The Toyota GR Corolla is one of the most exciting vehicles the automaker has ever released in the United States. Americans often have to watch as the rest of the world gets hot hatchback after hot hatchback, but this time is different. Now, we are the ones getting the car, the all-wheel drive, rally-bred, manual transmission-having hatchback.
I’m a longtime Toyota fanboy and have owned seven vehicles between the brand and its luxury division, Lexus. I started calling dealers, trying to land a reservation before the official announcement even dropped. Toyota didn’t offer reservations or preorders for the car as so many other automakers have done with hotly anticipated models, so buyers were left to find cars as they trickled out onto dealers’ lots. Fine. I worked in a call center in high school, so I hit the phones to see if I could find an actual car for sale for anywhere near MSRP.
My enthusiasm didn’t last long. After speaking with five dealers, getting nearly the same line every time, I gave up shopping for a GR Corolla. The experience inspired me to call several other Toyota dealers to learn more about how the car will be sold. In total, I called 25 east coast dealers from Maine to Florida. Some gave more information and insights into the overall situation, but like before, the story on pricing and availability was the same.
Markups have become a fact of life for car shoppers in the last couple of years, and I found that the GR Corolla is not sold without a significant upcharge. The average markup came out to a little more than $16,000, but most settled at a plump $15,000 add-on. That makes the previously affordable GR Corolla a little less appealing at $52,000. As you’ll read below, Toyota doesn’t take reservations for the car, either, rendering the MSRP meaningless and leaving buyers to pay the scalpers’ rates.
You cannot place a reservation or order for a Toyota GR Corolla
In an email response, Toyota told me that customers could not currently order directly or place a car reservation, noting that they need to go through a dealership. Many of the dealers I spoke with told me they had yet to learn when or if they would receive units to sell, while others offered more detail. One New England dealer noted that the entire region, which is basically everything north of Connecticut, would only be getting 30 cars for the model year and said that “everyone is doing a $15,000 adjustment.”
Toyota does not discourage markups
Dealers are independent businesses, and automakers have limited ability to enforce limits on pricing, markups, and other practices. Toyota and all others set a manufacturer’s suggested retail price (MSRP), but there are a limited number of actions they can take to stop markups. Dealer franchise laws and other regulations protect dealers’ ability to operate independently of the manufacturer. However, as Jalopnik pointed out earlier this year, automakers could take steps to encourage dealers to sell at more reasonable prices. Toyota could withhold future allocations of in-demand vehicles based on the number of other models sold at MSRP or less. For now, though, Toyota’s official stance on markups is more hands-off:
“We recognize that there is a lot of excitement about the new GR Corolla and that customers are anxious to be among the first to own the new model. Toyota has established a Manufacturer’ Suggested Retail Price (MSRP) that is, as it sounds, a retail price suggested by the manufacturer. Because our dealers are independent business owners, the final transaction price will be the result of interactions between the customer and the dealer. Our sales group has consulted with our regional offices to ask them to be aware of transaction prices and consult with dealers as needed.”
Markups go far beyond Toyota and the GR Corolla
The GR Corolla experience made me wonder about other cars in the not-too-expensive-but-highly-desirable category. In March 2022, I bought a 2022 VW GTI that I found at MSRP because the original buyer backed out of their order. At the time, I was on the hunt for a Golf R, but I didn’t find any for less than $10,000 over MSRP. This time, I called seven VW dealers in the northeast and mid-Atlantic region and found markups ranging from $5,000 to $7,500. There were no cars on sale for MSRP, and like Toyota, Volkswagen does not take orders or limit markups.
High-end luxury and performance vehicles sometimes carry shocking markups. It’s easy to find stories of six-figure upcharges on models like the Mercedes-Benz G-Class and Porsche 911, especially for limited or unique variants. That said, people are paying more than sticker for everything from the Honda Civic to the Ford F-150 Lightning, so it’s a tough time to need a new car.
