By on December 21, 2011

The rise of the internet has had myriad effects on everyday life, not the least of which has been its profound impact on consumer behavior. With ever more data being made available online, and with the rise of independent alternative media outlets like TTAC, car buyers in particular are fundamentally changing their relationship to the car buying process. Dealers have been noting for some time that the internet has created better-informed buyers who, armed with more information, are demanding the car they want at the best possible price, wreaking havoc on traditional car dealer tactics like upselling and opaque pricing policies.

But as the eternal dance between supply and demand shifts in favor of consumers, some dealers and OEMs are having a tough time adjusting to the new reality. At the same time, the need to make money off of online consumer education has created some tension for the new breed of consumer-oriented websites. This conflict has now broken out into the open, as the auto transaction data firm TrueCar has found itself locked in a battle with American Honda over the downward pricing pressure created by more widely accessible transaction data. And the outcome of this conflict could have profound impacts on the ever-changing face of the new car market.

Early last week, TrueCar CEO Scott Painter took to the TrueCar blog with an “Open Letter To The Automotive Industry,” in which he argued

Our world is changing. Unprecedented access to information and a massive shift in consumer behavior has resulted in a challenging new automotive retail landscape. It has also enabled a consumer appetite for data transparency. To hide from evolving consumer behavior is to deny change. At TrueCar, we embrace this opportunity. We also believe that transparency is the centerpiece of trusting relationships. Some in the industry disagree.

And indeed, from personal experience I feel comfortable saying that TrueCar does provide consumers with some highly valuable information by tracking vehicle transactions from several data sources and publishing the range of transaction prices on a local level. This clearly helps consumers navigate the often opaque and confusing world of dealer-level pricing, and facilitates a more efficient interaction between supply and demand. And if that’s all TrueCar did, it would be impossible to argue with the valuable service it provides.

But in order to fund its business model, TrueCar cannot simply give away data and hope everything pans out for the best. In order to generate profits, TrueCar works with “dealer partners,” allowing them to present a lower “haggle-free” price for the model being researched at no upfront cost. If the consumer buys that car, TrueCar gets a $299 commission from the dealer; if not, the dealer pays nothing. Dealers can tailor these “guaranteed lowest prices” based on TrueCar’s data, and they seem to generally beat non-”guaranteed” prices in the TrueCar “price curve” display by only a few hundred dollars. But by offering this service to its dealer partners, TrueCar has opened itself to conflict with OEMs, as this fiscally-necessary service muddies TrueCar’s role as a pure consumer service. Which is where the conflict with Honda comes in.

In his “Open Letter,” Painter mentions no OEM by name, and TrueCar’s EVP for Dealer Development Stewart Easterby tells TTAC

 We’re not trying to pick a fight… we very much value Honda/Acura. We have strong OEM relationships through our recent acquisition of Automotive Lease Guide, and we have lots of people on staff who have work for OEMs, so we generally have strong relationships with the industry.

But in an Automotive News [sub] piece published on the same day as Painter’s “Open Letter,” the TrueCar CEO claimed that American Honda was warning dealers away from advertising below-invoice “guaranteed lowest” prices. After talking to American Honda, AN updated its piece, noting that it had

incorrectly reported that Honda singled out TrueCar.com when the automaker warned dealers that they would put their local marketing payments from Honda at risk if they offered prices below invoice on Internet shopping sites

In fact, what had happened was that American Honda had simply warned its dealers that any advertisement of below-invoice prices could jeopardize the marketing assistance money Honda sends dealerships. American Honda’s Chris Martin clarified the automaker’s position in an emailed statement to TTAC, noting

Dealers who wish to receive marketing funds are expected to adhere to certain guidelines that govern dealer participation in its Honda Dealer Marketing Allowance (DMA) Program and its Acura Carline Marketing Allowance (CMA) Program.  Among the many advertising guidelines to which dealers must adhere to in order to receive DMA/CMA Funds, Honda dealers are restricted from advertising new Honda vehicles at a price below dealer invoice plus destination and handling charges and Acura dealers are restricted from advertising new Acura vehicles at a price below MSRP plus destination and handling charges.  Such guidelines do not limit a dealer’s discretion to advertise a new vehicle at any price if the dealer is not seeking DMA/CMA Funds.  Furthermore, the dealer is free to charge customers any price it chooses, in its absolute discretion, for a vehicle.

Martin goes on to identify the central bone of contention:

The development of third party websites used for advertising is not any different than advertising pricing in a traditional newspaper or on TV.

And here, American Honda has something of a point. Whereas TrueCar’s price curve is a pure reporting tool, simply reflecting otherwise available data, it’s not entirely unfair for Honda to characterize TrueCar’s service to dealer partners as an advertising service. In practice, the only real difference between this service and any other form of advertising is that TrueCar only gets paid if a car gets sold at the “guaranteed lowest” price offered by one of its dealer partners. If you accept that reality, Honda has some very valid reasons for threatening to withhold dealer marketing assistance, as Martin’s statement explains

The function of these [DMA] guidelines is three-fold. First, it encourages dealers to use the advertising money provided by American Honda for interbrand advertising.  That is, rather than providing funds to dealers so that they can engage in discount advertising against other Honda and Acura dealers (which does American Honda and consumers no good), American Honda wants dealers to use the funds to promote the advantages of Honda and Acura vehicles when compared with competing brands. Second, discount advertising is detrimental to the Honda and Acura brand images.  American Honda has no wish to pay for ads that portray its products as “cheap” or “low-end” vehicles.  This may be appropriate for other manufacturers; it is not appropriate for the Honda and Acura brands.

So far, so reasonable. TrueCar’s service may be more palatable than the local, low-rent “Check Out Our CRAAAAZY Prices!” ads you see on TV, but in practice there’s little meaningful difference. Besides, the choice belongs to dealers: either accept Honda’s money with the inevitable strings attached, or throw in your lot with the new lower-price, but potentially higher-volume TrueCar (or CRAAAAZY Prices!) strategies. But with its third rationale for its policies, Honda strays from this reasonable territory, and betrays a distinct bias against TrueCar, arguing

Third, American Honda believes that much discount advertising is bait-and-switch advertising, which is not beneficial to the consumer and reflects badly on the manufacturer that condones it.  Dealers that advertise vehicles for extremely low prices (as some do on the TrueCar site) may engage in either direct bait-and-switch tactics or using the automobile’s brand name to sell expensive accessories, service contracts and the like.

Memo to Honda: these practices are as old as the auto industry itself. Suggesting that these tactics will never be used at dealers who toe Honda’s DMA line is just as disingenuous as the implication that TrueCar’s dealer partners are more likely to use them. If anything, TrueCar’s major sin is that it makes below-invoice advertising easier for the OEM to monitor and therefore squelch than in the pre-internet days, when consistently maintaining these DMA standards would have required a survey of every local publication and TV/radio broadcaster (not to mention direct-mail marketing), a task that no automaker was or is equipped to do.

But Honda’s apparent antipathy towards TrueCar is just the tip of a growing resentment towards the site. In a speech cited in the AN piece published last Monday, AutoNation CEO Mike Jackson expressed the angst that appears to be spreading across the auto retailing industry, especially in light of its recent deal with Yahoo [sub].

The good deal that they’re pitching to the consumer is lower than average. So to the extent that everyone goes with the TrueCar price, it moves the average down. It’s a death spiral, and the question is whether they are powerful enough to unleash that dynamic in the U.S. marketplace.

But Jackson’s implication, that TrueCar can essentially manipulate the market in favor of consumers, simply doesn’t hold up to scrutiny. On an abstract level, you can’t repeal the law the law of supply and demand. As Painter puts it

They’re trying to say Hondas are worth more than invoice, but if everybody’s paying less than invoice, that’s not true

More practically, however, TrueCar’s own data seems to refute the industry’s fears. Specifically, Easterby tells TTAC

TrueCar represents two to three percent of new car sales… we’re flattered that people think we’re influencing the market, but at that share, we clearly aren’t. The 21st C consumer demands transparency in all products and services, that’s what the web has done. TrueCar reflects the market, just as Zillow reflects the market for real estate, rather than determines it.

Even more importantly, Painter insists

Our goal at TrueCar is to foster healthier relationships between manufacturers, dealers and consumers through data transparency. To deliver on this promise, we require a high standard from our 5,800 dealer partners – an upfront competitive price and a commitment to a great customer experience. A discoverable upfront price is the cost of getting noticed. Contrary to popular concerns this does not create a “race to the bottom.” The lowest price only secures the sale 19.2% of the time within the TrueCar network. The sale is still won by location, selection and good old-fashioned customer service. [Emphasis added]

So where does this all leave us? Clearly Honda has the right to withhold DMA money from dealers violating its reasonable conditions on that money. By the same token, dealers have the choice of pursuing higher volumes with less traditional advertising by choosing the TrueCar strategy, or continuing to follow the time-honored tradition of collaborating with the manufacturer. And here, TrueCar’s price curve, which it says is not populated by dealer partner data but from independent, anonymized sources, becomes the killer app: it’s so good (reflecting a claimed 90% of all new car transactions), it can’t help but draw ever more buyers, who will then be exposed to its dealer partner “advertisements.”

