By on July 21, 2011

The internet has been a boon for car buyers in a million ways, but for new car marketers it’s been a decidedly mixed bag. GM’s California-only experiment selling new cars over eBay was quickly abandoned, after generating more embarrassment than sales. Now, another high-ish profile online new car marketing gag has flopped, as Autoweek reports that Groupon’s car debut is going nowhere:

Only four consumers agreed to pay $200 for a $500 discount voucher on a new-vehicle purchase at LaFontaine Buick-GMC-Cadillac in Highland, Mich. Groupon and LaFontaine had set 10 as the minimum required for the vouchers to be issued.

For companies like Tesla, who hope to do without traditional franchised dealers altogether (Chrysler may harbor similar desires), the internet is next great frontier in new car sales… but the eBay and Groupon failures are troubling signs for that dream.

According to Donna Harris of Automotive News [sub], there were a few specific problems with the Groupon offer:

  • Negotiated prices. Most of the products promoted through Groupon, of Chicago, have fixed prices of less than $100. When Groupon says the price of a restaurant meal is half off, consumers can verify that against the menu price.
  • [Robert Milner, General Sales Manager at LaFontaine Buick-GMC-Cadillac, which made the Groupon offer] says consumers were skeptical, thinking the dealership would boost the price to offset the $500 discount. On the Groupon Web site, he told people to negotiate their best deal, then bring the voucher for a down payment.

    He also told them that if they decided not to buy a car, they could use the $500 on other products and services the dealership sells. Later, Groupon, which has been eager to move into high-ticket items, broke with its usual rules and offered to refund the cost of the voucher if a consumer didn’t use it by year end.

  • Skimpy discounts. Consumers expecting a Groupon-like half-off deal may have dismissed $500 off on a $30,000 car as not enough.
  • Not an impulse purchase. Many Groupon discounts are offered on impulse buys, such as a massage or flowers. Cars don’t fit that mold.
  • Neil Stern, senior partner with retail consulting firm McMillan Doolittle in Chicago, points out that instant offers work better on frequently purchased items.

    For Groupon retailers to break even on the deep discounts, “You need 20 percent of your customers to come back,” Stern says. “You lose money on the Groupon offer so you have to get return customers.”

    And someone who buys a car isn’t going to come back next week or next month to buy another one.

Her solution? Save the Groupons for no-haggle dealerships, so buyers know they’re getting $500 off… but then, offering discounts at a so-called “one-price” dealership kind of runs contrary to the whole point of the no-haggle, one-price, “no-dicker sticker.”

But really, it’s the size of the discount more than the lack of trust that’s the issue. People will buy anything online if the deal is good enough, and $300 off a new car priced in the tens of thousands of dollars doesn’t get you anywhere. Similarly, had GM actually auctioned cars on eBay with low reserves to clear inventory, it might not have made as much money as a “Red Tag Sale” or “Trucktoberfest,” but it would have moved every car and received a lot of attention in the process.

On the other hand, haven’t this industry worked hard to get away from that kind of thinking? Ever since the credit crunch, the US market has been moving towards higher transaction prices, lower discounts and tighter inventories, and online sales don’t really foster that kind of market. Just look at China, where even a year ago, Bertel was reporting that online car sales were booming. Why are online sales taking off there and not here?

[SAIC's site] has the usual 3-D images, car data etc. to drive buyers to dealers. However, it shows which dealers give the highest discounts, something very taboo amongst manufacturer-sponsored sites.

Geely is going one further. Customers who order a car on-line can receive a 30 percent discount if they are the lucky winner. Such a practice would cause howling protests and lawsuits elsewhere.

That’s right, deals. If you’ve got screaming deals on something you see as a pure commodity, the internet will always be happy to move your volume. If, on the other hand, you sell complex, expensive, branded consumer goods like new cars, you have to just price right and focus your efforts on getting people into your dealerships.

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107 Comments on “Will Online New Car Sales Ever Take Off? Should They?...”


  • avatar
    Educator(of teachers)Dan

    Grupon is a bad example.

    I would like to see manufacturers let me “build” a car like I can “build” the laptop I’m typing this on but I know it would take a hell of a lot of money and lawsuits to break the stranglehold dealerships have on the market.

    Right now I’m happy I can get online and seach dealers inventory around the country for a car that might come closest to meeting my actual “wished for” options. I’m glad I can also use the internet to figure out inventory levels to see which cars should have good deals.

    • 0 avatar
      ajla

      I would like to see manufacturers let me “build” a car like I can “build” the laptop

      +1.

    • 0 avatar
      NulloModo

      You generally can ‘build’ a car like you can build laptop. Whether you are shopping Dell, Apple, or another online computer vendor, while you can customize certain things about your laptop (processor speed, amount of RAM and HD space, sometimes different colored shells or which graphics chip) there are other things that are fixed for each model (screen size and resolution, optical drives, I/O ports) and even the things you can change have limits (a particular model may offer you the choice of certain Core i5 or i7 processors, but you can’t alway sub in an AMD Fusion chip or a quad-core i7 in place of a Core 2 Duo).

      You can build out your car online within the limits of the options, packages, and color choices available per model, and then either e-mail that build-sheet, or print it out and walk it in, to your preferred dealer and have them order the car to your choices. Right now I have eight vehicles on order for various customers. The deals were negotiated at time of order, everyone knows what they are getting for what price, and as soon as the cars come in I just call the customer, set up a time for delivery, and have the car cleaned up and the paperwork ready to go when the customer comes in. They sign the papers and pay, I show them how to use everything on the car, and everyone is happy, no muss no fuss.

      • 0 avatar
        Educator(of teachers)Dan

        @Nullo

        I’m gratified to hear that you dealership is so willing to work with customers. I can think of a few of my local dealers with which I could attempt this but likely will have to walk away and find someone else pedling that same manufacturers brand.

      • 0 avatar
        KitaIkki

        @Nullo

        That’s been my experience too. Bought a 1995 Impala SS that way in California, using a “car-buying service” with an 1-800 number, before there was even widespread internet. Today it’s even easier. Just go on KBB or Edmunds, configure a car with the exact options, then request “dealer quotes.” Usually multiple dealers will e-mail within days. Though it may take weeks to months for the ordered car to show up. I can’t understand people who buy something they will keep for years “on impulse.” (or let the latest volatile price of fuel dictate their buying choice)

      • 0 avatar
        M 1

        For the past 12 or 13 years, I’ve bought a new car that way every 18 to 24 months. Figure out what I want, figure out what I’m willing to pay, then hit up the various dealerships until I find one who will take my money.

    • 0 avatar
      Steve65

      The really annoying part is that the mechanism to do just that is already in place. But it’s only available to franchised dealers. There’s absolutely no reasonable logistical reason why domestic factories couldn’t accept specifically configured orders over the internet, feed them into the production plan, and then deliver that car a few weeks or months later to a regional distribution depot. Pay (contractually fixed)cost, shipping, fixed PDI/setup, plus some prenegotiated profit, and drive away. The dealership and saleman provide no added value to an informed buyer.

    • 0 avatar
      dartman

      You can. Go to bmwusa.com are see the BMW dealer of your choice. Maybe even take a cheap European vacation; drive the ‘ring, autobahn etc.. Another upside-you will get a couple of years worth of good-will from your significant other if you do European delivery. Downside: Some neanderthals will think your a douche–ignore them.

    • 0 avatar
      stryker1

      +1
      Was recently new car shopping. Ended up buying a used car because I couldn’t bring my self to shell out for a new car if it didn’t have exactly what I wanted on it.

    • 0 avatar
      VanillaDude

      I just bought a new car.
      I live online. It is my job.
      I would never have been able to buy that car online.
      Not because I didn’t want to.
      But because there is so much more to the entire transaction than catalog shopping allows.

      I did extensive online research. I knew the car inside and out before it was even available in the US. I judged this car by going to the dealership to see the dealership and to see other models similar to my future purchase.

      I had everything in order.

      But I still needed to use the opportunity to buy that car so that I could get more than just a car and a price from the dealership. I made certain that they earned that sale. They made me a deal, not just about price, but also about my trade-in, the value derived by that trade in, the cars on the lot, the cars in the system, and the kind of money I was loaned, and from whom. I interviewed my garage mechanic so that I was certain I was getting a realistic evaluation on my trade in. I actually brought him into the table on the deal itself. Doing that saved me $800.

