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The market for new cars is tight, and dealerships are taking advantage of the situation by adding steep market adjustment fees to the price of the cars. These fees can range from a few thousand dollars to tens of thousands of dollars, depending on how popular the car is.
If you are in the market for a new car, do your research to see what other dealerships are offering, and be prepared to walk away if the dealer isn’t being fair.
What is a market adjustment?
A market adjustment on a car is a fee that dealerships add to account for low supply and high demand. A market adjustment is a price increase that dealerships add on to the manufacturer-suggested retail price (MSRP) of a car. This is done when the dealership believes that the demand for the vehicle is high enough to support a price that is higher than the MSRP.
The practice goes by several other names, including “added dealer markup,” “added dealer profit,” or “adjusted market value.” You can find out if a market adjustment has been added to a car’s price by looking at the “second sticker” on the car, which will list any extras that the dealer has installed in addition to the market adjustment.
How are dealers determining the market adjustment amount?
Dealers will often use historical sales records, demand and supply for the vehicle, and the ability to increase prices to determine how much to charge for a market adjustment. However, there is no industry standard, and there is no law that says a dealer needs to justify the amount. They will increase the price by as much as the market will bear.
Are dealerships required to charge market adjustment fees?
Dealers are not required to charge a market adjustment fee. And if they do, they do not have to provide a reason. They can also choose to rescind the market adjustment fee.
How to beat market adjustments
While excessive market adjustments are common right now, you don’t have to cave to the pressure to pay more than you should. Here are some tips to get the best deal on your car, even in a high-price environment.
- Do your research: See what comparable deals other dealerships are offering to help you determine how much you should pay. Take your research to the dealer, and if they are willing to negotiate, you may be able to get a much better deal.
- Be prepared to walk away: If the dealer isn’t being fair, you don’t have to settle. Take your business elsewhere or wait to see how the market changes.
- Try to pay as close to the dealer invoice price as possible: The dealer invoice price is the amount the dealer paid the manufacturer for a vehicle. While the dealer invoice price is sometimes higher than the MSRP, it’s a good starting point for negotiations.
Other fees to keep an eye on
Dealerships may add fees to your final price other than a market adjustment, so be sure to ask about any applicable fees. The most common fees include:
- Documentation fee: This is a flat fee that dealerships charge to cover the paperwork involved with a car sale. Some states have set a maximum amount for this fee.
- Acquisition fee: Some manufacturers will charge this to deliver a vehicle to the dealership. It does not apply to all dealerships and is typically only a few hundred dollars.
- Advertising fee: This is a fee that dealerships may charge to cover their advertising costs. In some states, this fee has been capped, and in other states, it has been banned.
- Dealer-installed accessories: This is the cost of any additional equipment, items, or accessories that the dealer adds to the vehicle that you did not request.
Be aware that, in addition to dealer fees, you will have to pay taxes, title, and registration fees to the state. These fees vary, so be sure to check the sale price and then get an estimate of the taxes that you will need to pay. This can help you budget for the full cost of the vehicle.
The bottom line
The market for new cars remains tight, and it is not likely to loosen until 2023. If you can’t wait, be sure to shop at more than one dealership. When it comes time to finance, also shop around with more than one lender and prequalify to get an idea of what the loan will cost.