Ultimately, it’s difficult not to conclude that TrueCar (and sites like it) won’t continue to draw ever more dealers away from the old DMA agreements, especially as online research becomes more important to the car-buying process and as traditional advertising dollars flow from TV, radio and print towards the internet. And if dealers and brands are sufficiently hurt by downward pressure on pricing, the alternative is always there. This is how competition works, and because TrueCar has more fundamentally aligned itself with consumers and the power of the market, it’s tough seeing them not coming out ahead in this struggle. And if they do, car buying could be changed forever. Again.

 

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107 Comments on “TrueCar Versus Honda: Online Car Buying Challenges Hit Home...”


  • avatar
    V572625694

    Wouldn’t it be nice if you could just walk into a dealership and be told, “This car costs $xx,xxx” and be able to make your decision on that basis? New car salesmen probably think the world owes them a living manipulating and deceiving potential buyers, but no one else does.

    • 0 avatar
      Pch101

      Wouldn’t it be nice if you could just walk into a dealership and be told, “This car costs $xx,xxx” and be able to make your decision on that basis?

      You can do that right now. Just pay MSRP.

    • 0 avatar
      Volt 230

      I compared True car to carsdirect,com and found the True car had a much lower price for a given car, too low compared to other sources I looked into, I said right away: “This is too good to be true”, now we know better.

      • 0 avatar
        Morkus

        Not too good to be true. I found the price I wanted at a dealer located 110 miles away. I then told my local dealer (15 miles away) the price I had from the other one and they matched it.

        All of this was done using the internet and the phone on the other side of the country.

        Easy peasy, and the car has been rock solid.

    • 0 avatar
      hreardon

      I generally disdain the traditional dealership sales model as antiquated and overly costly, but the essential truth is this: don’t want to haggle? Pay the sticker price.

      There’s your no-haggle price.

      • 0 avatar
        JCraig

        Most dealers add $2-5k on top of MSRP. Do you just go ahead and pay that too? It’d be nice if 1) Car companys were allowed to sell cars directly to the consumer, why this is not legal is beyond me, and 2) if car makers did not allow dealers to charge more than MSRP.

      • 0 avatar
        hreardon

        JCraig -

        I wouldn’t say “most dealers”, but many dealers will add a markup to MSRP. By law, however, that has to be stated on a separate sticker on the window.

        Walk to another shop if you find those add-ons ridiculous (I agree with you, they are), but otherwise, MSRP technically IS the no-haggle price.

      • 0 avatar
        redav

        Given the processing/paperwork/other fees that dealerships charge that don’t appear on the sticker, ‘MSRP’ isn’t sufficiently transparent. Even if you buy a Ford with X-Plan the actual price may be different because even that plan allows dealers to charge paperwork fees & advertising reimbursements on top of the fixed price.

        Rather, you can look at any electronics store. TVs have a MSRP, but few retailers sell it for that much. Instead, there’s a minimum advertised price set by the manufacturer. A quick search yields what the TV will actually cost, and extra costs like tax, shipping, extended warranty are easy to figure out.

    • 0 avatar
      gslippy

      Scion – and the late Saturn – dealers do this. Trades are handled separately. It made buying my 05 xB1 much more pleasant.

      I strongly favor this model. New cars are commodities these days, like toasters. You don’t haggle with Wal-Mart over the price of a toaster.

      • 0 avatar
        mcs

        like toasters. You don’t haggle with Wal-Mart over the price of a toaster.

        Actually, that does happen now – or at least a form of it. Where I live, it’s common for people to pull out smart phones in stores looking for a price match. During the last couple of weeks I’ve seen it happen at several stores including Best Buy and Walmart.

      • 0 avatar
        Japanese Buick

        @mcs last time I tried that at WalMart they told me they don’t match online prices. So I left and ordered online.

    • 0 avatar
      jackhugo

      You are a complete as@%$^#… Every baby and their mother will want more off… Why don’t customers like you pay the price on the window you cheep f%^%… Everyone wants a better deal… If you can’t afford it don’t look at it… Would you go to Rodeo Dr. in BH and ask for a discount??? Then why do cheep f^%$@ like you go to dealers and ask for a discount??? Because no one wants to pay for what they want… Like you…

    • 0 avatar
      NulloModo

      I don’t know anyone at my dealership who earns a living through manipulation and deceit. Being paid on commission does give a certain motivation to do what it takes to make the sale, but anyone who has been in the business for any length of time realizes that lying and brow beating customers into deals is no long term solution. All manufacturers are paying close attention to survey results, and continually bad responses from customers will lead to the salesman being shown the door.

      Additionally, the best way to earn a living selling cars is to build up a customer base of referrals and repeat business. Customers who you piss off aren’t going to come back or refer their friends. There are a couple salesmen at my dealership who very rarely take ‘ups’. They don’t have to stand out in the heat waiting for someone to drive in because they have a constant flow of people from years past and people who those past customers have sent in to them who are coming in to buy cars.

      The benefit of having a salesperson work on commission is that they are motivated to the best they can at their job. I know the ins and outs of my products because I want to be able to show each customer what about a particular car is going to excite them. I want to make sure that I can show why my car is better than the other cars they are looking at, and earn their trust and business. While many enthusiasts may choose what they want before they even set foot in a showroom, most car buyers need and appreciate the guidance to find the right vehicle to meet their needs. Try going in to Wal-Mart or Best Buy and asking in depth questions about one of the TVs they have on display, and then go to a high end home theater store and try asking someone the same questions. Dollars to doughnuts the hourly big box clerk won’t tell you anything you couldn’t find out reading the side of TV’s box, while the commission based salesman will take the time to find out what you want, need, and expect, and explain in detail why a certain product is going to be the best fit for you.

      I’ve had a couple deals already this month that have required hours of work and research to answer questions for the customer and make sure the vehicle is going to do what they want it to do. If every dealer starts selling every car at $100 over actual cost then you’ll have nothing but minimum wage clerks on the lot the same as you get at Wal-Mart, and good luck finding anything out beyond what’s printed on the window sticker.

      • 0 avatar
        dwford

        Amen.

      • 0 avatar
        bikegoesbaa

        If every dealer starts selling every car at $100 over actual cost then you’ll have nothing but minimum wage clerks on the lot the same as you get at Wal-Mart, and good luck finding anything out beyond what’s printed on the window sticker.

        http://www.google.com

        I’m not spending five-figures on anything without doing my research; and I’m not going to take the word of somebody with a financial stake in selling me that item as a substitute.

        I am 100% fine with the dealership providing no more information that is contained in the window sticker and marketing literature.

      • 0 avatar
        Firestorm 500

        Did you make the sale to those customers that you spent hours researching information for? If so, then congratulations. You are in the minority.

        Most of the time, they will take your info and go down the street and buy at the first place that beats your deal. Dollars are more important than any perceived loyalty to many.

        They don’t feel like they owe you anything.

        “Oh, you did? What color?”

      • 0 avatar
        George B

        Nullo, I call BS. I can’t remember the name of any car salesman I have ever talked to in my life. Therefore I it’s hard for me to see how a happy customer recommends a specific salesman. With the up rotation system, it’s also hard for me to see how the friend of a happy customer ever gets to that specific salesman. In my opinion every person at a dealership besides the owner and the janitor is there to upsell. The kid at Best Buy is there to upsell too, but I can ignore him and go directly to the checkout.

        Can’t speak for other customers, but I don’t mind the haggling. What I hate is the all the time wasting tactics. I want to tell the salesman to just let me talk to the sales manager directly rather than play the stupid games.

      • 0 avatar
        Yirmin

        There is zero incentive for most car salesmen to have any morals. When someone buys a new car the salesman knows that odds are he will not be working at the same dealership when that buyer decides to buy another car. If this was someone selling bananas I would agree because you would need the repeat business… not so with cars.

      • 0 avatar
        joeaverage

        George – the best tactic I ever had was walking into a dealership and telling the salesman they had 20 minutes to make a deal happen. I gave him my price about 5% over invoice according to my research and he came back with a price $100 more and we signed. This was after weeks of visiting dealers around the state that played ALL sorts of games – mostly delay games.

        Next time ’round I am going to do it this way again and see what the outcome is and then if not, I’ll use one of the online car buying services and buy the same car at a fair price.

