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The new and used car markets have seen it all in the first few years of this decade. 2020 kicked off with a few months of normalcy before the bottom fell out. Car sales plummeted by 15% before pulling the quickest turnaround in automotive history. In 2022, simply finding the car you want can be a tall order, not to mention getting it at MSRP. But the way we buy cars has changed too. A third of car sales are now completed online, and the recent popularity of direct-to-consumer sales is showing that shoppers are tired of the dreaded dealership runaround.
My own recent car buying experience taught me a lot about how in today’s market, knowledge certainly is power. Although it’s still a seller’s market, that doesn’t mean you can’t drive away a winner with your next auto purchase. These are the game-changing solutions that are bringing consumer empowerment to the car buying experience in 2022.
Honest Pricing Is Hard to Come By Online
I’ve experienced the annoyance of online dealership pricing firsthand. Earlier this year, I was in the market for a car. After narrowing down my search to a few models, I began the tedious process of contacting dealerships to get the ‘real’ pricing. I was quickly discouraged, but refused to give up. Dealers would advertise a car at MSRP, but upon making contact, the true price became difficult to tease out. Some salespeople would let me know on the phone that there was a $2,000 to $10,000 ‘market adjustment’, which of course wasn’t reflected in the online pricing. Others would only spill the beans once I specifically asked about ‘additional dealer markups’. However, the madness didn’t end there.
Buying a car, whether new or used, too often feels like an obstacle course in this day and age. Asking your salesperson about dealer markups doesn’t cut it nine times out of ten. I quickly learned that it was just as important to inquire about dealer add-ons. Shopping for the all-electric Hyundai IONIQ 5, I found more than a few dealers in my region claiming to sell ‘at MSRP’, but with up to $2,500 in dealer add-ons such as pinstripes, ceramic coating, nitrogen-inflated tires and door guards. After a dozen phone calls ending in disappointment, I was left wondering if I should just go buy a Tesla to avoid the haggling and money games. Or maybe I’d wait it out for Ford’s supposed Model-e no-haggle pricing. Still, I pushed on.
Fortunately, I did end up finding the car I wanted at true MSRP at Hyundai 112 in New York. The power of crowdsourced reviews at CarEdge’s Car Dealer Reviews made it a whole lot easier to sift through thousands of auto dealers to find honest, pro-consumer car dealerships in America. Nearly 2,000 dealerships have been reviewed, with more added every day. So even if the dealership went out of their way to seem honest, I could see what real customers had to say. Why didn’t this exist before?!
Out-the-Door Pricing Reflects the REAL Cost of Buying a Car
When shopping for a car, the price you see is usually not the price you pay. The number you should really be looking for is the out-the-door price. With this in mind, CarEdge created the perfect car search engine for car shoppers looking for transparent pricing. CarEdge Car Search features the Out-the-Door Price to give you a better idea of how much a car really costs. It takes the dealer’s advertised price and adds in estimated taxes and fees. Finally, consumers get an accurate picture of what to expect in the finance office.
A $2,500 difference between the advertised price and Out-the-Door Price is not uncommon. Taxes, doc fees and registration fees vary widely from state to state. When buying in states with a high sales tax, the difference can be substantial for a car with a big price tag.
Research Saves You Money
Use Price History and Days On Market to Your Advantage
During a vehicle’s lifetime, there can be sharp changes in its market value. Knowing the price history is key to effective negotiating. If a car has seen repeated price drops or has been sitting on the market for a long time, your buying power is much greater than if it was fresh on the lot. CarEdge Car Search includes detailed new and used price history for every vehicle on the market.
Price history data as displayed on CarEdge Car Search
This 2019 Honda Ridgeline has been on the market for months, and has seen a significant price drop. Time to negotiate!
Vehicle Supply Data: It’s What Dealers Don’t Want You to See
Vehicle supply data is yet another number you can use to your advantage when negotiating on a new or used vehicle. For instance, if there’s an abundance of Nissan Rogue’s in your region, you know the dealer better not be playing ‘limited inventory’ games with you.
