What is a new car market adjustment? And do you have to pay it?

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When the market for new cars is tight, some dealerships take advantage of the situation by adding steep market adjustment fees to the price of the vehicles. These fees can add thousands of dollars to your price tag, depending on how popular the car is.

You may be able to negotiate the price back down. But be prepared to walk away if the dealer isn’t being fair.

What is a new car market adjustment?

A new car market adjustment is an extra fee car dealerships tack on to a new vehicle’s manufacturer-suggested retail price (MSRP). Dealers add this fee when there’s a strong demand and limited supply for a particular car. Dealerships believe they can fetch a price higher than the MSRP.

You might also hear this practice referred to as an “additional dealer markup” or “market adjustment premium.” It’s usually listed on the vehicle’s addendum sticker, along with any dealer-installed extras.

Financing this fee through your auto loan could mean paying hundreds of dollars in extra interest. Use Bankrate’s auto loan calculator to see how this markup may impact your overall cost.

How do dealers determine the market adjustment amount?

Determining the market adjustment amount isn’t an exact science. Dealers will often use historical sales records and compare the vehicle’s current demand and supply to determine how much to charge.

However, there is no industry standard. No law says a dealer needs to justify the amount. They will increase the price by as much as the market will bear.

According to Brian Moody, executive editor for Kelley Blue Book, the current market makes these sorts of adjustments unlikely.

“Usually, a market adjustment means the price moves up and supply dwindles, and demand rises,” he says.

Right now, both supply and demand are strong.

Are dealerships required to charge market adjustment fees?

No, dealerships are not under any obligation to impose these fees. And if they do, they do not have to provide a reason. Car buyers should know this and be prepared to negotiate these fees.

If you know demand is up and prices are high, factor market adjustment fees in when you’re deciding between a new vs. used car.

How to beat market adjustments

Here are some tips to get the best deal on your car, even in a high-price environment.

1. Do your research: See what comparable deals other dealerships are offering to help you determine how much you should pay. Take your research to the dealer, and if they are willing to negotiate, you may be able to get a much better deal.
2. Be prepared to walk away: You don’t have to settle if the dealer isn’t being fair. Take your business elsewhere or wait to see how the market changes.
3. Try to pay as close to the dealer invoice price as possible: The dealer invoice price is the amount the dealer paid the manufacturer for a vehicle. While the dealer invoice price is sometimes higher than the MSRP, it’s a good starting point for negotiations.

The bottom line

The market for new vehicles ebbs and flows. While 2024 seems like a positive year for shoppers, it is important to understand how additional costs influence prices. To get the best deal, shop around with more than one auto loan lender and opt for preapproval to preview the loan’s cost.