        I HATE the games dealers and salespeople play. My money is hard earned and I’m not giving up anymore than the price of the car plus a little extra to help them pay the bills.

        I don’t even WANT a salesman. I can research the car & have always known more about the car I’m buying than the salesman. Let me test drive one somewhere (even if I had to drive a couple hours away on a Saturday), order it via a webpage, and then take deliver at the factory door.

        Yeah I want my neighbors to have jobs but car salesmen don’t get any love from me. I say with salesmen in the family.

  • avatar
    Pch101

    TrueCar has fundamentally aligned itself with consumers and the power of the market

    I don’t think that they have. They’re a car broker, and they use data as a lure to establish their credibility with consumers, all so that they can get you to pay $300 more for the car than you would had you negotiated properly for yourself.

    Edmund’s has a somewhat similar tactic. It touts its “True Market Value” pricing as a tool for consumers to save money, while marketing it to dealers as a tool for improving their sales. TMV is represented as objective data, but it really is a device that is meant to get the most aggressive negotiators to overpay.

    • 0 avatar

      This is a valid point… a more correct phrasing would be “TrueCar has more fundamentally aligned itself with consumers and the power of the market.” The fact that dealer partner data is not used to populate the price curve is key here, and if only 20% of users are using the dealer partner “ads” rather than the curve itself (which I maintain is a great consumer service), they’re doing more good than luring.

    • 0 avatar
      mike978

      PCH – the key phrase you said was “negotiate properly” and that is true. However a lot of people do not negotiate properly as you would call it. Hence why they are on average paying much more – the Truecar curves show the full range of prices paid. Therefore the more data out there for consumers, like TMV from Edmunds or Truecar, give people a better chance of getting a good price. Until recently the information has been very asymmetric with dealers holding all the cards. As for your comment that people could pay a fixed price, it is called MSRP – technically true but facetious. What V was meaning, I assume, was if we could just pay one, fair, price at all dealers rather than having an MSRP of say $25K, but dealer A wills ell for $24K and dealer B will sell for $23K.

      As for Honda to say : “That is, rather than providing funds to dealers so that they can engage in discount advertising against other Honda and Acura dealers (which does American Honda and consumers no good).” – I agree it does them no good, but does it really do consumers no good to save money?

      Dealers will sell at a price that makes sense for them, if they want to sell cheaply so what. It is a free market.

      • 0 avatar
        Pch101

        As for your comment that people could pay a fixed price, it is called MSRP – technically true but facetious.

        It isn’t facetious. If you don’t want to haggle yourself, then either pay sticker or get a broker to do it for you.

        American consumers are hypocrites on this subject. They claim to want the “best” price, but then are astonished when the seller of the product doesn’t immediately give them that best price simply because the consumer wants it.

        The average consumer doesn’t want no-haggle pricing; they can have that right now, and when manufacturers such as GM have made a practice of it, it has generally been a failure. What the average consumer really wants is to pay the lowest price possible (or at least the feeling that he paid the lowest price possible) without doing anything to work for it. And that is woefully unrealistic; there is usually not much reason for the seller to take a rock-bottom offer without first testing the buyer to see whether he might just pay more.

        As for the ad spend money, that exists as a way of coping with US federal laws that forbid producers from fixing retail prices of their dealers. One of the common ways to get around this is to kick back ad money to the retailer, but with strings attached. This isn’t unique to cars; for example, it’s also quite common with consumer electronics.

      • 0 avatar
        mike978

        PCH – why people are not willing to just pay MSRP (which is a fixed price) is because they know that 95% of people are getting it cheaper – TMV and Truecar clearly show this. I understand your point about people not wanting to work for it but I think people want to feel they got a “good” price and they know MSRP is not a good price for an average car when 95% are getting it cheaper. Saturn was fixed price and that did well initially. It failed because of product, not customer experience.

      • 0 avatar
        Pch101

        I think people want to feel they got a “good” price and they know MSRP is not a good price for an average car when 95% are getting it cheaper.

        This supports my point. The claim that buyers want no-haggle pricing is bogus. What they really want is to avoid feeling that someone else got a better deal.

      • 0 avatar
        hreardon

        I agree with Pch101′s statement:

        “American consumers are hypocrites on this subject. They claim to want the “best” price, but then are astonished when the seller of the product doesn’t immediately give them that best price simply because the consumer wants it.”

        This is remarkably true. Mike978′s point about these pricing services giving consumers a better chance at a better price is equally true. Again, another reason why the dealership model is a 20th century relic that needs to die.

  • avatar

    Dear Stealerships,

    I hate buying cars and tend to be a bit of a dick when I buy a car because I just choose to reciprocate. Since you have a lock on a product and continuously try to manipulate and control us with your wishy washy pricing model, I can be a dick up to the point where you feel my patronage has no value. Feel free to tell me to take a flying leap at any time. I bet your innate greed won’t let you.

    Signed-
    The Car Buyer

    • 0 avatar
      carbiz

      You blame the dealers, but really it’s the OEMs that are to blame here. In the past, it has suited them to lay the responsibility (and blame) for all the pricing issues at the foot of the dealer.
      Automobiles are NOT toasters. I understand why cars need to be sold separately and not next to Tide at Wal-Mart; however, all of these issues would go away in a flash if the OEMs simply ‘bought out’ the dealerships and controlled them from the top.
      Poof! Just like that, all vehicles could sell at sticker, no more hassles and everyone is happy. Salespeople could be advisors, rather than commissioned salespeople, customers would know the price would be the same in Denver as in Houston. Everyone wins.
      After all, based on millions of market research done, the MSRP is the real price.

  • avatar
    dwford

    TrueCar is only as relevant as the number of dealers using it. At my dealership, we do not use it. People occasionally come in with a TrueCar price, if the number makes sense we do it, if not, we don’t. The dealers that sell the majority of their cars using TrueCar pricing are making extremely little per transaction. I don’t see how that is a recipe for long term success, unless they are also the dealers doing the hard sell on extended warranties, etc.

    With manufacturers controlling inventories better these days, I am not sure what incentive dealers have to whore out their cars on TrueCar. Must have weak salespeople and managers.

    • 0 avatar

      You said it- sell cars at a price that makes sense or do not make the sale. It is the pricing model we hate, not the people. You are all victims of your industry’s own design. I have to mention though as far as making sales or not- each customer you turn away at your “superior” stealership means that customer walks and will most likely never come back. The data does not lie and we are driven by price and overall do not like to get sold by “superior” salesmen.

      A side note- TrueCar prices are not far from what USAA details on their member site for fixed car prices.

    • 0 avatar
      PhilMills

      Math. (a little) * (a lot) = (not too bad in the end).
      Dealership A, selling 100 cars/month and making only $100 on each of them comes out ahead of Dealership B who makes $500 a car but can only move 15 because their price for the EXACT SAME PRODUCT is $400 higher than Dealership A down the road a couple of miles.

      You are selling a commodity product – the MAKE&MODEL your dealership has is the exact same as MAKE&MODEL at the dealership in the next town.

      Your location doesn’t matter as long as I can get there since I’m taxed where I live and will almost certainly get it serviced where I live, too.

      Your sales staff can really only work against you. I know what I want (I’ve probably done more to learn about the car than your own sales staff has). All your guy has to do is tell me a price and push papers across the desk if I like it, not give me their life story in clingy emails about how “we had such good chemistry when you were in the other day” and not try to upsell me on things I don’t want. If your guy is a smarmy vulture who asks for the keys to my current car so he can get it “evaluated for a trade-in” every five minutes, I’m gone.

      All that leaves you, the dealer, is Price. That’s what you’ve got to work with if you want me to buy this product from you instead of the guy across the street.

      As someone looking to buy a MAKE&MODEL, I have an interest in seeing your brand and associated service facilities stay alive – so I understand you need to make some profit. However, as a person with a family to support, I have a far greater interest in my bottom line than in yours.

      I’m not forcing anybody to lose money, here – if you can’t keep alive by selling a car for $X, then offer $Y. That said, if the dealership down the road *can* do $X (maybe their overhead is lower or they’re working on the “small profit but many sales” idea) then my bottom line says I’m buying from them if $Y-X is more than the hassle of driving across town.

      Your industry really has dug its own grave with the history of hard sells, upsells, “let me run this by the manager”, bait & switch etc. The buying public is not on your side and we have very little sympathy for you after years of getting treated like suckers.

