By on December 4, 2012

In the olden days known as the late 20th century, an ancient artifact called a “newspaper” would be dropped by your front door.

Inside this mostly unrecycled piece of pulp was an automotive “Classified” section. In better times, this magical list of thousands of vehicles would have offered car buyers an incurably acute case of acronymitis. “1994 Camry, ps, pw, a/c, auto, abs, 1 ownr! $5500 Ph#…”.  A short three line list of minimalist communicado would have cost the seller about $50.00 and given them a secondary presence in a newspaper section that made millions for major publishers.

There was only one saving grace if you wanted to find cars for sale that offered big print, big pictures and big discounts. The new car advertising section… and there were two reasons for that.

The first is that the dealer had to follow strict advertising laws that were enforced with an iron hand. You want to sell a car for a low price? Great! Now you get to tell the buyer everything that enables them to enjoy that unusually low price.

Does that price include a $250 discount for trading in a vehicle that is less than 10 years old? Well that’s one way of making it up on the used car side of the ledger if you are Bill Heard Chevrolet. But it’s perfectly legal, and thank you for disclosing it.

Does the cheap price also include seven long lines of legalspeak that are tucked into the nether regions of the ad? With sixteen asterisks and financial terms that would make even a finance major scratch their head? That’s fine. Just make sure you let everyone know the exact model you are selling with those terms, and how many of those specific vehicles are available at your lot.

New car buying was obviously still a bit difficult, even back then. Now it’s even more nuanced when it comes to mathematical misdirections.

Enter the new dealer/manufacturer pricing strategy which, as far as I’m concerned, has become way out of hand.

You start with one model with an insanely small MSRP. It could be $11,990 or $19,995. But you use that model for only about .2% of your sales and about 15% of your publicity.

That car is then given a destination fee that is now usually around the $800 range. So now you have anywhere between another 4% to 7% bump in the real selling price.

Dealer fees then pop up in the sales contract. In certain areas of this country, this is done in concert with low content add-ons. If you want to buy a car somewhere else in the state, good luck. Bogus fees of varying sorts and prices have now become a near universal reality. Especially for those markets that rely on distributors.

These fees often help bump the real selling price another $500 to $700. All of a sudden that cheap low level car of $12k is now at a genuine selling price of $13,500. While the midsized loss leader is edging ever closer to a real selling price of $21,500.

Finally you are levied with tag and title processing fees… and endless time wasted trying to get them reduced or removed.

In many dealerships you may possibly be looking at anywhere between a 7% to 14% jump in the final selling price of the car even before you pay sales taxes.

There is only one thing to blame for all this. The same truth in advertising laws that allowed the same loopholes and gotchas to take place way back in the old media days. It’s deceptive. But many consumers have come to expect these types of deceptions when it comes to buying new cars.

Should this change? Should dealers and manufacturers be compelled to advertise one simple price that reflects all their charges and fees? Or should we continue to play a decades old shell game that’s as useful as VINs etched on a car’s windows, and carpet care treatments, that consist of a low-paid kid from Savannah, Georgia spraying fifteen cents worth of aerosol into the inside of your vehicle.

People should vote with their feet. But sometimes those feet have nowhere to go, thanks to selling practices that go back as far as those old classified sections and the local Sunday comics.

So what should be the standard pricing model for today… when it comes to new cars?

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66 Comments on “Hammer Time: Is MSRP A Mathematical Study In BS?...”


  • avatar
    nikita

    Leasing has even been worse, and has been for a long time. They fee you at both ends. Heck, even buying an airline ticket is not simple anymore. While the government-imposed taxes now have to be disclosed in the advertised price, if that seat is actually available or not, fees for other things that used to be included really add up. BTW, I still get the LA Times and you should see the new car ads with all the “discounts”, college grad, military, loyalty, conquest, etc, etc.

    • 0 avatar
      CarPerson

      … and in Mt. Vernon, WA “quarter-horse association membership”.

      The salesperson will insist on writing up the sales agreement. Just line out that which you will not be offering to pay. When questioned, just say “These are not part of my offer to buy the car” and leave it at that. After the sales person’s bluff and bluster, just repeat “Those charges are not part of my offer.”

      They may be doing the writing but it is YOU that is in control of your offer.

    • 0 avatar
      segfault

      “Leasing has even been worse, and has been for a long time.”