Vehicle supply data as displayed on CarEdge Car Search
On the other hand, if there are only 15 Hyundai IONIQ 5’s around (as was the situation in my case), you know that you’re going to be fighting an uphill battle. All in all, you’re a better informed and more prepared car buyer with the behind-the-scenes research that CarEdge Car Search provides with every auto listing.
See Extended Warranty Quotes Before You Buy
CarEdge now offers a Tesla extended warranty, the first of its kind!
Past auto maintenance troubles giving you anxiety? Now you can get a free, no-hassle instant quote for an extended warranty while searching for your next car online. Since the start of the pandemic, Americans have been spending 124% more money on auto repairs. That’s a startling figure that would surely be lower if more drivers opted for an extended warranty with top-tier coverage and transparent pricing.
Buying a Car Is TOUGH in 2022, But These New Tools Empower YOU, the Consumer
Whether you’re thinking about buying new or used, the latest new car inventory and used car sales statistics point towards a rough second-half of 2022. Fortunately, this new car buying toolkit from CarEdge puts power back in the hands of the people.
Get the most when you sell your car.
Compare and choose multiple offers in minutes:
CARWISER LETS YOU COMPARE & CHOOSE MULTIPLE OFFERS IN MINUTES.
In 2024, most EVs charge much faster than you’d expect. Although some laggards still take nearly an hour to add 200 miles of range, today’s best-sellers are capable of ultra-fast charging. Unless you’re considering a bargain EV lease for short commutes, you’ll want to make sure that your vehicle is capable of fast charging.
These are the charging times for the fastest charging electric vehicles on the market today. Charge times are reflected as 10% to 80% since charging speeds slow significantly beyond 80% state of charge. You might have noticed that your phone and laptop do the same thing. Let’s dive in.
What’s the motivating force that keeps you showing up to work day after day, year after year? Is it your desire to own a home, the need to provide for your family, or simply to cover the bills? In 2022, more Americans are seeing their hard-earned money go straight to their monthly car payment. The latest numbers tell a worrisome tale of the economic reality that seems to be worsening.
The average transaction price reached a May record of $45,502, according to number crunchers at J.D. Power. Add in the cost of financing, taxes and fees, and the average TOTAL cost of buying a car is ten grand higher at $55,821, according to Cox Automotive and Moody’s Analytics. Considering that the U.S. median household income is $70,284, inflation is at 40-year highs and gas prices mean $100 fill-ups, how much worse can it get?
It now takes 41 weeks of the average American’s household income to purchase a new vehicle
The Cox Automotive/Moody Analytics vehicle affordability index showing weeks of median income needed to purchase an average light-duty new vehicle.
It can get worse, but will it? Rising interest rates mean that an auto loan will cost more over time. The average amount financed on a new car purchase is now $39,721. We’re all friends here, so let’s call it $40,000. The data show that most car buyers opt for a 72 month loan (even I did for my recent electric vehicle purchase), so let’s do the math to see how rising interest rates cost buyers.
In May, the average auto loan interest rate reached 4.07%. The Federal Reserve is openly stating that they plan additional interest rate increases as they flex their muscle in last-ditch efforts to put a damper on inflation. In all likelihood, the average auto loan rate will reach 5% at some point in the next year. Over a 72-month loan term for the average $45,502 transaction, the difference between 4% and 5% auto loan rates totals $1,400 more in interest paid over the life of the loan. At a 5% interest rate, today’s average auto loan will cost $6,813 in interest over 72 months.
Demand Remains Strong Despite Outrageous Prices and Rising Rates
Why are automakers and car dealers keeping prices inflated despite the economic downturn deepening? Simply put, it’s because consumers continue to pay the higher prices. From the perspective of the American consumer, lack of widespread public transportation and our deeply ingrained ‘car culture’ means that for many, a car is a necessity, not a want. Americans are paying higher prices because in many cases they have to. Cars get us to work, to school and to the grocery store.
AutoNation hasn’t had a problem with higher car prices.
AutoNation CEO Mike Manley said in April that the nation’s largest dealer group had “not seen any reduction in the demand for new vehicles or really any perceivable segment-shifting as a result of current economic conditions.”
“We, frankly, have customers for basically everything that’s coming,” Manley told Automotive News.