      I used TrueCar to get pricing guidelines on the Subaru I’m picking up tonight; I didn’t use a TrueCar dealer because they weren’t stocking the build-out I wanted (oh yeah – quit loading every freaking car on the lot with $1000 in mandatory “option” packages) so they didn’t have to honor the price TrueCar was listing. I did email every dealer in a 100-mile radius, though, and let them know that they were working against every dealer in a 100-mile radius. That helped. It helped to be able to tell 3 dealers they were full of crap about how their “dealer fees” were the lowest in the state and watch 2-300 disappear off of their quotes a minute later.

      I don’t like the process, but I like having the information to make an informed decision – knowing that you sold MAKE&MODEL to this guy for $X but you’re trying to quote me another thousand on top of that is good knowledge.

      • 0 avatar
        dwford

        You, and most of the B&B here are the exceptions in the car buying world. Most consumers know next to nothing about cars in general, let alone enough about particular makes and models to make an informed choice. And even with the internet, most consumers don’t make use of it and come into the dealerships blind. A knowledgeable salesperson can guide a consumer through their options so they can make an informed choice. Obviously, there is a price to be paid for that.

        I have noticed in my time selling cars that the happiest customers are the ones that paid the highest price (Apple customers?) while those that grind the last nickel are miserable to the end and usually tank the dealership on the CSI. Funny how that works.

        Everyone here wants to be happy buying a car. It’s easy, pay MSRP.

      • 0 avatar
        mike978

        dwford – I understand and accept your point about the majority of car buyers not knowing much about cars or knowing what they really want when they come in (compared to most on here I suspect). However to say “just pay MSRP” is unrealistic since most people know you can get a discount on a car, other than a niche or recently released car. I wished MSRP prices were more accurate (i.e. no discounts of 10% around) and it was more like buying other consumer goods (albeit cheaper ones).

      • 0 avatar
        dwford

        @Mike,

        Some manufacturers play into the discount mentality (Ford) by inflating MSRPs and then offering rebates even on new models. Others, like Hyundai, cut the dealer’s margin of MSRP to almost nothing – about $400 on a 2012 Elantra GLS – then offer no incentives at all. It is confusing to the consumer.

      • 0 avatar
        mike978

        dwford – I appreciate the Hyundai approach because then I know the price I am paying is “fair”. Fair meaning I am not overpaying and paying similar to most other people for the same product. Saturn and Scion did or do this.

        I can see truecar being harmful to dealers but not consumers or manufacturers.

      • 0 avatar
        carbiz

        Well, for better or worse, the readers/posters on TTAC are not representative of the vast majority of the consumers.
        I’ll tell you something: a dealer that sells a vehicle for $100 over invoice is LOSING money. We’re talking about a twenty or thirty thousand dollar item.
        I was in the business for 10 years. I got out 3 years ago because I was sick of the games. Which came first, the chicken or the egg? Do you think salespeople made up these rules?
        When I was in the ‘biz 3 months, a 70 year old lady picked my brains for an hour on various makes/models, test drove 3 vehicles, then after I gave her a price, she claimed she wanted to come back on Monday when the traffic was lighter to test drive the car of her choice on the freeway. She never came back. When I called her Monday afternoon, she freely admitted she had taken my price, gone straight to the dealer closer to her home and bought the vehicle already.
        You get what you pay for. You want bright, enthusiastic, well informed sales staff, you gotta pay for it.
        I got sick of the fighting and watching my paycheck diminish year after year. For 60 hours a week and $40k a year – ain’t worth it, thanks.

      • 0 avatar
        joeaverage

        There is no happiness paying MSRP unless the customer is ignorant to what MSRP means.

    • 0 avatar
      gslippy

      “With manufacturers controlling inventories better these days, I am not sure what incentive dealers have to whore out their cars on TrueCar.”

      @dwford: One incentive would be to make up the slim sales margin with other services, like financing or repairs, and keep the customer in play. You know, like cell phone mfrs and service providers do when they offer $200 phones for free.

      • 0 avatar
        dwford

        In theory, you are right. Dealers will discount a car, then make up the margin in finance and extended warranties, etc. The typical TrueCar buyer, however, will know the manufacturer advertised discount rates or want to pay cash and is unlikely to buy any products from the finance department, having been convinced that those products are worthless. That brings us back to a heavily discounted selling price with minimal if any profit on it.

      • 0 avatar
        carbiz

        Well, aren’t you clever? Comparing cars to a cell phone! Newsflash: dealers that make $100 on a sale, hoping to make it up afterward have mostly closed by now. That is not a profitable business model when you’re talking about an eight million dollar building and an item that costs $20-30k. A kiosk in a mall that pays $1,200 a month in rent, and a cellphone that costs $10 in China to manufacture?
        Which McDonalds do you work in?

    • 0 avatar
      Number6

      Long term-success for whom? The idea that I need to burn hours of research, visit multiple dealers, and collate quotes (the bulk of which are padded) is nothing short of ridiculous. And yeah, buying a TV these days is nearly as convoluted, but the TV guy isn’t drawing squares, haggling over monthly versus total price, overcharging for kick-out side-steps, or telling me I can’t have a copy of the worksheet he uses to figure out what HE will charge me.

      The first Ford dealer I went to quoted an F-150 nearly $2K higher than what I got it for. What justifies this particular expense, other than that maybe his kid needs tuition money? He certainly didn’t add any value to the transaction, in fact, he wasted nearly two hours of my life. Completely unacceptable. His counteroffer was $200 lower, and he called me for at least 3 weeks after I’d already bought the very same VIN I wound up buying. I figure I broke even on wasting his time versus mine, since he couldn’t work on screwing somebody else while he was trying to shake me down.

      If you can’t compete, you lose. Each and every person in America deals with this reality every day. And where that edict does not apply- the government is the best example- everybody, except the government itself, suffers for it.

      If buying the truck from that particular dealer/sales douche constitutes a long-term success in your eyes, you deserve the soon-to-fail business you think still works. Buying a car is a pain in the ass.

      If you think charging a few hundred over invoice is a failing model, head over to Van Bortel Subaru sometime. I live nearly 60 miles from that dealer and easily more than half of the Subarus I see here in Buffalo have plate-frames from that dealer.

      • 0 avatar
        joeaverage

        “Buying a car is a pain in the ass.”

        And it shouldn’t be. Second largest purchase the average person makes but it is a commodity item – I can have the same thing at the next dealer. I understand haggling over a house or something unique like land, not cars – not in 2012.

  • avatar
    hreardon

    My take on all of this is that the traditional dealership model is dead. People hate it, it adds excessive costs to the transaction, and in many instances is only propped up due to state franchise laws that prohibit manufacturers from selling direct.

    There was a day when we used to haggle with salesmen for televisions, radios, heck, even fruit vendors. Now, consumers are well educated enough on the aggregate to make these decisions without the assistance of someone else pushing them in one way or another due to inventory, incentives or commissions.

    In a perfect world we could eliminate franchise rules and one of the automakers would open their own delivery and service center, run similar to Apple’s retail stores. You come in, you check out the product, nobody pushes a damned thing on you, then you buy the car for the price listed.

    We’ve done this with so many other industries I see no reason why this could not have some modicum of success in the car business. The idea is to give customers a good experience walking in the door, an inviting atmosphere with no pressure. You can buy your iPad or Mac from Apple or save a few bucks and buy from Amazon or any other online retailer, but that hasn’t stopped Apple from reaping insane profits from controlling the whole experience from top to bottom.

    Luxury brands would benefit the most and margins for manufacturers would (in theory) increase. Of course, the whole concept only works if you have product that people are seeking you out to buy. If your current model year blows chunks – that ain’t gonna help.

  • avatar
    redliner

    What we really need is manufacture owned stores with salaried sales people. Think about it. Pricing would be uniform throughout a general geographic area, dealer service would be excellent, and there would be no such thing as “bad dealers.” Perhaps Tesla will some day grow large enough to influence the rest of the market.

    • 0 avatar
      dwford

      Without competition, prices would rise.

      • 0 avatar
        mike978

        There would be competition – BMW vs Lexus vs Audi vs MB for instance. Dealers give some competition but it is limited since they all buy them from the same manufacturer and differ by a few %.

      • 0 avatar
        hreardon

        Not necessarily. Again, look at Apple’s pysical and online retail stores. Their prices are competitive with other retailers (ie: MacMall, Amazon, Microcenter). They still compete within the ecosystem of personal electronics devices, so they cannot raise prices more than the market will support.

        Same would hold with manufacturer run retail stores.

    • 0 avatar
      JCraig

      Agreed! This is one of many useless laws lobbying has given us.

    • 0 avatar
      Morkus

      So everyone else can charge consumers 40,000 for a dead battery that the consumer (who probably is an idiot) was not properly warned about regarding charging hardware, procedure, and fequency?

      I agree with you about salaried salespeople, I just think Tesla was a poor choice as a good manufacturer.