      Yes, there is no requirement that they disclose the money factor on the lease (the equivalent of an interest rate on a loan), and BMW dealers are notorious for charging a huge markup on this rate.

  • avatar
    AMC_CJ

    The whole dealership system is so outdated and needs to go. The manufactures would do themselves a favor if they got rid of the dealer system and instead went to corporate sales centers. Keep a low overhead, low inventories; the only problem is most people want to buy a car and buy it NOW (and not wait for it to come from the factory or shipped from a few national distribution centers).

    Worked for a dealership once myself and I hope to never have to do that again.

    • 0 avatar
      ChiefPontiaxe

      Current outdated antitrust laws prohibit that

    • 0 avatar
      tatracitroensaab

      This is the classic dilemma with special interest groups that you learn in economics. A small group (the dealers) really cares about maintaining the status quo and will spend time and money to do so, while the vast majority, who are all getting screwed btw, have much less incentive to do anything about it, as its not really a big deal to most of them, and if someone else tok up the cause, they would benefit so why bother? This is why consumer groups rarely succeed.

    • 0 avatar
      Mandalorian

      Yes! And please let it BE OPEN ON SUNDAYS!

      • 0 avatar
        rampriscort

        The dealerships in our small town just added Sunday hours. I understand how nice that is for people with a tight or non-traditional schedule, but I hate it. It was the only day I could go wander the lot without getting hounded by the sales staff. I know how hard they have to try to get sales in this market, but when I say “I’m just looking” I don’t mean please hang out and give me the sales pitch for every car I glance at. So no more easy Sunday afternoons wandering the lot. Hardly a life-shattering loss, but I miss it.

  • avatar
    seth1065

    I am sure the Manufactures would dump the dealers in a minute if they could but state laws say they can not compete with them so they are stuck as we the buyers are stuck. perhaps using and paying a car broker may be worth it who knows. The only real choice we have is to buy used from another person, ( Or Steve of course) but somewhere along the line someone has to buy new or no used cars. I try to have my loan done outside the dealership and tell them this is what I want I will travel 4 states to get it now bid vs. the other dealers to get my business, sometimes it works sometimes it does not. I also never have my heart set on one model.

    • 0 avatar
      Detroit-Iron

      I hope this does not open up a whole can of political worms but I never understood how the interstate commerce clause can apply to things that are neither interstate nor commerce, yet not apply to activity that is both interstate and commerce.

  • avatar
    mike978

    Back in the UK many years ago it was mandated that the advertised price included delivery and fees. In the US some prices include delivery and some do not – which makes easy comparison difficult since delivery is close to $1000 for some cars. Here in NC dealer fees are usually $500 and are mandated but since they are separate from the dealer I can see the case for just mandating a MSRP that includes all manufacturer costs (i.e. delivery) so at least that is a level playing field.

    • 0 avatar
      Maymar

      Ontario’s enacted a similar law – as I understand it, the advertised price must include everything except the government’s chunk (tax and license). Not that it’s perfect, of course, but it’s a step in the right direction.

      That said, going off Steve’s mention of the loss leader, I used to work for a dealer advertising $19,995 minivans, except maybe one in 50 would geniunely be stripped. The majority would have one or two options (roof rack, tint, etc) that the sales manager actively told saleseople to claim was worth $1000 or some such figure that was clearly inflated over the sticker price.

      • 0 avatar
        ott

        I work at an Ontario dealership and advertising is definitely watched carefully by OMVIC (Ontario Motor Vehicle Industry Council). They implemented the all-inclusive advertised price about a year ago, and by and large this is a positive change. Any dealer that still charges admin fees has to list them either in the pre-tax selling price of the vehicle, or as an add-on, ( for example: $11995 plus $599 administration cost). When this advertising rule was adopted our dealership dropped our administration fee, (a lowly $399) and used the law to our advantage; we now advertise everywhere that there are NO FEES at our dealership, and I do believe that customers appreciate this. We offer good, clean cars at competitive prices, coupled with (or so we’ve been told time and time again by our customers) exceptional customer service. And you know what? we’re no worse off without the extra $400 per car we used to charge. In fact, I think it is adding sales to our bottom line. Win win.

      • 0 avatar
        mike978

        ott – interesting to hear. So you must be selling more cars to make up for the loss of the admin fee. At a normal dealership I always assumed the dealer fee covered all basic costs (rent, utilities etc) which allowed them to go down to invoice pricing more often. Is that the case? I can certainly see why saying “no fees” even if you are charging more gets people in since they hate add ons.