      I worked the dealership. I got them to do more than just get me the right car, I got them to cover that car bumper to bumper without any additional parts or labor costs for eight years – all within my budget.

      I worked that dealership so that they discovered that they liked me, and wanted my business. I have gotten regular phone calls over the past month from the dealership about a whole lot of stuff that has nothing to do with the price I paid for it.

      When you make a deal, you can not just make a deal on one particular car, you can make a deal on future deals as well.

      You cannot do this online.

      Everything I wear I buy online. Everything I listen to and read, I buy online. All my gift buying is done online. My pharmaceuticals are bought online. The FedEx and other delivery guys know me by their frequent visits on a regular basis to my home. They got Christmas gifts last year. They do their best knowing who I am.

      If you think you can go through life without human contact, you are shorting yourself. You can win the game of life when you take advantage of face to face communication. If you are shy, or have an emotional problem keeping you from being your best – then by all means, please enjoy online shopping and purchasing. But if you have a modicum of social normalcy, you can use the systems in place to work them to your advantage.

      You can win when you buy from a dealership, you just know how to be an adult and speak clearly, honestly and sincerely. A normal dealership will respond in kind.

      • 0 avatar
        Russycle

        I have to agree. When we bought our Mini, I went to the dealer sure that I did not want a white car and that the Clubman was the stupidest thing ever(a big Mini? What’s the point?)

        After actually looking at a Mini and calculating the gymnastics required to get into the back seat, the Clubman started making a lot more sense, and we noticed that the white Mini uses is more of a cream color which I really liked. I did plenty of research on line, but without actually seeing the car it wasn’t enough, and the salesman was great to work with and very helpful. He was on vacation when our car arrived, and getting our car off the lot did not go smoothly. I expect had he been there the process would have been much better.

        I think being able to configure a car on line is great, but when I’m dropping that kind of coin I want a competent human involved in the process.

  • avatar
    hreardon

    I’m not so sure that Groupon is a good example of online car sales. In reality, a lot of people already do this. In my case, when I purchased my A3 I test drove the car, then handled all of the negotiations through a few emails with my sales rep. It was easy: I’ll give you $500 over invoice for the A3 spec’d out as follows, plus I want X amount for my trade.

    He wrote back and said “okay”, assuming that when I brought my car in it was in the same condition as when I stopped in for the test drive. It was, I picked up the car, signed paperwork and was done.

    Easy peasy.

    The key here is that I had to kick the tires at some point, so someone needs to have a decent inventory of demo cars available to try. Who foots the bill for that? If it’s an independent dealer, they’re going to want a piece of the action – and I can’t blame them.

    The problem is that buying a car is very similar to buying a house: you will rely on it, you will spend lots of time and money on it and you need to feel good about the purchase. You also generally only buy cars once every few years at the most, at worst once every 8 – 10 years if you’re becoming part of the “new normal”.

    Those kinds of purchases require a lot of hand holding and emotional buy in to get people to sign on the dotted line. To that end, you’re going to need some kind of depot where you can check out the makes and models and take delivery. I’d love to see manufacturer-owned depots run like Apple stores. I’m sure makes like Audi, MB, BMW, Cadillac and Lexus would, too.

    This will require consumers becoming comfortable with one price, no haggle shopping. It will also require a detent between dealers and manufacturers when it comes to franchise laws. Unfortunately, I don’t see either happening anytime soon no matter how much I’d love for this to be the case.

    • 0 avatar
      tankinbeans

      “This will require consumers becoming comfortable with one price, no haggle shopping.”

      I’m already there. The dealers that I’ve been to are all one-price dealerships and usually the cars sell at slightly less that KBB retail. I know that I’d suck at negotiating because I don’t have the personality to do the white lies of “well this dealer said they’d give it to me for this” or similar.

  • avatar
    bumpy ii

    Online auto sales will take off when they’re actually sales, not double coupon returning student military retiree day at the crooked dealer who already sold the green car you wanted.

    Order the car through the online configurator, pay a deposit fee, schedule a delivery date, and on that day at that time a flatbed shows up with your car and a product rep to give you a walkthrough and collect the paperwork. They can evaluate and make an offer on your trade if you have one. If you accept, it goes on the flatbed. If you don’t, then have a nice day.

  • avatar
    PlentyofCars

    With places like Fitzgerald Auto Mall which has no haggle pricing and posts all their inventory with pricing, you can shop online.

    Some CarMax locations have new cars as well with no haggle prices online.

  • avatar
    ravenchris

    Dealerships will be allowed to exist as long as they make adequate payments to the usual career politicians.

    • 0 avatar
      Crosley

      +1

      This is the main reason this ridiculous sales model exists today.

      • 0 avatar
        Pch101

        This is the main reason this ridiculous sales model exists today.

        The current model was largely invented by Henry Ford. Demand for cars was wildly cyclical, and he wanted to offload that market risk onto the backs of the dealership network. (In the beginning, Ford was able to play the float, selling the cars to the dealers for cash while then delaying his payments to his own suppliers.)

        The model has since evolved, but its roots are based in what served FoMoCo best. Ford got out of the retail business very early on for a reason.

  • avatar
    uncleAl

    The US GAO did a study a few years ago that came to the conclusion that the average dealer adds $8800 to the transaction price of a new car. ( gao.gov ) Let’s do the math, the new Toyota dealer up the road from me built a new store. They spent 16.5 million on land, construction, etc (cost from local newspaper) and spend tens of thousands a week on salaries, interest, utilities, taxes, and on and on. All to sell 330 vehicles per year. They are like any other business, the bank or hedge fund providing the funds need 8 to 18% return on investment.
    In other words, they have to mark up that new car or truck $12,500 to break even if you average all of them together. Good luck new car shopper.
    If we could Buy direct from the manufacturer online, we would save tens of thousands on new cars. All of our state and local politicians are firmly in the pockets of the cars’ dealers, so the beatings will continue.

    • 0 avatar
      MikeAR

      Could you please link directly to that study, I would love to read it. The numbers seem high but I bet they are pretty accurate.

    • 0 avatar
      NulloModo

      If your new Toyota dealer spent/is spending that much to only sell 330 cars per year then they aren’t going to stay in business for very long.

      The current dealer model also benefits the manufacturers in a lot of ways. Toyota makes a larger profit on each car they sell to that dealer than the dealer makes selling it to a customer. Toyota makes their money on each car as soon as the dealer buys it, and while the incentives cost some as the cars sit on the lot, Toyota Financial is also making money from the floorplan interest over time.

      Are there costs that the manufacturers incur to support the dealer network? Sure. Would prices magically drop by thousands of dollars if vehicles were sold factory-direct? No way.

      • 0 avatar
        redmondjp

        Yes, but also remember that the Service Department is the profit center in the back of the building that helps keeps the lights on. Most dealerships would not survive without it.

    • 0 avatar
      John Horner

      “The US GAO did a study a few years ago that came to the conclusion that the average dealer adds $8800 to the transaction price of a new car.”

      What complete nonsense. I tried to find such a report on gao.gov without success.

      Even including holdbacks, finance spiffs and such no car dealer has $8800 gross margin on a typical vehicle.

      Sniff test failed.

      • 0 avatar
        Pch101

        I couldn’t find this GAO report, either, plus those numbers don’t correlate with anything else that I’ve seen.

        This is from NADA, which as a trade organization for the dealers may be inclined to understate things. But they are claiming that as of May 2011, typical gross on a new car was $1,360 and the typical gross on a used car was $2,214. Net pre-tax margin was about 2.5%.

        http://www.nada.org/NR/rdonlyres/4093B62D-97F1-4F25-8B89-A47E3A0EC37F/0/NADA_Dealership_Financial_Profile_201105.pdf

        (What I don’t see broken out in those numbers is F&I profit, which averages about $1,000. I think that may be included in the gross margin of the new car sale.)

      • 0 avatar
        charly

        A Ferrari dealer should have such a gross margin but i can’t see how it could be true for a car that sells for $20k

    • 0 avatar
      autointelligence

      Nonsense. Car dealers make less than $1000 on the average new car transaction (front end). They make more through financing and insurance, but if you bought a new car from the factory, you’d have to deal with a bank for financing, so that’s not an amount that would be negated. Dealers make more money from service (and parts), than they ever would in new car sales. They also have a used vehicle department that is more profitable than the new vehicle department. Why would they sell new cars for such a slim margin? Because “Units in Operation” means more service business, more referral business, more body shop business (if they have one), and more repeat customers. I can’t find this GAO report anywhere, and I suspect that is doesn’t exist, or is badly flawed if it does.