  • avatar
    JMII

    The problem is people want a deal, thus they are always going to go with whatever source (Edmunds, TrueCar, etc) has the lowest price. The only way to stop this is the Scion (and ex-Saturn) system of fixed pricing. After all a car is just an object like a TV so why not price and sell it that way.

    The place were I bought my 350Z worked like this: the salesman claimed (true or not, who knows) that they use a “pricing service” that appraises the car and tells them how to price it for a quick “no haggle” sale. He told me up front that there was no negotiation and so his manager would not be involved at all. I had been watching the car via Cars.com and in almost two months it had only dropped $300. Various online sources I checked indicated the car should have sold for +/- $500 of the newly listed price, so the dealership had indeed priced the car at fair market value. Thus I bought it without fearing that I was being ripped off in anyway.

    • 0 avatar
      hreardon

      Agreed, JMII, but the current dealership retail system doesn’t really support this kind of environment.

      That’s why I’m a fan of the Apple retail approach to car selling, and it only works if you’ve got manufacturer controlled retail environments where the prices are set and the entire customer experience is controlled from end to end.

      Take someone like Audi or BMW as an example. They open their own manufacturer storefronts. You walk in and they have various models for you to test drive. No salespeople, just salaried employees who answer questions, like at Apple. You drive a 335i and love it. BMW will have the most popular packaged cars available for you to pickup immediately, and for those not on hand, they’ll order it or have it shipped from a BMW inventory depot within a few days

      Price? Well, it’s the price on the window.

      Need service, come on back and we’ll hook you up with a loaner while we take care of the service. Price? Well, it’s right there on the placard. Don’t like it? No problem, there are plenty of indy shops who can service you in your area.

      If the manufacturers create an experience that invites people to the stores (not your cheesy lounge areas with leather sofas and latte makers), they will win. Like I said – you better have product that people want, otherwise it won’t matter how nice your retail environment.

      • 0 avatar
        Pch101

        That’s why I’m a fan of the Apple retail approach to car selling

        Apple’s margins are substantially higher than they are for the average car dealer or manufacturer. That experience comes at a very high price; Apple products are far more expensive than the competitive offerings of its rivals.

        If cars were sold in the same manner, they would be much more expensive for just about everyone. On the other hand, all Apple buyers are being ripped off in equal measures, so I guess that you could at least argue that it is egalitarian.

      • 0 avatar
        jmo

        Apple products are far more expensive than the competitive offerings of its rivals.

        That was true in the past – not so much anymore. As HP and Blackberry/RIM learned when they weren’t able to offer their tablets for less than Apple. RIM lost half a billion just writing off the inventory of Playbooks – that doesn’t even include the development costs.

      • 0 avatar
        DC Bruce

        Pch 101 wants to argue with the tide. People spend more for Apple products (and the price premium is much less than it used to be) because they perceive them to be more valuable. “Margins” (i.e. the difference between selling price and manufacturing cost) never tell the whole story. The general elegance of Apple’s industrial design and the elegance of its software has a value. After being a die-hard Wintel buyer (since 1992!) and having bought myself and my kids countless Wintel products (desktops and laptops) as they worked their way through high school and college, everyone of them, over time, has eventually migrated to Apple — even when spending their own money, not mine.

        So, saying that Apple “rips off its customers” because Apple has higher margins than some commodity WinTel manufacturer is about as meaningful as John Kerry saying that voters are stupid because W beat him in the ’04 presidential election.

        Finally, it does not follow that cars would be “more expensive for just about everyone” if cars were sold in the “Apple manner.” In fact, the spread between Apple computers and Wintel computers has narrowed considerably. Consider the last laptop I bought for my youngest, college-age, child. After her Sony Vaio packed it in just outside of the warranty period and after the Sony repair people made a total hash of the computer, she went Apple and bought a MacBook. The price difference between the two was negligible. Admittedly, I could have bought a cheaper WinTel laptop than the Sony, but the Sony was demonstrably superior in certain ways, such as the quality of its image.

      • 0 avatar
        Pch101

        That was true in the past – not so much anymore

        No, it’s true right now. For example, a Mac laptop with a 17″ monitor starts at $2500. For that same money, one could buy three similar major brand PC laptops, and have enough money left over to accessorize all of them.

        I certainly wouldn’t want to buy cars in that sort of environment. I realize that Apple products have a certain cult appeal, but I see a PC as a commodity plastic box and don’t want to pay what I believe to be an unnecessary markup.

        Apparently, the market agrees with me, as Apple has only a small share of that market. If consumers thought that the premium was warranted, then Apple would control more of that space.

        In any case, Apple attempts to be vertically integrated. Vertical integration doesn’t necessarily go well with a free enterprise economy. The lack of retail competition supports higher prices, and American regulations generally come from the position that competition among retailers is a benefit to the consumer.

      • 0 avatar
        joeaverage

        Exactly. Want the car on the lot? Price #1. Want a special order car? I’d pay a premium to get that car, say another $300 for that service.

        I don’t mind paying a little extra for extra trouble for the dealer. What bugs me is guy #1 getting the car for $20K and the next guy getting the car for $24K b/c he isn’t as adept at calling the salesman’s bluffs. Actually guy #1 is me, guy #2 has been the women in my life that have repeatedly been lied to by the salesmen. So much so that I make a point of going car shopping with them and embarrassing the salesman whenever possible. Let her talk, and when the salesman is laying it on thick I unload on him and we walk if necessary. There are some real weirdos selling cars out there.

        On the other hand in my example above, how would extra $ for the special order car be justified? It needs to be brought the dealer just like the in-stock cars, it needs to be built just like the in-stock cars, and the only real trouble is clicking the option list on a vehicle order page on a computer which honestly most customers could do themselves and might relish. I know I like doing it when I am exploring “build and price” pages on the manufacturer websites. My grandmother or Mom might need a little guidance but shouldn’t the dealer WANT to give the help? Any other business I ever frequent pays their people to be and eager to be helpful yet for some reason dealers expect me to pay thousands extra for their guidance?

        I don’t think so…

  • avatar
    dwford

    Everyone is a fan of the Apple approach. Really? The windows/android model of multiple manufacturers using the same OS has resulted in much lower prices for similar products than Apple’s monopoly approach. So you all WANT to pay more for your cars?? In the end, the price competition model – love it or hate it, benefits the consumers who use it to their advantage. Dealerships and manfacturers will have to how to make a profit at it.

    • 0 avatar
      hreardon

      dwford -

      I would challenge your assumption there: you can get iPhones for as little as $1, $49, $99, etc. Apple’s PCs may be slightly more expensive, but they’re competitive – and at the end of the day, all the manufacturer cares about is being competitive and more importantly: profitable.

      We’re also arguing about a retail model, not necessarily the entire business model. Apple’s retail model is predicated on the fact that they could never give customers the brand experience they wanted because they had to rely on 3rd party retailers to expand Apple’s reach.

      • 0 avatar
        dwford

        @hreardon,

        You might be paying the discount price for an iPhone, but that is subsidized by the phone company and you by committing to a 2 year contract. The phone company sells it at a loss to you to lock you into that contract. A better comparison would be Apple’s laptops and desktops.

      • 0 avatar
        carbiz

        I don’t get your point. Apple does not sell the iPhone for $49 – the cable/telephone company pays Apple $400, then charges you $49 when you agree to pay the cable/phone company $1,000 – $10,000 over the next 2 or 3 years, depending on which CONTRACT you agree to get locked into.
        The auto business is nothing like that. If the dealer sells the vehicle for $100 over invoice, then they’ve very likely ‘lost’ a few hundred dollars. If the sale occurred during some OEM backed sales push, there may be hidden incentives the dealer gets at the end of the quarter, if they meet other hurdles that the OEM puts in front of them.
        I understand that the major electronics outlets function that way: they sell at cost and then get a quarterly kickback from Sony, Yamaha, etc. based on sales.

  • avatar
    Educator(of teachers)Dan

    Sigh. I always want to use as many sources of data as possible and it is a shame that manufacturers/dealers are going to try to cut me off from one source of info. When I buy a car I already know that I’ll likely use a source like AutoTrader and after test drives find a dealer who is offering a price I’m comfortable with paying. If the discount is low enough I’ll even fly out to get it.

    • 0 avatar
      carbiz

      Life is too short. I plan to live to be 100, not die of a heart attack at 60 because of worry over getting ripped off $100 or $500 on a purchase that I make once every 6 or 7 years.
      Get a grip! I got out of the ‘biz 3 years ago, but I’ve helped a few friends and family members purchase vehicles since.
      Newsflash: if you want to drive all over town, wasting your time and gas, or spend hours on the internet obsessing over prices, deals, paying 3rd parties for invoice pricing, etc. – knock yourself out.
      Frankly, you blow more on groceries in a year by not shopping around then you would on any vehicle purchase. (And their markups are 100% – think about that!)