      • 0 avatar
        ott

        I do think we have increased our sales at least in part to adopting a No Fees sales process. It goes a looooong way to building up trust with your customer, and it really works for us. Everything up front and simple, no quick add-ins and nothing hidden.

        Admin fees can be applied liberally to any dealership costs, it is profit, pure and simple. But a dealer may decide to “work the numbers” to make the customer think they’re getting a better deal if he knows he’ll be collecting an admin fee, where as we will usually stick to our guns when it comes to price unless we really want to move a particular unit.

        Also there are many, many other ways for a dealership to earn money on a sale; aftermarket warranties, insurances and protection packages, etc. which we do quite well with. But again, we do offer good value for the dollar there.

        I think it all comes down to treating your customer the same way you’d like to be treated. I always hated being asked to charge my customers admin fees. Seemed shady somehow. So I’m very glad we implemented the No Fees business model.

      • 0 avatar
        golden2husky

        …..I can certainly see why saying “no fees” even if you are charging more gets people in since they hate add ons……

        Ain’t that the truth. Make the price the price. That’s why when I helped a friend buy a car, I made it clear that the negotiated price was the final price, tax and tags exlcluded. Include any costs you see fit into the price. No pre printed BS on the forms when it comes time to close the deal…

  • avatar
    Landcrusher

    The modern dealership, much like modern hospitals, has nothing to do with capitalism or free markets. Nada. Remember this next time you see a campaign for office bragging about protecting consumers.

  • avatar
    danio3834

    What’s the alternative? More mandates creating more confusion? Create a rule and the market will find a way around it.

    There are so many hands in the new car sales cookie-jar, the only way to get around it is:

    1. Go somewhere where the BS is minimal.
    2. Failing step 1, be up front and say you want the car for the advertised price, and don’t buy it unless they remove all of the BS fees to your satisfaction. Of course you won’t get everything knocked off, but depending on how hungry they are for a sale, they’ll work with you.

    I think people forget that in negotiating for a new car, the ball is in their court. The customer has the money, the dealer wants it. There are lots of cars to choose from, why should you buy theirs?

    A lot of people are uncomfortable negotiating, but look at it as a life lesson. There are many other aspects of life where a little bit of assertiveness and savviness will help you. Car dealers are the least worrisome of the people trying to steal your money.

    • 0 avatar
      Zackman

      In July when I bought my car, the advertised price had an asterisk, meaning this was the GM employee discount price. After wifey and I hammered on them, we didn’t get the car for that price, but we came pretty close. Close enough that I got a pretty good deal.

      I think the secret is how much time and how deep do you want to dig to get the best price you can? Many people don’t want to invest the time it may take, or as much time as others. Some just do whatever they have to do to get out the door ASAP no matter what the cost.

      • 0 avatar
        danio3834

        “I think the secret is how much time and how deep do you want to dig to get the best price you can? Many people don’t want to invest the time it may take, or as much time as others. Some just do whatever they have to do to get out the door ASAP no matter what the cost.”

        You nailed it exactly. How hard do you want to work at someting to get the results you want? If the answer is “not very” then that’s what you end up with, a “not very” good deal.

        What scares me is when people ask the Government to enact “consumer protection” rules because they’re too lazy to figure it out for themselves. Someone has to pay for these rules, and it’s not going to be the dealer.

    • 0 avatar
      mike978

      I understand where you are coming from, but I would expect confusion to be less if the stated MSRP included delivery. I don`t understand why it is not (other than to make a car look $800-1000 less) since it is a mandatory manufacturer charge that you cannot reduce. Unlike going down from MSRP to invoice.

      • 0 avatar
        danio3834

        The confusion comes in when they find some other, more convoluted way, to advertise a lower price. Dealers are pros at playing four square, they’ll put the cost somewhere else.

        In the end, everything must be disclosed before you sign on the line, so just read what you’re signing.

      • 0 avatar
        krhodes1

        One reason not to include the delivery charge is how sales tax is calculated. In my state, you don’t pay sales tax on the various fees, including delivery. Though you DO pay excise tax on them, go figure.