  • avatar
    stuki

    Strip away the plethora of dealer protection / consumer ripoff laws, and you’d have Amazon sell cars just as well as they are selling books.

    We’ll get there eventually. All it will take is a weakened Federal government for the more fascist states to lean on to repress their less so brethren; perhaps in combination with entry of players not tied down with dealer exclusivity contracts. Then some free states will start allowing these newcomers to sell cars on their own terms, and after awhile anyone but the most well indoctrinated progressive will realize that there are, who would have thought, no such thing as a “market failure” in car sales either.

    It works in China not because the Chinese are different, but because the Chinese don’t have a century of laws lobbied into place by self serving well connecteds. And because of that, any given Chinese car transaction has less friction loss than a comparable American one, rendering Chinese car consumers better off, wealthier, more competitive and whatnot, and Chinese auto industry more sharply aimed at satisfying the actual wants of auto consumers, rather than lawyers/lobbyists/politicians and all manners of other leeches who are feeding off of America’s decline.

  • avatar
    Robert.Walter

    I don’t have time now to read the editorial and the comments, but as a guy keenly interested in the psychology of marketing, I will come back to this page.

    My thoughts from reading the headline and the first paragraph:
    - They should. As a total replacement for dealer-based selling? Not likely, but these will become an additional channel, just as the mega-dealers became a channel;
    - Many people have had bad dealership experiences, roughly the back and forth bartering that results in the proverbial stage-play of “I have to go talk to the manager”. We know there is room for the no-haggle approach, because this was well demonstrated by Saturn (and yes, I know, it probably wasn’t all that, or it too had drawbacks, but I am unaware of these);
    - The failure of GM to successfully exploit this channel is not convincing proof that the channel is not worth doing. All it proves is that GM’s model was not the correct one;
    - The spoils, at least until the fast-followers catch-on, will go to the company that finds the model which successfully exploits this marketing niche.

    I can also think of some reasons why OEM’s (and especially their dealer bodies) might not want to challenge their traditional channels via web-marketing. Main one is that, all other things being equal, is that dealers have very large fixed investments; strong dealer franchising laws on their side; and both the dealers and the OEM’s know that at any point in time, selling the car is a zero-sum game.

    • 0 avatar
      rehposolihp

      I don’t have time now to read the your comment, but as a guy keenly interested in the psychology of people with who like to post without reading, I will come back to your comment.

      My thoughts from reading the the first and second sentence of your comment:
      -You need to realize that the other posters have (likely) taken the time and effort to read the post
      -Some of them have even gone so far as to read other people’s posts and to respond to them
      -You doing the same would go a long way towards other people being able to show your comment the same respect.

  • avatar
    don1967

    As a former car salesman who understands both the value of the internet as well as public feelings about car salesmen, let me suggest that there will always be a role for both.

    The modern consumer seeks objective information – and time to think – in the privacy of their own home. But when it comes time to toss 30 big ones out of their wallet they still trust a human face more than a monitor.

    Successful dealers realize this. They let online tools do 90% of the work, and for $100 they pay a trustworthy human to seal the deal.

  • avatar
    NulloModo

    Most dealerships already have internet sales departments where potential buyers can get price quotes, ask questions, and set up appointments to test drive or see a particular car in person. I don’t see pure internet shopping (i.e. you click on the car you want, type in your bank account number, complete the transaction and wait for the flatbed to show up) to ever take over.

    The biggest reason is that cars are a major purchase, and one that most people aren’t comfortable making sight-unseen. While the average TTAC reader knows a lot about cars and may be able to make an informed buying decision without ever visiting a dealership, that doesn’t hold true for the average car buyer. Most people don’t know what exactly they want, don’t know what features various models offer, and both need and want a little bit of guidance before spending tens of thousands of dollars.

    Online shopping is great for certain things. I can read a book excerpt, or even check the book out at the library first before buying it. I can listen to samples from a CD, watch clips from a movie, or download the whole thing via bittorrent before deciding if actually owning it is worth the money. I can look at benchmarks for a PC and the various component options before I click the order button. For all of these things, internet shopping works great.

    When it comes to other things, I want to actually put the object in my hands and experience it before making the decision to buy. I wouldn’t buy a pair of shoes without trying them on, I wouldn’t buy a TV or a set of speakers without seeing it in person or listening to them, I wouldn’t buy a house without walking through it and seeing the neighborhood, I wouldn’t buy a musical instrument without getting the chance to play it first, and I wouldn’t buy a new car without sitting in the driver’s seat and taking it for a test drive.

    For a certain very small part of the population the dealership might not provide a valuable service. For the vast majority of car buyers the expertise of knowledgeable salespeople to help them find the right car to meet their needs and the opportunity to experience the car before buying is worth it.

    • 0 avatar
      VespaFitz

      “I wouldn’t buy a pair of shoes without trying them on, I wouldn’t buy a TV or a set of speakers without seeing it in person or listening to them, I wouldn’t buy a house without walking through it and seeing the neighborhood, I wouldn’t buy a musical instrument without getting the chance to play it first, and I wouldn’t buy a new car without sitting in the driver’s seat and taking it for a test drive.”

      Then you’re unlike most people.

      Zappos figured out that traditional shoe retailers had dropped the customer service ball so horribly that they could deliver shoes without people trying them on and still manage to provide an excellent customer service experience.

      Bose and a whole lot of other companies have realized that if you allow a simple, painless return process, people will stand in line to buy something they’ve never heard or seen.

      Musician’s Friend, Guitar Center, eBay and Craigslist collectively sell hundreds of thousands of musical instruments every single day, without the end user ever hearing what the instrument sounds like until they get in in their hands. It works because, for the most part, the businesses, and even the private sellers are pretty honest and want to see their customer satisfied.

      There’s no reason that 50 percent of the car-buying public wouldn’t buy a car online. NADA is the only thing standing in the way. Most people don’t give a rat’s ass about their cars. The only thing the vast majority of people know about their car is that it’s red and that it has a radio.

      Especially at the low end, where cars are commodities, it would be absolutely feasible, just the way buying an air conditioner or a refrigerator online is feasible. But the dealer lobbies made it impossible.

      As far as paying for it? Piece of cake. I got my last three mortgages without ever seeing anyone at the bank. That purchase was significantly more expensive than any car I ever bought.

      • 0 avatar
        killthewabbit

        +1

        Having bought plenty of shoes from Zappos, I can vouch that I enjoy that much more than trying to find a random store that has the shoes I want in the size I need. Plus, they elevate customer service to an art form.

        Saying “people will never buy cars online” is making the same mistake as the music industry, newspapers, booksellers, or any number of other businesses. What internet commerce does very effectively is lower the barrier of entry for people to compete with established retailers. Ignore at your own peril.

        The biggest problem I see with this now is sales tax, but I’m betting that gets fixed before much longer.

      • 0 avatar
        SP

        In order for that to work, though, you first need a “no questions asked” return process, similar to what the cell phone carriers allow within the first week or so. Will manufacturers be willing to accept the risk of damage to a very expensive item?

        And secondly, a large, large number of people shop in the store and buy online. Only a real weirdo would buy a TV or stereo sight-unseen (or hearing-unheard). What they do is go to their local store that has a good selection of brands, find one they like, then go online and look for the best deal.

        Now, in that case, it’s still not exactly a manufacturer-direct sale, because the sales still happen through retail channels. The customer is just leveraging a larger dealer’s lower per-unit overhead costs against the smaller dealer.

        (I personally find it somewhat unethical to do this, which is why I try to avoid it.)

        Now if you throw manufacturer-direct sales into the mix, and chop off all or even half of the dealer’s markup, then the local dealer could never compete on price. So their new-car sales would go down the toilet immediately.

        Then the manufacturer would have to solve a new problem – what about service? Customers wouldn’t accept the Amazon model of sending the unit back across the country and waiting weeks for a repair or replacement. And they certainly wouldn’t pay $500+ return shipping for it. And neither would the manufacturer. So, either the manufacturer would have to support the local dealers until they could be self-reliant on service alone, or some new customer service channel would have to be created.

        It’s not a simple proposition, in my eyes.

