My 2 Cents on ADM

[xpimpindistressx]

My 2 Cents on why ADM is valid in this industry!

A little history about my hunt:

I live in CA and purchased my CTR from a dealership in Mississippi. Originally, I had deposit down to be 2nd in line here in CA with $5k ADM (most I would go for this car). I continued my search and came across these guys in MS after calling over 100+ dealers around the country, some were sold, some had ADM not reasonable to me, and some only wanted to sell to locals. Both parties committed to a deal with signed contract of VIN at $2k ADM. From a person who has negotiated over 100+ car deals in the past, I was confident and comfortable with this deal. Obviously, like everyone else, I dislike the idea to pay more money for a car than what the manufacture thinks it’s worth but I understand it. Eventually, I found transport for another $1k and car arrived to me on 6/30. (Total $3k on top MSRP)

Reasons why I think ADM is valid (doesn’t mean I like it but I understand its presence)

- Simple supply and demand for any commodity. The less quantity of a high demand item, the physical value increases. Then it comes down to “how much are you willing to pay for this item?”

- When people say to get rid of ADM completely, it’s like saying “You can’t sell your house for more than what Zillow’s estimate is” even if you have multiple offers 10-25% over. (well that’s not fair) If we put ourselves in the position of the dealer, we would better understand why they do it. At the end of the day, each Honda Dealer is still a For-Profit US business. No one put a gun to your head to buy this car.

- When you restrict dealerships of ADM you are disrupting the free capitalist market. One of the benefit of living in this great country is the opportunity to do business with who you want for what you want. If we allow this free market to be restricted then it gives ok for other commodities to possibly follow and our economy will shift in a negative pattern.

- Stop blaming Honda for dealers marking up their cars. That’s like me saying, I blame the developers because they build this beautiful house in the middle of this awesome town and now they are charging more than I want to pay for it.

- Nobody complains when we buy cars under MSRP, so don’t make it a big deal when we buy over MSRP. Bottom-line, if it’s not worth it to you, don’t buy it!

Under special circumstances, in the event that dealers and buyer have a pre-negotiated deal agreement to a specific price and dealer later backs out to increase potential profitability. This would be more of an ethical morality practice issue.

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[Vdeity86]

I most certainly agree with you. Mark-ups for items with low quantity and high demand are always going to be there. It's life. This topic has been beat dead here on the forums and I'm sure people are sick of arguing over it.

The problem I have with some of these ADM's is not the price in itself, but what some dealers are spewing. For instance, I had a FUNNY conversation today with a lady named Anne at Lejeune Honda in North Carolina. Call that dealership if you want, she has the WORST tone. She told me that this car is a very limited edition and that the Owner would not be selling it, though he may be open to some good offers. She went on to say that all dealerships are only getting 1 - I attempted to interrupt her and say that her information is false, only to be cut off and have her say she wasn't done. BUT - yes, BUT her dealership and ONE other in NC was lucky enough to get allocated a second.

I told her outright she was lying out of her ass and provided a couple sources and quoted my friend who is a district manager on the counts. On top of that, I named 4 dealerships (most of which are in the same state) that are doing MSRP ONLY and are also receiving more cars. Some receiving multiple, in fact. I even requested the NAME of the owner and she would not disclose it to me. She said you would have to come in and talk to him in person. (No, I'm not driving 4+ hours to be talked down to)

 

[leehom]

Finally, a reasonable thread about ADM.

 

[fuzznubbin]

Finally a post that makes some since! An item is only worth what someone is willing to pay for it. I bought my Type-R at $6000 over msrp because that's what it was worth to me. I've waited 20 years for the Civic Tupe-R to come to the states, getting a first run low number was important to me. And fortunately I am at a point in my life that I can afford this car. Not only that it's not even my DD. I hate it for everyone that isn't able or willing to pay mark up. Now everyone that had a WRITEN deal with a dealer yours is a different story.
On a lighter note, my father in law always told me in the automotive world sometimes you need to pay to play!

 

[yargk]

I understand where you're coming from, but I don't agree with a few points.

*This is a false scarcity for a few reasons and a false scarcity distorts free markets. A free market is efficient, but it needs to be large enough to avoid false scarcities and the buyers and sellers need to have equal information.

