Over the years TTAC has witnessed many skirmishes in the war between those who support car dealers (mostly car salespeople) and those who oppose car dealers (the rest of the known sentient universe). It’s time to put this particular argument to rest. Car dealers suck. Here’s why: buyers never know what kind of deal they got.
It really is as simple as that. Sure, there’s anecdotal evidence up the wazoo about pushy, intimidating, lying, cheating, incompetent, scummy salespeople. But here’s a little secret: Mother Theresa could be the salesgal and Gautama Buddha could be the F&I guy for Allah’s Ford Lincoln Mercury dealership and I still wouldn’t trust that I got a good deal.
Between sticker price, invoice price, dealer add-ons, incentives, rebates, discounts, hold backs, various employee/college grad/military/loyalty/your mama cash backs, weekly/monthly/yearly manufacturer-to-dealer quota deals and the other probable dozen or so on-again, off-again programs of which I have no knowledge, trying to make a good deal with a car dealer is a bit like trying to make a good deal with the devil himself.
Even when I think I made out like a bandit there’s always that lingering smell of rotten eggs in the air. And if I think I got a good deal shouldn’t I just be happy? Aren’t dealers entitled to make a profit, too? Absolutely not. Given the choice between thinking I got a good deal and knowing I got a good deal, I’ll take the knowing each time.
Unfortunately, after hearing twenty different price quotes from half a dozen dealers, each one implying it was as good an offer as I could get (until the next one, evidently), the knowing is nigh impossible. And even if the dealer is absolutely, positively, completely, 100%, without-a-doubt losing their shirt on the deal, 1) I’m not going to believe it because over the last hour(s) of sales negotiations you’ve lowered your price more than once so I’m getting the sense that there’s wiggle room, and 2) my concern isn’t whether or not you lose money, but rather that I get a good deal.
Car dealers, are you getting the point here? I don’t care if you don’t make a single red cent. I don’t care if the new salesguy I’m working with hasn’t made his first sale yet or if you go out of business and can’t feed your kids because of that great deal I just got (okay, I actually do care about the kids, but not enough to buy rust-proofing). I want to know I didn’t get ripped of while buying my brand-spanking-new massively depreciating “asset.” That’s it.
And assuming for just one infinitesimally small moment I actually did care if you made a tidy profit, just why exactly would I trust you to determine for me what a fair share of my money in your pocket is? I don’t know what you paid for the car, what it costs you to keep the car on the lot, or what kind of money/bonus you’ll get from the manufacturer when you sell it to me.
I have zero knowledge of your financial situation—except for the fact that you want to maximize your profit on the car you are trying to sell me. Which is absolutely groovy and above board given this wonderful free market society we live in. But don’t expect me to like it when your profit comes from my (non-self imposed) ignorance.
Yes, ignorance. Despite the plethora of pricing information on vehicles available online, there’s absolutely no way for the buyer to be aware of what a car costs you, and thus, what a fair deal for you would be.
A quick aside: while we’re all busy celebrating and abiding by that wonderful capitalist free market system, let’s not look too far behind the curtain at all those laws you passed in your state legislature to make sure that you were the only way I could continue to get my fix on those shiny dollops of addiction we call new cars.
If I never know what kind of a deal I got then I don’t know if I can trust you and if I don’t know if I can trust you then I’m not going to feel comfortable in my dealings with you and if I’m not going to feel comfortable in my dealings with you you’re either going to have to learn to deal with all the negative backlash that’s thrown your way or find a better way to do business and I guarantee you the only thing longer and more painful than this run-on sentence is the truth of said same.
I’m tied to you for new car sales and warranty work and the only ones who want it that way are you. That sucks. You suck. I’m done. We’re done.
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That was awesome Marcus. I just bought a new vehicle and everything was fine until I got to that A-hole called the F&I guy. He tried to jam me up for so much extra cash I was about to walk. He was extremely sneaky about it too. In the end though, I got out of there and took him for another $300. Needless to say but I will visit another dealership for warranty work if needed.
And this is different than any other purchase how?
I’d much rather buy a car than buy a mattress.
I push for the best deal as hard as anybody. But as I’ve gotten older, it has gotten clearer and clearer to me that there is a point of diminishing returns. If you’re going to be dissatisified unless you’re sure you got the best possible price, then you’re going to be dissatisfied.
Awesome!
Everything you say is true.
