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Biden Economy Shocks Car Buyers with Unprecedented Premiums

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By gpointstudio @ Shutterstock.com

Car buyers in America are facing unprecedented premiums for vehicles. The WSJ’s Mike Colias and Nora Eckert write “Before the pandemic, practically nobody paid above the sticker price for a new car. Last month, an unprecedented 82% of buyers did, according to consumer research site Edmunds.com.”

The Biden-era has been rife with shortages of many of the basic needs of the American people. They have endured shortages of fuel, food, lumber, gas, ammo, computer chips, and many other things Americans need every day.

But in a nation that runs on its automobiles, paying over sticker price on vehicles is shocking to many Americans. Colias and Eckert report:

How hard is it to buy a car today? For Kevin Peters, it recently involved a one-way flight and 330-mile road trip to avoid overpaying for a new truck.

Mr. Peters initially spent three weeks shopping around San Diego for a new F-150 Lariat pickup, only to encounter extra charges of $5,000 to $8,000 above the suggested retail price. He decided to fly to a dealership in Las Vegas, where he got what is considered a bargain: He paid the sticker price of $73,520.

“The rules have changed so dramatically,” he said. “Despite being armed with information, the dealer’s position is ‘This is kind of a take-it-or-leave-it proposition.’”

Pandemic-related supply chain problems are stretching the new-vehicle shortage into a second year, with near-empty dealer lots, sky-high prices and monthslong waits for new wheels. The prolonged disruption is now exposing fault lines in the car business’s century-old retailing model and prompting a broader rethinking of the entrenched way Americans buy cars.

Consumers are revolting. Like Mr. Peters, many are expanding their searches outside their hometowns and even across state lines. Some are banding together online to call out dealers charging the biggest markups. Others have taken their concerns directly to automotive CEOs via personal letters.

Car companies say they don’t want dealers charging above sticker and in some cases are pushing back, but dealerships are independent businesses that control the final transaction.

Many dealers say they must make do with their scant vehicle supplies and be realistic about what the market will bear, especially for high-demand models. In extreme cases, dealerships are charging $35,000 to $40,000 above the manufacturer’s suggested retail price, or MSRP, on luxury cars that normally sell for $80,000 or more.

Before the pandemic, practically nobody paid above the sticker price for a new car. Last month, an unprecedented 82% of buyers did, according to consumer research site Edmunds.com.

Dealers, for their part, are divided on the practice. Some say the upcharges are a reasonable reflection of the upside-down market, and that the auto industry is one of many where such inflation is visible, especially for small dealers trying to compensate for choked inventories.

Other dealerships on principle say they don’t charge above MSRP, with the exception of some new, high-demand models. They say the practice can permanently damage their reputation with buyers and hurt repeat business.

In today’s market, though, it is becoming more difficult to refrain from charging more, especially as it becomes commonplace, the dealers say.

Action Line: America’s supply chain is stretched thin. You should consider having extra supplies of the essentials stocked away at home in the event the system breaks down completely. Start with water. If you’re buying bottled water, remember that it’s being shipped on a truck. You need to protect yourself from unexpected disruptions in that supply. Next, if you’re serious about getting prepared, but can’t stay motivated, click here to sign up for my free monthly Survive & Thrive newsletter. I’ll help you stay motivated and beat the inertia that’s holding you back. But only if you’re serious.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.