*If the market is small, then a number of sellers could collude to distort the market. This isn't supply and demand, it's market distortion, that's a different thing.

*If many dealers hold out for 10-20k ADM, then it makes the scarcity seem worse than it really is, that's a classic market distortion.

*It's also about bad information and a lot of dealers are simply lying to customers. I was told by multiple dealers that this first CTR was the ONLY one they were getting. Seriously. Hopefully everyone here knows that 6000 Type R's are coming to the states and that whether it's a Golf R, an STI, or a Porsche GT4 with year long waiting lists, they all come down to reasonable prices sooner than you think. A true free market needs to have equal information for the buyers and sellers otherwise it's easy to distort.

*The analogy with house prices is a bad one because house prices don't spike for two months when a new kind of house comes out, they stay high for years when not enough housing is built, because of a true scarcity.

*I'm all for capitalism, but even the founding fathers of the capitalist ideal knew and wrote about how markets could be distorted. Adam Smith, famous for the "invisible hand" idea that you're quoting (the invisible hand is that a free market finds the right price for things), argued that certain situations could cripple the invisible hand (market distortions).

 

[kern]

I understand where you're coming from, but I don't agree with a few points.

*This is a false scarcity for a few reasons and a false scarcity distorts free markets. A free market is efficient, but it needs to be large enough to avoid false scarcities and the buyers and sellers need to have equal information.

*If the market is small, then a number of sellers could collude to distort the market. This isn't supply and demand, it's market distortion, that's a different thing.

*If many dealers hold out for 10-20k ADM, then it makes the scarcity seem worse than it really is, that's a classic market distortion.

*It's also about bad information and a lot of dealers are simply lying to customers. I was told by multiple dealers that this first CTR was the ONLY one they were getting. Seriously. Hopefully everyone here knows that 6000 Type R's are coming to the states and that whether it's a Golf R, an STI, or a Porsche GT4 with year long waiting lists, they all come down to reasonable prices sooner than you think. A true free market needs to have equal information for the buyers and sellers otherwise it's easy to distort.

*The analogy with house prices is a bad one because house prices don't spike for two months when a new kind of house comes out, they stay high for years when not enough housing is built, because of a true scarcity.

*I'm all for capitalism, but even the founding fathers of the capitalist ideal knew and wrote about how markets could be distorted. Adam Smith, famous for the "invisible hand" idea that you're quoting (the invisible hand is that a free market finds the right price for things), argued that certain situations could cripple the invisible hand (market distortions).

A better comparison is the ammunition shortage a few years ago. I do disagree with your statement on false scarcity the type r does have a true scarcity short term. Honda should not flood the market though as that is not the best utilization of their plant and employees. The question is how long that scarcity will last. Do I think that the dealers are lying....in some cases yes, but In general I know way more about the cars I'm buying than the dealer.

 

[E46Trojan]

I understand where you're coming from, but I don't agree with a few points.

*This is a false scarcity for a few reasons and a false scarcity distorts free markets. A free market is efficient, but it needs to be large enough to avoid false scarcities and the buyers and sellers need to have equal information.

*If the market is small, then a number of sellers could collude to distort the market. This isn't supply and demand, it's market distortion, that's a different thing.

*If many dealers hold out for 10-20k ADM, then it makes the scarcity seem worse than it really is, that's a classic market distortion.

*It's also about bad information and a lot of dealers are simply lying to customers. I was told by multiple dealers that this first CTR was the ONLY one they were getting. Seriously. Hopefully everyone here knows that 6000 Type R's are coming to the states and that whether it's a Golf R, an STI, or a Porsche GT4 with year long waiting lists, they all come down to reasonable prices sooner than you think. A true free market needs to have equal information for the buyers and sellers otherwise it's easy to distort.

*The analogy with house prices is a bad one because house prices don't spike for two months when a new kind of house comes out, they stay high for years when not enough housing is built, because of a true scarcity.

*I'm all for capitalism, but even the founding fathers of the capitalist ideal knew and wrote about how markets could be distorted. Adam Smith, famous for the "invisible hand" idea that you're quoting (the invisible hand is that a free market finds the right price for things), argued that certain situations could cripple the invisible hand (market distortions).