        One thing I have found is that around here the higher end dealerships have MUCH lower Admin fees than the lower end. It was $200 on my BMW, but Mom got nailed for $550 on her Prius-V. Seems to be pretty typical across brands. She got a good deal on her car, but I still bet the Toyota dealer made more on her car than the BMW dealer did on mine.

  • avatar
    Felix Hoenikker

    Back in the pre internet days, I was shopping for a new car using ads and the print price books available at my credit union. One dealer ran an ad with a very low price on a model I was interested in. It had very fine print that totaled about six mutually exclusive discounts and then subtracted that price from the MRSP.
    I took a test drive and expressed interest in buying the car that day. The salesman was gleeful until I pulled the add our of my pocket and stated that I wanted the advertised price. He hemmed and hawed and tried to explain the dubious scam that was the ad. I countered that the only number I could read without a magnifying glass was the total discount. Since they had no intention of selling the car at the advertised price, I left without further ado. But, I did mention their
    sleazy sales tactics to friends who asked for recommendations for new car dealers. I would like to think I helped drive them out of business a few years later.

    • 0 avatar
      danio3834

      This is very common. Back when I had less responsibilities in my life, I would sometimes spend a saturday afternoon just checking out new and used cars just to see what was what.

      My favorite thing to do was pick out the ads where there was NO WAY they were selling that car for that price, then go check out those cars.

      One particular dealer was notorious for consistently “making a mistake in the ad” and “accidently” putting the wrong price in. I loved to take these cars on long test drives and then attempt to buy them for the price in the ad. If they actually DID sell to me at that price, I could probably have turned the car around for a profit. They never did sell one to me.

    • 0 avatar
      Secret Hi5

      My favorite was the fine print saying that the GIANT FONT SUPER LOW PRICE reflected a trade-in or cash down payment of (insert X amount of thousands of dollars). What??!

      • 0 avatar
        nikita

        That is the low monthly lease payment scam. “Capital reduction” is the down payment. If $3000 up front (not counting tax, license, etc) on a 30 month lease, that’s essentially $100 a month more than the advertised payment.

  • avatar
    Kendahl

    To get the lowest price out the door, show around making it clear that you are doing so. That cuts through the BS with dealers who want your buisness. If you need financing, treat that as a separate transaction.

    Shopping doesn’t always require a lot of traveling. My mechanic bought a car from a dealership in another city when the local dealer proved intransigent. All negotiations took place via telephone. He took his check to the dealer and returned home with his new car.

    • 0 avatar
      George B

      The fastest way to get the best price on a widely available car is to pretend to be a business asking the dealer to bid on a car, implying that the car is for the company. Do all negotiations non-real-time by email and negotiate for lowest out-the-door price. This cuts through all the worthless time wasting sales tactics and get you a price number.

  • avatar
    Zackman

    In 1990, after I had researched for a year, the Plymouth Acclaim we eventually bought was easily negotiated by me spending time at the library looking over and writing down the figures from the NADA books in the research area, we then went to the dealership, picked out our car, quoted what we would pay and we got it for that price.

    I’m sure there still may have been some cash left on the table I didn’t pick up on or wasn’t savvy enough to know, but we were very happy with the car – so happy we drove it 10.5 years.

  • avatar
    bumpy ii

    I do it the easy way: pick a price I’m happy with, write a check for that amount, stick it in my pocket and find someone willing to take it. They can juggle the numbers on their side as much as they like, as long as the total matches mine.

    • 0 avatar
      Dukeboy01

      I like this plan. I think I’ll try it the next time I buy a new car.

    • 0 avatar
      redav

      I agree.

      Buying a car isn’t a contest. You aren’t competing with the seller or other buyers. There is something you want, something that has value to you, and if you can buy it for an amount equal to that value, you should be satisfied. If a dealership won’t/can’t accomodate that value, move one.

      • 0 avatar
        kkt

        But pretty much all car dealers DO look upon it as a contest. The money is a zero-sum game, and their goal is to put as much of it in the dealer’s pocket instead of the customer’s as possible. The customer’s choice is how hard they want to play the game.

      • 0 avatar
        burgersandbeer

        You are definitely competing with other buyers. It may not be spelled out as clearly as it is on ebay, but every sale is an auction. That’s the nature of the market. If the dealership thinks another buyer will offer more, they will stop negotiating and let you walk.

        This is another reason why Bumpy’s advice is great – you need to walk away when you aren’t comfortable with the price, and not get sucked into a bidding war. If you aren’t comfortable paying the market rate, then you need to re-evaluate how much you want that particular car.

