Buying a new car can be an exciting but often stressful experience. Many buyers look for ways to reduce the sticker price, and partner programs, like those offered through employers or organizations like Costco, are often seen as a reliable path to savings. But a common question arises: Do Dealers Still Mark Up Cars On Partner Programs? Understanding the nuances of these programs and dealer practices is crucial for getting the best possible deal.
Understanding Partner Programs and Car Pricing
Partner programs, also known as employee purchase programs or affinity programs, are agreements between car manufacturers and large organizations. These programs are designed to offer employees or members of these organizations special pricing on new vehicles. The general idea is that by leveraging the collective buying power of a large group, individuals can access pre-negotiated discounts, often touted as below MSRP (Manufacturer’s Suggested Retail Price) or invoice pricing.
However, the automotive retail landscape is complex, and the term “partner program” doesn’t automatically guarantee the absolute lowest price. To truly understand if dealers still mark up cars under these programs, we need to dissect how these programs work and where potential markups can still creep in.
Invoice Price vs. MSRP: The Starting Point
To grasp the concept of markups in partner programs, it’s essential to understand two key prices:
- MSRP (Manufacturer’s Suggested Retail Price): This is the sticker price, the manufacturer’s recommended selling price. It’s almost always higher than what dealers expect to actually sell a car for.
- Invoice Price: This is the price the dealer pays to the manufacturer for the car. It’s often considered the dealer’s cost, but it’s not the dealer’s true cost. Dealers also receive incentives, holdbacks, and other benefits from manufacturers.
Partner programs typically advertise pricing based on a discount from MSRP or a price close to invoice. The perception is that you’re getting a straightforward, transparent deal. However, the reality can be more layered.
The Markup Question: Where Do Dealers Make Money?
Even with partner programs, dealerships are businesses aiming to make a profit. While the program dictates a certain pricing structure, dealers can still find avenues to increase their revenue. Here are common areas where markups or added costs can occur, even within a partner program framework:
1. Dealer Add-ons and Accessories
This is perhaps the most common area for markups in any car buying scenario, including partner programs. Dealers might try to sell you:
- Extended Warranties: While these can offer peace of mind, they are often heavily marked up.
- Paint Protection, Fabric Protection, Rust Proofing: These services are often overpriced and may not deliver the value promised.
- Window Tinting, Floor Mats, Cargo Trays: While some accessories are desirable, dealer-installed versions can be significantly more expensive than aftermarket options.
Dealers may present these add-ons as “recommended” or even imply they are part of the partner program deal. It’s crucial to remember that partner program pricing typically applies to the vehicle itself, not these extra services. Scrutinize any add-ons and decline anything you don’t genuinely need or can get cheaper elsewhere.
2. Financing and Interest Rates
Dealerships also make money through financing. Even if you secure a partner program price on the car, the finance department can still impact your overall cost.
- Inflated Interest Rates: Dealers might try to offer you a higher interest rate than you qualify for, pocketing the difference. Always compare the dealer’s financing offer with pre-approved loans from banks or credit unions.
- Loan Add-ons (e.g., Credit Life Insurance, GAP Insurance): Similar to car add-ons, these financial products can be marked up and may not be necessary or competitively priced.
Partner programs usually do not dictate financing terms. It’s your responsibility to shop around for the best financing and understand the terms of any loan offered by the dealer.
3. Trade-in Value
If you’re trading in your old car, the trade-in process is another area where dealers can adjust the overall deal. A lower-than-market trade-in value can offset any savings you get from the partner program pricing on the new car.
- Lowball Offers: Dealers may offer a significantly lower value for your trade-in, knowing you’re focused on the new car’s price through the partner program.
Research the fair market value of your trade-in car using online tools like Kelley Blue Book or Edmunds before you go to the dealership. Negotiate your trade-in separately from the new car purchase to ensure you’re getting a fair value.
4. “Doc Fees” and Other Charges
Dealerships typically charge documentation fees (doc fees) and other administrative charges. The amount of these fees can vary and sometimes be inflated.
- High Doc Fees: Some states regulate doc fees, while others don’t. Dealers in unregulated states might charge very high doc fees, adding to the overall cost.
- “Market Adjustment” or “Demand” Fees: In periods of high demand or low inventory, some dealers might try to add “market adjustment” fees, even on partner program sales. These are essentially markups disguised under a different name.
Inquire about all fees upfront. While some doc fees are standard, be wary of excessive or unexpected charges. Question any “market adjustment” fees on partner program vehicles, as these programs are designed to offer pre-determined pricing.
Are Partner Programs Still Worth It?
Despite the potential for markups in the areas mentioned above, partner programs can still offer significant savings and a more straightforward car buying experience. The key is to be an informed buyer and understand how to navigate the process.
Benefits of Partner Programs:
- Pre-negotiated Pricing: Partner programs often provide pricing that is below MSRP and potentially close to invoice, saving you the hassle of extensive negotiation on the base price of the vehicle.
- Transparency (Potentially): Programs aim for more transparent pricing, reducing the typical back-and-forth haggling.
- Streamlined Process: Partner programs can sometimes simplify the buying process, connecting you with designated dealer contacts and offering a more structured experience.
How to Maximize Savings with Partner Programs:
- Understand the Program Details: Carefully review the terms of your specific partner program. Know what pricing is guaranteed and what aspects are still negotiable.
- Focus on the Out-the-Door Price: Don’t just focus on the discounted vehicle price. Consider the final out-the-door price, including all fees, taxes, and any add-ons.
- Shop Around for Financing: Secure pre-approval from your bank or credit union to compare rates and leverage your best option.
- Negotiate Trade-in Separately: Research your trade-in’s value and negotiate it independently from the new car purchase.
- Say No to Unwanted Add-ons: Be firm in declining any dealer add-ons you don’t need or want.
- Compare with Other Discounts: Sometimes, publicly available incentives or rebates might be better than the partner program price. Always compare all your options.
- Be Prepared to Walk Away: Don’t be afraid to walk away if you feel the dealer is not being transparent or is adding excessive markups, even within a partner program.
Conclusion: Informed Buyers Get the Best Deals
Yes, dealers can still mark up cars sold through partner programs, but these markups are typically not on the base vehicle price itself (which is often pre-determined by the program). Markups are more likely to appear in add-ons, financing, trade-in values, and fees.
Partner programs remain a valuable tool for car buyers, offering potential savings and a more structured buying process. However, they are not a magic bullet against all dealer markups. By being an informed consumer, understanding where markups can occur, and diligently comparing all aspects of the deal, you can leverage partner programs to your advantage and drive away with a great deal on your new car.
Ultimately, the best defense against unnecessary markups is buyer awareness and a willingness to negotiate and shop around. Partner programs provide a solid foundation, but your own diligence will ensure you truly maximize your savings and get the best possible value.
