What Is a Market Adjustment on a Car?

A market adjustment on a car represents a sticker price increase based on current or perceived market conditions that elevate a particular make or model as more desirable. For example, a market adjustment on a Cadillac CT4 premium sedan may increase the price by a few hundred to several thousand dollars if dealerships believe the market supports paying a premium. You can quickly determine the market adjustment on a car by looking at the difference between the Manufacturer’s Suggested Retail Pricing (MSRP) and the dealership’s advertised price.  

Traditionally, market adjustments occurred on highly anticipated newer vehicles or those that accrued a long waitlist of buyers. However, changing market conditions can artificially increase prices based on supply and demand. Market adjustment on a car is also referred to as “adjustment market value,” “additional dealer markup,” and “additional dealer profit.”  

How is the market adjustment amount determined by dealers?

Understanding how car dealers work can be challenging, from knowing if car dealerships are open on Sundays (spoiler alert: some actually are) to figuring out how and why they incorporate various fees into a vehicle’s retail price. While a diagnostic fee at a dealership represents a service-related charge you actively seek out, market adjustment fees are involuntary and, in some cases, essentially non-negotiable. Market adjustment can fluctuate vehicle pricing—increasing it by up to 50% in some cases—and depends on several factors, including:

• Dealership ownership costs
• Popularity of a particular model
• Local market conditions
• Brand reputation
• Dealer sales strategies
• Global automotive supply chains and trends

From a fundamental economic standpoint, market adjustment represents the impact of supply and demand on the automotive market. Value can significantly increase if there’s less of a specific commodity. Dealerships possessing a hot commodity can charge more for it due to the inherent exclusivity. 

Market adjustment already exists on a smaller scale, but the rate at which it increases car prices has ballooned in recent years. For example, all-wheel drive vehicles tend to fetch higher prices in snowier climates because they’re in higher demand than in temperate locations. In the end, dealerships push market adjustment pricing because it increases profits. 

A market adjustment and dealer holdback are similar in many ways. Both represent a dealership's additional profit after paying the manufacturer for a vehicle. While dealerships are hesitant to dip into these profits, many savvy car buyers leverage their knowledge of market adjustments to negotiate and reduce the purchase price. This tactic also helps buyers avoid excessive depreciation.

The following methods can help you beat market adjustments to pay less for your next car:  

• Know the market: One of the first steps in preparing to negotiate for market adjustment is reviewing the lay of the land. Learn what markets are hot in the automotive world and where dealerships are leaning into those prices to stack profits. Researching a particular vehicle can also help you identify competitors and round out your perspective on which vehicle(s) you want to pursue. 
• Investigate dealer incentives, discounts, and rebates: Local dealers often advertise their discounts and incentives online, on the radio, via email, and through flyers mailed directly to potential customers. Use these resources to find the best price for your chosen make and model.  
• Comparison shop: As you review dealers, determine which ones have positive reviews and which may be less willing to work with you on pricing. Glancing at the Better Business Bureau’s website can help you review past customer experiences to understand how a dealership operates. Compare pricing on your chosen model to determine what’s fair for the market. 
• Order your car directly from the factory: If you’re looking for a brand-new vehicle, sometimes ordering directly from the factory helps you avoid market adjustment pricing. You can also custom order features you want, though the final price tag will reflect your selections. 
• Wait until market demand subsides: As the adage goes, “Good things come to those who wait,” which can be true for the automotive market. Sometimes, waiting until demand cools can help you find a better deal and avoid a market adjustment.

Your success rate of beating market adjustments will vary depending on your location, the dealership you work with, and your chosen model, among several other factors. 

Avoiding the tricks car salesmen use to make a hefty commission often requires knowing more about the market and particular vehicle you want to purchase than they do. Spend a few hours researching the model you’re eyeing to see how pricing and resale values have recently changed, what specific trim levels or packages you’re looking for, and what local inventory exists to view and test drive. Avoiding add-ons and accessories can also help you get a better price. If you’re financing your purchase, consider alternate lenders to maximize your savings regarding interest rates and loan terms. 

Forecasting if and when the automotive market will return to normal is anyone’s guess. In the current market, passenger car sales are up 8.6% year-over-year from 2022 to 2023, with total vehicle sales up 12.2%. Thus far, monthly 2023 sales figures surpass their 2022 counterparts, with sales exceeding figures seen in 2021 since June 2023. The booming market hardly supports a reduction in pricing for most models, though there may be a handful of exceptions. 

Finding favorable financing terms (like impressive truck deals) remains challenging for most potential buyers. In addition, the rising cost of living due to inflation and a continued chip shortage portend a slow return to pre-pandemic levels. However, there’s no telling what other economic conditions may affect the automotive market in the future.