      • 0 avatar
        rehposolihp

        “Only a real weirdo would buy a TV or stereo sight-unseen (or hearing-unheard). What they do is go to their local store that has a good selection of brands, find one they like, then go online and look for the best deal.”

        I suppose that makes me a real weirdo.

        I find reviews of TV’s that meet the criterion I want: response, contrast, size, features, etc; find the one that has all of the features I want and has a few authoritative reviews and pull the trigger having never seen the picture.

        Why? Because honestly the differences are usually tiny, and my living room looks a lot different from Big Box Store: my ceilings aren’t warehouse height, my lighting isn’t fluorescent, etc.

        Cars have the added complexity of “driving feel” that I don’t quite get from other consumer goods, but when choosing my last vehicle I test drove 2 competing cars in the same price range, roughly the same features, and loved them both. I made the decision based on a couple of factors but eschewed my normal method.

        Retroactively I compared them using online reviews and found that the car I chose was the car I would have chosen based upon reviews.

      • 0 avatar
        killthewabbit

        I wouldn’t call it simple either, but it’s closer to do-able than you might think.

        The logistics of it are similar to how wholesale auto auctions work now. For ten years, I wrote software for one of the biggest ones in the world. Arbitration, title, financing, and transportation are all concepts with which your dealer is already familiar.

        Service departments are already a major source of profit for new vehicle dealers. A new sales model might be to have demo units present and available for a touch/feel and maybe a test drive? If the unethical of us use Carmax to give a real world price of our prospective trade ins or drive a similar model and year vehicle, why not make that an accepted and encouraged use of the facility attached to the service center?

      • 0 avatar
        SP

        @ rehposolihp:

        Well, maybe you’re only a teeny bit weird, and not a “real weirdo”. But I would not buy those items without being able to test them in person. I don’t have the kind of time or the kind of money to make a bad choice on a new TV or a new stereo. I agree that reviews are helpful. But my preferences may not match those of the reviewers. It is possible to compare your experiences to that of the reviewer and find a reviewer you trust, but it takes time.

        @killthewabbit:

        I am sure it can be done. A “brand center” would work in terms of new car sales. However, I would be more worried about the dealer-manufacturer relationship. A lot of work would have to be done to figure out how the two groups would co-exist. It’s a big change.

    • 0 avatar
      DC Bruce

      Eggsactly. The notion that the feel of a car can be captured in a set of numbers is risible. Hell, lots of ‘em even look different in person than they do in photos.

      I doubt seriously that a car will ever be as commoditized as, say, a computer is.

      As a long time audiophile, I used to laugh when Consumer Reports ranked speakers by “accuracy score.” The laughable part was that two speakers with the same “accuracy score” (usually expressed as a percentage) could sound wildly different.

    • 0 avatar

      If direct sales will be such a failure why do NADA and the dealers spend so much money and effort supporting franchise laws to prevent it? Why is the California New Car Dealer Association taking Chrysler to court? The lady doth protest too much, methinks.

  • avatar
    anchke

    Might depend on just what you’re buying. There are a lot of Civic and Corolla buyers. Why wouldn’t they just order off the Internet? But the dude who was driving the Audi A8 that I followed home this evening? He’d probably expect a well dressed fella to do a little shmoozing at some point.

  • avatar

    One company I admire, Samsung, they opened a show room of their newest products in the Time Warner building in NYC, I visited this place numerous times and it’s a joy, you get to see top tech stuff without the sales pressure because they do not sell anything there, instead, you can asked questions and get all the information you need from professional personal.
    Now, imagine such place for a car company, take a test drive, see the car, feel it but no sale pressure, than, when you decide on a car, you simply order it online and it will be delivered to your house, no dealer pressure.

    • 0 avatar
      Robstar

      I would just LOVE this. And if they wanted to charge $50 for an 30 min/30 miles with say a z06 or something, I’d do this as well. This would let possible buyers test drive & (hopefully) keep the riff-raff/joy riders out.

    • 0 avatar
      TomH

      No need to imagine it. You are describing a “brand center” concept that already exists in Europe. (Major cities like Paris, Berlin, Frankfurt, etc.)

    • 0 avatar
      Dynamic88

      How many brand centers would there be? I live in Michigan, so I’m not traveling to NYC to look at cars. I’m probably not willing to travel 100 miles to look at a car.

    • 0 avatar
      Darkhorse

      The original sales model for Saturn was similar. Being pre-Internet, you sat down at a computer terminal in the store and configured your car. For some reason the chose to go with the standard dealer model. I suspect the original concept lost its proponent when GM fired Ross Perot.

  • avatar
    Crosley

    I definitely believe that car manufacturers would sell a TON more cars if they had a sales model like say the Apple Store.

    Have the same price at every store with salaried, knowledgeable people that can answer questions and provide service. At the end of the day, I believe the product is what actually moves cars more than the salespeople. I’ve certainly never bought a car because I liked a particular dealership or salesman.

    The entire “dealership experience” is a big reason why I almost never even think about buying a car through them, new or used; and I doubt I’m the only one. If people could essentially “build” their car, get a factory direct price, and know it’s the same price everywhere else, I think you’d see more frequent car buyers.

    Saturn tried something similar, and it was actually very successful early on. Customers had incredibly high satisfaction with the sales experience, much higher than GM’s other brands. I think the brand’s failure was mainly due to poor products that even the best dealership couldn’t move.

    At the end of the day, the reason this ridiculous sales model still exists is because of the cozy relationship dealerships have with local politicians. It’s basically a protection racket.

    • 0 avatar
      NulloModo

      Competition amongst dealers leads to lower prices for customers. There are plenty of new car franchises that barely make a profit on new car sales, and make it up on used cars and service. The manufacturers wouldn’t be able to benefit from used car sales (unless they set up their own used car dealerships, in which case you have the same setup, just under new ownership), and while service profits could be had, I don’t see how having the manufacturer who has to directly pay the cost of warranty repairs being in charge of how something is handled would improve the situation for the average owner.

      Right now Apple is able to charge a fairly large price premium for hardware because most of it is sold direct, and the few retailers who have distribution agreements also have to abide by the pricing that Apple sets. If Apple were to sell computers wholesale to various retailers and allow them to charge whatever they want, as is the case with most other computer manufacturers and current car dealers, you would see prices for Apple hardware drop.

      People don’t really want manufacturer direct no-haggle pricing, they want wholesale prices for themselves without having to negotiate.

      • 0 avatar
        FromaBuick6

        “People don’t really want manufacture direct no-haggle pricing, they want wholesale prices for themselves without having to negotiate.”

        No, when I go into a dealership, I want a price that’s within a couple hundred bucks what Edmunds or one the other websites says is a fair market value. That goes for the vehicle I want to buy and my trade. And I don’t want it to take two hours to get to those numbers.

        Yeah, there are guys out there who think they’re going to screw the dealer over. They’re called morons. The rest of us understand that a dealership is a for-profit business just like any other. And I want the salesman to get a decent commission, since he’s probably getting paid crap otherwise.

        Look, I get it. You’re trying to defend your profession and livelihood. And I’m sure you treat your customers fairly and courteously. Problem is, for every one of you, there’s 10 scumbags that fulfill every stereotype. Honestly, I’m willing to pay more money for better service. If your prompt and honest with me, don’t try to sell me things I don’t want and treat me like a real person, not an ignorant mark, that’s worth at least an extra $500 to me. Otherwise, don’t try to convince me the average new car dealer is any better than we all think it is.

      • 0 avatar
        NulloModo

        Fromabuick –

        Those Edmunds, KBB, and Truecar numbers aren’t pulled out of a hat. They reflect averages of actual transactions made at dealers. Is the dealer going to ask for full sticker first just to see if you’ll bite? Of course, no one wants to give money away. At the same time the buyer is in most cases going to ask for an unreasonably high number for their trade and offer a lowball figure on the car being purchased, they don’t want to give money away either.

        In a no-haggle manufacturer-set price setup though those Edmunds and Truecar numbers don’t exist. If Mazda mandates that a CX-7 Grand Touring Turbo sells for $29,900 and all retailers selling that model have to charge that price, then that’s what you have to pay, no chance to work out your own best deal. Maybe it’s more ‘fair’ in that case because everyone is paying the same amount, but if competition amongst dealers can be leveraged in the current system to work out a better deal for those who are willing to take the time and do the research, I think most people would prefer to have that option.