      • 0 avatar
        Pch101

        “You are definitely competing with other buyers. It may not be spelled out as clearly as it is on ebay, but every sale is an auction. That’s the nature of the market. If the dealership thinks another buyer will offer more, they will stop negotiating and let you walk.”

        No, this is generally not the case. This really isn’t how the dealership sales model works.

        Buying a car can be compared to buying an airline ticket. On a given flight, different customers will pay different prices. Some customers are willing to pay more than others for the same flight. The airline uses software algorithms in an effort to identify whether you will pay a lot or a little, and then charge the sort of price that a buyer like you is willing to pay, with the understanding that some buyers are more price sensitive than others.

        Dealers attempt to do the same thing, except that they use humans who wear bad suits and who drink bad coffee to do what the airlines do with automation. If you are a buyer who is ultimately willing to pay a high price, then they are going to try to get you to pay a high price. If you are truly a low price buyer, then the dealership will give up once they realize that you are not going to be persuaded to pay more…but before that happens, the dealership will need to go through its process to make sure that they aren’t leaving too much money on the table with that particular customer.

        Unless a car is in very high demand, a dealer will generally accept a low but reasonable price from you, but only after it is clear that the dealer can’t do any better with you. (In the supply-demand equation, vehicle supply is generally not a problem; usually, they make more than enough units to satisfy demand, so there rarely any issues of scarcity that will cause dealers to push up prices due to competition between buyers.) But they aren’t going to give a mini to someone who will pay more with a bit of cajoling.

        Some dealers will make more effort to extract that cash than others. The commission system motivates salesmen to pursue margin, but their managers also have to worry about managing inventory and pushing volume, which produces what can seem to be contradictory goals.

        As is the case with the airlines, the dealerships can’t afford to sell everything at a discount. If everyone gets the rock bottom price, then the dealership won’t earn enough to stay in business. At the same time, the dealership generally can’t afford to allow serious and savvy lowballing customers to buy from someone else, so the reasonable but low priced buyer can’t just be ignored, either.

        Again, it’s a matter of them figuring out what kind of buyer who you are. Your job is to play the game well enough that they eventually figure out that you’re truly a low priced buyer and that you can’t be swayed otherwise. Many customers pretend to be low priced buyers but aren’t serious about it, and those who are just faking it will be expected to pay more.

  • avatar
    Geekcarlover

    When going to a dealer I’ve learned to emphasize the price I’m willing to pay off the lot. If I have $7,000 for a particular used vehicle, that’s what I have. Any fees above that come out of their pocket, not mine.

  • avatar
    Glenn Mercer

    Certainly good points in this piece. But as always in this century-old industry, it pays to look to history to see WHY this kind of behavior arose. It isn’t just random. Decades ago the factories decided there was no way they wanted to tie up their capital in vast inventories of cars on dealer lots. Especially as demand fluctuated up and down, meaning such inventory would often plummet in value as it was “stranded.” Thus we got a (sort of franchised) dealer system, in which the dealer buys the car and is stuck with it — it is up to her or him to resell it for as much as he or she can get. That is why they are “dealers” rather than “retailers:” they almost never have the option to return unsold stock (as do many bookstores), or to not pay for the car until it is sold (as many hard-goods retailers do), etc. The dealer is on the hook for the car as soon as it leaves the factory. The factory comes up with MSRP just because someone has to have some sense of the approximate price, but as the author points out, it is a fiction. (Another more modern reason to have an MSRP is to get one’s car popping up in online searches: if a search website has categories like “Cars between $20,000 and $25,000″ one might screw around with a $25,500 MSRP to get it into the lower search bucket.) Note that I am not saying this system is good or bad or that dealers or OEMs do or do not mislead people or make a fair profit or not. Only pointing out the history — we got here for a reason. I personally think this reason has atrophied, and we are now moving entirely to an “invoice up” versus “MSRP down” world. But it takes time for OEMs, dealers, and consumers to evolve. Habits die hard. Put it this way: next time you’re in a grocery store, try asking the retailer what her invoice price was for the lettuce, or whether he has any hidden manufacturer discounts on the Oreos… (grin).