Evidence for their bold claims? Kelley Blue Book says that the average vehicle sold went for $1,000 over MSRP. That’s not how it used to be.
Used Cars Are Cheaper, But At Record Highs Too
We’ve been tracking the volatility of the used car market. The pre-pandemic ups and downs gave way to prices in freefall at the height of the pandemic, followed by an unprecedented turnaround that culminated in skyrocketing used car prices as new car inventory was squeezed by the chip shortage.
What a wild ride it’s been. As of June 2022, overall used car prices have increased more than 30% year-over-year. In some vehicle segments, prices are 60% higher than they were in 2021.
The Case For Maintaining and Keeping Older Vehicles Gets Stronger
Tesla electric vehicles may be quick, efficient and in-style, but they sure aren’t affordable.
More often than not, it makes a lot of financial sense to repair an older vehicle than to shell out record amounts of cash (and financing) for a new car. Only those who drive A LOT (over 15,000 miles per year) might see the benefits of buying a newer, more fuel efficient vehicle. We recently did the math, and the break-even point when purchasing an EV over a combustion-powered competitor can take from four years to sometimes nearly a decade, depending on out-the-door cost, incentives and annual miles driven.
Maintenance isn’t cheap, but with the average monthly car payment over $600/month, more drivers are cornered into picking the lesser of two evils.
You’re one step closer to getting the PlayStation on wheels you’ve always wanted. On June 16, Honda Motor Company and Sony signed an agreement to design and build an electric vehicle. The new joint venture will operate under the name of Sony Honda Mobility Inc.
Introducing Sony Honda Mobility Inc.
Sony Honda Mobility will be a 50-50 joint venture with the goal of launching sales in 2025. The two Japanese giants said in a statement that the partnership “will combine Honda’s expertise in engineering and manufacturing vehicles, along with its proficiency in providing after-sales service, with Sony’s strengths in imaging, sensing, telecommunications and entertainment.”
The Sony Vision-S 02 electric SUV is in development.
Honda said in April it will invest $37.16 billion USD over the next 10 years in electrification. This investment will culminate in 30 new EV models globally. Honda aims to produce 2 million electric cars annually by 2030. This is ambitious, as there are currently no fully-electric Honda models for sale in North America.
Sony recently unveiled a concept electric crossover dubbed the Sony Vision-S 02. The Sony Honda partnership will likely pick up where Sony left off in research and development of this Sony EV.
Honda Is Already Collaborating with General Motors
The 2024 Honda Prologue EV, to be built by GM in Michigan.
Honda is late to the electric vehicle party. Now, Honda is depending on General Motors to get their EV plans off of the drawing board and onto the ground as they prepare for the latter half of the 2020s. The 2024 Honda Prologue is the much anticipated all-electric crossover headed to the American market.
Oddly enough, it’s only Honda in name and exterior design. The 2024 Honda Prologue will be powered by General Motor’s new Ultium Battery platform, which offers fast charging and great range. GM will even build the Prologue in its North American factories. By mid-2023, Honda-branded EVs will be leaving GM plants in Michigan. What a crazy world we live in, when GM-built vehicles become Hondas. Learn more about the Honda-GM partnership.
What if I told you that auto dealerships are one of the largest political forces in the United States? To dealerships both big and small, business is about a lot more than selling cars. There are 17,968 new car dealerships in the United States, a figure that has grown at the same time that vehicle inventory has plummeted, and new car prices have skyrocketed. As the price of a new vehicle rises out of reach for millions more American consumers, many are reporting all-time record profits.
How did dealerships come to exert such a massive influence on the economy and politics of the United States? To find out, we’ll take the backroads of America to bring this fascinating story of power and influence into the spotlight. Nine out of ten American households own a car, and 55% of autos are purchased at a dealership. This is the tale of how we got here.
A Brief History of the Auto Dealership
As the automotive industry was born in the late nineteenth and early twentieth centuries, automakers faced a dilemma. They had figured out how to engineer and produce a transformative product, but how would they deliver and service these first automobiles? Better yet, who would educate the consumer about vehicle ownership?
