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Autoweek article:

Audi of America Inc. wants to stop speculators from buying the R8, its first premium sports car, and flipping it for profit.

So it's copying a Ferrari practice: Dealers will ask would-be buyers to sign an affidavit stating that they will give the dealer first crack at buying back the R8 if they sell it. Signing the affidavit is voluntary.

Among other benefits, Audi's plan could provide dealers with some used R8s, which likely will be in short supply.

"This way we can better control the second life cycle of the car," says Marc Trahan, director of product quality and technical service. "It is such a rare and exotic car, and this protects the customers. And it will be good for the car's residual values."

The R8 goes on sale in the United States in September. Pricing starts at $110,000 for the six-speed manual and rises to $119,000 for the six-speed automatic. Both prices include shipping. The R8 has a 420-hp, 4.2-liter V-8 engine.

300 cars a year

The U.S. market will get only 300 R8s this year - 100 more than initially planned, because of demand, says Trahan.

"Dealers say they could sell many more, but we want to keep the car more exclusive," he says.

Trahan admits that Audi can do nothing to keep dealers from marking up the R8 except "strongly recommend" they don't.

The R8 will be sold by only 109 of Audi's 267 dealers. R8 dealers have agreed to devote at least 400 square feet of showroom space, train five employees and invest up to $40,000 for tools and marketing, says Trahan. All dealers were offered the opportunity to sell the R8, he says.

Allocation will be based on dealers' annual sales, says Trahan. An additional 58 dealers who dedicate one technician will be able to service R8s.

Audi will provide dealers with the affidavits for the resale agreement, which will be presented at the time of sale. The program was discussed with the Audi dealer council, which approved it.

Cars for 'end-users'

Joel Weinberger, owner of Continental Audi, of Naperville, Ill., and chairman of the dealer council, says the affidavit was prompted by "our concern about having the cars get into the hands of people who aren't the end-users."

"When you have a car more in demand than supply, you have people who are speculators and try to operate as dealers without a license," Weinberger says. "They buy a car, sell it and can make more profit than we did the first time around."

Weinberger, who has several orders for the R8 but doesn't yet know his allocation, says he will use the forms at his store.

What if a customer says no?

"Dealers have to manage the situation," Weinberger says. "I don't see why it would be a negative unless the buyer is one of those folks who want to flip it and make a profit right away."

A spokesman for Ferrari North America confirmed that the exotic brand makes "a strong recommendation" that its dealers make buyers sign a first-right-of-refusal affidavit. He would not say how many dealers comply.<ul><li><a href="http://www.autoweek.com/apps/pbcs.dll/article?AID=/20070508/FREE/70507013/1528/newsletter01">http://www.autoweek.com/apps/pbcs.dll/article?AID=/20070508/FREE/70507013/1528/newsletter01</a</li></ul>

Alan(NJ)

Ferrari makes the buyers agree to the sell back in writing, but what they don't guarantee is what they will pay for the car in writing. So the typical Ferrari practice is to force the buyer to sell back via the affadavit and then screw them on the price they offer them. The "reward" to the buyer for the "Ponzi scheme" is to be permitted to buy a new Ferrari at list price and then start the whole shennanigans all over again. this way the F car dealer can make a huge profit on the re-sale. It's how they stay in business given the low number of cars provided by the manufacturere

Personally, I always hated this scheme, but at least I understood it for a low volume manufacturer like Ferrari. For Audi to pull this stunt is incredible.

RXBG

it is not an agreement to sell it back to the dealer for whatever they want. you are selling the car. i don't see what the big deal is.

Alan(NJ)

don't know what the Audi dealers will do, but if you have to sell it to them, who sets the price? They do. Ferrari gives these "preferred buyers" a low ball buy back price and then rewards them with the right to buy a new car.

RXBG

is that you give the audi dealer first dibs at buying the car back from you as a used vehicle. you're the owner, however, and you set the price. if they don't want to buy it from you at X dollars you don't have to sell it to them. but maybe i am misunderstanding the issue. i don't see how anyone could make a binding agreement to sell something of theirs for a price someone else sets X years into the future.

on another note. the ferrari dealer thing i understand, from my cousin who knows it from firsthand experience, works in the same way except that a lot of owners/dealers make arrangements to sell their car through the dealer and split the profit once the cars is sold again whilst ensuring the the guy who sells his car back first dibs at another model, etc.... audi dealers could engage in that kind of practice to. but i hope not.

ScottishS4 feat. A3

Highly desirable items need to have the prices on them controlled to prevent people from buying these and turning them into profit machines. Motoring manufacturers want the cars to be driven, not traded.

A number of Ferrari dealers lost their rights to sell the F cars in the 90s because of profit making practices. The real benefit is for Audi corporate;
- They are able to monitor the market and adjust production numbers according to demand.
- The car's price controls keep the car trading at fair value

As for the practices, I don't have a view to how the dealer network would operate. However, I would guess that it is simply a first right of refusal more than an obligation to sell back.

This happens a lot with expensive items. The same practices are in place on Lambos, Fezzas, and even the new Teslas.

JDBlueAudiS4

They can control the rate of depreciation by controlling resale rates as well as controlling the ammount of units on the market. Makes perfect sense to me. Also this is not a right for Audi to lowball all owners when they go to sale. They have to make a reasonable offer or you can tell them to pound sand. Also its still questionable if this type of contract would hold up in court, or if Audi would even try to enforce it.

Francis Y.

AFAIK, there is no set-in-stone way the Ferrari dealers do it, but in general, this is how it goes:

Step 1) You buy one (sometimes more) "used" Ferraris from them (I used "used" liberally as usually they have a couple hundred miles, at most a thousand)

Step 2) You are now on the "approved list" of new Ferrari buyers

Step 3) You place an order and wait 2+ years for a new Ferrari; dealer is allowed to sell you only at MSRP without markup.

Step 4) There is a "handshake agreement" between you and dealer when the new Ferrari is delivered that if you decide to sell the Ferrari, the dealer has first dibs on buying it back, usually with a agreed upon price (say, near the original MSRP).

Step 5) Dealer obtains nearly new car several months or a year after it was first sold to resell at any price they want (usually couple tens of thousands more) to a new customer, who is at Step 1.