I used to sell cars, so I’ve seen it from the dealer’s side, too. That being said, however, I will defend some (definitely not all) salesmen. When you’re low on the sales totem pole at the dealership, you’re kept in a state of roughly equivalent ignorance as the consumer. I was not told what a good deal was for the dealership, and when I asked, I was told that I wouldn’t be told because that would make me fight harder for every last cent. It didn’t matter that that wasn’t the way I operated. I tried to be an honest salesman. But after six months of making shit for money, working 65+ hours per week, and having to deal with customers with rightfully-obtained chips on their shoulders as well as the downright mean owner of the dealership and his greedy son of a bitch minions, I packed my grip and got the hell out of Dodge (or maybe I should say Ford).
As my dad is fond of saying, “everything’s crooked.” Six months of selling cars proved it.
Are there actually any dealers that suck less?
CarMax is okay, I have bought both new and used from them, but as I learn more about cars and the process as a whole, the value of their premium pricing has waned.
SO….How much does your grocer pay for a box of Cheerios? Or a loaf of bread? Or bananas?
The truth is, the right price is the price a buyer will pay and a price a seller will sell for.
Do your self a favor, go to Edmunds/Truedelta or what ever, figure out what you want and what you will pay for it. Go in, tell the sales guy/gal, sign the papers, take the car home. If you want to spend the time and energy necessary to wring every last cent out of the dealer, then you should be prepared for them to do the same to you. I have had the good fortune to deal several times with a great sales guy at a pretty good dealership.
I must admit the “finance guy” wasn’t quite a pleasant, but as I already had financing arranged, all he could do was try to beat my in-place deal, which once he could, and once he couldn’t.
I have always felt like the buyer helps create the atmosphere, if you go in trying to beat them, they have to try and beat you. If you go in with reasonable expectations, more times than not, the buying experience will be good. AND it helps to remember, if you are not comfortable, go someplace that you are.
The problem for the Detroit automakers is that the prices are too good.
Their dealers compete against themselves in ways that complete dilute the brand image, and in ways that force the dealers to demand lower and lower prices, keeping the Detroit automaker accountants up late cost cutting.
Killing dealers and brands will be bad for price competition on Detroit automaker cars, but that’s a good thing. Much better than the Detroit automakers being on the dole.
Competition between businesses is good, it is the only thing that makes capitalism work. But when a business competes with itself that’s just stupid.
Independent dealers are a good thing with regard to warranty work. Who has a better incentive to do warranty work, an independent dealer that will be reimbursed by the manufacturer and make a profit, or a manufacturer owned dealer, where the manufacturer will simply lose money by doing the work?
@Karesh
I don’t think there are any other situations where you buy products where you are instantly considered a mark the moment you walk on to the premises. And if you haven’t prepared, and know enough to protect your wallet, the dealer will lift some cash you otherwise could have kept.
Heck – dealers are sent to to be trained in order to make it happen.
The internet’s your friend, as far as what it’s supposed to cost you is concerned – at least you can hit them with a benchmark and take the negotiation from there.
I get a kick out it when people state, “I got a good deal on my new car.” Oh you did! How do you know this? Cause the dealer said so! Please. What’s he gonna say, “I wish a few more suckers of your ilk would grace our showroom floor.”
Bottom line is, the dealer likely just made a nice chunk of change off of you and will continue to. That’s the way it works..
And if I think I got a good deal shouldn’t I just be happy?
Yes. It’s the only way to stay sane. There’s no way to confirm that some schmoe on a message board got a better price. People lie all the time! Once I take delivery, I don’t look back. Life’s too short.
I do agree that dealers in general suck.
A not so little known fact is that most car dealerships are simply small (or at least) family run business – with a professionally designed front end – that being the marketing materials, showroom layout, etc. All the stuff provided or developed by the manufacturer.
When combined with what constitutes “acceptable behavior” in the retail end of the industry – these types of organizations tend to develop ethical standards that would not be tolerated anywhere else.
I’d simply love to go to your business and buy a product at zero profit. See how you like working for free.
When you go to Best Buy for a TV you don’t know the markup?
Do you know how much Dell is making when you buy a laptop from them?
Amazon a book?
When you buy an airline seat you don’t know the markup?
When you buy almost any other product you don’t know the markup.
Sunglasses at a Gas station…I have a wholesaler friend he pays .50cents per pair in China, marks them up to 4.79 and the gas station sells them for 9.99. Why aren’t you mad about that?