      • 0 avatar
        FromaBuick6

        I’m not saying there shouldn’t be competition. If you go to buy a new dishwasher, what do you do? You go around to Lowes, Home Depot, Sears, etc and see what they’re charging for the model you want. Sometimes, they’ll honor their competitors lower price, otherwise take it or leave it.

        Why can’t car buying be the same way? I don’t care about “fair,” I just don’t want to be bothered with the extra hassle of the back and forth that doesn’t exist in the sale of any other new mass-produced consumer product. If the big box retailers can find a way to compete with non-negotiable prices, so can you. I bet Sears gets idiots who think they can bargain down the sticker price, too – tell ‘em to take a hike.

        Used cars and trade ins? Haggle all you want. Values vary drastically based on condition, and people typically have ridiculous notions of what their old beater is worth.

    • 0 avatar
      Pch101

      If people could essentially “build” their car, get a fair price, and know it’s the same place everywhere else, I think you’d see more frequent car buyers.

      If the car industry had margins like Apple’s, we’d all be paying much higher prices for cars.

      Last year, Apple had pre-tax income that was more than double that of Honda’s, even though it had only two-thirds of the revenue. Apple’s “fair” pricing transfers more money out of your wallet and into Steve Job’s.

      • 0 avatar
        Robstar

        @FromABuick6>

        I agree with you. I paid $500 more on my motorcycle to a place that I respected, didn’t treat me like an idiot, HONORED their online sales quote to me via e-mail and were pleasant to deal with.

        I then brought ~ $10k back to this dealership in insurance claims & maintenance. I drove 50 miles to go back to this dealership every year for the last 4 years and they are now out of business. They weren’t “Cheapest”. I actually had a few issues that I showed to them, they kept my motorcycle overnight and they didn’t charge me anything as they couldn’t find a problem. I’ll really miss that dealership. They actually told me that for some “scheduled maint” that even though the manufacturer recommended it, it usually wasn’t necessary to replace things like fuel hoses unless they saw issues, and they didn’t charge me. Their quotes were accurate. If something came up during maintenance, they’d call me and tell me exactly what they found and the price to fix it and let me make the call.

        On the other hand, my wife & I went to look at a Kia sorrento because we were in the neighborhood for something else and had it on our list to check out. A nice guy came up to help us who had only been there a few days, however he knew the car inside and out and was really nice. No sales pressure, asked us to test drive a few, etc etc. It was all good & we were going to purchase from him sometime in the next 30 until he brought in “The Closer” who tried to sell us JAPAN fud, asked us what it would take to sell us the car TODAY and the experience quickly went downhill from there.

        We’ll never go back even if they give us the “cheapest” price. There IS VALUE associated with treating customers respectfully, not pulling out the four square like we are idiots, asking us what we want our monthly payment to be (I HATE THIS. TELL ME THE INTEREST RATE & TERMS. I CAN FIGURE OUT THE MONTHLY PAYMENT MYSELF.), selling fud, rustproofing, vin etching, blah blah.

    • 0 avatar
      FromaBuick6

      You’ve said it all. For most of us, walking into a car dealership is about on par with a root canal. It’s even worse if you have a trade in or need financing. Buying a house is a breeze in comparison, even though it probably costs you 10 times as much.

      People scoff at CarMax, calling the prices a ripoff, but for many people the no hassle experience is worth the extra money. Same with Saturn – until crap product and corporate stupidity killed it. Besides, the open market will ultimately determine the amount of markup in those “no haggle” prices. Why new car dealerships can’t adopt the same practice on a large scale is beyond me.

      • 0 avatar
        NulloModo

        I disagree about buying a house being easier. Having to put down good faith deposits, having to negotiate through a realtor or agent instead of directly buyer to seller, not knowing if there are other people actively making offers on the same property at the same time you are, having to pay for appraisals before a loan is finalized, and having to pay for inspections before the required insurance can be bound, etc, there is a lot more hassle, obfuscation, middle-man profiteering in buying a house than in buying a car.

        It even gets tricker looking at short sales where the listing may start out at a too-good-to-be-true figure but where the bank plays all of the eager buyers off of each other gradually raising the price until the final figure it a lot more than the same house would have gone for through a private seller.

      • 0 avatar
        John Horner

        People who think that the Apple sales model is providing them the best possible price have certainly been drinking Apple juice flavored Kool-Aid!

      • 0 avatar
        highdesertcat

        I have relatives in the new-car retail business and sales personnel are crucial. The downside is that there are differences between the efficiencies of dealerships from one location to another and from one state to another. Each dealership has to have a certain margin in order to make a profit. Some dealerships need to make more than others just to break even.

        The problem comes into focus when sales commissions are tied to the profit margins. The sales staff is going to try and sell you as much as they can. An excellent source for background is the article at Edmunds that illustrates the confessions of a car salesman.

        It is rare to find a dealer these days that has exactly the vehicle you want with the options you want in the color you want. And if you decide to do a lookup for availability nationwide you may also discover that the dealer that has your perfect car at their location may not want to do a trade with the dealer at your location. How does that benefit them unless they, too, make a ton of money on the deal?

        But there have been buyers at my relatives’ dealerships who have paid airfare from their location in another state to buy that perfect car in the state where the dealership is located.

        Buying a car online sight unseen is a bit of a stretch. The closest thing would be the internet sales department of many dealerships. But they are not without their problems either.

    • 0 avatar
      M 1

      “Saturn tried something similar, and it was actually very successful early on.”

      Marketing is amazing voodoo, isn’t it?

  • avatar
    John Horner

    In general, Groupon doesn’t work well for retailers selling products with relatively low margins. Groupon typically keeps 50% of whatever the customer pays for their “Coupon”, so the dealership is only getting $100 in return for giving what is in theory $500 more off the vehicle than the customer could have negotiated without a Groupon deal. Also, Groupon takes their time actually turning the money over to the company which contracted with them.

    The vast majority of Groupon deals are for services provided by businesses with relatively high fixed costs and low marginal costs.

  • avatar

    Look at Gallup’s Honesty & Ethics Poll, conducted since 1976. ‘Car Salespeople’ have ranking last every single year. You have an industry that KNOWS over 90% of the population views them as untrustworthy sleazy scum, yet have done nothing to improve that perception in 35 years. In fact they recently used their political clout to earn exemption from oversight by the new consumer financial protection bureau. I hope they enjoy continuing to slithering around at the bottom of the barrel. Pathetic.

    • 0 avatar
      charly

      35 years? Horse dealers where seen as untrustworthy sleazy scum in the neolithic.

    • 0 avatar
      M 1

      You should try actually thinking about that instead of just wallowing in the self-satisfaction of seeing a poll that supports your opinion. Most people walk into these dealerships to make the second-largest purchase of their life, expecting to have a miserable experience, and assuming they’re going to be ass-raped in the final analysis — all without making the slightest effort to better prepare themselves — in the height of the Free Information Everydamnedwhere Age.

      I have zero sympathy for customers who do actually get taken by actually-sleazy car salesman, and given that the car business is actually pretty damned difficult, I have a lot of sympathy for the more honest guys who continuously take a beating for things they simply don’t do.

      The level of scrutiny and regulation in the business is unbelievable. What other retailer is forced by the state to annually post a bond just so a regulatory agency has an easy source of cash to seize in the event of consumer complaints?

      I think of everyone born from about 1980 on as the “Waaah Poor Me” Generations. No sympathy.

      • 0 avatar
        geozinger

        @M1: Having been a salesweasel at one time, I can tell you there are few angels in the room.

        Until you do the job, you don’t realize how many sleazebag customers there are too. They, lie about their jobs, credit scores, how much money they’re willing to put down, the condition of their trade in, etc.

        Even if you are a decent and honest sales person, you will deal with so many sleazy people, it will make you cynical at a minimum.

        I can see how some people can become jaded and just try to hose every person that comes through the doors.

        It was good money, but this was the reason why I walked away from this kind of work.

      • 0 avatar
        killthewabbit

        “I think of everyone born from about 1980 on as the “Waaah Poor Me” Generations. No sympathy.”

        You know why that scrutiny and those regulations exists? Because a lot of them have a reputation for screwing people.

        http://www.thetruthaboutcars.com/2008/09/why-didnt-gm-cut-of-bill-heard/

        Should I feel sorry for dealers who have to deal with regulations and oversight? Nope. That’s the price of doing business. They wouldn’t do it if they didn’t make money doing it.