      Me, once my friend has made up their mind WHAT they want to buy, we pick two dealers, then go to their second choice, do the test drive, etc., ask for their ‘best price,’ be very clear what we are doing, then go to the second dealer and do the same thing. Voila! You have 2 prices for comparison, pick the one that suits you and BUY THE DAMNED THING.
      And here’s a real cardio-saver: DO NOT LOOK AT FLYERS OR ADS FOR AT LEAST 6 MONTHS. It is a guarantee that you will see your purchase advertised cheaper.
      Two prices, buy the damned thing, go golfing.

      • 0 avatar
        Pch101

        I plan to live to be 100, not die of a heart attack at 60 because of worry over getting ripped off $100 or $500 on a purchase that I make once every 6 or 7 years.

        It’s funny how dealers like to make that argument, while they fight to keep that $100 or $500 (or $1,000 or whatever) for themselves.

        My advice to the dealers: If the money really doesn’t matter, then just give up and let me walk away with it in my pocket. After all, I only buy a car every several years, so I have to make sure that my occasional purchases count.

        On the other hand, you sell cars every day. Surely you can find plenty of suckers who you can use to make up for my skinny deal. Life’s short, ya know?

      • 0 avatar
        carbiz

        Like I said, if your time is worth nothing, and if you think car shopping should be an Olympic sport, then knock yourself out. But to me, it sounds more like you have an axe to grind with the dealers and want to show your ‘superior’ knowledge by kicking around some 20 year old newbie. The veterans will not be kicked around. They will either see you coming and head for lunch, or toss you so many volleys that you won’t know what hit you.
        I hated the game, but the consumer wouldn’t know a real deal it if walked up and bit them. You think you got a good deal, but I’d wager $100 that you still go home and obsess for a week about whether you could have done better when your shiny new chariot sits in the driveway.
        I paid $2,400 for my plasma TV 5 years ago. I did not go into any electronic shops for about a year after. The same TV is $800 today. Big deal. I made my decision, it was a ‘good’ deal based on the flyers and ads I looked at 5 years ago. I was happy, I am happy.
        As far as the dealerships are concerned, the price whore is not a customer they want. I remember those $600 gross deals and without exception those people were pains in the a$$, lived in the service department, whined and complained about everything AND generally trashed us in the CSI report. My CSI bonus was higher than my commissions some months!
        So, don’t be surprised when you get treated like sh$t by the sales staff when you wave some printout from one of these 3rd party scam operations. Most likely the salesperson is getting a flat $150 or $200 anyway, since they get paid on profit, which generally becomes zero for them below $1,000 gross.
        LOL. I am glad I got out, but I still feel for my former friends and associates who bust their butts, like any other business, and have to put up with increasingly nasty, entitled shoppers.
        Like I said, life is too short and the days and hours you agonize over your purchase could be spent on the golf course or earning an extra $10 grand at work, not ‘saving’ $100 on a deal that you can never know was good or not.

      • 0 avatar
        Pch101

        Like I said, if your time is worth nothing, and if you think car shopping should be an Olympic sport, then knock yourself out.

        This sort of line is so common among car salesmen that I have to assume that it comes from your training.

        But anyone with half a brain can see the hypocrisy of it. Dealers use this line in an effort to halt price negotiations. They claim that the money doesn’t matter, but it’s quite apparent that the dealers really want to keep the money for themselves.

        And good negotiation is not an “Olympic sport.” It’s actually quite easy and not at all difficult for the consumer who figures out how to play the system.

        And part of that game is understanding that car salesmen will quickly resort to petty insults whenever they feel that they are losing control of a customer. A buyer who understands the command and control mentality, and the type of ego that accompanies it, can easily turn it back around on the seller and use it against him. But it would help if consumers understood that it really is a game, that they can only hope to manipulate the rules (not change them), and that whining about how nasty it is won’t help them.

      • 0 avatar
        Syke

        PcH101,

        Following your threads on this, it’s painfully obvious that the most important part of buying a car for you is screwing over the ‘effing salesman. Your hatred is palpable.

      • 0 avatar
        vwet9394

        I don’t understand why you need to step into B&M to “ask for their best price”. With internet, I can email/Edmunds/Truecar/Autotrader/carsdirect as many dealerships and pitch them against each other in front of my desktop. I don’t even need to do research on invoice pricing anymore.

      • 0 avatar
        joeaverage

        It’s not the $200 that is a big problem. It’s the $2500 that is the problem – the difference between the start of negotiations and what the salesman is willing to let the car go if I hammer on him enough. I shouldn’t need to hammer on him that much b/c I know he is still making a fair profit even at the reduced price or he wouldn’t sell me the car at that price.

        Here the idea: their price + their costs + a fair profit = sales price. Up front. Without all the drama. Without all the delay tactics and B.S.

        The harder he wants to make it, the harder I want to hammer on him to get the last friggin’ dime out of him. Why? Because in his own way he is hammering on my check book.

        You know why I didn’t sweat the price of my TV purchase last December when the old one finally quit? It’s b/c the Sears price was about the same as the price that everyone else advertised (give or take 4% or so) and they were convenient. I walked in, paid the price and they loaded it into my old CR-V. I got multiple “thank you’s” from the salespeople and a “let us know if you have any troubles” and lots of smiles. All for about the same price as the discount electronics store down the road which I dislike.

  • avatar
    stuntmonkey

    In many industries, you have a similar situation where some companies participate in third-party market research and other don’t. It’s not a balance, it’s a tension to be managed. Some companies think they get a competitive advantage from participating, others don’t, but the point is that neither is completely correct and it’s just a part of business life.

    • 0 avatar
      Morkus

      I was looking for a place to respond to carbiz and this was the first one I found.

      Totally agree about nasty customers, especially in the service department. Everyone here has valid points. I have been a consumer who felt like he was getting hosed, but I was also the service representative who worked 70hr weeks for 40k a year whos job was to listen to customers who were mostly nasty, pissed off, etc.

  • avatar
    Banger

    This was a very good read, especially as I have been mining TrueCar data in my plans to buy a new car sometime in the next two or three years. Yes, car-buying is a long, drawn-out exercise in my world.

    Interestingly, TrueCar is just about the only place I can find base models of many different cars I’ve considered. Their dealer partners claim to have them at a given price. Ask for a base model in person at most dealerships in my immediate area, and you’ll be told it’s a special order and you’ll have to pony up MSRP for it, plus destination charge. That’s a bunch of hooey on the part of local dealers, and I’ve always believed that it was to some extent, but TrueCar seems to confirm my belief.

    As an example, try finding a base Nissan Cube with a 6M/T on the website of Nissan dealers in your region. Go ahead, just try it. Around here, you won’t. Period. And the once in a blue moon I’ve found one at a dealership in my home state, it’s been priced at $15,000 or so– admittedly before haggling. A far cry from TrueCar’s guaranteed price of $13,700.

    Sure, maybe it’s $300 more than I’d pay if I took the time to haggle with a dealer the old-fashioned way. But what TrueCar is doing, essentially, is giving you 9/10ths of that discount (or slightly more, depending on the price level of the car you’re looking at) without any hassle or effort on your part, beyond contacting the dealer partner and showing up for a test drive/writing a check/signing the papers. It’s a good model, and I fail to see how it’s bad for consumers or, in the long run, car manufacturers. As others have said, eventually, the automakers either get a handle on the relationship between supply and demand, which will allow them to make a profit on each sale, or they’ll die.

    • 0 avatar
      PhilMills

      Keep in mind that the dealership price getting quoted on TrueCar does NOT mean that they have that car on the lot or that they’re obligated to give you that price if they factory order it or have to trade for it.

      That was one of my hassles with the process – from the mileage info, I can tell who the dealer is. So I call them up directly and ask for a price and they say ‘$x’. Then I tell them I have a TrueCar price ‘$y’ for that and they say “Oh, well we don’t have that build-out available; we can order it for ‘$z’”. “Z” is inevitably higher than ‘Y’.

      • 0 avatar
        kvndoom

        In my case, Mechanicsville Honda did honor their original offered price, even though I had to wait a month for my car to be built. Wound up with 0.9% APR too. I did it all through TrueCar and saved around 5 grand doing so. It was the best car buying experience I have EVER had.

      • 0 avatar
        Banger

        I’m aware they may not have it on the lot, but my understanding was they were supposed to be willing to sell one for that price regardless of whether they have to order it specifically for you.

