By on April 7, 2016

Hall Chevrolet Dealership

I worked at a Ford dealer in Silicon Valley from 1994 to 1999. It was a transitional time in the car business; a time when old-school car guys told war stories about back-lot portables stocked with sales incentives, while young consumers arrived with astonishingly accurate invoice and holdback information. We packed payments, sold $79 undercoat for $1,500, and occasionally found customers smarter than us.

By 1999, more than 40 percent of Americans were online and the Internet was democratizing information everywhere. If someone asked me then if the retail auto environment would be different 17 years hence, I would have emphatically responded yes.

I would have been wrong.

The car business and the customer experience are all but identical. The biggest change is perhaps the relocation of the smoking area.

Former Stevens Vauxhall car dealership, Crawley

Auto retail is a difficult business for everyone.

Consumers despise the car buying experience. A 2015 Autotrader study of 4,000 active car shoppers found less than 1 percent enjoy the current car buying process.

Dealer margins are thin. The 2015 National Automobile Dealers Association’s (NADA) Annual Report indicates the average new vehicle gross profit has eroded steadily over the last five years to just $1,144 and negative in-store experiences cripple costly corporate branding campaigns.

Manufacturers and dealers are nonetheless profitable, and consumers are getting increasingly safer, higher quality, lower emissions vehicles. Even so, every stakeholder could benefit from improvement in automotive retail.

Carmakers are no longer the apathetic industrialists they once were. However, the current practice of measuring customer satisfaction through OEM managed post-transaction surveys (CSI) is a farce. The automakers have guaranteed the attention of their dealers by tying CSI to everything from incentive eligibility to vehicle allocation. As a result, customers are coached in how to complete surveys and are occasionally influenced with free oil changes, car washes, and fuel. An entire industry has taken root just to help dealers improve CSI. The current practice enables trend analysis as well as competitive benchmarking. It has elevated the customer experience from atrocious to almost tolerable.

As shockingly low as the 0.4 percent satisfaction rate found in the 2015 Autotrader study is, the complete results are more damning. Fifty-three percent report the car buying experience is so negative that it lengthens their time between purchases. The level of discontent is not altogether astonishing, but that makes it no less appalling, particularly as consumers are presented with increasingly attractive alternatives, including shared mobility solutions.

Saturn Dealership

What are people looking for?

Deloitte Consulting recent published a white white paper titled “The Future of Auto Retailing.” In it, they state:

No longer do customers view their retail journeys in an industry-specific vacuum — they compare the quality of every buying and service experience relative to every other one, regardless of the product or service in question.

Car shoppers are no longer giving dealers a pass simply because that’s the way things have always been. According to Deloitte, Generation Y shoppers (born 1981-2000) value the purchase experience three times more than vehicle design. With the twin transformations of shared and autonomous mobility looming, the last thing dealers need is to alienate themselves from the largest demographic in U.S. history. This pivotal consumer segment is seeking an experience that is incompatible with today’s reality.

Process drives the purchase experience — and it’s not just the negotiation process that turns people off. In fact, 56 percent of consumers who responded to the Autotrader survey indicated they prefer to negotiate. Likewise, price is not king. The same survey found just over half of shoppers, if given the choice, would select a positive experience over the lowest price. Add to that two recent big budget, one-price failures — Saturn and Scion — and the value of eliminating price negotiation is questionable.

Tesla Store opening in Westfield Mall, London, October, 2013

What about the direct sellers?

Tesla, and soon Elio, are disrupting the traditional retail process through a direct sales model. Its small footprint, relatively low-cost, mall-based locations are manufacturer owned and operated. They feature limited inventory, offer a technology laden low-pressure sales experience, and seek to capitalize on regionally maintained stocks to deliver vehicles with 48 hours — or, in some cases, far later.

There are real differences between traditional franchise dealers and the direct sellers, but the franchise dealers have much to learn from direct sellers. For example, not delivering a car today is not a failure. Customers value the build-to-order model and are capable of waiting. Additionally, the negotiating and closing infrastructure associated with traditional dealerships may not be necessary.

Chinese Lincoln Dealership, Image: Lincoln Motor Company

The Vision

Innovation from within a mature industry is difficult. This challenge is what made Sony’s lost leadership in consumer electronics predictable, and it’s what makes Apple’s continuous parade of hit products all the more incredible. Innovation takes more than talent, vision, and capital. Self-confidence and patience are critical enablers. Few organizations possess this unique mix of attributes. Even rarer is the profitable business that elects to reinvent itself. Last year, the average new car dealer earned a net profit of $1.1 million on $52.1 million in sales.

Below is what an innovative, patient, deep-pocketed dealer operating in the entrenched two-step distribution model (Manufacturer > Dealer > Consumer) may execute if it were willing to flush everything it knows in pursuit of the optimal customer experience.

Creating a retail location where people want to be and an experience they will evangelize is difficult. But the experience does not begin with a building. It begins with the philosophy, process, and people.

Common sense dictates that a minority of customers who set foot on a lot will buy from that dealer. However, the prevailing wisdom among dealers is that each customer must be approached as a one-time opportunity. How frequently do shoppers leave a dealer, without having made a purchase, thinking they had an experience so superior they must tell others about it? It simply doesn’t happen. Dealers do everything possible to get each customer to make a decision today. This is where the stereotypical sales pressure arises.

This is not the most effective way to build loyalty or real satisfaction. The sales department must reframe its approach. It needs to unlock lifetime customer value. The organizational objective must shift from land every customer in a vehicle in inventory today, to match each visitor with the vehicle they want. IHS Automotive reports that the average American will own 10 to 13 vehicles in a lifetime. Not all of these will be addressable by a single dealer, but some will be and there are service and referral opportunities to consider.

