Bark's Bites: The Dealers Who Add $3,000 to Window Stickers While Secretly Selling at Invoice
In the last five years, I’ve visited over 2,500 dealers in 44 different states. Sometimes I think I’ve seen everything. And just when I think that, I’m invariably proven wrong.
This week, I walked through the doors of a massive dealership — easily one of the largest dealers I’ve ever set foot in (the name and make of this dealer shall remain anonymous, since the conversation was “off the record”). This dealer sells upwards of 500 new cars a month and about 200 used per month, and they’re planning to add even more floor space so they can increase their volume.
As I waited to talk to the GM, I browsed the cars on the showroom floor. Considering the overwhelming success of this store, you can imagine my surprise when I saw that every car on the floor, without exception, had an extra sticker on the window.
The sticker said:
DEALER-ADDED EQUIPMENT AND SERVICES
ADJUSTED MARKET VALUE $1949.00
LIMITED MARKET AVAILABILITY $1000
I damn near sprinted around the showroom to check, and yes, I was right — this sticker was on Every. Single. Car. The dealer did have a couple of new models that, in theory, could possibly be considered “limited availability,” but most of them were “limited to how many the factory can produce in a year.”
Of course, everybody knows (because the internet says it’s true) that dealers absolutely, positively, do not make money on new cars (insert eye-roll emoji), so I had to find out what was going on here.
Turns out it’s some pretty sinister shit that you, the consumer, definitely need to know about.
There are a fair number of manufacturers that absolutely, positively, will not allow their dealers to advertise below invoice (Toyota, Honda, etc.), so they have to get fairly creative in order to advertise “specials” to entice customers to come in the door. Let me explain.
Have you ever shopped at a liquidation sale, like when Circuit City went out of business? The liquidators buy up all the inventory and subsequently throw up big “50% OFF” signs all over the store.
Well, of course that’s not really true — the inventory of washers, dryers, and HDTVs is, in most cases, actually no cheaper than it was before, but they can advertise it as 50 percent off by marking it up before “slashing prices.” In order for your local Japanese import dealer to do those “$5,000 OFF ALL NEW CAMCORDIMA” sales, they actually have to mark the cars up first.
You may be saying to yourself, “But, Bark, isn’t that illegal?” In some states, yes, it is. In many states in the union, you can’t put any dealer markup on the sticker. In others, you have to put something of value on the sticker in order to mark it up — you can claim that window tint is worth $2,000 if you want to, but there has to be something there. However, in many states, you can put whatever the hell you want to on the sticker, and you can make it look nearly identical to the actual Monroney sticker.
But is anybody actually stupid enough to fall for this? Does anybody ever walk in and pay full pop plus an additional $3,149? “Sometimes, yes,” said the GM of this particular store. “It’s almost always immigrants who don’t know any better.” While punching people labelled as Nazis may be up for debate, I think we can all agree that it’s okay to punch GMs who take advantage of immigrants.
“But,” he continued, “we actually only sell about 10 percent of our cars at MSRP or above. It’s psychological warfare — the customer feels like he’s getting a really great deal, but we know that we’re glad to sell the car at invoice, so anything above that is a win.”
I did a quick check of his third-party listings on the usual suspects, and noticed that he didn’t have any of the ADM added to his cars on the classified sites. “No, of course not. Nobody would click on them if we did that. We advertise at invoice, which is the minimum price that we’re allowed to advertise at.
“However, if you click through to our website, you’ll see that all of the cars have a little button that says ‘Click to unlock our Internet Specials.’ If they click that button, they have to fill out a contact form, including name, phone number, and e-mail. If they provide a valid e-mail, we’ll show them the real price — invoice minus holdback and all dealer fees. Every internet deal is a loser for us, but it helps us hit our sales targets.”
In case you’re not playing along at home, I’ll sum it up for you: the dealer marks up all of his cars on the sales floor, hoping that uneducated customers will fall for it, so that he can, in turn, sell the majority of his cars at a loss to smart shoppers, but only if they’re willing to give up a “lead.” It also allows him to advertise “sales” to pull in more traffic in the slower times, even though the sale price is, in most cases, essentially MSRP.
And dealers wonder why customers don’t trust them. So how can you avoid this sort of nonsense?
It sounds simple, but do your homework. Over 80 percent of customers now “research” online before they visit a dealership, but the vast majority of that research consists of reading new car reviews and dealer reviews on Google and DealerRater. At the very least, if you’re shopping new, you need to come to the dealer armed with invoice numbers.
Third-party searches are a great place to start your search, but it’s not where you should end it. Many dealers are doing exactly what my new GM friend is doing — saving the best deals for their own websites. Doesn’t really matter if it’s due to OEM regulations or if it’s because the dealer thinks that he closes at a higher percentage on leads from his site, it’s just true. After you find the car you want via Cars.com or AutoTrader.com, head over to the dealer’s site to make sure that better pricing isn’t available there.
This tactic of forcing a customer to give up an email address in order to “unlock” the best deals is, unfortunately, becoming rather commonplace. While I don’t really care if a dealer spams my personal email (60,000 unread and counting), you might. So it doesn’t hurt to throw together an extra email address for yourself like “email@example.com.” As long as you actually create the address, their CRM tools will recognize it as valid and email you the pertinent information.
Also, never, ever pay ADM. Not never. I don’t care if it’s the latest and greatest car on the market. MSRP, sure. ADM, nope. I bought two of the hottest, most marked up cars on the market (2013 Boss 302, 2016 Focus RS) and refused to pay ADM. There certainly is no reason to do it on a 2018 Camry.
Lastly, don’t write off a dealer that has a car you want just because you hate their tactics. While it can be somewhat emotionally satisfying to say “screw you” to a dealer who marks up everything on his lot, there’s no reason to inconvenience yourself by driving across town or, God forbid, flying across the country. Chances are the dealer isn’t as stupid as he’s appearing to be and that he understands that he’ll eventually have to sell the car at invoice or below. Just make it clear in your communications that you’re willing to pay invoice minus holdback, and stick to your guns. No negotiation, no haggling. Invoice minus holdback and go.
Now you know how to avoid this particular dealer trick, but as long as there are franchise dealers, there will be more tricks. If you come across any new ones, email me at firstname.lastname@example.org and I’ll let you know how to beat them. It’s kinda my thing.
[Image: HappyAlex/ Bigstock]
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