Why does it have to be different with a automobile? Why are you sterotyping all us salespeople with the same brush. When I was at Lexus all of the salespeople have degress from University, we speak multiple languages are polite straightforward and professional. At my current position in Fleet Leasing again same thing.
This has to be the most oblivious editorial I’ve ever seen posted here.
One of the problems with car purchases is that negotiation is an expected part of the process. I hate that General Mills made their cereal boxes smaller and it’s really a punk-weenie move to squeeze more money from customers, but since it’s not a negotiation people don’t pillory the company. Car dealers are in kind of a rough spot because everybody knows MSRP and for some reason expects to waltz into the dealership and waltz out paying the same money for a car that the dealer paid.
I’m no fan of car salesmen, or salesmen in general (I don’t trust anyone, ever, for anything if there’s money involved) but I recognize the system for what it is. Best way to go about it? Save up about $10-15000, do your research, find a lightly-used car, work a deal that you find acceptable, and buy it cash-money. Negotiating this rate and these terms with this warranty etc. will just get you screwed. If it’s inconceivable for you to save up $10-15,000, certainly don’t go out and buy a $35,000 car because that is a rather stupid thing to do, and bad decisions have bad consequences. Then again, people do stupid things for love, and I know I’m just as vulnerable as the next guy to going ga-ga over a car and getting bent over at the dealer…
It’s too bad manufacturers use dealers anyway. If you want a Toyota for example, why couldn’t you just go to the Toyota Factory Outlet? Yep, I know I don’t know how the whole convoluted system works, but if there was a way to cut out the middle man, it would be nice…
I did learn recently that many, perhaps most, dealers not only give their customers the shaft, but their sales force as well. From what I understand, they promise their sales guys big bonuses if they sell so many units, but then they hire so many sales staff, that it’s impossible for them to make the numbers. I guess that’s why there’s always high turnover in the business.
GM really shit the bed on this one. Saturn had a great idea that could have gone one step further…just company-owned delivery & service outlets for their cars. No haggle, no pressure, full transparency, come into our shop or order your car online and it will be delivered here as you wish, etc. I want the manufacturer to make a (small) profit on my sale, because I want them to continue to exist. But I don’t any sleazeballs putting their hands in the pot, also.
In fact, this may give Saturn dealerships a reason to continue to exist, if they could only work to sell all other brands (would never happen due to franchise laws, but oh well one can dream).
They already do this in the UK and probably elsewhere.
Buying a car is the second biggest purchase in your life. In no way can it compare to a TV, let alone a box of cheerios. It’s more like buying a house.
The problem with comparing cars sales to sales of bananas, 1981.911.SC, or dell computers, Point Given, is that those transactions cost tens of thousands of dollars less, happen far more frequently and have no haggle expectations (for the most part). Also, with much more frequent transactions of those goods come come an equilibrium of price between buyer and seller.
And @Point Given, as I said in the piece, I don’t expect you to work for free, but I don’t trust you to tell me what kind of profit you need to stay in business.
And what’s with the obsession with how much markup they make? How much profit does Costco make on a flatscreen? (FYI, a lot) Nobody cares because it’s cheaper than Best Buy, with a better return policy, and you didn’t have to be hassled by a smug pimply troll.
People only freak out about the profit that the Detroit automaker dealers make because they are (generally) such assholes. Nobody is like, s**t, is that invoice price on msn.com really what the Honda dealer paid? Oh crap, now I can’t sleep, the dealer may have gotten a better-than-invoice price for being a volume seller.
Still I can see how customers think that way. That’s how the Detroit automakers treat suppliers. It isn’t “give me the best product at the best price.” It’s “you’re going to have to cut the price until you aren’t making any profit.”
Here is how to get the best price. Go to several dealers. Test drive the car. Be polite. Show a lot of interest. Leave. They will call you back. Return to the dealer that gives the best price. Don’t worry about how much the dealer made.
Having been a dealer and dealt with retail buyers, I can state that the most important thing is whether the customer thinks they got a great car and a decent deal. Some folks do get great deals, others not so good. And hot merchandise is the best situation of all – no dickering required, take it or leave it. Did that person who paid sticker plus for a hot unit pay too much?? Or did they get a decent deal?
