Car buyers paying more than MSRP feel lasting resentment

Last month, Cox Automotive research uncovered a brace of unpleasant findings for car buyers. The average transaction price for a new car hit $48,043. That figure was a ridiculous $895 more than the month before, and an even more ridiculous 12.7% more than in June 2021. And buyers were, on average, paying $1,000 over MSRP for the first half of this year. Research firm GfK Automotive has put numbers to the results of these market distortions — numbers that could help make sense about why OEMs continue to push various tactics to tamp down dealer markups. The short of it is that through May and June, GfK says 80% of car buyers paid MSRP or above, including 34% who "paid fees they had never heard of before." Afterward, data from roughly 40,000 shoppers showed that "Paying above MSRP leaves car buyers with strong negative feelings toward auto brands, dealerships."

The initial burn is quick, but the pain can stay with the customer a long time. Word-of-mouth marketing took the worst turn, with 31% of respondents who paid more than the manufacturer's suggested retail price saying they'd warn others to avoid the dealership they used, compared to 14% of those who paid MSRP saying they'd do the same. Brands aren't safe from the resentment, either, 27% of buyers who paid more than MSRP saying they "would never buy the same brand again." Only 10% of those who paid MSRP shared that sentiment.

What could be worse for dealers is that 23% of those who paid over MSRP in May said they wouldn't take their car in for service to the dealer they bought from, the figure rising to 32% in June. In the good old days — 2019, if any of us can remember that far back — dealers might take a haircut on the sale to get the service goodwill, because that's where profit and repeat business lived. Word-of-mouth took a beating here, too, 35% of buyers who shoveled cash into dealer coffers saying they'd tell others to avoid a particular service department.