Richard Reina, our resident expert on the classic and collector car market, also writes for his own website, richardscarblog.com. We thank him for his permission to repost this story below.
My Experience With Dealer Markups
I first heard of ADM (Additional Dealer Markups) around 1970, when the then-new Datsun 240Z was launched. The press reported that with demand so great for this Japanese sports car, dealers were asking, and getting, hundreds of dollars over its Monroney-label MSRP of $3,500. (There is some misunderstanding about the legally-required Manufacturer’s Suggested Retail Price. The law says that vehicle manufacturers must establish and publish the MSRP; however, dealers, as independent businesses, are free to ask any price, lower or higher, than the MSRP.)
Since that time, there have been innumerable cases of car dealers applying ADM to high-demand vehicles. My initial exposure to it was in 1986 when I worked for the first Acura dealer in New Jersey. Dealer management thought that the new Legend, with an MSRP of $19,298, could easily command another $3,000, and “ADM” labels were affixed to the cars. However, as I was working both service and sales for that fledgling dealer, I don’t recall anyone actually paying over sticker for a Legend.
The Mazda Miata, introduced in the summer of 1989 as a 1990 model, created enough demand that dealers were successfully getting their requested ADM. Most recently, the same has been happening with the popular Kia Telluride (my daughter-in-law’s brother admitted paying $2,000 over sticker for his but saved face by still claiming he got a great deal because today’s pricing is supposedly $10,000 over sticker).
“Limited Edition Market Adjustment”
Over the weekend, I brought my wife’s Honda to our local dealer for routine service and waited there while the work was done. Wandering through the showroom, it was impossible to ignore the bright-yellow Civic four-door in the corner. It was a 2021 Civic Type R Limited Edition, and this one really is limited: only 1,000 copies worldwide, with 600 coming to the U.S.
Compared to the “regular” Type R, the Limited Edition sheds 46 lbs., mounts track-ready Michelins on lighter forged aluminum wheels, and adds other performance goodies. Yellow is the only color choice. The Monroney grabs as much attention as the searing paint: MSRP is $44,990. But wait, there’s more: the “Limited Edition Market Adjustment” label tacks on another $50,000 for a final price of $94,990.
For quick comparisons, a new Chevrolet Corvette coupe with the 3LT package starts at $74,145, a new Jaguar F-Type Coupe with AWD starts at $81,500, and a new Lexus LC coupe starts at $93,050. Mull those over in your mind for a few moments.
The Same Car
Something had a ring of familiarity to all of this, so I scanned through my photos from earlier this year and discovered that I had taken a snapshot of a similar label six months ago at this same dealer. At that time, the ADM was “only” $25,000. Then I caught the “Limited Edition Number.” In both cases, it’s #352 of 600 – it’s the same car!
This Honda dealer has had a 2021 Civic Type R Limited Edition in its showroom since at least May of 2021. In May, the ADM was $25,000. Six months later, still not sold, the ADM for this same car has doubled to $50,000. Is this a marketing strategy? We are less than a month away from the calendar year 2022; this 2021 Civic Type R is growing old as it sits. Honda has announced that there will be a 2022 Type R, but it’s not out yet, and there’s no word about a Limited Edition.
From the dealer’s point of view, if you want the Limited Edition, they have one, and you’ll have to pay the price. From the consumer’s point of view, this car is already one model year old, and one might be inclined to wait for the 2022 model to arrive, never mind giving consideration to what else the $95,000 burning a hole in your pocket could buy.
What Do You Think?
Personally, the dealer can do whatever it pleases; however, this kind of approach can backfire if it’s perceived that the dealer is gouging, even if you’re not in the market for this model. I also don’t think they will get their ask; 10 grand over is a maybe. Finally, I don’t picture the target audience for this car having the scratch, and if they did, the competition in this price range is formidable (my three examples just touch the surface of choices).
What do you think of Additional Dealer Markups in general and of this dealer’s approach with this particular car?
Richard Reina is Automoblog’s resident expert on the classic and collector car market. He enjoys restoring and driving old cars with a special love for anything Italian.Richard is the author of The Collector Car Hobby, a free guidebook for finding and enjoying the classic car of your dreams.