Also, most car deals are somewhat complicated involving multiple issues such as trade, finance, credit, down payment, etc. Figuring it all out to make it happen is work – and trades involve risk. Then there’s the issue of consumer fraud which is much more rampant that one might believe.
The bottom line is that new car sales contribute less to dealer profits than one might think. The real money is in service.
I don’t care how much the dealers make. However, I want to be able to buy a new car which is mass produced consumer item that is virtually identical to thousands of the same units, like I do every other stinking mass produced item. I want to be able to do the same thing I do with every other item. When I look in the paper and see an ad at Best Buy for an item I have a reasonable expectation of purchasing said item at said price (not counting Black Friday loss leaders). I have virtually no chance of that at dealerships. When I spend 15, 20, 25 30 or more thousand dollars, I want my experience to be pleasant. I don’t want the seller to be abusive, curse me out, ignore me, or insult and demean me. If I ask for a product demonstration ( test drive) I expect to be given a product demonstration. I want to be able to expect that if I send my mother, a young friend, a recent immigrant or someone with a slight mental handicap to purchase said item that they will be able to purchase the same without having them ripped off simply because they are weak and not as savvy as I am.
This will never happen
All dealers must die
This is really less of an editorial and more of troubled soul lamenting his inability to rise above the concept of the free market.
Full Disclosure – I am a dealer. My family own several stores on the East Coast and I manage our Mitsubishi operation.
The bottom line is this…The market sets the value for all commodities. Any good or service is worth what the market will bear, only and always. This is applicable across all transactions – wholesale, private and retail – for all commodities – new cars, used cars, diamonds, oil, bacon, lobster, foot massages, etc.
You really wanna know what I pay for things? Use this simple formula.
1. Select a piece of property you think would be suitable for a large-scale retail operation.
2. Procure financing for property. (It’s a lot of fun)
3. Develop and zone property in accordance with all state and local regulations. (Good times!!)
4. Enter into franchise agreement with disconnected, inefficient monolith and agree to build hideously ugly, wildly expensive showroom. (Marble and Glass, Yay!)
5. Build your workforce by interviewing literally hundreds of pathetic goofballs in the hopes that, maybe, 15-20 quality people can be found. (Repeat as often as necessary)
6-20. Tons of other stuff you don’t care about.
21. Secure floorplan financing.
22. For new cars, battle other larger and more established dealers in your region for allocations of the most desired models and fail.
23. For used cars, go to auctions and compete for the best units against larger, more established dealers from all over the world! And usually fail.
24. Profit!!
Or…
You could research the market, determine a median value for the commodity you wish to purchase and find a dealer willing to transact the commodity at a price below the median (I’m waiting for your call!).
Your choice.
I think one of the main causes for the feelings of indeterminacy is that at the end of the day neither the customer nor the dealer really know how they made out in the deal. The editorial nicely summarizes the reasons for a car buyer’s uncertainty (i.e., customers don’t know how much cash they left on the table). However, after you walk out of the dealership with your new car, the deal is not over for the dealer.
I imagine that a healthy majority of retail (non-fleet) auto transactions involve a trade-in, and for almost all of these the dealer does not have a customer lined up to purchase your trade-in at a set price. The dealer still has to sell your car, and he doesn’t know exactly how much he will get for your car. He may have a pretty good idea, but he is not certain.
The dealers’ indeterminacy with respect to the majority of their automotive retail transaction breeds a culture than can both cope with the indeterminacy and capitalize on it when possible.
Why does it have to be different with a automobile? Why are you sterotyping all us salespeople with the same brush.
Because those are retail items and you generally can’t bargain on them. You can try, but it’s not going to happen. You don’t know if you got a good deal at Best Buy or not, but you do know that you weren’t played for a sucker when you made your purchase.
Hell, compare buying a car to buying a house:
* With the house, it’s a simple offer/counter cycle until both parties reach an amenable selling price. The fees and commissions are disclosed up-front, or are easily available.
* With a car, it’s a dance of payments, incentives, hold-backs, secret or conditional credits, plus any number of shadow fees that the dealer tried to tack on to boost gross margin. Nothing is up-front outside of a Saturn dealer.
I’ve bought other things that are about as problematic (I spent two weeks negotiating the purchase of high-end storage systems, the “oh, wait, no, this is my best price” every day was really tiresome) but nothing is as dirty as car buying.
