Dealer Markups: Are They Finally Disappearing?

For the past three years, car buyers have faced a harsh reality. Sticker prices became mere suggestions, and “market adjustments” added thousands of dollars to the cost of a standard family vehicle. However, the tide is finally turning. Inventory levels are recovering rapidly, and for the first time since the pandemic began, the balance of power is shifting back to the consumer.

The Return of Inventory

The primary driver of dealer markups was scarcity. When the microchip shortage halted production lines in 2021 and 2022, dealers had empty lots. If you wanted a car, you paid a premium. Today, that scarcity is largely gone for most brands.

Automakers have resolved most supply chain bottlenecks. Production is running at full capacity, and vehicles are arriving at dealerships faster than they are being sold. In the automotive industry, inventory is measured by “days’ supply.” This metric estimates how long it would take to sell the current inventory at the current sales rate.

  • The Shortage Era: During the peak of the shortage, the industry average hovered around a 30-day supply or less.
  • The Current Reality: As of mid-2024, the national average has climbed significantly. Many domestic brands are seeing inventory levels rise above 70 days, which is considered a healthy buyer’s market.

This surplus means dealers can no longer demand premiums. Instead, they must compete for your business again.

Brands Leading the Price Drops

Not all manufacturers are in the same position. The disappearance of markups is uneven across the market. Domestic automakers currently have the highest inventory levels, leading to the most aggressive price cuts.

Stellantis (Jeep, Ram, Dodge)

Dealers representing Stellantis brands are currently facing a massive oversupply. Reports indicate that Jeep and Ram dealers often have inventory levels exceeding a 100-day supply. Consequently, these dealers are dropping prices well below MSRP (Manufacturer’s Suggested Retail Price) to move metal. You are likely to find significant discounts on models like the Jeep Gladiator, Ram 1500, and Jeep Grand Cherokee.

Ford and General Motors

Ford and GM are also seeing inventory recover. While their supply isn’t as swollen as Stellantis, popular models like the Ford F-150 and Chevrolet Silverado are becoming easier to find without markups. In fact, average transaction prices for these trucks are trending downward as factory rebates return.

The Asian Import Exception

While markups are vanishing for domestic trucks and SUVs, some Asian manufacturers are still tight on inventory. Toyota and Honda are improving, but they generally run leaner operations. You might still encounter MSRP pricing or small markups on highly desirable models like the Toyota RAV4 Hybrid or the Honda CR-V Hybrid. However, even for these brands, the exorbitant $5,000 or $10,000 markups of 2022 are largely extinct.

High Interest Rates Are Forcing Dealers' Hands

Inventory is not the only factor killing the dealer markup. High interest rates have fundamentally changed the affordability equation for buyers.

When auto loan rates were at 2% or 3%, buyers could absorb a markup because the monthly payment remained manageable. With average new car loan rates hovering between 7% and 9% in 2024, the cost of borrowing has skyrocketed.

Dealers realize that if they charge MSRP plus a markup and the customer faces high interest, the car becomes unaffordable. To get the monthly payment into a sellable range, dealers are forced to discount the selling price of the car.

The Comeback of Incentives

We are seeing the return of aggressive manufacturer incentives. This is the clearest signal that markups are dead and discounts are back.

  • Cash on the Hood: Cash rebates, which had all but disappeared, are increasing. It is common to see $1,000 to $3,000 cash allowances on domestic SUVs and trucks.
  • Subvented Financing: To combat high federal interest rates, automakers represent the only source for cheap money. Brands like Mazda, Ford, and Nissan have recently run promotions offering 0% to 2.9% APR financing for varying terms. These offers are arguably more valuable than cash discounts in the current economic climate.

Where You Might Still See Markups

While the general market is cooling, specific segments remain hot. If you are shopping for these types of vehicles, you may still face stubborn pricing:

  1. Hybrids and Plug-in Hybrids (PHEVs): Demand for hybrids, specifically from Toyota and Lexus, still outstrips supply. Expect to pay MSRP or slightly over for a Prius Prime or Sienna.
  2. Specialty Performance Cars: Limited production vehicles like the Chevrolet Corvette Z06, Porsche 911 GT3, or Ford Mustang Dark Horse continue to command premiums because supply is artificially limited.
  3. New Releases: When a completely redesigned model launches (like the upcoming Toyota Land Cruiser), early adopters often pay a premium for the privilege of being first.

Tactics to Secure a Below-MSRP Deal

Now that the market has shifted, you should adjust your negotiation strategy.

  • Expand Your Search: If a local dealer demands a markup, look 50 miles away. With inventory rising, a dealer in the next town over is likely sitting on too many cars and will be willing to undercut their competitor.
  • Focus on Aged Inventory: Ask the dealer which cars have been on the lot the longest. Dealers pay interest on the cars sitting on their lots (floor plan costs). They are desperate to get rid of units that have been sitting for 90+ days and will likely offer them below invoice price.
  • Get Out-the-Door Pricing: Always negotiate the “out-the-door” price. This exposes any hidden fees or add-ons the dealer might try to slip in to replace the lost markup revenue.

Frequently Asked Questions

Is it a good time to buy a car now? Yes, conditions are significantly better than they were in 2022 or 2023. While interest rates are high, the drop in vehicle prices and the return of incentives make it a better buyer’s market. If you can secure promotional financing from the manufacturer, it is a great time to buy.

Will car prices drop even further? It is likely. As inventory continues to pile up throughout the year, dealers will face increasing pressure to clear lots for next year’s models. This typically leads to better year-end sales events and deeper discounts.

What is a “Market Adjustment”? “Market Adjustment” is the term dealers use on a window sticker to indicate a markup. It is an arbitrary fee added simply because demand is higher than supply. You should refuse to pay these adjustments on almost any mass-produced vehicle in the current market.

Which brands have the most inventory right now? Currently, Jeep, Ram, Dodge, and Chrysler have some of the highest inventory levels in the industry. Other brands with recovering stock include Ford, Nissan, and Buick.