Hello readers and welcome to today’s round of Letters to Doug. I’m your host, Doug, and today I will be responding to Letters. Actually, just one letter, like usual. Don’t get your hopes up.
If you’d like to participate in Letters to Doug, you can! Just send your letters to me at Letters2Doug@gmail.com, and I’ll see to it that it gets a) read, and b) discarded. I say this because only a very small portion of letters from a very lucky group of readers gets answered. I print the rest and then I eat the paper to stay alive.
Anyway, on to today’s letter, which comes to us from a reader I’ve named Rafael. He writes:
I have a conundrum. I am very stingy, but I have had this dream since I was a pimple-faced high schooler. I have always wanted to own a Honda with a Type-R badge. Unfortunately for me, 2001 was the last time they made one and I had about enough money to buy 6 Jack-in-the Box tacos.
Lo and behold, 15 years later Honda announces a new Type-R for model year 2018 and I’ve been employed 10 years that put me on the right side of the median salary. But life curses me again! Capitalism has this little thing called pent-up demand and I know I’m not the only Fast and the Furious kid who has a job and no more student loans (well maybe there are a lot who still have student loans).
My question is, how the hell do I avoid being extorted by (based on my experience) the most unwilling to budge dealership group, Honda? I can wait. But it will be fairly limited (2 year run maybe, low production numbers) and used Hondas depreciate about as much as a house in San Francisco. I don’t want to miss it like my managers missed out on the 1M (“I’ll buy in 3 years for $30k”). Am I doomed to pay more than MSRP? Or is there another way?
You’ve asked a very good question, Rafael, specifically: how do I buy a highly demanded car without paying dealer markup? Fortunately, this one is simple: you don’t.
Here’s the problem, Rafael: we have, in this economic structure, something called supply and demand, where the entity that has the supply gets to set the price based on demand for the good it’s peddling. This is why Porsche generally sells its cars for MSRP, while Chrysler dealerships are lucky to get thirty-seven bucks and a makeup mirror.
Although automotive prices generally follow the same basic structure when it comes to supply and demand, a hot new car is a different story. There’s no haggling. There’s no dealer selling the car for invoice just so he can make enough in holdback to buy a lemonade from the nine-year-old girl down the street. Instead, there’s something called a “market adjustment,” where the dealership takes a look at the manufacturer’s suggested retail price, giggles at the appearance of the word “suggested,” and then adds four grand to the window sticker.
Will this happen to the new Civic Type-R? Maybe. Maybe not. If I were betting, I’d expect it would. And there is nothing you can do about it.
Here’s what I’ve learned about car dealerships: some are good. Some are bad. But regardless of quality, they’re all in business to make money. If someone’s willing to pay four grand over sticker and you aren’t, they’re going to sell it to four-grand-over-sticker guy, even if you are, in fact, the salesperson’s mother, and you wash his underwear for him.
And so, if you aren’t willing to pay four grand over sticker, you’re screwed. You basically have three strategies: you can wait. You can pay it. Or you can buy used.
If I didn’t want to pay over sticker, I’d wait. Virtually every car that sells at some huge premium when it first comes out eventually takes a nosedive into “seen it already” territory – and that’s when deals and incentives start coming out. Sure, there are examples where this never really happened, like the BMW 1 Series M and the LaFerrari. But let’s be clear: Honda isn’t BMW, and they certainly aren’t Ferrari. If they see an opportunity to make money, they’ll probably produce as many cars as they can until the well runs dry.
Of course, you can also buy used. Cars like the new Civic Type-R usually follow a predictable pattern: some rich guy gets ahold of it because he’s wanted one since he was 14. Then he drives it for a while and realizes it’s crashy and loud and not luxurious compared to his BMW 6 Series, and by the way, he forgot how annoying it is to drive a stick shift in the San Francisco Bay Area. So he tires of it quickly and he lists the thing on Craigslist, eager to move on to his next bad idea. That’s when you swoop in, Rafael, and buy the car without paying the premium.
The last strategy is obvious: you could just pay the premium. After all, life is short, and what’s a couple grand extra for the car of your dreams? Go for it, Rafael. Do it. You know you want to. Oh, by the way, can I borrow it to film a video?