The Saturn example is especially poignant. Despite making, at their best, miserable little second-rate econoboxes that weren’t all that reliable, people loved them, more than they did Lexus. If the lack of dealer bullshit is enough to make Ion owners happier than RX350 owners, that should tell you something about how utterly deplorable the typical car-buying process is.
This is the worst article I’ve ever seen on TTAC. It’s full of foaming-at-the-mouth ranting (I’d say flaming of dealers, but I know there’s no flaming allowed here…), with no substatiation of any point raised. I have to agree with 1981.911.SC, do your homework, and if you are not comfortable with the atmosphere where you are shopping, just leave. It’s not that hard. Sheesh.
TVC its not a free market or capitalism at play if I get the government to say my business is the only one that can sell said item. If I could freely buy Toyotas from both Target and Walmart then it would be a free market and capitalism
@TVC15
“The market sets the value for all commodities” Along with manufacturer subsidies, government subsidies, dealer franchise state laws…there’s very little of the free market in car sales.
100% accurate take. Dealers have ginned the car purchase system for exactly this reason. To keep the buyer in the dark. Most car dealers are among the most rapacious humans on the planet. Their god is greed. Although, being, in the main, “conservative, Christian Republicans” they can never admit that. As long as they get richer, it’s proof that the American way works. And while they are at it, they’ll spend some of that loot to buy politicians (wanna guess which party?) to keep the game rigged in their favor.
Well the chickens are coming home now, and it couldn’t happen to a nicer bunch of guys.
And yet, car dealers rank above lawyers as the profession Americans consider to be the least ethical. If I were a lawyer, I’d feel insulted.
@ Point Given
I know your example of Lexus salespeople having University degrees was meant as an example of the fine quality of people that work for Lexus dealers, but I look at it from an opposite viewpoint.
If you have a college degree and you’re working as a car salesperson chances are you’re underemployed. Even with a degree in a related field such as business or marketing a person should be able to do better than to sell cars. Car salesman is an unskilled labor job that doesn’t require any formal degree or schooling.
Now, if you were to say the people were working their way THROUGH college as car salespeople it’d be a different matter.
Open a phonebook, Sherman. There are thousands of Toyota dealers. All in competition against one another.
I’ve never bought a new car so I can’t really comment too much. My father drove company cars for years. When it came time for a new car the company had a prenegotiated price for a base model. If he wanted to add power windows, CD player, etc. there was a price list, which was also negotiated as it was far cheaper than a dealer would normally charge. He faxed in his order and what dealer he’d take deliver at. Simple as pie. With the internet I’m not so sure why the transaction isn’t similar. A new car dealer should be nothing more than a receiving agent given a minimal $$$ cut from the manufacturer. Slimy salesmen swarming the cutomer should only apply to used car sales where price is a little more up to debate. A new car is a consumer product no different from a new toothbrush. Big purchase yes, but why it has to be different from anything sitting on the shelf at the local Target store is beyond me. This would slash sales staff, make prices cheaper by ending spiffs and other crap. The laid off salesmen can go stock shelves at Safeway, haggle with people on used cars, or get an education and find honest work.
TVC I don’t have to buy a samsung LCD at the samsung store, I don’t have to buy lays potato chips at the frito lay store.
If walmart wants to sell Toyotas Can they?
No its not a free market or capitalism in this case
Car companies should do away with sales at dealers and just operate service centers for warranty support. Might even make a tidy profit. Alternatively the manufacturer could just pay to have your car serviced at any one of millions of car repair places coast to coast.
Toyota has sold cars door to door in Tokyo for years. If they can move metal without a stealership then why not here?
The first company that truly delivers dealer free sales will conquer the world.
If it will put things into perspective, you can haggle on a TV (and other stuff) at Best Buy. I’ve done it. Successfully. It’s a matter of what the consumer knows.
Dealers, internet merchants, big box stores, you name it… as long as there’s middlemen involved, you’ll never know if you’re truly getting a “good deal”. You will only get a “good deal” if you convince yourself you did. If not, well, you’ll never be happy with anything.
“The market sets the value for all commodities” Along with manufacturer subsidies, government subsidies, dealer franchise state laws…there’s very little of the free market in car sales
@Marcus
Ah, now I understand. Your real issue is with the manufacturers, the Federal gov’t and state legislatures. We find ourselves in agreement. All three are massively corrupt and greed-driven, much more so than any family-owned small business.
Count on all dealers and salesmen to lie and bullshit in Comment Streams also.