It’s important to remember that automakers were selling what they called ‘horseless carriages’ to customers at the time. The majority of the population knew nothing of internal combustion engines. In the first and second decades of the twentieth century, automobile adoption picked up pace. How would an ordered vehicle get to a customer’s hands? Who would service these ‘motor carriages’? Would the customer foot the bill for repairs, or would the automaker offer a warranty? These are just a few of the questions up for debate when the car dealer distribution model was conceived.
The First Car Dealership in America
It took a few decades for the logistics of car distribution to get worked out. Not everyone was on the same page, and some pushed for solutions modeled after other industries. In fact, some early ideas sound ludicrous to us today. Many early auto industry players advocated for a mail order service modeled after the successes of Sears & Roebuck and Montgomery Ward. But that left too many questions unanswered for a young industry that was eager to get it right. Despite the world-changing invention at hand, automakers still feared their own demise. Considering how few of the early automakers have persisted to this day, their fears were not unfounded.
The first dealership in the United States was established in 1898 by William E. Metzger, who sold Oldsmobiles in Detroit. Over the next two decades, the dealership model rose to prominence, slowly overcoming competing automobile sales models. In 1917, the now-famous National Auto Dealers Association (NADA) was established with the goal of giving car dealers a voice in Washington.
The Rise of the Car Dealer Lobby
Today, the NADA is a nationally-recognized industry and political force that represents over 16,000 auto dealers nationwide. However, one of America’s most powerful lobbies had humble beginnings rooted in the turmoil of a wartime economy.
The NADA was founded in 1917 when a group of dealers set out to change the way Congress viewed the emerging automobile industry. Thirty dealers from state and local associations succeeded in convincing Congress that cars weren’t ‘luxuries’ as they had been classified in the federal tax code. By convincing lawmakers that cars were vital to the economy, the group prevented the conversion of young automobile manufacturing facilities into wartime factories. The so-called ‘luxury tax’ that had been levied on cars was reduced from 5 percent to 3 percent.
In essence, the NADA has been lobbying since the very beginning. And they’re good at it. From 1919 to the present day, the group spearheaded hundreds of legislative priorities that served the interest of the ever-growing number of car dealers in the United States.
In American car culture, cars are central to the economy and most of our day-to-day lives. In 2020, 91% of American households owned at least one car, a figure that continues to grow. Where do the 276 million registered vehicles in the U.S. come from? Tesla and Rivian aside, it’s almost always from a local dealer.
State dealer associations are prominent organizations around the country. The Florida Automobile Dealers Association has over 1,000 dealer members, and dozens of other states have associations of similar size. Political action begins at the grassroots level, and this is where state dealer associations flex their muscle.
State auto dealer associations provide networking opportunities for professionals, a regional dealer support system, and a venue for working out solutions to challenges. There’s also the unified political voice that lobbies at the local, state and nationwide levels. Lobbying costs money, both in the form of employing professional lobbyists, and in lawmaker donations. I’ll scratch your back if you scratch mine? Dealer industry associations have shown time and time again that their lobbyists achieve the desired outcome more often than not.
SOS: Save Our Service Department
A recent example of what’s possible at the state level comes in the form of an emerging legislative push that’s troubling for any electric vehicle owner or prospective buyer. In 2022, bills were introduced in both Oklahoma and West Virginia that would ban over-the-air (OTA) updates. Why? Car dealer lobbying groups are doing their best to keep drivers returning to dealer service centers for repairs. Tesla’s pioneering OTA updates have revolutionized everything from performance upgrades via wifi to recall fixes from the comfort of home.
Why would dealership lobbying groups have a bone to pick with OTA updates? Service center visits account for nearly half of total dealership revenue, with some locations relying heavily on service to stay profitable. The electrification of the auto industry is here, and resistance to OTA updates is just a sign of what could be around the corner.
Online car sales have disrupted the industry over the past decade, with the likes of Carvana and Vroom seemingly coming out of nowhere. Their entrance hasn’t been without problems. Carvana is under pressure for repeatedly failing to transfer vehicle titles in a timely manner. The solution? A Florida state senator took the time to hand-craft legislation to simply remove the requirement to provide the title at all. If that’s not motivated by state-level dealer lobbying, I don’t know what is.