        We used Edmunds TMV as a guideline for our previous purchase of a 2010 Nissan Cube S w/CVT and a few accessories (floor mats, stainless steel illuminated kick plates, the interior bungees and “dash topper,” cruise control, etc.) and knew going in that (1) the dealer had a fair price advertised based on Edmunds’ transaction data, and (2) they were willing to give us more than our car was worth (by about $1,000). Easiest buying decision we’ve ever made. The TrueCar system would seem to improve upon that even more by making it easier to get the car nearly exactly as you want it at a fair price without any hassle. Their “options” tab doesn’t always list all the options for a given model, but it lists most of the important ones, from what I’ve seen.

      • 0 avatar
        Felis Concolor

        A need to order a vehicle with options to the customer’s exact specifications is a non-factor and does not add any cost to the final price. In fact, an ordered vehicle costs the dealer much less as its time on the lot is measured in hours versus weeks or months for the “most popular package” models. The real downward price pressure for an auto dealer are those vehicles which are just sitting on the lot.

      • 0 avatar
        Pch101

        In fact, an ordered vehicle costs the dealer much less as its time on the lot is measured in hours versus weeks or months for the “most popular package” models.

        Not really, when the alternative is to have an existing item of inventory still parked on the lot, generating interest expense and taking up space.

        All things being equal, the best thing for the dealer is if you walk onto the lot, and buy a car that they already have in inventory, TODAY. It isn’t a fluke that the salespeople are trained to keep pushing to see whether you will buy TODAY, because the dealership compensates them in a manner that encourages them to sell inventory that is already on the lot.

        Every day that a car sits on a lot, it becomes less profitable. Since the US dealership model is built around holding existing inventory and moving it, it makes sense for them to want to move what they already have.

        The mass production model favors capacity utilization, which means that it makes more sense for the factory to build cars on spec than to craft everything to order. Since the American consumer aspires to pay low prices for most things and often buys on impulse, customization is not particularly worthwhile to either dealer or manufacturer.

      • 0 avatar
        Felis Concolor

        You’ve spent several paragraphs completely reaffirming my prior statement. Thank you very much.

      • 0 avatar
        Pch101

        You’ve spent several paragraphs completely reaffirming my prior statement.

        Not quite.

        “In fact, an ordered vehicle costs the dealer much less” is not a fact at all. It is better for the dealer if you buy what he already has.

      • 0 avatar
        Felis Concolor

        That argument approaches the same conclusion from a different angle.

        It is the dealer’s guess as to what will sell and that can only affect costs negatively when what is on display does not match what the customer wants and continues to soak up valuable space. The fleeting time spent on the lot for a preordered car is the best case for the dealer. That is why it costs less for them when a customer orders a specific combination instead of playing a waiting game to move the metal already on the lot.

      • 0 avatar
        Pch101

        The fleeting time spent on the lot for a preordered car is the best case for the dealer

        It isn’t, for the reasons that I have explained. The dealer already has inventory; his goal is to sell what he has, not to add to his inventory pipeline.

        Ordering a car in lieu of selling one that is already there is not at all preferable to the dealer. And since special orders often end up with oddball combinations, the dealer takes an additional risk of owning a white elephant if the customer bails out, which makes the special order car even more risky.

      • 0 avatar
        Felis Concolor

        That’s aggregating the costs associated with the current inventory with the separate transaction. The individual transaction of a preordered vehicle costs the dealer much less than the already sunk costs associated with a display or spec order sitting on the lot. The latter transaction’s desirability is irrelevant compared to the rapid resolution of the former, and the real but hypothetical situation of a customer backing out of the deal is obfuscation, especially as the customer can back out of a deal for existing inventory.

      • 0 avatar
        Pch101

        That’s aggregating the costs associated with the current inventory with the separate transaction.

        Of course it is. Your failure to do the same causes you to completely miss the point.

        The business is driven by this business model, which is centered around carrying relatively large amounts of inventory. Profits are improved when that inventory turn is sped up.

        Special orders don’t improve average turn because the special order presumably comes at the expense of continuing to hold other existing inventory. Hence, the dealer’s preference to get the customer to buy what he has in stock; that purchase improves his turn on existing inventory. In most cases, the well-managed dealer will try to move you toward buying something that he already has.

      • 0 avatar
        Felis Concolor

        That’s just blaming the customer for not wanting what the dealer has in stock, especially when the inventory has been poorly chosen.

        Saying “this is how it is” as the argument against special orders does nothing but underscore how broken the model has become; it doesn’t change the fact the quick delivery for a preordered vehicle takes up far less of the dealer’s valuable time and inventory space than a stagnant lot filled with display vehicles that – for whatever reason – aren’t moving very well.

      • 0 avatar
        NulloModo

        It likely differs place to place, but at my dealership we offer the same pricing on an ordered car as one in stock. If it’s a model that we’re willing to sell for invoice, we’ll order one for you at price it at invoice. If it sells at MSRP, we’ll order it to sell to you at MSRP. We do require that pricing be finalized and agreed upon before the order, and we collect a non-refundable deposit so that we don’t end up stuck with some weird color/option/package combo, but other than that an ordered car is the same as a car on the lot.

        The one area where things can change a bit is if the customer has a trade. For an order we have to project a trade value out a couple months, so we’re understandably a bit more cautious, and if the trade condition changes dramatically between when it’s appraised and the ordered car arrives (such as it being in an accident) the value can change, but otherwise it’s pretty cut and dry.

      • 0 avatar
        Pch101

        That’s just blaming the customer for not wanting what the dealer has in stock

        Nobody’s blaming anyone. It’s a finance and inventory issue. If you are in the seller’s position, then it’s better to sell what you have than to not sell it. It’s just business.

      • 0 avatar
        carbiz

        The original dealer gets the marketing credits for their factory order. Where I used to work participated with one of these third party scams (they got $300 of the $600 over invoice we agreed to sell vehicles for – my commission was $200.) What a joke! But we would not do dealer trades. You took from inventory or get lost.
        Most OEMs have multiple price increases throughout the year (much safer than the once a year jumps back in the ’70s and ’80s that used to get GM crucified every year), so factory ordering may not circumvent this, either.
        I love reading threads like this. It serves two purpose: it affirms my reasons for getting out of the sales business and it makes me very glad I am not like the majority on this thread.
        For any high ticket item my strategy is always the same: there is generally a 6 month time lag between when the idea of buying an expensive item becomes serious, followed by visits to stores and lots to check things out, watching the internet and local papers for the trending of pricing, then the purchase itself which is usually done the same day with a visit to two dealers (in this case), get two prices, buy it, pick it up, the move on in my life.
        Will I get the ‘best price?’ Now that I am not in the business, I am like the rest of YOU: I have no idea what the best price is. The difference between myself and most of the posters here is that I DON’T GIVE A DAMN. My life is too busy. I will not be ripped off, but as long as I got some sort of a deal, I am happy.
        Seriously, people. Nobody pays sticker anymore. I’ve seen the stats (well, at least the stats as they existed in Ontario 3 years ago) and throughout our dealer marketing group the average selling price between all the GM dealers varied by about $100.
        For that you want to kill yourselves obsessing over price? LOL

  • avatar
    jeremie

    I was very impressed with my ’93 Civic and ’03 Accord. So when my mom was looking for a small new compact CUV I took her to the honda dealership. They wanted $1000 over MSRP for a new CRV. Yes I know the dealer can charge what the market will bear, and if I don’t like it I don’t have buy it. Thanks for the newsflash. It cost Honda her business and my loyalty.

    • 0 avatar
      DenverMike

      Did you give a counter offer? I always start by giving them ridiculous offer at around 1/3 the MSRP with a straight face. They laugh, I laugh and it lightens the mood a bit. After some ‘back N forth’, I end up paying closer to true market value but if they won’t budge, there’s either too much pent up demand or they’re just plain stupid.

      • 0 avatar
        carbiz

        Or your just buying at the wrong time of the year. Lease in December; buy in June/July. That’s my rule. If you gamble and wait later than June/July you might get a better deal on the current year model, but the inventory will be gone (the factories shut down and re-tool in April to June, cutting off supply) December is good for leasing because the residuals are generally higher (which is what you want if you plan to dump the vehicle) and the Xmas clearance prices are usually almost as good as the summer ones.
        And if you must have a hot vehicle when it first comes out, why penalize the dealer? If they’ve only been allocated 5, why would they sell it to you for less?
        Isn’t it funny how you’re quick to gloat over how much you ‘saved’ when you buy an item, but when the retailer tries to make more, that’s not fair.

  • avatar
    daveainchina

    Does anyone else feel like this is the auto industries version of complaining about mp3′s and napster etc. I think they better wake up to the new reality and realize that computers are empowering the buyer to such and extent that they are now at least on equal footing and sometimes better prepared than dealers.