    • 0 avatar
      mike978

      Good points, however for that lettuce there are no adds like delivery, refrigeration etc. Just sales tax.
      I can see why they play around with MSRP but the delivery cost is a manufacturer decided fixed cost that is added to every car and is non-negotiable. It also covered a core part of the process. We don`t get extra fees to cover tires, R&D or other stuff. It should all be in one list price, from which the customer and dealer work down. The invoice price should also include the delivery cost and work up from that – whatever the customer prefers.

  • avatar
    Kevin Jaeger

    I can’t wait for the day I can shop online and place my order directly with the manufacturer. The dealer can then try to earn my non-warranty service business. Everyone but the dealers will be happier when that day arrives.

    • 0 avatar
      Ron B.

      Exactly!!!. I do not know how the dealership setup works in the USA but here in OZ the dealers are sent a number of cars. it doesn’t matter if they sell for less than the set price because they in fact receive a bonus payment at the end of the financial year for each sale from the manufacturer. This bonus is very lucrative (and folks wonder how GM et al got into trouble??) .
      A lot of dealerships are advertising 1% to 0 % interest loans just to get the cars off the floor. And that is all makes not just Chery or great wall.
      The money is in the servicing and parts.
      check out a service contact deal and think about the $500 oil change etc.

    • 0 avatar
      ott

      That would be fine, at least until you need warranty work on your vehicle and the local dealer is closed due to lack of business… I guess you could send the car back to the manufacturer for warranty work; ‘please allow 6 – 8 weeks for delivery…’

      • 0 avatar
        el scotto

        Paradigm shift or some other marketing buzzword. Find some money making inclined shop owner to buy the XYZ Motors repair franchise for doing warranty work and selling parts.

      • 0 avatar
        corntrollio

        People have figured out this problem in countries where they don’t have franchised dealers. Generally speaking, in these countries, you can find mechanics who will do warranty work.

        People would be better off in such a system too. When local dealers aren’t doing warranty work, they are generally ripping you off.

  • avatar
    ChiefPontiaxe

    My favorite dealer tactic was in Miami in the 1980′s, where one dealership offered a free “car phone” with every new or used car purchase- remember, this was when car phones cost more than $1000 (and people could get a dedicated phone in their car). Turned out that the “car phone” was really a cheap $10 landline phone shaped like a car.

    • 0 avatar
      bumpy ii

      TV or radio: “Win a new Toyota!”

      in-person: “Here’s your new toy Yoda!”

      • 0 avatar
        SuperACG

        That was a contest for Hooters waitresses with beer sales. I’m sure management told the staff “sell the most beer and get a ‘toyyoda’” but no doubt the rules and regs were published in print. Remember, the waitress who won the contest successfully sued and got any Toyota she wanted.

  • avatar
    SuperACG

    The amount of Due Diligence one must perform has gotten out of hand to where people just don’t want to deal with it. One dealer I worked for advertised a compact sedan for $99 a month. A stripper model in silver (we only ordered stripper cars in silver), stickshift, lease with all profit stripped away, and $5700 down payment. We NEVER wrote up any of those deals, but we got a lot of phone calls.

    As for me, I’m looking for a shop that will work on my car and not gouge me on parts prices. I just burned a bridge with one that asked over $300 for something I found for $89 on the Internet. Their response was “we gotta make a living.” My answer was “well you’re not getting my business.”

    • 0 avatar
      kvndoom

      Find a good shadetree mechanic, and buy your own parts online. Rockauto has great prices. My stepdaughter got both her upper control arms replaced for $300 total, we bought the parts and our mechanic put them on. It would have cost her over $1000 at the dealership.

  • avatar
    mistercopacetic

    I just recently completed a 2-week odyssey of negotiating with dealerships in my area for a brand new 2013 model car. This is the first car I bought for myself, but over the past 15 years I have been involved with almost every car purchase in my extended family. I’ve learned several things:
    1) MSRP is meaningless.
    2) Buyers who walk into the dealership want to buy the car.
    3) Buyers are stressed because they think the dealer has all the power, which they actually don’t. When you explain “freedom of contract” to people, their eyes widen in awe.
    4) Buyers don’t understand why dealers make it so difficult to take our money, when we are ready and willing to give it.
    5) Dealers don’t give a flying frig about the buyer’s time.

    and most recently:
    6) The internet has completely changed car buying. Instead of sitting in one dealership for four hours, being gradually worn down and questioning your own sanity, nowadays a savvy buyer can spend a cumulative four hours in the comfort of their home/office trading emails with dealers. The more dealers you contact, the lower the offers. Dealers hate it. Buyers love it. I may have gone overboard forwarding emails from dealers to each other, asking to match prices. I couldn’t believe how easy it was to save money this way, I’ll never let anyone I know buy a car any other way again.
    7) Dealers will eat each other for a single sale.

