Quart of milk too expensive? Blame greedy car dealers and their profits

The study found that dealer brands were a major driver of inflation over the past two years

for Chris Chilton

April 24, 2023 at 7:15 p.m

Dealership profits have made buying a new car an expensive business over the past couple of years. But car prices aren’t the only prices dealers have raised. That $10,000 profit your local dealer put on their supply of F-150 Lightnings or Nissan Zs could have helped drive the price of everything up.

That’s according to a study that suggests new car profits played a big role in the recent period of high inflation. Data published in a journal of the US Bureau of Labor Statistics reveal that dealer profits contributed between 0.3 and 0.7 percentage points of the more than 15 percent increase in the index of consumer prices between the end of 2019 and the end of 2022.

The combination of stifled supply as a result of supply chain bottlenecks collided with increased demand as customers found money from stimulus checks to create the perfect storm of the ‘spiral of new car prices. And as buyers who couldn’t afford the high prices being asked for new cars turned to used alternatives, used car prices soared.

Related: The days of paying for MSRP could be ending as new vehicle inventory hits two-year high

Unsurprisingly, dealers are less than enthusiastic about being blamed for recent jumps in the cost of living. A spokesman for the National Automobile Dealers Association said Wall Street Journall that the idea that merchants contributed much, or even at all, to inflation was “absurd”.

“By this logic, every consumer who sold or traded in a used vehicle for more than its Kelley Blue Book value profited from that sale and is therefore responsible for contributing to consumer inflation,” he said. tell the WSJ.

The study’s author compared the consumer price index, which showed what prices customers paid for their cars, with the producer price index, which shows what dealers pay manufacturers for their cars , and found that the two lines on the graph had diverged markedly in recent years. , largely for dealer profits.

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Dealer markups have made buying a new car an expensive business over the last couple of years. But car prices aren’t the only prices dealers have been driving upwards. That $10k markup your local dealer put on his supply of F-150 Lightnings or Nissan Zs could have contributed to the price of everything going up."
  [1]=>
  string(497) "



That’s according to a study suggesting new car markups played a significant role in the recent period of high inflation. Data published in a U.S. Bureau of Labor Statistics journal reveals that dealer profits contributed to between 0.3 and 0.7 percent points of the more than 15 percent rise in the consumer price index between late 2019 and the end of 2022."
  [2]=>
  string(434) "



The combination of a choked supply resulting from supply-chain bottlenecks collided with a boost in demand as customers found themselves flush with money from stimulus checks to create the perfect storm of spiraling new car prices. And as buyers unable to afford those rocketing prices being asked for new cars turned to used alternatives, so the prices of used cars grew."
  [3]=>
  string(269) "



Related: The Days Of Paying Over MSRP Could Be Ending As New Vehicle Inventory Hits 2-Year High"
  [4]=>
  string(2521) "




         
            
  
        


Unsurprisingly, dealers are less than ecstatic about being blamed for recent jumps in the cost of living. A spokesman for the National Automobile Dealers Association told the Wall Street Journal that the notion that dealers contributed greatly, or even at all, to inflation was “absurd.”"
  [5]=>
  string(242) "



“By that logic, every consumer who sold or traded in a used vehicle for more than its Kelley Blue Book value profiteered off that sale and thus bears responsibility for contributing to consumer inflation,” he told the WSJ."
  [6]=>
  string(376) "



The study’s author compared the consumer price index, which illustrated what prices customers paid for their cars, with the producer-price index that shows what dealers pay manufacturers for their cars, and found that the two lines on the graph had diverged markedly in recent years, largely down to dealer markups."
  [7]=>
  string(1773) "




         
            
  
        "

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