J.D. Power has found that customer satisfaction, among premium and non-premium buyers alike, revolves around the sales process and salesperson. Deloitte, J.D. Power, and others have also found a strong consumer preference for the application of technology, namely the use of tablets during the sales process and a disdain for hand-written pricing information. Shocker alert, consumers do not like the four-square and back and forth traditionally used by dealers during the negotiation process. What’s more, people don’t like how long the purchase process takes!

The new sales process is driven by one simple customer-centric objective: match each visitor with the vehicle they want.

The innovative dealer will employ an end-to-end technology solution that enables customers to begin their shopping process outside the dealership. They may even visit the store, be introduced to the dealer’s internet-based solutions and be invited to make an appointment. Customers who make an appointment will enjoy a guarantee: If the dealer fails to complete their transaction and delivery in a set period of time the dealer pays their first payment. People are reasonable, particularly when treated with respect. The innovative dealer needs to own and promote its process.

Nine out of ten people report they will not purchase a car they have not driven. But 81 percent report dissatisfaction with the current test drive experience. Test drives are essential, but need to change. The visionary dealer will put shoppers in cars by themselves if they like, for up to 24 hours. Few dealers have anything to hide in their products. Allow customers the option of experiencing vehicles on their own terms and they will sell themselves.

A dealer will always prefer selling vehicles from inventory. However, the visionary dealer will more rapidly dealer-trade for a unit than a traditional dealer. In fact, the visionary dealer will make this a core aspect of its new-car business by dedicating resources to frequent, rapid trades. They must play well with other dealers and make trading easy, but in so doing they can sell from an expanded inventory.

Consumers compromise every time they purchase a vehicle, but in every compromise is an opportunity. One example is dealers already providing their plug-in electric (PEV) buyers with free access to conventionally powered vehicles to address range anxiety associated with long trips. The innovative dealer will provide every customer with free access to a variety of vehicles, regardless of what they buy. Access to a truck, minivan, convertible, sedan, or PEV will be of exceptional value to many consumers, particularly if local delivery and pickup are included. The unique provision of free access, in conjunction with the dealer’s active encouragement of its use, creates ongoing value-added touch points between the dealer and its customers, improving the customer experience and more closely connecting the consumer with the dealer.

The innovative dealership is more than a place where vehicles are sold and serviced. It is a place where mobility needs are understood and met. Shoppers will initially arrive with the goal of acquiring a new vehicle at a reasonable price. It’s the dealer’s responsibility to introduce them to its unique philosophy and menu of solutions.

These heretical deviations from the norm in dealer operations must be supported by appropriate staffing. According to a recent McKinsey & Company study, a pleasant, well trained, and motivated sales staff not only generates more referrals and sales, but can lead to more than doubling sales department profitability. The innovative sales staff will receive elevated base pay combined with reduced incentive compensation. Incentive comp will be calculated based on customer outreach activity facilitated through a customer relationship management (CRM) system, third-party operated customer satisfaction evaluations, and — yes — sales. The top volume seller may not receive the largest bonus or the most accolades.

The sales staff can be drawn from a combination of reform-minded auto sales professionals as well as others from outside the industry. Tablets will be used throughout, back-and-forth negotiations minimized, and hard close tactics eliminated. Employees will undergo regular training, not only on product but also on process and service. And much like Costco, the innovative dealer will cap profit margins on everything – vehicles, trade-ins, F&I, service, and parts.

What will the innovative dealer look like?

Rather than lining up cars row on row at the street and festooning them with balloons and stickers, the visionary dealer will feature a new appearance. The physical elements of the store will depend on the brand, market, location, size, etc. For this example, the assumption is a full-line, non-premium dealer located in a common suburban auto center.

The entrance must be easily identifiable and welcoming, not hidden or imposing. Parking will be easy and stalls will not be individually labeled; customers know who they are. The entrance will not be flanked by sales reps. A host with a tablet, not a seller, will greet each customer, provide direction, and take any necessary internal action without the use of a public address system. Think Apple Store.

A customer can check their young children into a supervised play area, grab a beverage from the full-service branded coffee shop, and head out to look at vehicles. The vehicle inventory will be uniquely organized. A relatively small number of units representing the trim levels, cab configurations, and engine choices for each nameplate will be located adjacent the showroom. Along with each nameplate grouping will also be one to three competitor vehicles. Providing competitor vehicles may not seem desirable, but the innovative dealer knows that by making them available for customer evaluation they demonstrate confidence and control context. The full inventory will be maintained at the rear of the store. This is a consultative sales process with a value proposition the competition will not match.

A set of prominently located and displayed experiential services will also be provided for demonstration and instruction. For example, a set of trailers of various weights will be available for towing. An all-weather off-road course, an expanded version of those found at Land Rover stores, will also be available. These and other facilities will be used as real-time sales tools as well as for scheduled instructional opportunities that give customers yet another reason to return, deepening the customer-dealer relationship with each visit.

The 17,000 new car dealers across the United States employ 1.1 million people, have a century of history, and operate under a well established legal foundation. The two-step distribution model isn’t going anywhere. And as dissatisfied as consumers may be with the traditional car buying experience, dealers face a classic prisoner’s dilemma: If they innovate they put their profitable enterprise at risk. If they fail to innovate they face a long decline in which they limit their ability to impact outcomes.

Car dealers are famously conservative. Innovation is expensive and risky, but what if a dealer had the confidence to be genuinely innovative?

[Images: Vauxhall Dealership, Stacey Harris/Geograph.org.uk; Saturn Dealership, GMInsideNews; Lincoln Dealership, Lincoln Motor Company]

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81 Comments on “An Innovative Car Dealer Is a Future Car Dealer...”


  • avatar
    thelaine

    Anyone who gets ripped off at a car dealership deserves it, especially old people and honest people. The dealer experience is awesome for the consumer, whether he appreciates it or not. Don’t like it? Buy your own dealership.