The Power of Dealerships Isn’t Just Political
Over 1.2 million Americans are employed at the nearly 18,000 franchised car dealerships and 60,000 independent dealerships in the United States. The power of dealerships is very much rooted in the economy of the nation. However, this power is not evenly distributed. In many communities, particularly in small-town America, dealerships have an oversized role in the local economy.
Jim Lardner, spokesperson for Americans for Financial Reform, told David Dayen of The Intercept that communities sometimes even rely on the economic powerhouse of locally owned and operated dealerships. “They sponsor Little League teams. Their advertising dollars are crucial to local newspapers and broadcasters. When they talk, lawmakers don’t just listen — they have a hard time hearing anybody else or looking at facts.”
As is often the case, with more economic power comes the appetite for political power. Sure, probably not for the sake of power itself, but to have a say in the rules of the game.
How Do Auto Dealers Influence Politics? You Guessed It…
The National Auto Dealers Association has delivered $35 million to members of Congress since 2022. The NADA maintains a large lobbying operation in DC, one that costs $3 million a year to operate. The power of dealers is not limited to the doings of the NADA and state-level associations. In a recent election cycle, 372 of 435 members of the House of Representatives received campaign contributions (money) from auto dealers. 57 out of 100 senators could say the same.
Dealers Don’t Go It Alone
On a national level, the NADA has collaborated with the Alliance of Automobile Manufacturers and even the American Financial Services Association to push favorable legislation. In 2015, a rare bipartisan bill was a textbook example. The bipartisan bill amounted to a stand-down order to the Consumer Financial Protection Bureau (CFPB). Shouldn’t lawmakers be standing up for the consumer, not the opposite?
It gets worse. The CFPB was established in 2011 to protect consumers to promote “transparency and consumer choice and prevent abusive and deceptive financial practices. It was partially in response to what we all went through in the 2008 financial crisis. When the CFPB was created, a special provision was added last-minute just for nervous dealers. This provision, which is enshrined in CFPB regulations, says that the agency itself can NOT directly monitor dealerships. As David Daley notes in his wonderful piece in The Intercept, “the CFPB can only fine the lenders who finance car purchases, not the dealers who make the markups”.
Riders: The Secret Sauce
This is one of many examples of auto dealers wielding their power to influence laws and regulations in their favor. The secret to their success is something called legislative riders. Riders are provisions or ‘add-ons’ that can be added to a bill last-minute, often with hopes of its controversial aspects being buried in the hundreds or thousands of pages of more newsworthy text. The West Virginia OTA ban that was proposed and later removed is one such example. It was conveniently tucked into a much larger pro-dealer bill.
What Does the Future Hold?
Record new and used car prices from 2021 to 2023 soured consumer sentiment. Dealer markups regularly reached beyond $10,000, and more car buyers turned to Tesla and other direct-to-consumer automakers to steer clear of the dealership experience. Nine out of ten Tesla buyers cite the no-hassle direct-to-consumer sales model as a major factor in their buying decision. Now, legacy automakers are testing the waters too.
In 2022, Ford made headlines with the announcement that it would split into two new companies under the Ford Motor Company umbrella: Ford Blue for combustion sales, and Ford Model e for electric vehicle sales.
Ford Model e transforms Ford’s electric vehicles sales model to something between direct-to-consumer and the traditional dealership model. There will be no-haggle set pricing, online ordering, but dealers will continue with a role as delivery, test drive and service centers. If you haven’t connected the dots, Ford is taking a few big steps away from the past century of traditional dealership sales. Will other automakers follow?
Mercedes-Benz and BMW are beginning to test what they call agency sales in Europe. Essentially, it’s the same concept as Ford’s Model e business model. Are the floodgates opening in the push to direct-to-consumer sales? We’ll know soon enough.
Car dealerships are powerful economic and political forces in America. The birth of American car culture parallel to the rise of the dealership lobby was no coincidence. However, times are changing. Can dealers lobby their way out of an industry that is evolving at breakneck speed? What will buying a vehicle look like a decade from now? Unknowns abound, but one thing is for sure: the salespeople out front are eagerly awaiting your arrival.
CarEdge Insights