        Being almost 40, I’m not in the demographic that would get offended by this, so please don’t take the above as getting all red-assed and overreacting. For what it’s worth, I’ve purchased exactly two new cars in my life and had just peachy experiences with both. I attribute that to doing my homework ahead of time and walking in knowing what I wanted.

      • 0 avatar
        Dynamic88

        ” What other retailer is forced by the state to annually post a bond just so a regulatory agency has an easy source of cash to seize in the event of consumer complaints?”

        What other industry needs it?

      • 0 avatar

        “Most people walk into these dealerships to make the second-largest purchase of their life, expecting to have a miserable experience”

        Most people don’t walk into the hospital expecting a picnic, yet even after they receive the $500 bill for a 2 minute consult and an asprin they still rank Nurses, Doctors and Pharmacists among the 5 most trusted in the same survey. I doubt it has to do with how much time they ‘prepare themselves’ by reading WebMD.

  • avatar
    cleek

    I believe Toyota also has an additional tier of distribution between the factory and the retail dealer.

    • 0 avatar
      TomH

      All of the “imports” have this tier in their national sales companies. Toyota Motor Company is “the factory” while Toyota Motor Sales is the “additional tier.” In two US regions Toyota still uses distributors who are making waaaaaaaaaaaaaaay too much money to sell their franchises back to the mother ship.

  • avatar
    Stacy McMahon

    I’m a knowledgeable enthusiast who can do all my own research online, but at the end of the day I need to go out and drive a car to know whether I really like it. So the folks making the Apple Store comparison have it right.

    And Apple is actually a really good comparison, because they are in the business of convincing you to pay a lot more for their products than you would for a similar commodity electronic device, such as most of us do buy online, sight unseen. To make that sale, they need people to be able to put their hands on the product and get attached to it, just like dealerships do with flashy new cars.

  • avatar
    cleek

    Let me share our experience when purchasing a grand piano.

    MSRP for the German made unit in question was well north of US$30K. Units are sold through retail shops that take the factory delivery and setup the unit ready for use. Though pianos are generally all the same basic construction “taking a test drive” on the particular unit to be purchased is highly desirable and getting comfortable enough to purchase generally require some hands on time. And margins on the used pianos are generally *much* better than the new ones.

    The retail shops are very import and generally do a good job of taking care of the clientele. Pianos rival cars for cash outlay and desired longevity. Most buyers are first timers and require guidance and good, reliable local service for lessons, maintenance, delivery, moving, setup etc. However, the local retail dealers do not generally discount much if at all and dedicate a good portion of their floor space to the used inventory.

    However if you are an informed and experienced buyer like my family (classically trained including a pro and semi-pro) it was difficult to go the no frills purchase route. In our case, we the buyers knew more about what we were buying and why than the sales staff. We knew what we wanted, were self sufficient for setup and maintenance, etc. “No”, we were told (over and over…), “No one can afford to sell a new grand piano for less.” “All of the money is made on the used units and ancillary services” Sounds familiar, eh?

    We eventually found a dealer that was located right next door to the mfgs US warehouse about four hours drive from our home. We called ahead, told them what we were looking for and made an appointment. The shop was truly no frills but had plenty of new inventory ready for us to review. It literally took less than 20 minutes to complete the test drive and close the transaction. And the price was 35% less than the best retail offer. There was problem with the finish on one part of the unit and it was swapped out for another on the spot. Delivery was also the same price as all of the local dealer quotes though it was over 4 times the distance.

    Now are there any real reasons other than cartel like distributor agreements and ginned up state/local auto franchise laws that would stop an auto mfg from doing the exactly same thing?

  • avatar
    dgran

    If online sales are treated as obtaining a bargain it will fail because the margin in car sales has already been chipped down considerably over the years. The key is to use the Internet to enable customer satisfaction. Combining Internet sales with just in time production techniques would make it possible to go beyond three trim levels for most brands. Many people may still prefer the stock trim options, but a price conscious buyer can often find some options they could live without and customize their purchase better.

  • avatar
    thesal

    I have to agree with the commenters against the traditional forms of “dealerships” we see. I can understand dealerships existing for used cars, there’s a lot going into the buy & sell, and deals can be had.

    For manufactures though, selling a car with all the plastic wrap still on, I can’t understand why there can’t be a FIXED PRICE ACROSS THE BOARD. The only reason online buying is a tough sell is because you have to ask yourself “Am I getting the best price on this brand new product?”.

    That question shouldn’t have to be asked. The manufac. sets a price, nationally perhaps on their website. That’s what it costs. End of story. Market forces will keep that price in line. No cheap suits, no telling me my brand new 328s “stability control brakes for you in corners, so it changes the way you drive, that’s how advanced it is”. (Absolutely true quote, I can’t make this stuff up).

    • 0 avatar
      bikegoesbaa

      You’re welcome to go to a dealership and pay whatever MSRP the manufacturer is requesting. There’s your no-haggle consistent price across the board.

      The fact that I’m willing to haggle and therefore get the same car for less in no way impacts you – don’t worry about that part.

      • 0 avatar
        rehposolihp

        See, that is where the whole thing begins to stick in the consumers throat.

        I can buy my milk for the same cost as you from the same place as you, but you and I could get different prices for a car from the same dealer from the same salesperson.

        Some people like this haggling aspect, but the fact is most people don’t.

        And car companies are catering to ‘most people’

      • 0 avatar
        bikegoesbaa

        Why do you care what I paid for my car?

        You were willing to buy Car X for price Y, so obviously you felt at the time that it was an advantageous trade for you.

        The fact that I (through haggling, timing, luck, etc) paid a lower price Z for the same machine doesn’t change the economics of your original advantageous purchase. So, again, why do you care?

        There are always going to be people getting really great employee deals. Does that also bother you?

  • avatar
    200k-min

    People are very strange when it comes to buying vehicles. I know several people that are “Chevy” or “Toyota” or whatever people. When they are ready for a new vehicle they just go down to their trusted dealer and buy a newer model of the same brand. That has never made sense to me, but I’ve met many people that do that.

    Then you have the idiot car shopper that wants something but usually can’t afford it and the dealer talks them into something else. Have known a few people that said something like, “I wanted a Tahoe but I got this Cobalt instead.”

    Honest to God I think most dealerships prey on the uninformed, the easily manipulated and the loyalists. I count those that finance through dealers as the easily manipulated, i.e. the bulk of a new car dealers business.

    In my opinion the real frugal car shoppers that would embrace an online model where you can easily research and find the best deal are people that don’t buy new. They are buying used and letting someone else take that initial hit of depreciation. They are also more likely to pay cash and not worry about a trade. Then again, when buying used I sure as hell am not going to buy sight unseen.

  • avatar
    Acd

    Actually it is very easy to have a Saturn-like experience from any manufacturer of your choice. Just walk into the dealership and offer to pay full sticker for the new car and take their first offer for your trade. You’ll be amazed at how pleasant the experience wil be.

    • 0 avatar
      VanillaDude

      You obviously never had any experience with Saturn, because you make the millions who had, sound like gullible morons – and we were not. You don’t know what you are talking about.

      • 0 avatar
        Pch101

        You don’t know what you are talking about.

        Just a tad defensive, aren’t you?

        We may all want to notice that Saturn is out of business. While I wouldn’t lay all the blame on the sales model, the no-haggle concept apparently wasn’t enough to save them, either.

        Ditto Scion. Having a no-haggle mantra isn’t boosting their numbers, either.

        No-haggle seems to be one of those things that people like a lot in theory, but then usually reject when it comes time to actually spend their money. For all of their talk about “fairness”, car buyers want to feel that they’re getting the best deal, so they’re motivated to horse trade. (They resent it when the horse kicks them in the head, but that doesn’t stop most of them from trying to ride.)

      • 0 avatar
        Acd

        I’m very familiar with Saturn and their one price selling model. Saturn was able to make their dealers stick to a no discounting pricing model with lower markup than GM’s traditional brands but allowed Saturn dealers to make an acceptable profit on each car. Their dealers also had larger areas of responsiblity and didn’t have to worry about a competing Saturn dealer putting a store too close to his and had one of the highest sales per store throughout the 1990′s. The dealers made money but GM lost money on Saturn most years. Their dealers and retail model really were the most successful thing about Saturn.

