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Monday, February 27, 2023

The Late U.S. Senator Mike Monroney is the New Car Buyers' Best Friend

Years ago, I wrote a blog entitled "Beware the Phony Monroney". You can read it at The factory window sticker didn't exist until 1958 when U.S. Senator Mike Monroney got a law passed by Congress, the Monroney Act. Since then, every new vehicle sold in the United States must have the manufacturer's suggested retail price (MSRP) posted on a window of the new vehicle until the retail buyer takes delivery. Before this, every car dealer could post any price they liked on the window of their cars or post no price. This created mass confusion for car buyers because every car dealer asked a different price.

I guess it falls under the category of "The Best Laid Plans of Mice and Men Often Go Awry" because the MSRP never really made much difference in every car dealer charging every customer as much as they can get away with for the same car. Dealers quickly learned how to eliminate the good intentions of Mike Monroney and the U.S. Congress. Car dealers add virtually worthless dealer-installed options, hidden junk fees, and, of course, the Market Adjustment Addendum, also known as the Phony Monroney.

If you've been buying new cars for a few years, you probably remember that the MSRP on the Monroney sticker used to be considered a very high price to pay for a car. The exception was for high-demand, low-supply cars like Chevrolet Corvettes and other exotic sports cars. The real value of the Monroney sticker, MSRP, was a true and reliable point of reference for new car buyers to negotiate the greatest discount off the MSRP.

Of course, the COVID-19 pandemic happened three years ago and disrupted the supply chains for auto manufacturers. New car inventories all but vanished, and consumer demand soared. This caused car prices to soar to all-time highs. Buying a new car flip-flopped from how big a discount below MSRP to how many thousands of dollars over MSRP.

The good news is that Mike Monroney's window sticker, the MSRP, is still the best tool for the car buyer in evaluating the lowest price. As I write this blog, new car prices can be negotiated down from way over MSRP (5-10 thousand dollars and higher) to near MSRP. Hopefully, this trend will continue, and the educated consumer will be able to negotiate prices below MSRP again.

Educated consumers know that the price they must negotiate is the out-the-door price, not the "advertised" price or the price the "car salesman" quotes you. The definition of an out-the-door price is the amount of money you pay the car dealer, allowing you to drive the car home. Only government fees paid to the state (not profit to the dealer) can be legitimately added. Sadly, dealers commonly disguise added profit as government fees by using false names like tag agency fee, electronic filing fee, and doc fee. The "acid test" for a government fee is whether the state assessed sales tax to it. A phony fee, like an electronic filing fee, will be assessed state sales tax because it's added profit for the dealer.

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