    Ruggles

  • avatar

    A long time ago, I answered an ad for “Dealership Performance Manager” for Jaguar. I made an interview appointment, then called back to change to the next day. I spoke with the same assistant both times.

    I come to the interview. The Boss informs me (with assistant behind) that I am a day late. I ask assistant if he recalls I called him back and we agreed on today. He tells me, no, I never called him back. Boss “humphs” and walks off, assistant in tow, who smirks at me.

    Bizarre experience….but I think I dodged a career bullet. The reward would have been having to hound dealers…

  • avatar
    hreardon

    My standard caveat applies: I am not advocating for the current dealership network. We all know stories of flat-out-shady dealers, but I’m more interested in the general model than I am about specific instances of corrupt practices. That said…..

    The auto dealer discussion boils down to human nature: people are more interested in getting a better deal *than the next guy*. If they weren’t, everyone would pay MSRP and go on their merry way.

    That said, the primary reason for customer dissatisfaction absolutely *is* over price. Nobody ever walked out of a car dealership with a new car for the price they wanted, without any negotiating, and was unhappy. Consumers are always unhappy when they feel that they got a “raw deal” and that’s almost always because they couldn’t get what they wanted at the price they wanted.

    It’s like a Pew survey from a few years ago where the vast majority of respondents said that they would gladly vote for a politician who “spoke their mind without regard”. Well, we have that today in Trump, and look at peoples’ feelings on that.

    Buying a car is usually the second most expensive purchase next to a home. I don’t know of many people who didn’t negotiate their home, or go through hassles with that. This isn’t like buying a shirt from J.Crew (btw – that $75 shirt has a material cost of about $2.25), it’s far closer to the home purchase where financing, trades, etc. are all part of the equation.

    For those who prefer the manufacturer -> direct model for the sake of convenience: that’s fine. Just understand that average transaction prices will more than likely increase, not decrease, due to the manufacturer assuming the liability and costs of a retail network, controlling the price and reducing overall competition.

    • 0 avatar
      ajla

      Honestly, I think buying a house is way less of a hassle than buying a car from a dealer.

      • 0 avatar
        duncanator

        I’d have to agree. I have one sales person to deal with when purchasing a home, unlike the two you get at a dealership. I really hate buying cars, but that helps me keep my car longer.

      • 0 avatar
        highdesertcat

        “Honestly, I think buying a house is way less of a hassle than buying a car from a dealer.”

        There are rules and laws to follow for both the buyer and the seller when transacting real property.

        There are no rules when transacting chattel, like cars. It is whatever the market will bear.

    • 0 avatar
      dal20402

      I’ve been much more unhappy with dealers over the years because I couldn’t get the product I wanted than over price. There’s usually another dealer to compete on price, and you can negotiate on price, but if no one is willing to stock or order the car you want it’s kind of academic.

      This is how my 2006 manual Civic EX ended up being beige with a beige interior.

    • 0 avatar
      dwford

      I was told when I first started selling cars that the customers who paid the most were the happiest. Made no sense at the time, but a little experience showed that to be true. The customers who argued for every nickel still left convinced they got screwed, while the customers who took the first pencil were very happy about their new car.

      • 0 avatar
        highdesertcat

        This is generally true and the sales staff needs to identify which buttons to push to make that customer go for the gusto. Is it ego? Is it necessity? Is it lust? Is it to please the wife?

        The wisest customer is the one who asks the question, “What does the store need to sell this vehicle for?”

        Watch out for that one! Those are the ones who’ve got the money and are not looking for special deals or financing.

        It gives pro-active salesmanagers shivers. It’s usually an indication that a customer does not dance.

        So the salesmanagers have to wonder, “Should I stay, or should I go?” Risk a potential walk or make the sale at a lower margin.

        No salesmanager interested in making sales wants to be put over that barrel. Wrong price = wasted time, and a customer who walks away to buy elsewhere.

    • 0 avatar
      Lou_BC

      @hreardon – my dissatisfaction with the car buying process has little to do with price. I paid full retail on our minivan and felt better about the experience than about my truck purchase where I got 13k off and 3k for a old Safari van on trade.

      As Seth Parks has pointed out, it centres around “must close a deal today” pressure and various other pressures related to sales commissions. “4 square” tactics and other tactics just piss me off. I’ve spent most of my professional career dealing with people so I can easy spot BS.

      Be honest and treat me with respect. Don’t try manipulation and know your product.

      • 0 avatar
        hreardon

        Lou –

        I get that, and maybe my experiences are different because I’ve never had those kinds of negotiations. Between myself, my wife and my parents, I’ve negotiated six car deals in the last fifteen years. None of these negotiations lasted more than 30 minutes and never once was I faced with a ‘four square’. All of these deals were done over the phone or via email, or most recently, via text messaging. I spent more time waiting for paperwork to be printed and politely declining the additional services than anything else.

        It might be because I walk in with a purpose and, as my wife noted, I have a no-nonsense approach to negotiations.

        I treat car buying like I do house buying/selling. When I put a house up for sale, I have a range I’m willing to accept. First number within that range wins because the waiting, dickering, and potential unknowns aren’t worth it to me. With cars, I have a range for both the trade and the new car purchase. So long as the dealer comes within that range, I’m happy. I may have paid a little bit more than the next guy or received a little bit less on the trade, but so long as it’s within my range I consider it a good deal.

        I know what I want and what I’m comfortable paying. If the dealership doesn’t work the way I want, I walk. It’s really not that difficult.

        That said, I understand why so many people loathe the process.

  • avatar
    28-Cars-Later

    I realize you are quoting Deloitte, but please add a “[sic]” as Deloitte’s information is wrong. We do no appreciate being lumped in with “Y”. Thank you.

