manage their inventory, list it on their own site as well as feed it to all the marketplace sites. That can be time consuming and tedious if not well integrated with their various systems and processes. And right now, since most cars are already sold or sell nearly immediately anyway, I feel like a lot of dealers just aren’t putting any effort into accurately putting their vehicles online.
Even before covid supply chain and production nightmares dealers would often leave vehicles listed online. This way they’d still be able to try to get people who were searching for cars to try to contact them. Tricky tricky, right? Today, dealer websites and listing sites have tried to accommodate the situation that we’re in. Some sites allow the dealer to indicate whether the vehicle is physically on the lot or whether it’s “in transit” meaning it’s somewhere in a train or truck to the dealership. Some dealerships are also forthcoming with identifying when a vehicle is pre-sold to a customer, so it’s not actually available. And finally, sites are allowing dealers to show if they’re adding a markup above the sticker price of the car.
Again, this all generally relies on dealers and their inventory systems and sales managers in being good about representing information accurately. That isn’t always the case, especially with cars selling so quickly these days, dealers likely don’t feel the need to be super detailed with the information that they’re putting on the listings themselves. Why bother when it’ll likely sell no matter what within weeks or even days of arriving?
Well, this is all terrible for shoppers. Even when a vehicle might show as “on the lot” I found that this is many times untrue. We’d go to the dealer and find that no vehicles were actually available, even to look at, let alone drive despite showing as on the lot. Other dealers wouldn’t show any sort of markup online, but once we contacted them, they’d communicate that they were adding anywhere from $2,000 to $20,000 on top of the vehicle price. Many dealer listings even show a price as MSRP that isn’t truly the manufacturer suggested retail price. Example, the listing itself shows MSRP as $49,775, but when you click on the “See Window Sticker” option that is at least becoming common, you might see that the actual MSRP from the factory is $44,260. So that additional $5,000+ is a dealer markup/adjustment. Misleading and somewhat dishonest in my opinion. More transparent listings would itemize the adjustment, or they at least call it the List Price or “Dealer Name” Price.
One crowdsourced website has even popped up to help people find out if a specific dealer is adding this market adjustments, www.markups.org. Certain dealers are at least adding some substance to go along with these upcharges, like a “protection package” or added accessories, but others are simply a cash grab from the retailer.
On one hand I get it, this is an open market. If they don’t charge a markup, odds are there are many people out there who would take advantage of that, buy the car, turn around and flip it to another dealer for a significant profit, even as a used car. And to some extent, sales volumes are down due to supply chain shortages, so yes, dealers need to make more per unit in order to maintain operations. Trouble here is many dealers are part of publicly held large corporations, and those are all reporting record levels of profit, despite the lowered sales volumes.
What did we end up with? We initially started shopping for some used vehicles, as we had quickly found that yes, new vehicles were indeed few and far between. Especially if you were not interested in caving to the dealers that were charging markups. Vehicle would mostly be for my wife, who likes a little bit of luxury. Feature requirements were front and rear parking sensors, around view 360 camera, panoramic roof and ideally some sort of massaging seat (okay maybe she likes a lot bit of luxury).
Short list of targets that were readily available included certified pre-owned examples of the 2019 Porsche Cayenne (it’s on the newest platform and technology) although that would do without the massaging seats, similar used Mercedes-Benz GLE or GLS-Class (these could indeed offer all of the desired features), and then if possible, a new Genesis GV80. Had the GV60 been available earlier it would have made it under consideration.
Two good Cayenne options were available and we test drove them. Unfortunately, neither dealer was willing to budge at all on the price. Interestingly, one dealer’s unit was originally priced at $76,000, and wasn’t certified, but had decent original warranty coverage remaining. I had offered $72,000, which was reasonable (to me at least) given comparable vehicles in the area at the time. They said no. Now, nearly 3 months later, that particular dealer is still sitting on that exact used unit. They’ve now certified it, and the asking price is… $69,000. (since writing this it since dropped to $67,000) So I guess they’re happy to continue paying interest on that unit while waiting for someone to buy it. Comparable units today would still peg it at about $3,000 too high.
Next, we drove a used 2020 GLS 450. This one was nicely equipped, it even had massaging seats! It wasn’t a certified pre-owned unit, but it was low on miles and still had a good amount of time left on the original factory warranty. The air suspension kept the ride smooth and tech inside was nice. A third row of seats was nice as well. Our targeted car was listed at $74,000 and we had offered the dealer $72,000 based on other comparable listings we had looked at in the area. The dealer said there was no way they could do that. I said we’d be taking one visit to the Genesis dealer down the street to test drive the GV80 before we’d make a final decision, I put it back on the table that with $2,000 off, we’d forgo going down the street and just finalize on the GLS. But they held to their price.
We had been searching for GV80s for a while, but like everything else, they were hard to come by, particularly in the 3.5 Prestige trim. Finally, my wife had seen one pop up at a local Genesis dealer online and, knowing what to do, she called to confirm it was actually on the lot and available for sale. They also confirmed that they were not charging any sort of mark up above the factory sticker price. Luck had it that it was just down the street from the dealer where the used GLS-Class was.
Finally, we were able to see and drive the GV80 3.5 Prestige, but not before waiting for another two parties that had also come through to test drive it as well. My wife loved the design and it definitely felt lighter than the admittedly much larger GLS-Class. It was Silver, so not our first color choice, but it looked nicer in person than a plain silver. As we were finishing our test drive, I received a text from the other dealer that they come down $1,500 on the GLS. But by then, my wife’s mind was made up, we were sold on the GV80. We confirmed with our salesman that we wanted to move forward and that was that. Car shopping done… for now.
So, again, unless you absolutely need to get something or replace a vehicle, market conditions still aren’t buyer friendly. Try to find a dealer that, at the very least, isn’t adding a markup above the sticker price. Odds are once you find a dealer that isn’t, they’ll have a waiting list, so be prepared to wait a few months (or even longer on some super popular models!). We are seeing the idea of certain and small discounts on various brands and models these days, but they’re still few and far between.
Special Note on Leases and Financing
Leases in particular are not as attractive as they usually are. Automotive manufacturers and their captive finance organizations are not spending incentive money to either bulk up the forecasted resale value/residual of cars to help bring payments down. There is also very little in terms of cash rebates and discounts. On electric vehicles and plug-in hybrids we’re even seeing some brands not offering the federal tax credit as a discount on the lease as they almost all had been to this point. Also the lease interest rate, called the money factor, is also high today thanks to the increased interest rates across the board and again the lack of discount incentive spending from the OEMs.
On the same note, the days of OEMs typically offering 0% financing for 5 years are pretty much done at this point. Those ultra low financing rates were the benefactor of low interest rates as well as incentive spending by the companies to help lure customers in. Since there’s no need to lure customers when demand heartily outstrips supply, there isn’t a lot of heavily discounted financing out there. As always, be sure to check with your personal bank/credit union before heading to the dealer to know what you can qualify for without their help. Make the dealer match or beat your approved financing terms.