    Overall I think truecar is good news, and can’t truecar get it’s information from government tax receipts? Does it have to get it from dealer self-reporting? I don’t know about this, but that to me would seem to be the method. They might also be able to get the information from financial institutions, those hold no loyalty to anything other than profit.

    What about insurance companies, can’t they get the information that way too? I just see to many different possibilities for getting this information.

    I think Honda and Autonation might end up regretting fighting against this, just look at the record industry if you want to see what happens when you fight basically freely distributed information.

    • 0 avatar
      Morkus

      TrueCar is usefull, I used it to help me purchase my last car.

      But (as allready stated in the article and by posters), it is not freely distributed information.

      You also still have to negotiate with your salesman and the dealership. The law of supply and demand allways applies, regardless of how “educated” yourself or the saleman is.

  • avatar
    mopar4wd

    Not Sure if it’s the same as when I was with a dealership back in the day but a long standing dealer I worked for 10 years ago made hardly anything on new car sales at their Chrysler point. The sales manager told me they used new car sales as a tool for pulling in used cars for bad credit finance sales (woohoo adding a point in half for yourself)and for keeping the service dept busy. He said that new car sales only accounted for less then 10% of their profit. He also said that the kia outlet down the street (also part of the dealergroup) had to get the cars much closer to MSRP as at the time the customers coming for a $9000 kia had pretty crappy trades and often did not go back to the dealer for service. He said there the new car sales profit was much closer to 50% for the outlet. As to online research I sold boats and outboards for awhile over in that market they are currently fighting a few dealer cost websites that popped up (don’t think it will work) I worked at high volume dealer we were usually but not always the cheapest. For outboards we ran a fixed price setup with semi annual markdowns to again fixed prices. With boats we had a set price that we advertised too we would then have a fall back price that was a floor that we stuck too. So basically you could pay the advertised price or if requested we would drop off a little to the fall back price and that would be it. I would say about 60% of the buyers were well informed and new what they were getting and what they wanted to pay before they came in. The other 40% were always entertaining.

  • avatar
    SherbornSean

    This is timely, as I am picking up a new Odyssey tomorrow. I did research on both TrueCar and Edmonds (the prices paid forum) to understand dealer cost and typical pricing.

    I used TrueCar to reach out to dealers, but didn’t buy through their recommended dealer, because they only had one model at the advertised price, and it was a leftover in an unpopular color.

    My sense is that unless you are looking at a hot model, you are best off waiting until dealers are motivated (i.e., year end) and knowing their cost basis.

    Always be respectful and kind, no matter what, but stick to your guns. I will be paying invoice less holdback, which I think is about as good as it gets.

  • avatar
    ravenchris

    Drive by or google the dealership owners houses before you decide how much money you should give them.

  • avatar
    Absolom Absolom

    Great stuff, great topic.

    1. Where is it written that consumers should expect a discount off MSRP?

    2. Nice sentiment above re: information availability forcing change of car sales etc, but until the grossly consumer-unfriendly state laws that support these manufacturer monopolies are changed, nothing will really change.

    No one pays sub-MSRP for iPods, Playstations or North Face jackets. Why should anyone pay less for a Kia?

  • avatar
    Absolom Absolom

    And now this:

    “The agency that oversees auto sales in Colorado has launched a probe into the operations of TrueCar.Com…Colorado launched the probe after receiving objections to the buying service from the Colorado Automobile Dealers Assn. and an additional unspecified complaint. The state’s Department of Revenue is looking into what it described as advertising violations. The agency also said TrueCar might not have the correct license for conducting car sales through Colorado dealers.”

    State laws protect car dealers and hurt the consumer. I wonder what TrueCar is doing about the Edsel in the Chamber…

  • avatar
    FlightService

    TrueCar’s service is interesting. They give you data to understand where car pricing comes from.

    Contrary to their misleading statements, they do nothing to SECURE these low prices.

    Dealers, on 2 occasions with coworkers, have not honored their TrueCar price. One was on a new Toyota the other was on a Honda.

    The Toyota dealer fiasco, all 3 dealers were contacted and the lowest price one ended up being the highest out the door. Only one dealer would actually confirm their pricing (with a $300 acquisition fee because the vehicle wasn’t on their lot) on a Buyers Order. (Given the dealers we would have had to deal with were between 120 and 200 miles away, paperwork needed to be confirmed via Buyers Order.)

    In the end TrueCar is no different than any other pricing website. They just present the data differently.

  • avatar
    Dave M.

    I can’t remember the name of any car salesman I have ever talked to in my life. Therefore I it’s hard for me to see how a happy customer recommends a specific salesman.

    Juju (2001 Isuzu, now at MB dealership)
    Michael (2003 Toyota, still there)
    Sheila (2006 Lexus, retired in ’10)

    They were our last 3 salespeople. And since their great service, I’ve referred dozens of folks their way. Many have bought through them, and have made further referrals.

    To me, it’s worth the extra $500-800 to go to a reputable dealer with a great service department. If it’s a family dealership (sadly unusual these days, especially in the big city….), bonus points.

  • avatar
    hriehl1

    Just call me a happy TrueCar user.

    Through TrueCar I paid 17.5K for a Mazda5 which was still $500 BELOW invoice minus holdback minus factory-to-dealer incentive (identical figures pulled from Edmunds & Consumer Reports).

    I am a 60-year-old experienced and capable car buyer who has always negotiated hard without squeezing the last $100 bill. TrueCar pitched me a price easily $750 (that’s 4% on an $18K car) under what I thought I would have to pay, and that is with the dealer having to swap for the exact car I wanted. The dealer’s only additional charge was a $200 Doc Fee, which I felt was high but palatable. There was no trade on this cash deal so no monkeyshines there either.

    I’d recommend TrueCar to anybody and everybody who wants a fair price with no face-to-face hassles and haggling. I closed this deal in less than a day with 4 or 5 emails then waited another 3 days for them to locate and acquire the car.

    As an aside, they made clear in their TrueCar response:
    - they’d extend the exact same dollar-off price to any in stock Mazda5 if I’d accept or preferred a different configuration,
    - their quoted price did not include Doc Fees (or TTL) but I felt this dealer’s $200 was acceptable

    The protected dealer franchise model is obsolete in the internet age. Someday a foreigh manufacturer will come to these shores (Peugeot, Renault, Skoda???) and forgo the franchise model by establishing factory delivery and service depots fed by internet one-price selling and regional inventory yards. Auto retailing will be turned on its ear the same way travel and financial product retailing (also commodities) have been. Makers already stuck under the franchise dealer model will be seriously disadvantaged, but government will be very slow to provide relief (unless they harness the “new” model, which sadly is likely).

  • avatar
    Benn

    People don’t need True Car to get a good price. However, True Car can be valuable. For my last few purchases I used True Car to get a price and to identify the dealer(s) who are likely willing to meet or beat the True Car price. Not hard to do with a map and a bit of imagination. Once I have the True Car price, I know I should have a dealer(s) who will beat that price by at least $300. Why let True Car gain that $300 when I can go to the dealer myself. The last four vehicles I have purchased were all purchased for less than the True Car price. However, the best prices will always be obtained via actual negotiation with a dealer. The trick is to identify dealers who will deal at the time you want to buy. For that True Car is useful.

    • 0 avatar
      hriehl1

      Why yes… you were very clever in how you beat them out of their take… though your first statement that one doesn’t need True Car is at odds with your later explanation of how you used True Car to secure very good deals directly.

      Don’t you feel they provided you with some value and deserve a piece?

  • avatar
    msquare

    I always found it strange that the auto industry is one of precious few (only?) that cannot sell its products directly to the public. You have to buy through a franchised dealer.

    That system has caused automakers all kinds of problems as the Pontiac dealers push for the same classes of cars the Chevy dealers have to sell, for example. It also leads to a unique style of buying.

    But unless you change that model, little else will change.

  • avatar
    cutchemist42

    Yeah the RX8 was a great car that for its intended market had the wrong engine. The engine was put in a car that had appeal as a daily driver. When people drove the engine like a daily driver, the engine developed problems. Not only that, Mazda was recommending too thin of engine oil to meet emission standards; that same thin oil is the reason the engines failed and the warranty was needed.

    I worked at Mazda dealer for 1 summer and every mechanic who saw a girl bring in an automatic RX8, they made sure to drive the car hard for 5 minutes. It wasn’t for enjoyment but an effort to keep the engine healthy. Unless driven hard, those engines suffer.

    The rotary engine only belongs in a dedicated sports car like the RX7s of the past because no one is mistaking it as a daily driver nor driving it like a daily driver. The RX8 should have had something like the Japanese spec FS-DE engine.

    Anyone know if the RX8 community does I4 engine swaps?


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