        The difference between one price selling and traditional negotiating is that the one price stores have the discipline to hold their price. Consumers have more access to pricing information via the internet than they’ve ever had before. Dealers can also price their cars to the market which leads to less negotiation.

        Saturn buyers saw enough value in either the cars or the sales process to pay full list price. If they hadn’t thought it was a fair price they wouldn’t have paid it.

        I stand by my original comment.

  • avatar
    jaje

    I normally treat dealers as inventory storage lots and negotiate any deals over the Internet. In fact I prefer doing it this way as I can do it in small bits of time (whenever I get them) and not all at once. In fact I streamline the process and try to take away bargaining power from the dealers by removing their 5 pronged strategy of making profit off of me (trade, option packages, dealer options, financing, and dealer fees):

    1st – Never trade in a car at the dealer if you want to get what it is really worth. Get your car a good detailing / wax job – it is worth the $200 it costs. Then bring your trade to Car Max and get a quote from them (sit down and enjoy free food / drink). Thank them nicely and say you’ll think about it, then take that quote with you. Sell the car privately by simply adding ~ $1k (make up for your time and cost of a detail) and then advertise if for sale privately (cars.com, craigslist.org, etc.) If something is obviously mechanically wrong or has damage – get it fixed. Trying to sell a car that needs work right away really hurts your price. When I’m selling it I actually show the new buyer the Carmax Trade in Quote as evidence of what the car is really worth (a sight unseen KBB value is pretty worthless). The Carmax quote really helps as it is based on the actual sight seen car in your area. If they would buy your car from them they’d pay $2-4k more than what you are selling it for.

    2nd – Line up your own financing if you can. I know $0 down or low monthly payments sound great, but I found that if I borrow less than 50% of the purchase price of the car I can get a great deal through my local bank where I’m a customer or even better use a Line of Credit home loan (hopefully you have the equity) and then enjoy marking down your taxes as it is deductible interest. If the dealer financing deal is too good to pass up (i.e. 0% interest for 60 months) then stick to your guns. If you can purchase the car out of your own savings – all the better as you now only need to pay liability insurance which is much lower than full coverage (of course with a new car it is a gamble).

    3rd – Options…never buy dealer installed options from the dealer. They are always marked up and a pain in the butt to bargain on them. Instead, go online and find a wholesaler for those parts and buy them there (you can get them for up to 50% less than the dealer asks). What I’ve done successfully once was print out the pricing from the online plus the shipping cost (print shopping cart out) and was able to negotiate with the dealer to sell to me those items at that price and install for 10% of the price of the parts. Since then I’ve not gotten them to do that. Most of the time I buy them and install them myself as they come with detailed installation instructions and really are not that hard to do (most fog light kits come plug and play with no need to run wires through the firewall or cut into bumpers hardly anymore. It is also kind of a fun project.

    4th – Never buy prepaid maintenance and have it rolled into your purchase price. First off it is only the basic items and does not include most oil changes. If it does include them then it is only for regular oil and not synthetic. Any other work they do will cost you $. And when you bring it in, the dealer never checks each time and you have to constantly remind them when making the appointment, when dropping the car off, and when paying as you’ll see on the bill it was not taken into account. It becomes a pain in the butt if you are not making sure it is accounted for.

    5th – Now on the actual purchase transaction strategy that I use. Go to dealer lots and test drive cars you are considering. Get the sales persons’ card but don’t sit down and talk price. Tell them not to call and you’ll email them later. After test driving and researching, pick the car and options package you would like. When I find the car I want I get it in a standard options package (like DX, LX, EX, etc.). If you try to do ala carte it limits exact matches and makes this harder as it gives the sales person differentiation between other dealers and thus higher price justification.

    Now that I’m ready – I type up an email with the exact car configuration and any options I want (and only want). In that email I ask for their In that email I specify they give me an Out The Door Price (OTD) that includes EVERYTHING including any OEM rebates / spiffs, taxes, tags, title, fees, etc. I ignore “freebies”. I send that email to 4-5 dealers all on the To: line so they can see I sent it to their competition (I’m making this into a “bid” scenario). I get pricing back and enter them into a spreadsheet to compare. I follow up with dealers who have “additional charges” and what they are and why. A lot of times I can get them taken out. I then pick the dealer I felt who treated me nicely and ask if they will match the lowest price (or come withing $100-$300 of that price) – hopefully local so I don’t have to drive to far to get it serviced, etc. I then get them to commit to the price in the email. Then I set up a time I’ll be there to sign the documents, pay the down payment or purchase price, and for them to have the car completely ready. If I do find that the oem financing deal is too good to pass up then I also arrange to get that done there. I also set a time limit of maximum 2 hours being at the dealer (I have to make sure I have everything taken care of – including having them run the credit check before I arrive, etc.).

    With this method I’ve negotiated everything before I sit down with the dealer. I no longer have to go through the entire transaction and can get in there and out of there in almost an hour. I also eliminate the urgency of me giving up as the price is settled ahead of time and I do not have any other issues to negotiate.

    I worked in sales at a dealer for a short time and have sold several cars including the first S2000 sold in the Washington / Baltimore area. I’ve bought over 10 new cars since then and am a gear head always looking to make this process easier.

    • 0 avatar
      Dynamic88

      ” 1st – Never trade in a car at the dealer if you want to get what it is really worth.”

      This is why I see so many cars sitting at the end of peoples driveways with a for sale sign on the windshield, month after month after month.

      • 0 avatar
        jaje

        If you are lazy and just park it at the end of your driveway – it’ll take a long time. If you actually use free resources available to you that take 1-2 hours of work you can market it to a much larger audience and have it sold faster. Pay a little bit to provide an even greater audience with the likes of Autotrader, etc. To me losing $1-3k (model dependent) just for the convenience of trading it in doesn’t make sense. In fact – apportion an hourly rate to your free time…is it worth $50 per hour…up to $500 per hour – this is savings you’d have left.

  • avatar
    Domestic Hearse

    No, internet car sales will never “take off” — or be the bulk of new car transitions.

    Why?

    The convenience of the Trade-In. You can’t trade-in your used car over the ‘net. You have to be at the store in person, get an appraisal, dicker, etc.

    And…

    Creative financing. Most people’s trade-in still has an unpaid balance. Maybe it’s black, many times it’s red (upside down). That means a trip to the F&I office where your past sin gets rolled into your new sin.

    None of that can be acheived over the ‘net.

    Sure, a quick, clean cash buyer/lessee can roll that way. But for 85% of vehicle consumers in this country, no.

    • 0 avatar
      Pch101

      This is accurate. The needs for credit and to sell the trade-in will prevent pure online sales from ever becoming more than just a niche.

      In car sales, the retailer often also plays the role of banker. That’s a problem that your local Apple store doesn’t have to worry about — they get to leave that pesky problem of your ability to afford it between you and your credit card company.

      Then there is a matter of the trade-in. Sorry, but no dealer or professional used car buyer is going to buy a used car without at least looking at it.

  • avatar
    Dynamic88

    Most comments have treated this as a consumer vs dealership thing. It’s very telling that dealerships are so badly thought of.

    The pure on-line model, where you configure your car just the way you’d like it built, and then they bring it to you on a flatbed truck isn’t going to work because of trade in and service.

    If you buy a computer on-line, the seller doesn’t usually offer you anything for your old computer. You sell it on ebay, craigslist, or give it to someone, or donate it to VOA. The old computer is your problem. Likely as not you loose what value the used computer has because it’s too much hassle to sell it. You drop it in a nearby dumpster or give it to Goodwill.

    You don’t really want to junk or give away your ’07 Turbobelchfire. It still has thousands of dollars of value that you need to get back out of it, and besides, it won’t fit in a dumpster.

    The other thing is service. Even us Honda buyers have to admit that sometime in the next 150K miles we might need some mechanical service. Boxing your Dell and sending it in for service is not convenient, but it is doable. Boxing up your car and sending it in for service is not possible. People need service within a reasonable driving distance.

    But this doesn’t mean we are stuck forever with the current dealership system.

    A combination (hybrid?) system of building your car on the computer and a studio/sales/service center would benefit everyone.

    Manufacturers could build more (maybe eventually nearly all) cars and trucks on an as/when ordered basis.

    Dealer floorplan would be maxed at one of each model. Since every option/extra can’t be on that one model, the studio would have mockups and displays to show the options. The Imapala interior mockup, for example, would include fabric/color samples, and real seats to sit on. Videos could show how different options work and what their benefits are.