    “In 2011, “The Generation X Report”, based on annual surveys used in the longitudinal study of today’s adults, found Gen Xers, defined in the report as people born between 1961 and 1981″

    https://en.wikipedia.org/wiki/Generation_X

    X for the win, b*tchez.

    • 0 avatar
      thornmark

      >>According to Deloitte, Generation Y shoppers (born 1981-2000) value the purchase experience three times more than vehicle design.<<

      AssBackwards.

      “Build a better mousetrap, and the world will beat a path to your door.”

      Design should matter more to intelligent people.

      • 0 avatar
        CoreyDL

        For real. What sort of idiot values the two hours they’ll spend buying the car more than the five+ YEARS they’ll spend driving it?

        • 0 avatar
          Xeranar

          Because outside of dedicated enthusiasts who love cars most camcords and their expanded brethren largely drive and feel the same. People want to minimize stress for what is a large purchase after they’ve done some basic research on transportation.

          That’s reality. Welcome it into your home next time a comment like that wants to erupt…

      • 0 avatar
        smartascii

        You beat me to it. A person who cares more about the days they spend car shopping than the years they spend driving their purchase is just not smart.

    • 0 avatar
      Lou_BC

      I was born in ’62 and always thought myself to be part of the babyboomer generation albeit the young end of it.
      My parents were born in 1919 so they definitely were not boomers.

      • 0 avatar
        Jeff S

        Lou_BC–You are technically considered a Baby Boomer. Those born from 1946 to 1964 are Baby Boomers. I was born in 1952 so I am a Baby Boomer. My parents were both born in 1918.

        As for the car buying experience I am one that hates it. Not just the time spent negotiating but the stupid games and the sales people who usually know a lot less about what they are selling than I do. I know more about vehicles than the average person but I am not an expert. If I were selling something I would at least read up on that product and get some knowledge. Service is important to me and can be a major factor in a purchase. I tend to keep my vehicles for more than 10 years.

  • avatar
    laserwizard

    It has been almost 20 years since I purchased my last new car.

    I would value a sales person who listened and didn’t waste my time showing me vehicles that were above what I wanted to pay;

    My last run in with a salesman was such an instance of wasting my time; I told the salesman I wanted the vehicle that is in the ad you have in the paper – “from $9,990…”. That vehicle had all I wanted and within 30 minutes I would be done.

    I was showed everything but that car. Then we went into the showroom and I was left alone. Sitting on the floor was the $9,990 vehicle. When I asked the salesman about the car, he replied “It’s white”. I had never mentioned a color preference ever.

    I ended up with that car; and because of the dirtbag treatment I received, I made sure I spent my frustrations on the F&I lady where I nickled and dimed her to death for an hour until I got the rate I wanted and the extended warranty at a fair price (it ended up being half of what I was initially told).

    I understand everyone needs to make a profit – I resent being dismissed and not listened to. If that happens, I will bleed the profit out of your deal and then some or go elsewhere.

  • avatar
    Pch101

    This is a variation of the “tragedy of the commons.” What’s best for the individual dealer is not necessarily best for the collective (the brand).

    If there was a genuine desire to improve the customer experience, then the OEMs would pay dealers just for schmoozing customers, including all of the times that they don’t make a sale. But of course they don’t do that and they aren’t going to do that because that isn’t a profitable activity.

    The bottom line is that customers will not pay the premium necessary to support that happy smiley business model. (They will with iPhones, but good luck trying to slap 25% margins onto new cars.) And that leaves you with, “What can I do to get you into this car TODAY?!?!?!”

    • 0 avatar
      Xeranar

      That is the problem with the entire model. The car manufacturer cares about the quality of the product. They care about how drivers feel about cars and if they want another one. Dealers care only about selling a vehicle, in effect car dealers are the most basic form of sales we have. You could sell a brush, a toaster, a piece of furniture, or a car and get the same effect. The problem is that when you force cars to play in separate showrooms unless you’re a rich dealer who can afford a multi-brand setup outside of a family manufacturer you’re going to maximize the SALES aspect and minimize the PRODUCT.

      For all the touting of iOS it is effectively 95% identical to Android and it’s line of phones and tablets. But the stores that sell Apple are company owned, they have a vested vertical interest in the market. They also barely care about the phones sold by the carriers because they both make less money and aren’t in control of the situation any longer.

      Pretty much a truly smart dealer who followed through on this plan would make a small fortune but would have to fight through covenant clauses, legal battles, and increase margins on vehicles to a healthy extent to cover the difference in behavior. It’s doable but it’s risky so long as everybody else remains cut throat and stupid. It’s more so the prisoner’s dilemma…but that’s pretty accurate for most businesses. See: Minimum wage and turnover.

      • 0 avatar
        Lou_BC

        @Xeranar – you hit the nail on the head since everybody else Will remain cutthroat and stupid. Actually they aren’t stupid just cutthroat and mercenary.

        Car sales is a prime example of the hawk and dove model of society. In theory all hawks works because everyone knows everyone else is a hawk. Who wants to be the first dove in this wilderness? It would only work if a critical mass of doves get introduced all at once.

  • avatar
    CoreyDL

    “OEM managed post-transaction surveys (CSI) is a farce”

    “The current practice enables trend analysis as well as competitive benchmarking. It has elevated the customer experience from atrocious to almost tolerable.”

    So which is it?

    • 0 avatar
      Lou_BC

      CoreyDL – waterboarding is less atrocious than jumper cables on your genitals therefore the former is almost tolerable.

      As Einstein pointed out, it is all relative.

  • avatar
    dwford

    Customers are not “capable of waiting,” they just have no choice at Tesla because there is only one store to buy from, and they don’t stock fleets of the cars anyway.

    • 0 avatar
      SCE to AUX

      But their loyalty and eagerness to have a Tesla means they’re willing to wait for that specific product.

