Kirk’s Korner #3 – ADMs: The unwelcome reality of the current Porsche buying landscape

Porsche Ownership – Economics and Emotions Series
by Tom Kirk, Financial Advisor – Savant Wealth Management, tkirk@savantwealth.com, 321-241-1313

What is an ADM? The ADM we will be addressing in this issue of Kirk’s Korner is the Additional Dealer Markup. These are the fees and chargers above the Manufacturer’s Suggested Retail Price (MSRP) that Porsche dealerships are now collecting for new Porsches.

When did ADMs start for Porsches? They seem to have begun during or just after the Covid pandemic. Before Covid you could walk into a Porsche showroom and see several varieties of many models, take one for a test drive and negotiate a deal with your sales advisor. Supply chain issues and Porsche’s desirability changed all that. Now if you see a popular Porsche model on the showroom floor it is probably there waiting to be picked up by its new owner. Less desirable models might be available, but for many models you must wait in line for what the dealer has coming their way.

What is a stated goal of ADMs? Before ADMs some customers were paying MSRP for a desirable Porsche model and immediately selling it on the secondary market for significantly above MSRP. I understand that Porsche Corporate did not like selling cars to these “flippers”, and dealerships felt like they were leaving money on the table. ADMs are a tool that addresses both of these issues. If a “flipper” must pay above MSRP they are less likely to do so, leaving these cars for “non-flipper” Porsche owners. If a Porsche’s market value really is above MSRP, then the dealership can argue that they have a right to try to collect this instead of the first owner.

How much can an ADM be? While some new Porsches may be purchased at MSRP, if you want the latest model of a particular non-GT car you may be asked to pay $5,000 to $20,000 over MSRP. But if you want a GT car (GT3, GT3RS, GT4, GT4RS, etc.) or a limited production Porsche like a 911 S/T, ADMs can range from $50,000 to $150,000 or more, assuming you get invited to the party.

What are the effects of ADMs? Porsches are already relatively expensive cars, worth it IMO, but still expensive. ADMs make them even more so. As I have stated in a previous edition of Kirk’s Korner, most Porsches tend to hold their value better than other brands. But ADMs may not hold their value. If you paid $75,000 over MSRP for a GT4RS and the market demand goes down while your own it, you may only get $25,000 over MSRP when you sell or trade it. The car itself is still holding its value ($25,000 over MSRP in my example) but you lost $50,000 because of the high ADM paid at purchase. Suffering a loss in value during car ownership is how it usually goes with most cars. ADMs have made this the case for Porsches that otherwise might have appreciated slightly or otherwise held their values over time.

Should you pay an ADM? If you shop online for a GT Porsche you will find dealership advertisements for them at MSRP only to find there is an ADM in reality. This is because Porsche requires new car ads by dealerships to state MSRP even though they charge an ADM. If you don’t have a relationship with the particular Porsche dealership, you would likely not get a GT car even if you were willing to pay the ADM. If you want the car and have a relationship that makes it available to you, try to negotiate the ADM down to reduce your risk of the market pulling away from your particular model. Another factor is the value of your trade-in. If your dealership will give you top value for your trade, then the ADM on your next car may be a little bit easier to swallow.

Closing thoughts. We live in an interesting time for the automobile. Internal combustion engines are being phased-out and “final” models are being manufactured. People are paying top dollar for these potentially historic cars. If you want some of that action it is definitely a pay-to-play game. The ADM you pay at purchase may be returned to you later by increased market value, but that may take some time to come about. At least while you wait you can enjoy the intangible rewards of driving one of the best cars every created … a Porsche!