By on June 7, 2019

“I’ll tell you something.”

Normally this sort of phrase is followed by, well, something. But the grizzled old dealership veteran seated across the desk from me seemed to be sizing me up a bit, seeing if I was worth the time it would take for him to dispense some of his six decades’ worth of wisdom. After a deep sigh, he must have decided that I was, because he continued.

“This is the worst business. The absolute worst. I invest $30,000 to make $500 — if I’m lucky. Even Vegas would give me those odds. If I had any sense at all, I’d liquidate every car on the damned lot and put all of my money in the stock market. If I had done that at the beginning up the year, I’d be up a couple of hundred grand right now.”

I sensed that I was supposed to say nothing. So I did just that, silently encouraging him to continue.

He noticed my obedience and nodded gently. “Of course, I’d never do anything of the sort. I was born into it, you know. I’m a little bit older than most people think. My father opened the first of the Japanese stores here in (undisclosed state). Then he opened another one. I opened the first Korean store. And now look at me — master of all I survey, owner of ten points.

“As much as I want to get out the business — as much as I wish Daddy had never even thought about buying a car lot — I can’t. But you, young man, you should get out now. I mean now.”

It only took me about seven more years to follow his advice. I am officially out of the car business — kinda. I still have clients who have automotive clients. But I don’t directly sell to car dealerships anymore, which is why I have no problem pulling back the curtain in answering this next question from our friend and reader, Bart.

Bart writes:

My question concerns dealership sales practices. The consumer wants a fair deal and the dealership wants to maximize profit per car. From the eyes of a consumer, most feel like they don’t get a fair deal when buying a car from a dealer.

Instead of a dealership maximizing profit per car by seeing how much they can take from each consumer, why not switch up the sales model to one that is volume based?

I would respect and want to build a relationship with a dealer if they showed me the invoice from the mfg and said, I need to make $500-$1k per car to eat and pay my bills. In this transaction the dealer makes money, the salesman is paid for their time, and the consumer feels like they had a positive experience.

The more cars the dealer moves, the more incentives the mfg rebates back to the dealer. Additionally, the consumer refers more customers due to the positive experience.

I am sure this is too simplistic, where is my logic flawed?

Thank you!

Well, Bart, remember the story I told about half a page ago? Let me go a little deeper and explain why my old friend was right about the car business being the worst business of them all.

Dealerships really only sell new cars for three reasons:

  1. The legitimacy that having the franchise gives them. Customers inherently trust a franchise dealer more than an independent. They probably think that the OEM is holding the dealer to some standard of excellence (insider joke alert).
  2. It helps them get trades for their used car department
  3. They get the service and warranty work

That’s it.

Nobody believes this when I tell them, but the readers who are in the business must have been either smiling and nodding or shaking with anger when they read your question — because they know that’s already what dealers are doing. The new car business already is a volume game, and it has been for a long, long time, even back when Doug Demuro was asking, well, uninformed questions about it. Alas, your assumption about the money isn’t exactly right. The dealer is making money, yes, but the sales guy? He’s making a mini commission of maybe $50.

Outside of a few holdovers at luxury brand stores, pretty much every other dealer is already either breaking even or losing money on the front end of the majority of new car sales (front end = the profit made on the actual sale of the car, not including rebates or finance and insurance). Customers don’t believe this, largely due to the terrible reputation that car dealerships have rightfully earned over the years. As Ursula once said, it’s sad, but true.

Unfortunately, Bart, the reason they don’t do this with every customer from the get-go is that there’s an axiom in the car business that will be true until Elon reneges on the last mall lease he’s got, and it is this: In order for some customers to pay too little, some customers have to pay too much. There is the occasional mark who walks into a dealer and pays whatever the sticker tells him to pay — mostly immigrants, the elderly, and subprime customers. (By the way, that dealer was a Toyota store in South Florida. Fuck ’em.) But everybody else has the internet, and they use to it to research the hell out of car purchases.