What you can do to avoid paying a markup on a new car
The best advice for car shoppers right now is to stop shopping for a car if you can help it. Yes, I realize I started this article with my own car shopping story, but for normal, not-obsessed people, it’s still an awful time to buy a car. New vehicle inventories are improving, but there is still plenty of ground to make up, and dealer price changes don’t happen immediately. Many analysts expect new car prices to decline by up to five percent in 2023 and used car prices to fall by up to 20 percent. If you can wait and keep your current car on the road longer, you’ll be better off buying in 2023.
If you’re absolutely desperate for a new car, either because your current ride is falling apart or because you can’t stop thinking about all-wheel drive hatchbacks, there are a few things you can do to improve your chances of getting a reasonable price. It’s never a great idea to buy a used car sight unseen, but shopping outside your home region for a new car gives you a much wider net to cast. Shipping vehicles is super simple, and more dealers offer shipping assistance since the pandemic has made it challenging to shop in person. If you can, test drive the car locally to be sure it’s the one for you, and make sure you understand the available options, features, and specifications.
It also pays to be flexible. You’ll have a much better chance of getting a fair price if you’re open to different colors, options, and features. The most popular colors can sell for thousands more than less exciting hues, so being picky can be expensive. Automakers are increasingly equipping advanced driver aids as standard in new vehicles. Several models get fantastic tech features in the most basic trim level, so settling for a different color or doing without a sunroof could help you save considerable time.
Will I eventually buy a Toyota GR Corolla?
The GR Corolla would be a significant purchase for me, even at MSRP, and I’m thankful to be lucky enough not to need a car desperately. My Toyota fandom and obsession with rally-inspired hatchbacks are strong enough to make me a weirdo to people outside the car world, but they’re not stronger than my unwillingness to pay a markup.
The GR Corolla is a luxury and would be a fun car for me, not one I’d need to rely on for daily driving, so it’s not a hardship for me to walk away from a deal. Markups become more of a problem when they’re applied broadly and end up on vehicles like the Toyota RAV4 Prime and other more practical vehicles. That said, the most marked-up vehicles tend to be luxury, sports, or off-road models.
I don’t like the word “never,” but I struggle to think of a situation where I’d be ok with paying a markup. Even so, the situation with the GR Corolla, Golf R, and countless others could be made much better for buyers if automakers accepted reservations and/or early orders. Dropping a new car model without any ability to order one and letting buyers duke it out with dealers isn’t good for anyone. Buyers take the worst hit, though, as they’re handing the dealer money and get zero added value in return.
Frequently Asked Questions
We can’t tell you when prices will drop, but we can answer some of the most popular markup-related questions.
What is the average price of a new car in 2022?
Americans paid an average of more than $48,000 for a new car in September 2022, slightly better than the month before. Abnormally large or small numbers can skew averages, but even if the average purchase amount was a few thousand less, it’s still shocking.
Is there any way to determine which dealers add markups and which don’t?
Yes, to a degree. Markups.org is a crowdsourced database of dealer markups. The site requires a membership fee to access more advanced features, but you can run a simple search with your state in the keyword field to find dealers near you. Users can also note dealers that have not added markups to popular models.
Is it difficult to insure a marked-up car?
Not particularly. Calls to Progressive, Geico, and State Farm yielded a fairly consistent response across the board. Insurance companies and some financial institutions offer and strongly recommend gap insurance, which covers you if there is a “gap” between the value of the car and what you owe. If you owe more than the car’s value, gap insurance covers the difference, so you’re not on the hook. It’s worth noting that some lenders require gap insurance, especially with loans for the entire vehicle price or more.
Can I get a loan for a marked-up car?
Yes, but there may be limits depending on the vehicle, your credit, and the lender. Banks and other financial institutions use a ratio known as loan to value, or LTV, as part of their lending risk assessments. Loan to value measures the loan amount against the book value of a car, so buying a $20,000 vehicle with a $10,000 down payment leaves the buyer applying for a $10,000 loan, or a 50 percent LTV. Some lenders have limits on LTV, using the buyer’s credit score and other information as a guide. If you’ve got sterling credit, you might be able to obtain a loan for more than the vehicle’s value, but every lender and situation is different.