ADM - It won't stop

[BroncoAZ]

The dealers are trying to survive. The difference between car dealers, vs say general mills, is they can only increase the price of what you have to sell if you can't do it in volume. General mills can reduce the size of the box and put less in each box effectively increasing the value of what they do have, but you don't feel it.

Dealerships aren’t trying to survive, they are thriving. I spoke to a buddy who runs a 20+ dealer group in the west. Their two most profitable years on record are 2021 followed by 2020. I’m starting to think the Covid supply chain issues were done a year ago, but manufacturers are colluding to keep prices high. After backing out the $9.1 billion Ford made in its stake in Rivian, Ford made $8.8 billion in profit in 2021.

https://www.google.com/amp/s/amp.detroitnews.com/amp/6654926001

GM made $14.3 billion.

https://www.google.com/amp/s/amp.freep.com/amp/9289819002

Other companies are showing similar trends.

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[mike8675309]

Dealerships aren’t trying to survive, they are thriving. I spoke to a buddy who runs a 20+ dealer group in the west. Their two most profitable years on record are 2021 followed by 2020. I’m starting to think the Covid supply chain issues were done a year ago, but manufacturers are colluding to keep prices high.

That is a misunderstanding of what is going on. Sure their profits are up, because their labor is down, and their unit prices are up. They have fewer salespeople selling fewer cars but selling the cars for much more profit. Many of us here are buying the bronco because we want to. But people are getting in accidents, their cars are unrepairable, or people get divorced and they have to get a new car, and they just pay the price. Fewer options, but that baseline need is still there. And because the issues are affecting all automakers, there is no natural drive to cut prices.

The savvy dealer is using this situation to increase profits.

 

[Carolina Jim]

They have fewer salespeople

If you thought salespeople were clueless Before Covid, wait till you talk to the crop of new hires next year.

 

[BroncoAZ]

That is a misunderstanding of what is going on. Sure their profits are up, because their labor is down, and their unit prices are up. They have fewer salespeople selling fewer cars but selling the cars for much more profit. Many of us here are buying the bronco because we want to. But people are getting in accidents, their cars are unrepairable, or people get divorced and they have to get a new car, and they just pay the price. Fewer options, but that baseline need is still there. And because the issues are affecting all automakers, there is no natural drive to cut prices.

The savvy dealer is using this situation to increase profits.

I worked in dealerships as a consultant for 14 years. I disagree with your assessment that less salespeople on the floor selling less inventory is making the difference. Sure, there are less salespeople selling cars, but other labor is demanding raises. Many of the service techs are demanding 80% more than they made before Covid. The shop labor rates have risen, parts prices have risen, and they are selling available cars for significant markup. The dealership’s fixed costs on the buildings haven’t changed. The net result is record profits.

 

[mike8675309]

I worked in dealerships as a consultant for 14 years. I disagree with your assessment that less salespeople on the floor selling less inventory is making the difference. Sure, there are less salespeople selling cars, but other labor is demanding raises. Many of the service techs are demanding 80% more than they made before Covid. The shop labor rates have risen, parts prices have risen, and they are selling available cars for a significant markup. The dealership’s fixed costs on the buildings haven’t changed. The net result is record profits.

Service prices are going up as well. There isn't going to be an increase in cost that a company sees that won't come along with increases in price.
Like gas prices, the auto dealers are selling their available cars for the price they can get for their available cars. Until people stop buying them for that price until the lenders will stop lending money for that price. What made them feel it was possible to sell the cars for that price? The demand. People keep being born, people keep getting to the age where they can drive, people keep finding the need to drive, and thus the growth in the market of drivers continues to create pressure that car dealers work to meet. And when every dealer has the same issues, prices can go up until people stop paying the price.

 

[IWDesertGuy]

Reports are coming in that build orders for final production units of the 2022 Porsche GT4 are being marked up +$100,000 . . . . . pretty dramatic for a well optioned version showing a MSRP in the $140-$150,000 range. Glad I got mine a year ago at MSRP.

 

[Bronco21fan]

Nobody likes ADM but the dealers. Look how many threads here are talking about it. The reality is that ADM will continue until people quit paying it. It really is that simple, but oh so difficult to make happen.

We've all seen stories of people walking away from previously agreed on deals because of ADM, and we should absolutely applaud them. They should get special status here among fellow enthusiasts. But for every person who walks away, there are many more who are willing to pay ADM. That's why it won't go away.

 

[JT58Bronc]

I have never paid "ADM" as much as I may have wanted something new to the market in the past. I have had interest in Civic SI's, etc. and whenever a dealer had "ADM" I walked out.

But I had to pay a little more for my Bronco. The dealership had a mark up of $2500 on anything you bought across the board. It was not specific to the Bronco. But in return they gave me window tint, points and a gift card for accessories. I also recently bout a 2019 VW Jetta as my economy car commuter. I paid "market" price which was more than when it sold new but no ADM. It's paying for itself with gas savings getting 55 MPG, me driving it 100 miles a day while the Bronco and Corvette sit.

 

[mountainbronco]

well, here some economic effects that will heavily influence the near term future of new car sales, and how much leverage a dealer has to add ADM

so, lets assume you did not order everything, but still ended with a Bronco MSRP of $ 57000. You knew this was coming, so you either saved for the down payment or are using your trade-in to cover the first 15%, lets say $ 10'000, so you are financing $ 47'000 - but aha, the Fed has just increased rates but a whopping 0.75% and more of these are to come! So, your monthly interest charge alone (not yet any amortization) in the first month is going to be approximately (5% for a 60 month term, as example, some will pay more, others maybe less) $ 200, plus $ 783 amortization, for a total of almost $ 1000.

With every further rate increase of 1%, the monthly payment increases by approximately $ 40

I don't know about you guys, but how many people can afford close to $ 1000/month car payment with significant increases to this expected in the future?

ADM will die as quickly as demand destruction is built by the Fed with these rate increases. If you don't believe me, just look at the housing market and mortgage rates, otherwise just wait 2 or 3 months - the effects are going to be swift.

And yes, with regard to shop prices increasing. I did my first oil change on my Black Diamond at 3000 miles in March and it cost $ 100, and I just did my second oil change at 8000 miles and it cost $ 143. (no other work or any special parts included, just a straight oil change) representing a 43% increase, now THAT is inflation!

 

[BroncoAZ]

And yes, with regard to shop prices increasing. I did my first oil change on my Black Diamond at 3000 miles in March and it cost $ 100, and I just did my second oil change at 8000 miles and it cost $ 143. (no other work or any special parts included, just a straight oil change) representing a 43% increase, now THAT is inflation!

Seems like a good case for the prepaid maintenance program on the Bronco. I considered it when I bought my extended warranty, but I don’t see me driving my Bronco (third vehicle) enough to justify the cost.

 

[PSUTE]

Pretty sure that the ones who reserved and have '21 price protection will save ~10% over '23 pricing...

 

[J-Dubya]

Just got off the phone with Ford. They said the dealer can just keep the price protection for themselves if they choose to? Does that sound correct?

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