You mentioned that customers feel they’re getting ripped off, and you’re right, they do. But the ones who feel the most violated are typically the ones who got the best deals! They’re the ones to whom the dealer did show the invoice, the ones for whom the dealer went into holdback and bought too heavy on the trade. Those customers leave the dealership pissed off and ready to tell the world on their Facebook page how long the deal took and how hard they had to fight.

The happiest customers are always the ones who get straight up cracked — they rave about the excellent service and attentive salespeople. Well, no shit, Betty — the rep got a $1,500 commission check on your deal, of course he was attentive. Again, sad, but true, so your point about people who got good deals referring more customers doesn’t hold up.

So, my point in all of this rambling is this: Car dealers are already doing this, they’re just not advertising it. The market has already demonstrated that it doesn’t much care for the fixed-price model (see: Scion, Saturn), but we essentially have an unadvertised fixed price model now — sell the car at invoice, keep the holdback, hope for the OEM volume bonuses. It’s why my dealer friend complained about the new car sales model — in 2012. You’re not being simplistic, you’ve just been uninformed.

Now you know better.


Send Bark, a recovering automotive advertising semi-lifer, your questions at [email protected], and look at pictures of his kids playing soccer and monitor his borderline-obsessive workout schedule on his Instagram. He promises to post more pictures of cars. 

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92 Comments on “Ask Bark: Why Don’t Dealers Just Make Better Deals?...”


  • avatar
    Urlik

    Truth!

    • 0 avatar
      NormSV650

      You can’t believe everything you read on the internet.

      • 0 avatar
        highdesertcat

        Read “Confessions of a Car Salesman” , at one time available on Edmunds, but probably available elsewhere as well.

        There’s a whole lot of truth in Mark’s article and the bottom line always was, is and will be forever that a dealership’s sole existential function is to part a buyer with as much of the buyer’s money as the dealership can, any which way they can.

      • 0 avatar
        Kenn

        Unless it’s golden words of praise from Norm for the exceptional quality and value of anything sold by General Motors.

  • avatar
    PeriSoft

    My local midsize dealer chain is pretty much the only game in town, and they do a no-negotiation, no-commission thing which is pretty close to what the questioner is asking for. They don’t outright say, “We’re making N on this car because we need to”, but they genuinely won’t negotiate on a new car price, and their advertised prices are quite a bit lower than the pre-negotiation advertised prices at nearby dealers for the same car. A couple of times when I was tire-kicking some of their sales managers would look for a particular car and show me the monitor with all the same info they saw on pricing etc. So it seems to work OK for them. And they also don’t pull the same level of F&I crap other places, anecdotally, seem to.

    I don’t know what their margins are, but they seem reasonably successful (at expanding their dealership network if not in remembering that my phone number is different than my mother’s) so it looks like the model can work in some cases. Based on other stories I’ve read here and other random Internet places, I definitely prefer buying from them, and I’m informed enough to be fairly certain that I’m not one of the ones who got soaked!

    • 0 avatar
      Robotdawn

      Several Buick/GMC dealerships I’ve bought through before seemed to follow this model. Much preferred this. I was in and out in under 3 hours in one car purchase.

    • 0 avatar
      NormSV650

      Just compare their prices versus everyone else on a regional area. Local dealerships around me charge too much so I shop an hour away or just have the car delivered from out state.

  • avatar
    Robbie

    Why can’t we buy cars straight from the manufacturer for a fixed price?

    Because dealerships have bought politicians and have bought from them the exclusive middleman right to sell cars.

    I wish that politicians gave me the exclusive right to amazon.com products, and that you all had to buy through me, and that I could add random amounts to any purchase price and keep the profits for not doing anything at all…

    • 0 avatar
      Groovypippin

      Because any sensible manufacturer has NO INTEREST in dealing directly with the public. NONE. ZERO.