Here are the facts: 6,000 units by March 31st 2018 means every U.S. dealership will be allocated on average 5-6 Type Rs for the 2017 model year alone. If production is linear, that means dealerships will on average get 1 Type R every 2 months from today. Every dealer I've spoken to has referred to the Type R as "extremely rare" or "limited production" when I know some of them already have a delivery date on the next shipment showing up in their inventory database.

They think they can outsmart consumers and get away with disseminating lies that obfuscate supply-side price indicators. The problem isn't that they are being opportunistic by selling these cars for as high of a markup for as long as possible (which is pure supply and demand), it's that they're manipulating demand pressures by exploiting a short term inefficiency in the spread of information and poisoning the pool with bullshit. In other words, a pump and dump.

The dealerships of course know that these $20k ADMs are going to be worth $0 in resale/trade-in value in less than one year. Some of their buyers will know, and won't care because $20k to them is nothing. What about the buyers that are under-informed and place trust in their salesperson to accurately educate their purchase? I originally didn't think there were many of these people, but even in this forum I see posts made by regulars who say they never would have considered paying a markup... until they came to a miraculous "deal" with their Honda dealership that finally got them to open up their wallets and still pay a markup, just a smaller one.

That's how they get you: every Honda dealer looks around at other dealers to see where they're setting their ADMs at, like the group of cars you speed with on the highway. $20k? $15k? No problem, the original price point doesn't even matter. It's just a moonshot, hoping some rich guy will walk in, plop down $55k in cash, and walk out with the keys. What they're really expecting is the average nostalgic Joe who is just desperately obsessed with the car to phone in and negotiate a more "reasonable" deal. $20k ADM becomes $8k ADM. That sure sounds good in comparison. Almost makes you forget that $8,000 can buy you a year's lease+insurance in a nice BMW, which you can beat around until the Type R eventually hits MSRP.

And then those posters who do pull the trigger understandably become vested in their decision and come back to this forum to try to convince everyone else that paying the ADM is worth it and it's normal and moral for dealerships to behave like this. I feel bad when I see this happen so clearly because those people are the victims in this situation.

At least from what I've observed in person and from what I see on the naughty list spreadsheet, the majority of dealers still have their "only" Type R sitting on their lots waiting for that nostalgic Joe type of buyer to come along. So what are they going to do? Keep the bait hanging out there until supply corrects demand, which may take as long as a year or as short as the next few rounds of shipments. They've got nothing to lose but inventory cap, those cars are gonna sell anyway. So what should we do? Don't fucking bite.

 

[Mick the Quick]

I don't mind a dealer who is transparent about boning you dry, but I am not going to tolerate anyone who lies.

I also can't stand the morons who claim to sell the car at MSRP, only to require you to buy the car with 10 pre-installed accessories with 400% markup collectively.

Just be straight with me, and I can tolerate an ADM (I wouldn't pay it myself, but to each's own). I mean, I think this car is worth $37 or $38K based on the competition, so an ADM that would get the MSRP to that point seems (relatively) reasonable.

 

[xpimpindistressx]

I'm glad we can get some "REAL" discussion about this topic. Thank you all for chiming in.

Its frustrating to hear a bunch of kids saying, "fvck adm, fvck this, and fvck that" without any real understanding of how a capitalist market works.

 

[Phosky]

It's the whole dealership sales model that's archaic and needs to be replaced with a direct-sales model.

 

[xpimpindistressx]

It's the whole dealership sales model that's archaic and needs to be replaced with a direct-sales model.

Or just learn how to play the game. If you can't beat them, join them =)

 

[motazor]

I can see both sides of the coin (I get to make coin puns because I work at a coin store.)

As a dealer, I want to sell things for a fair market value. Most of the items we sell are second hand so they don't have an MSRP attached to them. But for some things there is simply more demand than the manufacturer either produces or supplies. I've taken the stance on these products that I will sell them to my local customers at MSRP simply because it's not worth juicing somebody for an extra 10% to have them never come back, or take their business online/elsewhere. If my local customers aren't interested in it then I list it online for a fair market price. Yes, I realize it's not so easy to take my business elsewhere and pickup a Type R down the road. After how the local dealership to me treated me I will be driving my Type R about 40 miles to have it serviced where I bought it. I tried to put a deposit on the car at my local dealership back in November and they wouldn't accept it. They said they'd call me. I e-mailed/called the salesperson in January, February, and March, and never got called back. They received their Type R on June 21st and it's still sitting in their showroom as of yesterday marked at $5K ADM (but advertised on their website at MSRP.) The way I see it, they want to squeeze every dime out of their customers so why should I trust them to service my vehicle? They're going to want to squeeze every dime out of me then too.

