Sticker shock: 80% of car buyers now paying above suggested retail

Estimated read time: 5-6 minutes

ATLANTA — Only a year ago almost no one paid the full sticker price when buying a new car. Now you’re lucky if you can.

In perhaps the most striking sign of the change in new car pricing, 80% of new car buyers in January paid more than the manufacturer’s suggested retail price, according to data from Edmunds, the online site that tracks car rankings and prices. That’s what’s commonly known as sticker price.

It’s the latest manifestation of the fact that a shortage of parts, especially computer chips, has caused automakers to temporarily halt production at various plants. That has left dealers with fewer vehicles than they need to meet customer demand.

That has resulted the average transaction price hitting $45,717 in January, or $728 above MSRP.

It’s up nearly $6,000, or 15%, from January a year ago, and about $7,500 higher than the average price paid in January 2020, just before the pandemic started roiling the auto industry.

Only 2% of buyers paid above MSRP a year ago, with buyers paying on average about $2,150 less than sticker at that time.

“Demand is through the roof, and supplies are historically tight,” said Ivan Drury, senior manager of insights for Edmunds. He said if a buyer isn’t willing to pay above the sticker price, the dealer can be confident there will soon be another buyer who will.

“We’re talking only a 10- to 11-day average for the time vehicles are on the lot,” he said. “We’ve never seen that.”

Part of the increase in pricing is because consumers are increasingly buying more SUVs and pickups and fewer sedans, which are typically less expensive. They’re also choosing more expensive options, such as automatic braking and lane departure warnings that are designed to make the cars safer.

But the biggest factor behind the price increases is the shortage of cars.

The only good news for car buyers is that used car prices are going up even faster than new car prices, due to an even tighter supply of vehicles in that market. The average value of a trade-in has increased $8,000 in the last year, according to Edmunds.

Dealers are the big winners

The biggest winners from the current prices: auto dealers, and not the automakers. Until Tesla came along with its company-owned stores and direct sales to consumers, all automakers used a network of independent businesses to sell cars to American buyers. Dealers would buy cars wholesale at set prices from automakers. The price paid by consumers were then negotiated with the dealer.

So while automakers benefit from not having to offer some of the…