    • 0 avatar
      healthy skeptic

      @dwford

      Tesla customers have no choice but to wait because Tesla hasn’t actually built the cars yet. That’s got nothing to do with having only one vendor to buy from, and that explains why they don’t stock fleets.

  • avatar
    carguy

    Dealers exist mainly to so car companies don’t have to deal with customers directly. They don’t really add much value beyond that. The problems is that better price information has reduced their margins which in turn means 1.) they can’t afford good employees and 2) they focus on selling dodgy add-ons and services to make up the shortfall. Both lead to a negative customer experience.

    All the suggestions in the article are reasonable but won’t happen unless they make financial sense and, given the current margins, they don’t. Manufacturers will need to provide more resources if they want to change the customer experience and that will mean changing the relationship with the dealers by either owning them outright or at least tightening their franchise agreements.

    The Apple store was a great example but notice how those are owned by Apple and they make sure its operations aligns with Apple corporate image & values. They wouldn’t expose their brand by having their flagship store run by some cowboy dealer.

    Another great example is fast food such as McDonald’s. You can be a franchise owner but the business process and rules (and, by extension, customer experience) are tightly governed by corporate.

    Car makers are entrusting dealerships with their brand and by allowing these businesses to do as they please is just asking for trouble. Combine it with low profitability and you have a guaranteed formula for bad customer experiences.

    • 0 avatar
      psarhjinian

      “Dealers exist mainly to so car companies don’t have to deal with customers directly”

      Dealers exist to buffer inventory and allow OEMs to smooth out lumps production. They’re glorified distributors.

      • 0 avatar
        healthy skeptic

        @psarhjinian

        +1

      • 0 avatar
        hreardon

        Bingo.

        BMW executives will tell you flat out that they need subsidized leases to keep moving the metal to keep the cash flowing to keep the factory running.

        Cash flow is EVERYTHING to the manufacturer, and the faster they can take the liability off their balance sheet and hoist it onto someone else, the better.

    • 0 avatar
      Pch101

      Car dealers take on a low-margin piece of the business. There’s tremendous value in that for the manufacturer.

      • 0 avatar
        carguy

        @Pch101: It may be cheap but I doubt its great value when your product’s customers are having a lousy buying and service experience. This is particularly the case for luxury brands.

        You don’t Louis Vuitton selling its product at Walmart.

        • 0 avatar
          Kyree S. Williams

          It depends. I’ve dealt with mainstream dealers (Chevrolet, Ford, Kia, Hyundai, FCA, Buick/GMC, etc..) and those were all hit-and-miss.

          The higher-end dealerships OTOH (BMW, Mercedes-Benz, Maserati, Cadillac) were better about respecting their customers’ time, asking fair prices for their wares, and generally not dragging the images of the brands they sold into the dirt.

        • 0 avatar
          Pch101

          It’s obvious that the automakers don’t want to use their profits just to make customers happier. They want the dealers to pay for it, as is the case when they tie holdback payments (or what are effectively holdback payments) to CSI scores.

          And we should consider the possibility that the things that consumers claim to want do not match what they actually want. What many of them really want is the sort of price that can usually only be achieved due to a clever negotiation, while skipping the clever negotiation and the work that this entails. It’s the proverbial free lunch.

    • 0 avatar

      Of course, the big barrier to car companies managing their own dealers is state franchise laws that in most states say that they can’t.

      I’ve always liked the idea of direct sales just for the configure-to-order aspect of it. I can go on Dell’s website and build a laptop just the way I want it – I’d love to be able to do the same with a car. I also think it would allow for things like a wider selection of colors, as opposed to dealers stocking lots of inoffensive silvers and blacks.

      • 0 avatar
        Kyree S. Williams

        “Of course, the big barrier to car companies managing their own dealers is state franchise laws that in most states say that they can’t.”

        With the exception of Tesla, they don’t *want* to sell their own cars. They also don’t want other manufacturers to be able to sell their own cars, because then customers will come to expect it…which is why many of them are lobbying against Tesla’s model. They like dealerships because dealerships alleviate the risk associated with having way more inventory than demand. Nowhere is that more apparent than at Volkswagen, where dealers of that brand are stuck with a whole bunch of cars they can’t sell. Volkswagen would be hurting much more if its own stores were the ones keeping inventory of those cars.

        As for true, laptop-like ordering, that will probably happen once manufacturing an automobile becomes as trivial as manufacturing a computer. I’ll be glad when that day comes.

        • 0 avatar
          Jeff S

          Kyree-Me too. I just as soon order a vehicle from a list with the color and options I want. I don’t care so much that the options are limited to trim levels as just getting the closest to what I want. As long as the seller had a demo to test that would be enough.

      • 0 avatar
        SaulTigh

        My BMW dealership told me that if I’d give them 8 weeks they’d have the factory build me the exact car I want. I might take them up on that next time.

      • 0 avatar
        hreardon

        Actually, the biggest barrier will end up being the manufacturers themselves. They rely on the fact that once a car is shipped it moves from their balance sheet to someone else’s and keep the cash flow moving.

        As an example – Apple typically has 18 days’ worth of inventory in the pipeline at any one point. They are masters of logistical / factory / inventory management (this was Tim Cook’s gift to the company when he came onboard in the late 90s).

        Auto manufacturing is so much more complex than this that there is little comparison that can be made. Add to the fact that Apple can match supply to demand on an almost per-minute basis and can re-route inventory in ways that automakers couldn’t dream of. Finally, Apple doesn’t need to worry about things like faulty components or installations that might lead to the death of a consumer to the same extent as an automaker.

        So long as we cannot build cars to specification and deliver them within a matter of days, the vast majority of automobiles will be purchased off the lot. This means stocking what people want, when people want it, built the way they want it. This means coordinating supply with demand. Ultimately, this leads to negotiations of some sort.