Bingo Sherman Lin!
This is not a free market, this is a very limited sales channel. This is also NOTHING like buying a house. Cars are mass-produced consumer items, period. The average American buys perhaps a dozen of them over their lifetime.
NO OTHER consumer item is as hard to buy as a car, and this is precisely due to Car Dealers. No other buying experience is so unpleasant.
I’ve said it many times before, I’ll never buy another new car until I can order it online the same way I buy everything else.
–chuck
If walmart wants to sell Toyotas Can they?
Yes. See the steps I outlined above.
TVC I don’t have to buy a samsung LCD at the samsung store, I don’t have to buy lays potato chips at the frito lay store.
As many above have stated. Cars are not comparable to bananas, chips or even TVs. Using such examples to make a point brings nothing to the debate and makes you seem uninformed.
This piece seems too aggressive for its own good. I don’t believe in large-scale dealer conspiracy to screw the consumer. Heck, given the low margins at dealerships, why do they get in business for?
Classical economy theory posits that capitalism works perfectly when human beings (”homo economicus”) can make rational, informed decisions.
Considering that cars are potent status and power symbols, rationality goes off the window. As for informed decisions, there are plenty of great websites that help one price a car, evaluate rebates available, and generally get the best possible deal.
I don’t see where the problem is, especially considering that the process is actually MORE transparent than for most other consumer goods.
Financing is definitely a sore point, but that’s the fault of financial institutions as much as that of dealers.
Great article and thread.
As an ex-car salesman/mgr I can tell you that three of the four dealers I worked for in northern NJ were creeps. They were thieves who would screw the customers, their managers, the salesmen, the mechanics and the manufacturers at every opportunity. Oh, and the girls in the office too….(literally).
I think the above advice to do your research, learn the cost, the holdback, the incentives, etc. is the best approach. Figure out in advance before going to the dealer the price you will pay for the car. If you get there or relatively close, buy the car and be happy. Don’t beat yourself up thinking the dealer might have made an extra hundred or two on you that you didn’t know about.
Is ANYBODY with a brain and some pull from General Motors reading this?
Hellooooooooooooooooooooo anybody out there?
Remember Saturn? Well, despite the fact that it never made you a penny, can you not see the handwriting on the wall, here?
MOST NORMAL PEOPLE DON’T LIKE TO FEEL LIKE THEY ARE AT A MIDDLE EASTERN BAZAAR.
OK here’s the thing, General Messup.
Take the entire Saturn pricing and put it forward through ALL GM DEALERS.
Figure out what the cars can sell for in the market place (as in the real transaction prices over the past 2 months), figure out if the vehicle is profitable for you and the dealers at that price; if so, that’s the new non-negotiable price; if it’s not profitable at that price, then CLOSE IT DOWN.
The look at the puzzle pieces left, and figure out how to make it work.
For example, if the only Pontiac that is saleable for a profit is the Vibe and the Vibe isn’t enough to sustain Pontiac, then see about moving that line to Chevrolet.
Then ADVERTISE THE HECK OUT OF THE FACT that GM is now “non-negotiable” fixed “Saturn style” pricing across the board.
Then sit down with the dealers – on an honest one to one basis – and say: OK guys, those of you with 4 or 5 star operations, on the right side of the room. Otherwise, over on the left side of the room. On the right, put pins in the big map on the wall, showing where your dealerships are.
Are there enough dealers on that map? If so, great. If not, call the 3 star dealers over ONLY IF THEY ARE IN “OPEN” AREAS ON THE MAP.
As for the guys on the left side of the room, sit them down and start writing checks. We’re buying back your business; you can keep the building, and sell used cars from GM and auctions if you want.
Then go back to the right side of the room, and start parsing out dealership franchises for Chevrolet AND/OR Buick-GMC-Cadillac with the small upcoming Chevrolet Cruze specifically renamed the “Saturn by Chevrolet”. Kind of like the original 1960 Valiant was sold by Chrysler-Plymouth dealers, or how AMC sold their top of the line Ambassador by Rambler back in the day.
Then to REALLY tell the public that you’ve changed, make 2 more changes.
Put a 6 year bumper-to-bumper REAL warrantee in place, backed by a non-government-bailed-out, real, top line insurance company such as Amica Mutual (so if GM goes under, the insurance kicks in to pay the warrantee costs). Make the warrantee EASY TO UNDERSTAND AND IN PLAIN ENGLISH. Dig out an early 1970’s AMC Buyer Protection Plan if you want to see how it was done properly before.
