As the automotive industry undergoes a massive transformation towards electric, autonomous, and shared mobility, car dealerships are also experiencing a major shift in their business models. One notable change is the disappearance of added car dealer markups, which have traditionally been a significant source of revenue for dealerships. This report will explore how added car dealer markups are disappearing as the new vehicle market is shifting, the reasons behind this shift, and what it means for the industry.
Added car dealer markups are extra fees that dealerships charge on top of the manufacturer's suggested retail price (MSRP) for a new vehicle. These markups can include charges for items such as paint protection, undercoating, and advertising fees. They are often added to the final purchase price of a vehicle without the knowledge of the consumer, who may only discover them when reviewing the final bill. These markups can add hundreds or even thousands of dollars to the final purchase price of a vehicle, which has led to frustration and distrust among consumers.
There are several reasons behind this shift. First, the rise of electric vehicles (EVs) has led to greater transparency in pricing. EVs have fewer options for additional features and accessories, which means there are fewer opportunities for dealerships to add extra fees to the purchase price. Additionally, EV manufacturers such as Tesla sell their vehicles directly to consumers, bypassing the traditional dealership model altogether. This direct-to-consumer approach has been successful for Tesla, which has experienced significant growth in recent years.
Another reason for the disappearance of added car dealer markups is the growing popularity of online car buying. Consumers can now research, configure, and purchase a vehicle entirely online, without ever stepping foot in a dealership. Online car buying platforms such as Carvana, Vroom, and Shift are disrupting the traditional dealership model by offering a more transparent and hassle-free car buying experience. These platforms provide a fixed price for the vehicle, which includes all fees and taxes, eliminating the need for added dealer markups.
The disappearance of added car dealer markups has significant implications for the automotive industry. On the one hand, it could lead to greater transparency and trust between dealerships and consumers. By eliminating surprise fees and extra charges, consumers may feel more confident in their car buying experience and be more likely to return to a dealership for future purchases. On the other hand, dealerships may struggle to find new sources of revenue as these markups disappear. This could lead to a further consolidation of the industry, with smaller dealerships being forced to close or merge with larger ones.
After a brief cruise on the online car social sales sites, it was hysterical to see dealers posting new Ford Lightning EVs for MRSP and LESS! MY, how the market is changing. And QUICKLY!
What are you seeing in YOUR area of the country?