    Customers could custom configure a car, or take a basic version with a trim package – but it would still be built to order.

    Prices should become no haggle so people don’t feel cheated. Also, w/o haggling, all the pricing financing can be done on the computer by the customer w/o the sales and F/I guys. I know some of you like haggling and believe you’ll save money, but you are only saving money compared to MSRP, which is a number pulled out of a hat anyway.

    A buyer with a trade in would still have to watch out – the dealer is going to low ball you on the trade in)

    • 0 avatar
      Pch101

      I know some of you like haggling and believe you’ll save money, but you are only saving money compared to MSRP, which is a number pulled out of a hat anyway.

      That isn’t accurate. It’s possible to get the invoice pricing, the holdback and factory-to-dealer incentives, if you make the effort to look. But you have to make the effort.

    • 0 avatar
      Dynamic88

      OK, let me re-phrase. You are only saving compared to the seller’s silly first offer. Invoice, holdback, incentives are subtracted from the first offer, whether or not the first offer was actually MSRP, or some other number.

      Why not just figure out a price to sell at and offer it to everyone – as is done with the vast majority of goods and services?

      Alternatively, if it’s such a great system, why don’t we haggle over the price of everything we buy everyday? Most goods, at the retail level, are not sold on the haggle system. There must be a reason for that.

      • 0 avatar
        Pch101

        Why not just figure out a price to sell at and offer it to everyone – as is done with the vast majority of goods and services?

        Because I’d rather pay less than most other people. The Apple Store, in all its glory, makes far more margin than even the worst car dealer.

        Alternatively, if it’s such a great system, why don’t we haggle over the price of everything we buy everyday?

        I already do — any merchandise with a three-figure price tag and up is fair game for negotiation, including furniture, electronics, musical instruments, even suits. Why the rest of you don’t haggle, I have no idea.

    • 0 avatar
      Dynamic88

      “Because I’d rather pay less than most other people. ”

      So your motive isn’t to get the good for X, but rather to get it for less than me?

      ” Why the rest of you don’t haggle, I have no idea.”

      I do. I just got 25% off a flat panel TV at Target. But darned if I can see the advantage to the store. If they hadn’t haggled, I’d have bought it at retail. (Or something very similar)

      • 0 avatar
        Pch101

        So your motive isn’t to get the good for X, but rather to get it for less than me?

        Retailers will have a band of acceptable prices (which can vary from place to place, and from day to day). I’d rather buy at the lower end of that band. By definition, that means if I haggle that most people will pay more than I do — it’s the benchmark for determining whether one is outperforming the market.

        But darned if I can see the advantage to the store. If they hadn’t haggled, I’d have bought it at retail.

        Apparently, they preferred the knowledge that they had a sale than to risk the chance that you would leave. Whether or not that was a benefit to them in this instance, I don’t know.

    • 0 avatar
      SimonAlberta

      The problem with all non-dealership sales models is being overlooked by everyone here so far. Dealerships do an excellent job of MOVING METAL because they are SELLING organisms. The clue is in that they employ SALESPEOPLE to twist your arm and they have fancy showrooms and hundreds of shiny vehicles to ENTICE YOU TO BUY, they spend fortunes on advertising, run special SALES DAYS, etc. etc.

      All of that, and much more, is lost with online or manufacturer direct sales and VOLUME WILL DROP…ergo, not going to happen anytime soon.

  • avatar
    carguy

    No haggle pricing is not in the interest of any dealer as it will lead to less profitability as the economics of differential pricing will always favor the seller. Every customer has their own supply and demand curve for each vehicle that they consider so every customer is prepared to pay a different amount for the same car. By using a fixed price business model, not only will some customers pay less than they were prepared to but many walk away when another $100 discount would have closed the deal.

    And this is the fundamental problem with web car sales – its not very conducive to differential pricing and thus will always be less profitable. This may change in the future as new technologies may enable it but for now I don’t see much of a role for click-and-buy online sales.

  • avatar
    Dynamic88

    It’s probably the case that for every individual there is a different supply/demand curve for every good and service in the economy, yet most goods and services are not sold on the let’s spend 4 hours haggling about it model.

    • 0 avatar
      carguy

      Not so. For example airline tickets are sold cheaper to the pleasure travelers than to business travelers via various fare classifications and purchase methods. Even supermarkets practice differential pricing through coupons – those that are price sensitive can cut the coupons those that don’t care effectively pay more. Mail in rebates are nothing more that a disguised form of differential pricing and the list goes on.

      The very fact that some will pay more than others drives nearly all businesses towards some form of differential pricing scheme. When haggling for the price of a car it just seems more obvious that some other methods.

      • 0 avatar
        Dynamic88

        carguy, you make some good points. I have to go along with you to some extent, but not fully.

        If I go into a supermarket, there is not a coupon for every item. Only for the items the store (or manufacturer) wants to push. If there is no coupon for ground beef then you and I are paying the same price for ground beef. We don’t have to, and probably cannot, negotiate the price.

        I’ve spent time in countries where one must haggle for every item. It’s a PITA.

  • avatar
    Dynamic88

    OK, let me re-phrase. You are only saving compared to the seller’s silly first offer.

    Why not just figure out a price to sell at and offer it to everyone – as is done with the vast majority of goods and services?

    Alternatively, if it’s such a great system, why don’t we haggle over the price of everything we buy everyday? Most goods, at the retail level, are not sold on the haggle system. There must be a reason for that.

    • 0 avatar
      bikegoesbaa

      There’s no law saying you have to pay the seller’s asking price for anything, it’s just that most items don’t cost enough to be worth haggling.

      4 hours negotiating is a lot of time and effort to knock 5% off the cost of a gallon of milk or a $600 laptop.

      That same 5% makes more sense when you’re buying a $30k+ car.

      It’s worth noting that the other place where haggling is common is real estate transactions, which is another infrequent high-value purchase.

      However, lots of buyers cross shop a variety of merchants online and in person to find the “best deal” on even low-ticket items. It could be argued that this is also a form of “haggling”. As a buyer, 4 hours spent chasing the lowest price at several different sellers is pretty much the same as spending 4 hours grinding out a deal with a single seller.

      • 0 avatar
        Dynamic88

        I see your point about big ticket items, but I don’t really agree that price comparison is the same as haggling.

        For example, I know milk is cheaper at Walmart than at locally owned slightly “posh” grocery store. I decide how I want to spend my money and time, but I don’t negotiate a price with either retailer. If I go to Wally World, I get the low priced milk. If I go to the other merchant, I pay more. I don’t spend even 3 seconds negotiating price at either store.

        If I’m checking prices online, I’m not negotiating either. I’m just comparing. I’m not going to send an email to Amazon asking them for another 10% off.

      • 0 avatar
        bikegoesbaa

        Of course it’s not an exact comparison, but the point still stands that (outside of very minor purchases) most consumers don’t just accept the first offer/price that they get from the market; and spend some amount of time and effort to find a better deal.

        The more they think they can save, the more time and effort they’re willing to spend haggling/searching for a better deal. This is entirely rational.

      • 0 avatar
        carguy

        +1 and since cars are big ticket items (for both the seller and the buyer) it makes the differential price model even more important as a % or two is real money. The problem with Internet car sales is that they don’t easily facilitate that.

  • avatar
    Dynamic88

    Why does carmax have no haggle pricing?

  • avatar
    RLK

    Amazing to see how many people have such strong feelings about it – and I bet there are many more outside that feel the same.

    I believe that the future will bring changes to all involved – and provide a more win-win situation. Things have to change!

  • avatar
    Zackman

    We haven’t had to worry about the hassle of back-and-forth horse-trading for years, now. We bought our 2002 Honda CR-V over the dealer’s internet site. For some reason, we got twice as much knocked off using the internet instead of what the dealer in-person would’ve given us – we had already been down that road.

    My 2004 Impala was bought using the GM Supplier Discount Program arrangement my former company had, as we made packaging for them. For this purchase, I picked out a car – they just had to have exactly what I was looking for – and they gave me the price. All incentives/rebates applied as well.

    The last time I haggled at a car dealer was in 1999, when we bought our Dodge Stratus, and the experience wasn’t too bad.

    I enjoy getting an internet price, then going to the dealer to discuss the possible purchase. I prefer human contact as much as possible, but on large monetary purchases, I do my homework in order to be prepared!


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