      Dealers shield manufacturers from a vast array of day to day nightmares, like all the people who are convinced that a single, correctable issue with their new vehicle means they have purchased a lemon and therefore they should extort 18 free services from the dealer or they will throw a temper tantrum on the internet and tell everyone what horrible human beings you are.

      • 0 avatar
        sirwired

        “Because any sensible manufacturer has NO INTEREST in dealing directly with the public. NONE. ZERO.”

        I keep hearing that, but given how jealously dealerships guard the ability to stop manufacturers from selling directly, I don’t believe it for a second. If manufacturers *really* wanted to farm out the customer experience, why would there need to be laws forcing them to do so? Wouldn’t they do that on their own?

        Given how crappy dealerships treat customers, and how those customers hold the brand responsible, I think they’d very much like to take it over.

        • 0 avatar
          dwford

          Manufacturers tried opening factory stores in the early 2000s, and got their asses handed to them by their own franchise stores. They quickly got out of the business.

          As other commenters have said, a direct sales model would result in higher prices for consumers.

        • 0 avatar
          hreardon

          sirwired:

          This is case of two things being true at once. You are correct, dealers have written some seriously advantageous laws that I don’t agree with. If the factory wants to try selling direct, they should be able to.

          However, the factories really DON’T want to do this because of the aforementioned reasons.

    • 0 avatar
      sportyaccordy

      Where to begin?

      Should I start with how swell your idea is going for Tesla?

      Nah… maybe I can launch off of the fact that factory direct = zero negotiating power on your part.

      Or maybe I could speak to how pretty much everything you buy is sold in the very manner you’re decrying? Amazon is the exclusive seller of Amazon Basics… and they do add random amounts to purchase prices for reasons you’d have to work at the company to know. Pop quiz, what is the “real” cost to the manufacturer of any product? Everything… clothes, groceries, electronics, lawn mowers, new houses… is almost always either sold through a retailer, or if it’s factory direct is sold at MSRP. Why? Because there is cost and risk in managing inventory and carrying transactions that doesn’t make sense for OEMs to take on. Hardly “not doing anything at all”. This is a textbook example of the very consumer ignorance Bark literally just spoke to… congrats!

      • 0 avatar
        ajla

        “maybe I can launch off of the fact that factory direct = zero negotiating power on your part.”

        If you’re wanting to buy a low-volume enthusiast car or do a custom order then it really doesn’t matter because it’s not like you’ll have any leverage with a dealer in the first place.

        I personally think direct sales makes sense for certain vehicle segments.

        • 0 avatar
          jack4x

          In my experience the first part of that statement is true, the second is not.

          I could have custom ordered my truck from any Ford dealer in the country and it would have been delivered to me exactly the same. Since one dealer is as good as any other, I have all the leverage to find a place that will deal. Even a one way plane ticket and gas home is cheap by comparison to the variance in asking price. In my case I was lucky because a local dealer was willing to work with me aggressively and save me the hassle of traveling.

          For a limited production vehicle with allocation limits or ADMs you are 100% correct. Just need to wait until the hype dies down or find a dealer that’s stuck with something they can’t unload.

          • 0 avatar
            ajla

            I’m not sure that having to travel to Oklahoma to buy a car is a really a “win” for the shopper.

            I personally like the Tesla model a lot. Now, maybe it isn’t great for the manufacturer, but I think the potential harms of direct sales on the consumer side are overstated.

      • 0 avatar
        FreedMike

        I’d say Tesla has 100 problems, 99 of which are named “Elon Musk,” with the hundredth being production issues. I don’t think their direct to consumer setup is an issue for them – I actually think it’s an asset.

        • 0 avatar
          Mnemic

          Lol @ “an asset”. Go watch rich rebuilds fiasco buying that used model X through that nightmare of a “sales model” and get back to us.

        • 0 avatar
          ToddAtlasF1

          100 problems that don’t include fires, decapitations, Panasonic losing faith in their vision, or looming competition in Europe?

