Selling over sticker price can backfire on car dealer, automaker

About one-third of customers paid more than sticker price for a new vehicle in December 2022, sales that GfK research indicates might cost the retailer — or manufacturer — repeat business. 

Twenty-seven percent of customers who paid more than sticker price told GfK they would never buy that brand of vehicle again. Julie Kenar, GfK senior vice president of consulting, said on a GfK webinar March 16 that while automakers have no control over dealership pricing, "brands are still being negatively impacted."

Thirty-one percent of buyers charged above sticker told GfK they would advise other consumers to avoid that dealership, while 29 percent plan to never use that retailer for service.

"There are downstream revenue implications and customer relationship implications with charging over MSRP," Kenar said.

Selling above sticker price when inventory is just returning is “a bad look,” said Keith Powell, owner of Yes Chevrolet and Yes Ford near Charleston, W.Va. His group does not exceed sticker price on any model except for the Corvette.

“It’s not good for CSI, it’s not good for customer retention,” Powell said. In a small market like West Virginia, “We gotta take care of the people that do business with us,” he added.

Rob Shabe, fixed-operations director at Murphy Ford in Chester, Pa., thinks it’s possible dealers who charge above sticker might undercut their service department.

“I could see how a customer would feel that way ... ‘If they’re overcharging me because [of] supply and demand, they would do the same in service,’ ” said Shabe, whose store doesn’t exceed sticker.

Mercedes-Benz of Edison in New Jersey doesn’t charge above sticker price. But general manager Doug Wells doubts that retailers who price above sticker need to worry about their service department losing business.

The negative sentiment found by GfK reflects consumers shopping outside their market, rendering the issue moot, Wells said. A customer who searched the country for a pickup truck during an inventory shortage found one in New York City and traveled there to buy it at a $5,000 premium. “They weren’t gonna service the car in New York anyhow,” he said.

Powell said he doubts customers would forego a particular automaker’s brand because of a dealer’s pricing. He likens it to a customer who quits patronizing one McDonald’s location that is perpetually lacking milkshakes in favor of another store in the chain.

“They’re not gonna stop going to McDonald’s,” he said.

GfK said 47 percent of shoppers in December paid sticker price for a vehicle, while 34 percent paid more and 19 percent paid less.

More recent figures from J.D. Power indicate 29 percent of vehicle shoppers were still paying more than sticker price in February.

Kenar told Automotive News that paying sticker price doesn’t engender the same backlash as paying above sticker.
With the latter, she said, “there’s a much bigger lift” in negative feelings.

Consumers in some demographics were even more likely to have bought a vehicle for more than the price the manufacturer recommended.

Forty-three percent of millennials were charged more than sticker on their last purchase, the largest proportion among any age group studied, according to GfK. Millennials comprise one-third of the consumer base and aren't a group that automakers or dealerships "want to disenfranchise," Kenar said on the webinar.

Forty-eight percent of households earning more than $150,000 also paid above sticker price, according to GfK.

For millennials and affluent shoppers, "retailers really want to think twice about these market adjustments," Kenar said.

Vehicle prices began to rise above sticker in May 2021, when the average shopper agreed to pay 100.3 percent of the manufacturer’s suggested price for a vehicle, according to J.D. Power. However, incentives kept a customer’s actual bill from exceeding sticker price until October 2021, when buyers were purchasing vehicles for 104.7 percent of the manufacturer’s suggested price and paying 100.5 percent of that after incentives.

In February, the average vehicle sold for 102.8 percent of sticker, 100.1 percent after incentives, according to J.D. Power.