    Buyers have significantly more leverage over dealers than ever before. There is nothing unique about most cars. Major manufacturers sell 100k of their most popular models in single country in a single year. Except for the end of the year when supply is low on an outgoing model, for most sales there is no such thing as “we can’t find the color you want…how about a different color?”

    Buyers really don’t care about MSRP anymore. The dealership model is being broken. It’s a race to the bottom. The dealers that understand this are the ones who will adapt and survive, or jump ship for other jobs.

  • avatar
    chicagoland

    “I just want to order online and get it shipped”

    Later, “Oh, it’s so slow” “My head hits the roof” “These seats are awful”

    Can’t just return it for full refund if it doesnt “fit”.

    Relity check, Dealers aren’t going to ‘disappear’ because internet savy people wish for it. Business is business, and when dealers close, tax base shrinks in towns. Guess who complains of higher property taxes? The same ‘grinders’ who expect free new cars.
    Some gleeful online shoppers want ‘brick and morter’ retail store to close and do “all on Amazon tax free”. Once more stores close, online sales will bne taxed to the hilt. There is no such thing as a “free lunch”.

    • 0 avatar
      mistercopacetic

      I think you are missing the point. Buyers don’t want “free new cars.” They are willing to pay a fair price for their cars. The problem is they have no idea what a “fair” price would be, so they shop around to find it. The buyer doesn’t care what the dealer paid for the car, they want a fair price. The current way new car buying is set up, the onus is on the buyer to determine what a fair price is. If the dealership is selling cars at a loss, the blame is on the dealer for selling things they can’t afford and operating in the red, not the buyer for getting a good deal.

      In my experience, the biggest overall problem with the new car buying process in the US is that there is no point in the process which could be described as customer-focused. The buyer is a walking wallet from the moment they walk through the door until they drive off the lot in a new car. Other industries, even highly profitably ones, are much better at responding to customer concerns. There are no estimates or explanations of how long things take to prepare, what will be prepared, how much things will cost, and most importantly why things cost what they cost. The entire process of new car buying is focused on the benefit to the dealer. There is nothing about the process where the focus is on the customer. The best industries always survive because they ask a simple question of all their employees, from corporate boards, to middle managers, to line employees, to stock-pushers, mailboys, engineers, marketers, finance, etc: “If what you are doing does not serve the customer, don’t do it.”

      I almost feel like employees at dealerships live on a different planet, maybe they are subject to certain training to convince them of the certainty of relationships between completely unrelated concepts, i.e. “We need to sell cars at high profits, or else my family won’t eat/schools will close because there are no taxes/people will lose their jobs.” One of the signs of a failed business model is resistance to change and adaptation. As other commentators have noted above, people will be buying new cars for the foreseeable future, whether or not individual dealerships listen to their clients and change the way they do business. For all the complaining dealerships do, I wonder how many gated communities are filled with dealership owners who have the same “persecuted majority” complex.

      Of course, new car dealerships in the US could decide things are fine as they are, and follow the examples of similar highly profitable businesses that were either unable or unwilling to change to meet customer expectations. See, for example, Kodak, Polaroid, Blackberry, etc.

      • 0 avatar
        burgersandbeer

        Agreed. The worst part is the sales associate typically offer zero value to the process. The dealership itself is useful in providing a location to physically inspect the car and then drive it. The sales associate is most often an obstacle to an efficient deal, existing only to part customers with as much money as possible.

        It’s frustrating to spend 15 minutes online and walk into a dealership knowing far more about a target car than the sales associate. A recent TTAC story even discussed how the sales staff often can’t be bothered to invest in the training necessary explain modern infotainment systems. And yet they act entitled to a fat commission.

    • 0 avatar
      burgersandbeer

      This is already the case in California, as the state has successfully forced Amazon to collect sales tax on orders purchased from CA. Other states that force Amazon to collect sales tax are Kansas, Kentucky, New York, North Dakota, Pennsylvania, Texas, and Washington.

