Car Dealer Markups Are Stupid and You Shouldn’t Pay Them
Dealership experience matters, folks.
The pandemic-era car market has been absolute pandemonium if you haven’t noticed yet. There are barely any new cars on dealer lots, used cars are selling for ridiculous numbers, and it’s getting harder and harder to find decent cheap transportation. Worst of all, however, is the extreme rise in dealer markups on new cars. I actually experienced this phenomenon myself just a few days ago.
My dad’s 2018 Mazda 6 has been acting up a little bit. Something strange with the transmission calibration or programming is making it shift rough and cut the throttle too early before the car can shift. Since he does serious miles, the car accumulated 78,000 miles since he bought it new, and therefore it’s out of warranty. Commuting his truck 80 miles a day is impractical, so he needed to replace it with something new and proven. He wanted a new Honda Accord 2.0T with a 10-speed automatic — by all accounts, a very normal, available, and un-special car.
While I did explain to him that the entire drivetrain of the new Accord is new and unproven, he’s an old-fashioned guy who believes in the reliability of Hondas, and it’s admittedly a wise choice. But that isn’t what drove us away from buying a Honda in the end. It was a particularly unfavorable dealership experience.
The first dealership we spoke to ran numbers for my dad and had a financing offer ready on the table for him online, but I was sent to check the car out because he was out of town. Excited, I set off to test drive a new Accord and report back to my dad. For some reason, he trusts my judgment with cars and I know his tastes well.
I stepped into the dealership and asked for the salesperson that my dad spoke to. While I waited, I made note of the old-fashioned dealership vibes of cross-armed salespeople bro’ing it out (without masks) and doing their best impression of a gym locker room. It was a little off-putting, but there was a Civic Type R Limited Edition hanging out near the front desk that I went to check out.
Enamored by its red-accented interior, my eyes casually drifted to the window sticker where the fantasy shattered so quickly that I let out an audible “what the… fuck?” The Civic Type R LE has an MSRP of $43,995 before options. This car had a dealer markup of $31,000 for a total price of around $75,000. What. The. Fuck.
While the dusty vibes of the salesmen weren’t great, it didn’t have too much bearing on how I felt about the dealership; this was typical. That colossal markup, however, signaled that I might be in for some heaping mounds of horse doo-doo with this experience.
With that thought, the salesperson collected me and took me to the Accord. I was impressed with the interior quality, and the Sonic Gray Pearl paint. The car was totally out of gas so the salesperson dragged me to a gas station where I then took over for a real test drive. That was all great and fun, and the Accord is a sporty, fun, and smooth sedan. What completely derailed this experience for me was the salesperson coming in with a late blindside.
“OK, so it’s going to have a $1,000 protection package” He started pointing at the car. “That includes film on the doors and a paint coating. Also, we’re adding a $2,000 market adjustment because it’s the only 2.0T on the lot and one of only six Accords we have at all. Also, the market is crazy.”
I stopped dead in my tracks and blurted out “We aren’t paying a markup” as a knee-jerk reaction.
The salesperson affirmed to me that the markup was not negotiable. I told him that I’d call my dad, and affirmed to him that we aren’t paying a markup. I stepped through the lobby and called pops up, and had a good conversation about it. We were both on the same page with the markup and the vibe of the dealership and basically agreed to step away if the markup was non-negotiable.
I walked back into the dealer where the dealer manager approached me and asked how I felt about the car. I once again said that we are not paying a markup, but would be happy to make a deal without the markup.
Do you know what he said to me? Verbatim: “Good luck with that.”
With that rudeness, I said bye and left the dealership. What an unpleasant experience. Which was then repeated by higher markups at a second dealership about 25 miles away. What gives here? Why were these dealers so committed to the bad stereotype of being rude, pushy business people? It’s ridiculous behavior fed by short-sighted greed. Guess what? Honda’s going to keep stamping more of these cars out pretty soon. Accords aren’t some rare commodity, they’re a mass-produced sedan, short-term production delays be damned.
My dad promptly shifted gears after I showed him some Lexus certified used cars with that generous six-year unlimited mile warranty. He showed up to a dealer, was quoted the price he saw online, given two extra years of that CPO warranty, and now happily owns a 2020 Lexus ES350 with 10,000 miles for less than what he would have paid for a brand new Accord Touring 2.0T.
Dealership experience matters, folks. If they keep doing this garbage, will there be customers after all these pandemic delays and problems settle down? I’m sure there will be, but dealer reputation in the U.S. is already as poor as it could be. Thanks to complex laws and legislation, dealers are here to stay and allowed to be complete assholes to their customers.
The weirdest and most concerning part to me is that it seems like lower-end brands like Kia, Honda, Nissan, and Toyota are perfectly happy to do this, while premium brands seem to have a no-haggle, no-markup sales style that translates to an experience that retains customers. Why should those looking for more basic transportation be penalized and shamed for it? Just because you can’t afford a better car, you aren’t afforded a decent experience. There’s something incredibly stinky about that.
Luckily, you can find dealerships that are zero-markup dealers. Sometimes, you’ll have to travel for them, but it can often be worth it just for the thousands of dollars saved, and the sanity of being treated like a human instead of a walking APR percentage. Don’t pay markups. Don’t give a reason to keep doing it. The manufacturer’s suggested retail price is already designed to let dealers make some coin, and they really collect on service anyway. Whether it’s $3,000 on an Accord or $31,000 on a Civic Type R, markups are a big waste of money. Even if you can afford it, you’re setting yourself up for a bad situation taking out a loan for a car that’s much bigger than its actual value. Nevermind insurance — I doubt most carriers will suddenly start valuing your Civic Type R at $70,000 because one greedy dealership decided that’s what it was going to take to move the car. No mass-produced new car is ever worth more than MSRP — don’t let dealers josh you around!