Then offer 6 years GM scheduled servicing to each and every new vehicle sold or leased, pre-paid, at a fixed menu price as the major option – and show, in writing, how it could save the buyer money. Have it transferable to the subsequent owners at no cost. For Cadillacs, GMC’s and Buicks, make this provision STANDARD. (Hence, a real reason for a slightly higher price on a GMC than a Chevy pickup).
Done. Now watch as your decline stops and people slowly start having some confidence in your company, again.
People buy and sell cars all the time. Saying it is different than any other purchase because of price point is silly. Unlike homes, most people will buy several cars in their lifetime. It’s a car. Set a price and get over it.
The problem is that there is no price. You bring up Best Buy TV’s…You know that a particular model is $2990 because WalMart, Circuit City and the local Mall all sell it for that. Maybe the local TV store is $3149 (increase costs of the “little guy”). If you really care, with a little research, you can determine about what that TV cost’s Best Buy. Then you either go buy it or do without. If you go in and say “Look, I know you only paid $1250 for it, I’ll give you $1500 and carry it out myself, they will throw you out…without the TV. With a car you don’t have that.
Between dealer incentives, cash back, money on the hood etc, you have no idea what a car is worth and can only base your “deal” on MSRP. I really disliked Saturn vehicles but I agreed with their sales philosaphy.
You want to haggle? Go to Casablanca. Otherwise, pay the 50 cents for damn coffee.
If dealers earn so much money from car sales, then why are so many of them folding?
If you think company-owned dealers would be better, call a company-operated “customer care center” and check out the service you receive.
In the end, though, I’m not arguing that dealers are great. Just that the sales outlets for other negotiable products (electronics, furniture, art, jewelry) are no better. There are plenty of places where you can haggle over the price of a TV. If you’d rather go to BestBuy and pay a higher fixed price, you can. Some dealers have also offered that alternative. I’m guessing (but don’t really know) that it didn’t work out.
Groceries might be cheaper on a unit by unit basis. But overall I suspect I’ve overpaid more for groceries during my life (if by “overpaid” we mean the amount over the lowest price available elsewhere in a given month) than I have for cars.
Ironically, those who put in the effort to get a low price benefit from the current system. If prices were fixed, they’d end up close to the average transaction price. If you do better than the average transaction price, you’re coming out ahead compared to a fixed-price system. Are you getting the absolute lowest price? Probably not. But then if everyone got the absolute lowest price then dealers would go out of business.
So, what are we complaining about? The need to haggle, or the feeling that the dealer is earning too much? These are two different things, and somewhat in opposition. Haggling benefits the savvy buyer much more than it benefits dealers. I bet dealers would prefer a fixed-price system. Only one problem: it’s not legal given anti-trust laws.
At least with a car you know what you’re getting. With furniture and especially with matresses, good luck.
Allah’s Ford Lincoln Mercury
If there are any gearhead headchopping jihadis out there I would guess you might be hearing from them (or him).
Why exactly would I trust you to determine for me what a fair share of my money in your pocket is?
Of course the reseller sets the profit margin? I cannot think of another industry where the cost of the product (and therefore profit margin) is known to the buyer. Most items you buy retail have a gross profit margin of anywhere from 10 to 40 percent (generally decreasing as the cost of the item goes up). I don’t hear anyone complaining that mattress they just bought for $999 cost the store 700 bucks.
Article author aside, I don’t think most people begrudge the dealer a making a profit. The big problem is the lack of transparency in the pricing, and the fact that the sticker price means nothing any more. GM tried a few years back to bring their sticker prices in line with the transaction prices by reducing the sticker price, and it was a failure. People still automatically expected at least 3 or 4 grand off the sticker price, so all it did was cost GM more margin.
The fact that the sticker price is meaningless breeds a lot of fear and uncertainty, which leads to the the fear that the guy in the cube next to you is getting a better deal than you are.
My advice – get over it. Even if the guy in the next cube over is getting a better deal, he’s probably paying only five bucks a month less than you are. Not worth getting your blood boiling over.
While not agreeing with everything in the editorial, there are indeed many sad truths about auto retailing.
Which begs the question… why? Why is buying a car such a mess?
For what it’s worth, my contentions: The single most important reality of this business is that the salesperson and the Business Manager are on commission.