      Provided you can find free shipping, I think online retail still has an advantage. Also remember that Amazon also agreed to increase their warehouse presence in CA, and will likely do this in other states as well. Now that they have to collect sales tax anyway, they need to decrease shipping times and cost to maintain an advantage against brick and mortar stores. Point being, ordering online isn’t necessarily costing your state jobs anymore. Distribution centers and couriers get paid too.

      The market will adapt.

      • 0 avatar
        danio3834

        “The worst part is the sales associate typically offer zero value to the process. The dealership itself is useful in providing a location to physically inspect the car and then drive it. The sales associate is most often an obstacle to an efficient deal, existing only to part customers with as much money as possible.”

        If this is your experience with a salesperson, you ought to leave that establishment immediately.

        Over the years I’ve developed some relationships with some salespeople who always go out of their way to make you comfortable, be up front about all costs, fees and pricing, work hard to find the vehicle you want, show you alternatives, work to get you a fair deal, bend over backwards to make the sale, ensure the car is perfect at deliver, spend as much time as needed explaining all the features and showing you how to personalize all the settings then follow up to ensure everything is to satisfaction.

        These are the people I send my people to and I deal with. The dealer experience does offer some significant value in this regard. Painting all salespeople with the same brush isn’t fair to the ones that earn their commission.

      • 0 avatar
        jonnyq

        I’ll second danio’s opine since I agree (and can’t reply to his post?).

        As much as we would like buying a car to equate to buying a refrigerator, we have to test the product to be truly happy with the purchase. And if we buy new cars more than once every 10 years, having a salesperson in our court does smooth the process, i.e. the salesperson knows you and knows you’re serious and not a time waster. He/she also trusts you enough to just throw you the keys w/o requiring a copy of your driver’s license, proof of insurance, etc. that a dealership you don’t have a relationship with will require. And finally if you’ve proved to be a savvy customer in past transactions, you can sidestep the majority of the sales & F&I BS and just negotiate the final number to both parties’ satisfaction.

        If only the real estate market would operate this way much grief could be spared. What I mean is, the next time you want to make an offer on, to make it easy, say a new, unoccupied home, ask to be allowed to live in it for the weekend to be sure you’re happy before you sign.

      • 0 avatar
        Bill Wade

        I’m with danio too. I’ve actually purchased cars from different manufacturers because the salesman I dealt with jumped to another dealer.

        The salesman can in fact be your friend in some cases.

  • avatar
    sideshowtom98

    Reading these car buying stories, especially on The Truth About Cars, leaves me perplexed. For many years, third parties have made car prices available to anyone willing to pay for them. Since the Internet, you don’t even have to pay, and the sites include incentive cash by vehicle that the dealers might ‘forget’.

    Edwards.com’s True Market Value, TrueCar pricing dealerships, COSTCO and Sam’s Club pricing deals, all make buying a car the easiest it has ever been. I recently bought a 2013 model, priced it thru all of the above, and the prices for all were within $100 on $32K final price.

    I ended up using COSTCO, which guarantees you dealer invoice, and negotiated an additional $1600 off because the model I wanted had AWD, which I would never use. Rather than get the car from another dealer, in FWD, the dealer knocked off the price difference between the two.

    Buying a new car is easy and simple, use the services to know what the cars are selling for, use that as a starting point. Negotiate your best deal, in an hour or two. If you know you got a good price from a dealer, buy. Your time spent running all over town and grinding some salesman for an additional $50 is counter productive.

    • 0 avatar
      corntrollio

      Costco does not guarantee you dealer invoice last I checked. In fact, if you negotiate yourself, in many cases you can get a lower price than the Costco-price. The price you get depends on the type of car and some other factors. For some cars, you may be within a few hundred dollars of invoice, but for others (such as luxury marques) it could easily be almost $2000 above invoice.

      What the Costco auto buying program does mean is that you will get a decent, but not rock-bottom price, and you will deal with the fleet manager typically instead of the regular up salesman. There can be benefits to this, but you can also email fleet managers as well and negotiate yourself.

  • avatar
    olddavid

    Mooches. People who want something for nothing.

    • 0 avatar
      zeus01

      “Mooches. People who want something for nothing.”

      Are you referring to:

      a) Customers who want to get a new car for free?

      Or b) Dealers who want to load up the back end of the deal with useless add-ons that give the dealers a “tip” of several hundred (or several thousand) dollars while really offering nothing of value to the buyer?

      Just wondering.


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