        We’d all love to see it, and some automakers are much better at custom order and delivery than others, especially at the high end of the market. We are a long way away from ‘on demand purchasing’ of mass-market transport, however.

        • 0 avatar
          Pch101

          A key difference between Apple and most other companies is Apple’s costs tend to be fixed. If Apple can figure out how to make an i-Whatever that people want, then it’s basically printing money — much of the cost is front-loaded into R&D, etc., and the variable cost of producing one more unit is relatively low.

          Automakers need scale, but their costs are still largely variable. If you build one more unit, then you still need to spend a lot on parts. Yes, the millionth unit is cheaper than the first, but it never gets to be that cheap. Because of this, the margins of a successful automaker will never be high as those of a successful tech company.

          Retailing is not a great business for the OEMs. If sure that if they had their way, they would get to cherrypick a few key locations for themselves while dumping the mediocre ones and the dogs onto franchisees.

    • 0 avatar
      stuki

      In practice, current dealers exist to fund political campaigns. For politicians willing to keep the franchise law scam running unimpeded.

  • avatar
    ajla

    The CSI begging is hilarious. You really want all 10s after grinding me over pinstripes, plastic mudflaps, and a 4-figure dealer fee?

    • 0 avatar
      Gardiner Westbound

      +1

    • 0 avatar
      dal20402

      Yep. I’ve only ever responded to one survey, and that was for a dealer experience that was truly painless and the best I’ve ever had (at a Seattle Subaru dealer). Except for that purchase, I’ve been mysteriously impossible to get a hold of when the survey people come calling.

    • 0 avatar
      Lou_BC

      Agreed. When I bought my truck the salesman was almost begging for a good score. Since he didn’t know anything about the truck and most of the sales process involved the assistant manager I gave him a poor rating. 4 years later I ran across him at the local FCA dealer and he was just as clueless there.

  • avatar
    roverv8i

    “Add to that two recent big budget, one-price failures — Saturn and Scion — and the value of eliminating price negotiation is questionable.”

    Not sure how you can say the value of eliminating pice negotiation is questionable because of the failure of Saturn and Scion. They did not exactly offer a full range of vehicles or even ones desirable to many consumers.

    Car Max seems to sell on this value and it shows there is demand for experience of lowest cost, at least for used cars.

  • avatar
    SCE to AUX

    I maintain that Saturn and Scion didn’t fail due to their fixed-price approach. They failed due to poor product (Saturn), and failure to understand their market (Scion).

    Saturn was never profitable throughout its 20-year history. Negotiated pricing would only have hastened its demise. They were even non-union for a long time.

    Scion’s fortunes turned south when the xB2 was released. They essentially ceded all of their sales to the Kia Soul.

    Tesla (another fixed-price seller) doesn’t yet have the volume of Saturn or Scion, but they have the most rabid customer and fan base of any mfr – because of product and ‘dealer’ experience.

    But I will agree on many of your other points. I’m not one to fight for the last dollar, but I’ll leave a car dealer happy if I’m treated right.

    • 0 avatar
      psarhjinian

      I would tend to agree. The product was the only thing that really held Saturn back; otherwise, they held CS ratings that beat Lexus. Saturn dealers selling, eg, Hondas would have knocked it out of the park.

      Scion I’m not sure about. I don’t know about the US market, but Canadian Scion dealers were just as pleasant or unpleasant as the Toyota ones they were paired to. Nothing special.

      • 0 avatar
        CoreyDL

        Wouldn’t all Scion sales be pretty basic and low margin? Since you’re selling cheap cars which don’t feature many pricey options. The youth market would mean lots of annoying customers with no money.

        Can’t attract the friendly experienced salesmen with that.

      • 0 avatar
        SCE to AUX

        Scion dealer #1 tried to do a bait & switch re: the xB1 I ordered.

        Scion dealer #2 (2 hours’ drive away) got my business instead.

        I drive past dealer #1 every day, but I won’t step back in there again. I can buy a Toyota from dealers with better reputations.

      • 0 avatar

        Saturn was typical GM taking a great idea and screwing it up. The original SL/SC Saturns were innovative – for the mid ’80’s, when they started developing. Not so much by the time they actually released them in the early ’90’s.

        And by the end, they were just a bunch of rebadged GM and Opel products.

    • 0 avatar
      krhodes1

      Tesla has product. Their sales experience largely sucks, just in different ways than from a dealership.

  • avatar
    SCE to AUX

    More important to the dealers should be their online customer ratings and reviews.

    We live in the Amazon world now, and I’d be hesitant to try a 3-star dealer with the same number of 1-star reviews as 5-star reviews.

  • avatar
    Felix Hoenikker

    I think VW has a great opportunity to re-invent their US dealerships per the recommendations in this article. Given their current situation, they have no where to go but up.

  • avatar
    Russycle

    “…the visionary dealer will make this a core aspect of its new-car business by dedicating resources to frequent, rapid trades.”

    I can’t believe (OK, sadly I can) this isn’t SOP. When I bought my Honda 8 years ago, the dealer didn’t have what I wanted in stock but before I left he had a list of vehicles in the state that were close. I picked the one I wanted, my dealer had it the next day. Doesn’t seem like it’s very hard to do.

    • 0 avatar
      duffman13

      It depends on dealer networks generally. In our last new car purchase, the first dealer didn’t have the trim we wanted, and even lied to us, saying a dealer trade wasn’t possible, that there wasn’t one in the entire state.

      I went home and used the manufacturer’s inventory search tool and found out the dealer 2 towns over had the exact trim/option package we wanted in 4 different colors. We bought there of course.

      Part of this I know was because that dealer 1 wanted us to buy from current inventory, but I’d like to imagine that this was the only Mazda dealership within their small regional network (basically only SE Virginia), so they didn’t have anyone in-network to try for a trade with.

