MSRP and new vehicle prices

Factual Questions
21

There’s the financing side to complete the dealer trifecta (price, financing, service), but these days even that is tricky with the many at-our-fingertips options to research financing.

22

I’m curious to know how inflated prices affect a couple other things…

Let’s suppose I’m looking at a Ford with a $30K MSRP. The dealer adds a market adjustment of $10K, meaning the car will cost $40K.

  1. Are lenders happy to work with that $40K number? The borrower will be more upside-down than usual if s/he stops paying the loan.

  2. Are insurers happy to work with that $40K number? If I buy mine for $40K and you wait a year…you get yours for $30K. If I have an accident, when is mine “totalled” —is it to be based on a $40K or $30K value? OTOH if it becomes wildly popular and the MSRP shoots up past $40K, which figure does insurance use?

I guess reading the fine print is suddenly more important.

23

What you paid for a vehicle has zero to do with what insurance will pay if it’s totaled. Insurance will pay “replacement value”, getting similar used car values to base what it’ll give you.

Now, there is GAP insurance available to cover the difference between the totaled value of the car and what you owe. But that’s usually an ad on to basic insurance.

24

Here’s KBB with a listing of 2019 F150 trucks. I see one going for under $22K. I also see one going for almost $80K. Are you saying that they were the same price when they were new or that the insurance will pay out the same if they’re both totaled?

And used car values include how expensive the trim line was, which options were included, whether it was 4x4, and other things that drive the price up…and therefore the replacement value is higher.