Automotive dealerships 2019–22: dealer markup increases drive new-vehicle consumer inflation

Using U.S. Bureau of Labor Statistics data and novel analytical methods, this article shows how automotive dealerships contributed to new-vehicle consumer inflation through markup increases during the economic recovery from the COVID-19 pandemic. Dealerships have a major role in managing the inventory of unsold vehicles and typically have a significant amount of unsold inventory rotating through their lots and garages. Being an inventory intermediary in the vehicle supply chain, and already having subdued margins due to previous profit-margin compressions, dealerships were well positioned to expand profit margins from new-vehicle sales in the recent economic expansion. These increases contributed substantially to new-vehicle consumer inflation over the last 3 years. The automotive industry is an important part of the U.S. economy. During the recent economic expansion associated with the recovery from the COVID-19 pandemic, price increases for new cars and trucks contributed moderately to overall consumer inflation.