As a customer, if Honda says this car will cost $XYZ, I want to pay $XYZ or less for it. Everybody loves getting a deal. In this instance, MSRP IS a deal on the vehicle. I'm completely stoked that I picked my Type R up for MSRP, and I'm going to throw business to that dealer every chance I get. Whenever a friend of mine wants to look at new vehicles I always push a Honda on them, but now I'll even push a specific salesperson on them.

In my opinion, a happy customer and subsequent word of mouth advertising is worth more than ADM, but obviously a lot of dealerships want to ride the hype train.

 

[xpimpindistressx]

I can see both sides of the coin (I get to make coin puns because I work at a coin store.)

As a dealer, I want to sell things for a fair market value. Most of the items we sell are second hand so they don't have an MSRP attached to them. But for some things there is simply more demand than the manufacturer either produces or supplies. I've taken the stance on these products that I will sell them to my local customers at MSRP simply because it's not worth juicing somebody for an extra 10% to have them never come back, or take their business online/elsewhere. If my local customers aren't interested in it then I list it online for a fair market price. Yes, I realize it's not so easy to take my business elsewhere and pickup a Type R down the road. After how the local dealership to me treated me I will be driving my Type R about 40 miles to have it serviced where I bought it. I tried to put a deposit on the car at my local dealership back in November and they wouldn't accept it. They said they'd call me. I e-mailed/called the salesperson in January, February, and March, and never got called back. They received their Type R on June 21st and it's still sitting in their showroom as of yesterday marked at $5K ADM (but advertised on their website at MSRP.) The way I see it, they want to squeeze every dime out of their customers so why should I trust them to service my vehicle? They're going to want to squeeze every dime out of me then too.

As a customer, if Honda says this car will cost $XYZ, I want to pay $XYZ or less for it. Everybody loves getting a deal. In this instance, MSRP IS a deal on the vehicle. I'm completely stoked that I picked my Type R up for MSRP, and I'm going to throw business to that dealer every chance I get. Whenever a friend of mine wants to look at new vehicles I always push a Honda on them, but now I'll even push a specific salesperson on them.

In my opinion, a happy customer and subsequent word of mouth advertising is worth more than ADM, but obviously a lot of dealerships want to ride the hype train.

I feel like your statement is true when it comes to an item more frequently available. this Type R is a very rare breed which is only attracted by certain individuals. Honda dealers know this. If they squeeze the last penny out of this buyer for the R they aren't banking on them coming back and buying a honda accord from them in the long run. The mentality here is, take as much as you can.

 

[MatadorCE]

ADM is simply a "I want it now!!" tax. Dealers get away with it because people pay it and because car sales are so poorly regulated. Does Footlocker charge "ADM" when a new hot pair of shoes comes out? Does a restaurant charge "ADM" when a dish become really popular?
I'm into mountain biking, and no shop or retailer charges or will ever charge "ADM" no matter how popular their new latest bike is. Instead, manufacturers will make every last one they can sell.
Car sales are shady in their traditional sense thanks to the dealer network and multiple middle men, so that's why you end up with crap like "ADM".

 

[xpimpindistressx]

ADM is simply a "I want it now!!" tax. Dealers get away with it because people pay it and because car sales are so poorly regulated. Does Footlocker charge "ADM" when a new hot pair of shoes comes out? Does a restaurant charge "ADM" when a dish become really popular?
I'm into mountain biking, and no shop or retailer charges or will ever charge "ADM" no matter how popular their new latest bike is. Instead, manufacturers will make every last one they can sell.
Car sales are shady in their traditional sense thanks to the dealer network and multiple middle men, so that's why you end up with crap like "ADM".

Not necessarily. there is no guarantees NOT paying ADM will get you a R later. you will be fighting with every other Type R lover out there for MSRP price.

Simple supply and demand. ADM is more of a "luxury tax"

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