No matter how friendly and chummy the salesperson or avuncular the “Business Manager” they aren’t paid to be your friend. It’s a zero sum game.
But aren’t there other all-commission professions that don’t have such a bad rap?
Absolutely. There are many sales positions whereby the seller makes their livelihood on commission or bonus or some such “variable comp”. Many are honorable and noble and extremely professional (think everything from b-to-b computers, software, to heavy industrial machinery, consulting services etc, etc).
Q: So why so different with car sales?
A: All commissioned sales hinge on two key elements.
1 – EVERY commissioned salesperson has experienced circumstances where they are tempted … at least on occasion …even if only once in a blue moon … to oversell their customers. Fate has conspired to give them an upper hand in such a way where they are sorely tempted to oversell, overprice, load ‘em up with product/services that aren’t really needed. Whatever. The only thing stopping them is either their own moral code or the built-in checks and balances in their industry.
2 – Every sale profession has some degree of checks and balances that mitigates against too much of #1. Some have more… some have less.
For example, many B-to-B sales reps have “territories” of but a handful of companies, or even a handful of departments at a single company. They may depend on literally a dozen individual customers for their livelihood. They burn those bridges at their peril.
Also, in a B-to-B setting customers are generally more objective and less emotional than in a showroom. They set the pace of the deliberations. And if the quote is big enough there may be others drawn into the RFQ analysis . …and of course the chain-of-command reviews. These are all checks and balances that militate against quick, emotional, lop-sided decisions.
Enter the new car showroom. Entirely different set of rules. The searing temptation to oversell exisits with every single customer that walks through the door. Forget the banal tripe about “building customers for life” and garnering referrals. These guys live their lives 30 days at time (in sometimes a week at a time).
Sell more this month – take more cash home to Momma. Don’t sell enough – you may be out of a job. They’re not thinking about you coming back in three years. They need to make their quota this month or the game is over for them.
Checks and Balances: Almost none. The customer willing to invest some time in reseach is one. And exercising his constitutional right to turn on his heel and walk out the door is another. But that’s about it.
From these two factors – the system of “incentives” and lack of checks and balances – flow all the other dishonest, disingenuous tactics and practices mentioned here and elsewhere.
Are there any honest car salesman? Sure. Undoubtedly there are some that have a moral code that provides the requisite checks and balances that the dealer-designed sales process lacks. But that’s a topic for another time. (…maybe RF will extend his brand and start a truth-about-moral-codes site.)
The typical process is designed in such a way that there are few checks and balances on integrity and it is stacked in such a way to reward those of questionable moral suasion.
Some bloggers have contended that in these deeply troubled times, dealers should/would change their deeply ingrained predatory ways.
I contend just the opposite. A few may see the light but dealing with most dealers will get worse. With their very businesses hanging by a thread they will do what they only know how to do.
The pressure to close and close now; to up-sell/cross-sell; and get more gross, etc will only intensify.
Not saying it’s right…just saying it is what it is.
Karesh nailed it.
@TVC15
While I most certainly have issues with manufacturers, the federal government and state legislatures, it is – in this particular instance – the dealers I have a problem with.
1) You get money from the maufacturer when you sell a car. That means you get money instead of me saving more money when I purchase a car. That sucks.
2) Dealers are asking for concessions from the federal bailout. That means I will be paying you – through the government – to stay in business. That sucks.
3)Dealers got laws passed in state legislatures to keep me from buying a new car in potentially better and potentially cheaper ways. That sucks.
Marcus, where you a lay down on a bad deal or what. This is the most one-sided opinion piece I have ever seen on this site. No facts, just foaming at the mouth. I sold Fords for a small town family owned dealership where the motto was “Screw the customer once and he will never come back. Sell him the right vehicle at a reasonable price and you will have him forever, as well as his family and friends”. We did good business, it was fun and our deals were sound. Not all are “stealerships”
@All Commenters
I’d like to take a brief moment to thank all of you for the kudos and/or criticisms. I appreciate that you took the time to comment.
Back in the day (maybe early ’80s???) Oldsmobile tried a one-price strategy, the price on the car is the price you pay. It was a miserable failure. Customers would not accept the fact that they couldn’t haggle! So to blame dealers completely for the car sales environment is not totally fair. Buyers want to negotiate! Too bad so many step into the showroom unprepared. It’s their own fault.