      The Mazda dealer two towns over from a different dealer network that had the model I want had no incentive to trade for it. Why would they give their competitor a sale when I could potentially drive 20 minutes and buy the car I actually wanted from them? Sure, If I wasn’t a savvy shopper I wouldn’t even know the particular car existed, but that’s not a reason to go handing out sales to competitors either.

    • 0 avatar
      SaulTigh

      Honda’s a little different in the way the do their packages. Lots of standardization. My local dealer can right this moment give you an LX Accord in every wheel and color combination Honda makes, and virtually all of them have the same sticker price. Try building a Ford Fusion with exactly what you want and it will end up costing $40k+.

  • avatar
    eggsalad

    I’m on the cusp between Baby Boomer and GenX, but I clearly break all the rules.

    I bought my last late-model used car from a Chevy dealer 250 miles away.

    Not only had I never driven that car, but I’d never driven one of the same model.

    It was offered at $9988. I didn’t argue; I felt that was a fair deal and gave them $11,300 out the door.

    Cash buyer, cheap car. No hassles.

  • avatar
    Fred

    I like researching products to buy. Internet is great for that. Going to the dealers, test driving, negotiation, saying no to warranties and coatings. Just part of the deal. Stay calm and it’s really not that bad. Still I’m okay with not doing it but every 7 to 10 years.

  • avatar
    redliner

    I just purchased a new motorcycle without ever having stepped into the dealer showroom. Why should I? I already knew what I wanted, found one online at a fair price and told the dealer to deliver it to my house. Easy-peasy, and I dealt directly with the store manager. I signed all the papers in the comfort of my living room. Buying a car should be like ordering something on Amazon. Pick your color, pick your options, click, done!

    Want to test drive with zero pressure? Go rent the car you want for a day.

  • avatar

    “Fifty-three percent report the car buying experience is so negative that it lengthens their time between purchases.”

    I know several people who are in that exact position. I’ve got a friend who won’t part with a 2005 or so Mazda6 specifically because he doesn’t want to tangle with a dealer.

    As for us, we could probably use a minivan at this point, what with expecting our third child. But at the thought of dealing with the average sales experience, my wife cringes.

    Who can blame her? Everything about the dealership experience is designed with the goal of breaking the customer down emotionally and physically. Starting negotiations, even remotely, is more like beginning legal proceedings than interacting with a company whose product the customer is purchasing. Dealerships are set up like high-pressure puppy mills. Even the lighting is often harsh. Delays and paperwork games drag the process on further. F&I is often populated by characters from a Tolkein novel. Dealers have set up a gauntlet, and they’re frustrated that consumers don’t want to enter it? Why can’t one of these guys with seven or eight dealerships under his wing be brave and just try running a dealership with a new kind of buying experience?

    I’ve learned to go directly to the internet sales manager, and get written punch-ups before ever setting foot in a dealership, but even that doesn’t excise a buyer from the pain.

    Someone earlier mentioned all this was largely acceptable because a car was second only to a home in expense. The difference is there’s absolutely nothing special about the typical family car that makes it as compelling as that one house that happens to be in that perfect spot in that perfect school district. There aren’t hundreds of parking lots full of copies of that one perfect house, with balloons and neon stickers on them.

    • 0 avatar
      dal20402

      It is probably good for my wallet that buying a car is such a high-friction exercise. I would certainly have bought more of them in my life if it were less painful.

      • 0 avatar
        malikknows

        Yes, me too. I learned long ago that every time I buy or sell a car at a dealership I lose. Period. I seek to minimize those transactions, and keep my cars as long as I can. You can’t lose if you don’t buy or sell.

    • 0 avatar
      Kyree S. Williams

      I’m sympathetic to both your friend and your wife.

      I don’t advocate being rude to a salesman, but dealers have no right getting offended when the industry has steadily cultivated an us-vs-them attitude. Many people don’t want to buy a new car from a dealer. The dealers are in their way. They can’t possibly be surprised when people are reluctant to deal with them.

      • 0 avatar
        Lou_BC

        Kyree S. Williams – I admitted got rude once with a salesman after he blatantly lied and tried his best to screw me on my trade-in. I could tell where he was going and even with me warning him to change tactics he continued on.
        My truck at the time was in excellent shape and low mileage. It had around 6k worth of accessories. He lowballed me on the price and said that the accessories did not change the value of the truck. I argued that there was a positive market appeal on my accessories i.e. stereo (in the 90’s factory stereo’s sucked) , running boards, aluminum box liner, aftermarket wheels and tires (slightly larger than stock). He kept on insisting so I said, “fine, I’ll trade but I’ll be back in 4 hours”. He obviously said, “why not do the deal now?” I told him that it would take me about 4 hours to remove all of my accessories and turn the truck back to stock. He blurted out, “YOU CAN’T DO THAT!” I had him cold with the reply, ” You just spent the last 1/2 hour telling me those accessories didn’t change the value of the trade!” He stammered and stuttered and kept trying. I told him to stick his truck up his ass.
        The sales manager seemed more upset by the fact that I cornered his slaesman than by the fact that I wasn’t happy with being manipulated.

        • 0 avatar

          “The sales manager seemed more upset by the fact that I cornered his slaesman than by the fact that I wasn’t happy with being manipulated.”

          That’s the crux of the problem right there. People know where the dealer’s priority is on the costumer service experience.

        • 0 avatar
          Jeff S

          Lou_BC–I would have liked to see you strip your truck of those accessories. That would have taught that salesperson a lesson but I would have done what you did in that I would have walked away. I hate to play those games.

  • avatar
    smartascii

    At this point, if you’re 1) buying a new car and 2) live in a populated area with multiple dealerships, you can pretty much do everything online, eliminate the salesperson, get quotes you can compare against each other, and if you don’t get the very best price anyone’s ever gotten on that particular car, you won’t be far off.

