And there's no sign this trend is stopping any time soon
At what point does a performance bargain cease to be a bargain?
It has been two years since the FK8 Honda Civic Type R came to America. Priced at $35,700, this Type R was the first time Americans could acquire the small, affordable, front-wheel-drive JDM legend.
The problem is finding a Type R on sale today at or below MSRP. The new Type R inventory is still selling for well above sticker price. Since the cars went on sale in the U.S. in June 2017, they have not stopped selling with a markup. There appears to be no sign this trend is stopping any time soon.
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The Type R has won praise around the world for its competency on road and track. It has built a reputation for setting the fastest front-wheel lap of the Nürburgring Nordschleife, at 7:43. Although lap times are great for bragging rights, the Type R has also won praise for its communicative driving experience and daily practicality. That was perhaps best displayed in impressive fourth-place finish the 2018 MotorTrend Best Driver's Car competition against the likes of Lamborghini, McLaren, Porsche, and Aston Martin.
With such a wide breadth of capability, the 2019 Civic Type R should be a performance bargain. But Honda dealerships (who, to be fair, have seen new car profit margins dwindle to nearly zero in recent years) have used demand for the Civic Type R to pad their profits with fake markups on the car.
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Typically dealerships will entice customers with sales of their new inventory below MSRP. Their profit margin rests somewhere between the invoice price (the price the dealership bought the car from the manufacturer) and the final sale price. It's easier to negotiate on a price with large inventories and multiple dealerships competing for customers. If a dealership sells a car at MSRP, its profit margin is somewhere between 8 and 15 percent, depending on the brand and the car. But limited edition performance cars are a different animal.
The average markup of Type Rs on sale today is just over $4,000. At the time of writing this article, there were 405 Civic Type R's listed on sale according to the major online car listing sites (Autotrader, Cars.com). The markups ranged from a few hundred dollars to more than $10,000 (50 cars did not have a listed price, so the average was calculated from the remaining 355 that were on sale). This average does not tell the full story.
A popular thread on CivicX, one of the most popular online forums surrounding the Type R, reveals some interesting truths into the commonality of dealers marking up their cars. The "Civic Type-R Over Sticker Dealer Naughty List" thread contains more than 500 pages with nearly 7,500 posts of people reporting marked-up cars around the country.
Over the past several months, dozens of cars have been reported on this thread. The average markup over MSRP: $6,178. Nineteen cars were marked up over $10,000 above MSRP and the highest markup belonged to a car in Daytona Beach, Florida, for $17,500 over sticker. This pricing was not uncommon when the car first went on sale in June 2017, but it is unusual for this level of markup to continue after two years.
As described by numerous upset customers, Honda dealerships have been reported to use a bait and switch tactic to lure potential Type R buyers into their showrooms only to reveal a higher price than advertised. One forum member stated he saw an online advertisement in Houston, Texas, for $34,000, but upon arriving at the dealership was told the car was actually selling for $43,000.
Another forum member from South Carolina reported a dozen emails with a dealership before they revealed the actual price on the car in March. Yet another member in New Jersey stated that a car listed at $34,000 on the dealership's website was revealed to have a price of $42,000 after contacting the dealership directly.
Can't American Honda do anything about this? Can't they make the dealers stop the price gouging? Technically, no. Dealers are independent businesses, and strong franchise laws allow each to set its own prices. Sure, Honda could pull some regressive tactics—like cutting future Type R allocations or sending a flotilla of black cars in July—but usually the factory doesn't want to get into a war with its dealers.
When asked for comment, American Honda spokesman Sage Marie responded: "We have over 1,000 dealers in this country, and there are many who see Type R as an opportunity to cultivate long-term relationships with young, enthusiastic customers. It is possible to find such dealers that will sell cars at the price Honda suggests, and [Honda regrets] any frustration that pricing at some stores creates. Dealers have the right to price all their vehicles as the choose, but consider for a moment that the vast majority of new car transactions at Honda dealerships take place at a price far less than we suggest. The transactions that fall on the other side of the supply/demand curve are extremely rare in that context."
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Scott Robinson Honda in Torrance, California, is located in the shadow of American Honda headquarters. They have a Civic Type R with a sticker price of $36,620 marked up to $42,615—including $995 for a dealer-installed security system even though the Type R comes with a standard SmartEntry security system. A message left with the dealership for comment was not returned when this article went to publish.
I, the author, have experienced a similar situation. I bought a 2019 Civic Type R two months ago. I was aware some dealerships had a six-month wait list for the car when it first came out two years ago. I assumed prices had died down and were probably around $36,000 by now. I was very wrong.
I had found a new 2019 Type R on sale at a dealership in Dallas, Texas. The car was advertised at MSRP, which was a relief after two dealerships in El Paso would either not reveal a price to me or were trying to sell the car for $4,000 over sticker. After nearly a week of calls and emails, they finally revealed that the Type R in their inventory was actually on sale for $52,580. The salesman, however, was kind enough to reduce that price to $46,620 as a special price "just for you," still $6,000 over sticker, not to mention charging $3,460 for a cargo tray, window tint, wheel locks, door edge guards, and a paint/fabric warranty. "Thank you, but no thank you, dude," was my response.
The theory is that the Civic Type R at $36,000 is a performance bargain. The reality is most Civic Type Rs are not selling at this price. If shoppers are patient and look around, they might be able to find a dealership willing to make a deal. That's what I did. Some dealerships do not work off of commission, and as a result it is possible to buy a Type R for MSRP. That's what I did from a Honda dealership in Dover, Delaware. But once that price increases by several thousand dollars, customers need to start asking themselves as they compare it to other performance cars above the $40,000 price range: Is it still worth it?
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Postscript: Might we expect similar behavior from Toyota dealers when the Supra arrives? We reached out to Toyota, who responded: "We recognize that there is a lot of excitement about the return of the Supra and that customers are anxious to be among the first to own the new model. Toyota has established a Manufacturers' Suggested Retail Price (MSRP) that is, as it sounds, a retail price suggested by the manufacturer. Because our dealers are independent business owners, the final transaction price will be the result of interactions between the customer and the dealer. Our sales group has consulted with our regional offices to ask them to be aware of the transaction prices and consult with dealers as necessary."
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