  • avatar
    Kyree S. Williams

    Indeed. There’s a lot of money to be made in short and simple transactions., especially if they’re online.

    For example, I’m a web designer / developer. A $200 website is generally not worth my time…unless I can complete it in a day. Then, I’m all for it.

    I try to be that customer when I step into a dealership. No, I’m not going to let you pack my payments, mark up my interest rate or sell me a ridiculous warranty that isn’t worth the paper it’s written on. But my financing is guaranteed and arranged, I know what I want, I’ll offer you a *fair* price for it, I’ll probably call or email ahead and set up an appointment so that you’re expecting me…and you can have me in and out of your hair in under an hour if you’re efficient.

    And there are a lot of people like that. I’m surprised at the number of dealers who would rather alienate those customers by trying to milk them for all they’re worth than to serve them and make a smaller, but much quicker profit.

    • 0 avatar
      duffman13

      Kyree,

      By the very nature of us being on this site we’re probably more informed on the process than the average consumer. If you or I go in to buy a car, we probably already know which particular car in the dealer’s inventory we want. The vast majority of people come in saying “I need a new car,” not “I want the Golf SE manual you guys have in stock.” Even just knowing that one thing can take hours off the sale process.

      Knowing the specific car you want also makes price negotiations easier too, because you had time t actually do some market research on comparables before you showed up.

      Personally, I’ll have secured financing beforehand on a used car, or have detailed knowledge of factory incentives on a new car, which speeds up tie in the finance office, since I know I have great credit. Finally, when the closer comes in with all the high-margin garbage, you just say no.

      In my last 3 car purchases from dealers I’ve never been in the building longer than 60-75 minutes once the negotiation process starts, but that comes from the fact that I do my homework before. People think they do their homework (edmunds, kbb, truecar, manufacturer config tool), but it really takes the knowledge you get from a place like here to put you ahead of the power curve IMO.

  • avatar
    Dan

    I’m a tightwad at heart and between internet research and the vast number of dealerships on the east coast the car buying experience has always been pretty easy. Once I’ve decided that I wanted a car I’ve never had any difficulty negotiating a price that I was happy with, either in person or online.

    The car shopping experience to get as far as actually wanting it, OTOH, sucks. All I need a salesman to do is show me the model and trim that I asked him about and let me kick the tires for a bit and drive it or an equivalent demo for a couple miles if it passes the first test. Not all of the cool features of the $60,000 Platinum, not the certified used one, not let’s go inside and talk about appraising the car I drove up in. Just show me the car.

    On top of that I get you leaving me two or three voice mails a week for six full months after I told you that I wasn’t interested. Leaving me voice mails at all after I told you that I’d prefer information via txt or email. Selling my unlisted cell phone number to telemarketers who started hammering it the week after I dealt with you. Putting me on a multiple spam email lists. Not actually answering specific question that I’d emailed you in the first place.

    Lying to my face at every point in the process. No, your lowball trade number didn’t come from “Honda.” No, you didn’t “just get this one in” when it has 80 miles on it already and the sticker right in front of us has a born on date from last summer the bottom. No, the factory rust warranty isn’t just a year when you’re selling me undercoating. No, the two colors on your lot aren’t the only ones they make this year.

    In a world where even Hyundais and VWs are good for 100K before anything goes much wrong and a CPO Camry for 14,000 bucks will will take you to 2028 a new car is every bit the discretionary purchase as a four star dinner out. If it felt like it they’d sell more of them.

  • avatar

    The one assumption that is made in all these CSI surveys is that the customer is a QUALIFIED BUYER. It is NOT an assumption that SHOULD be made…

    • 0 avatar
      highdesertcat

      You’re right. The sales staff has to ascertain which are the lookey-loos and which are the real deal.

      Marketing and advertising programs are designed to motivate people to go and buy that new (whatever), in this case a vehicle, including many who are not qualified for even the lowest of subprime rates.

      The difference between wants and needs.

      Often, while the sales staff is BS-ing a potential customer on the lot, the back office is busy doing a “soft pull” and a “DMV name search.”

      Ever wonder why a dealership wants a copy of your drivers license even BEFORE they let you test drive a vehicle, if at all?

      It’s all sleight of hand. An illusion designed to part you with as much of your personal information as possible to help part you with as much of your money as possible.

  • avatar
    BobinPgh

    Two things I have noticed about the car buying process, which I have not done often: Why don’t the salespeople know about the product? I usually know more about the car than they do, which I think is true for many consumers. Meanwhile, I can go to Macy’s and when I want to buy a gift for my mother, the Estee Lauder lady knows all about what products they carry and even knows what mom likes. Then there is the issue of inventory. Why do car dealers have to have hundreds of cars on the lot? It seems that even for the people who need a car NOW, maybe 20 to 30 might be enough. Less inventory would save space and maybe not so much pressure to buy what is there.

    • 0 avatar
      danio3834

      “Why do car dealers have to have hundreds of cars on the lot?”

      1. Because manufacturers want it so.
      2. Because if you don’t have it, someone else will and customers will buy there.

  • avatar
    danio3834

    The thing with car dealers is that you don’t have to be smart to get into the business, you just need money or someone with money who will back you. Manufacturers will sort-of pick and choose who can and who can’t get into the game, but for the most part the concern is whether you have deep enough pockets to keep the point afloat.

    Bad dealers will still make money with thin margins and never do much to improve themselves. That $1,100 GP number is pathetic.

    Good dealers will use all the tools at their disposal to make their customers happy and make more gross because of it. The thing is, most of those tools are of little to no cost. They’re either a simple best practice or a tool that the manufacturer provides to the dealer. The bad dealers fail consistently at the basics. Some of the highest satisfaction dealers have some of the lowest fixed costs.

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