        • 0 avatar
          civicjohn

          Freed, then I guess Tesla has 150-200 extra problems where I live, with all of the S and X models collecting dust at the local mall parking lot…

        • 0 avatar
          sportyaccordy

          The waiting periods alone put the direct to consumer setup at a disadvantage. Tesla’s aversion to having a physical presence also undermines the ownership experience, and their stronghold on body work and parts makes any kind of repairs (which seem to be frequent) a nightmare.

          People talk about dealership greed but Tesla’s direct to consumer model seems designed solely to maximize profit and cashflow wholly at the customer’s expense. It’s a demonstration of how awful the direct to customer model can be.

    • 0 avatar
      danio3834

      That’s the small consumer item mindset, and the one most consumers are familiar with. Cars differ substantially so the business model doesn’t work the same for the most part. The similarity ends where once the customer has decided to buy, they want it NOW.

      Small consumer items, like most sold on amazon, have relatively few variations and are relatively cheap to keep in stock to satisfy demand and deliver to a customer in short order.

      Cars are the opposite. Large variations in equipment, very expensive to store with lots of frozen capital.

      OEMs know that to maximize sales velocity, the models customers want have to be in stock, ready for delivery. But they don’t want the billions in finished depreciating inventory on the books. So the plant builds it, and as soon as it ships, the dealer is billed and company paid. The dealers hold the costs of the finished goods.

  • avatar
    Robotdawn

    I agree and disagree. IF you do your research, you should be ok. Or at least I think I’ve done OK in the internet age. I might be wrong and not know it.

    But go find 3 very similar cars at 3 dealerships, get quotes, internet or in person, value your trade and see where you are. Of the 3 numbers at least one of them is straight up jobbing you, and if you go complain, they and every person at the dealership acts like you are out of your mind.

  • avatar
    Groovypippin

    Amen. The first thing you learn selling ANYTHING is that the people who pay the most are – by far – your happiest clients because they saw the value in what they were buying. Your WORST, UNHAPPIEST, MOST MISERABLE clients are invariably those who get the best deals (or conversely, the dealership’s worst deals). They think anything more expensive than free is a rip off.

    Any client who has done the research, knows our costs and makes an offer that leaves a semi-reasonable amount of profit for the store I work at get an immediate handshake. No nonsense. No further questions asked. No attempt to get a “bump”. That’s 80% + of our clientele.

    The other 15%? They make everybody’s lives miserable. most especially their own. But as the old saying goes, there are those who know the cost of everything and the value of nothing.

    • 0 avatar
      thegamper

      The happiest clients are likely happy because they have enough money where they dont need to negotiate. The unhappy buyers, ever dollar is important. Both are there because they recognize the value of what they are buying.

      Money can buy happiness!

      • 0 avatar
        Groovypippin

        Nope. You are wrong. In my 12 years and 1,000+ car sale experience that has ZERO bearing on it. It’s just the way some people are wired. Some people, rich or poor, are unbelievably cheap and HATE the idea of a dealer profiting. Some people, rich or poor (often wealthy) are perennially dissatisfied with everything. Some negotiate for sport (the narcissists) and genuinely like to goad the people they are dealing with. They get off on suffering. But, like I said, they are in the minority. The vast majority of people just want a fair deal on a good product.

    • 0 avatar
      TMA1

      I’ve never met a dealer who only wanted a reasonable profit. I met plenty of dealers willing to round up my trade in value to the nearest $100 over what I owed (See? We’re paying off your car!), despite the actual value of the vehicle being thousands more. I really don’t like being underwater on a vehicle, but watching multiple dealers try to walk away with the entirety of my equity was really aggravating.

      • 0 avatar
        Groovypippin

        “Trade-in” is a misnomer. You are buying a car from they dealer – and negotiating aggressively no doubt – and they are buying a car from you and doing the same. Turnabout is fair play.

        Trading a car is – in essence – paying someone else to sell it for you. we, as dealer, then have to inspect and repair it, detail it and quite commonly pay for cosmetic fixes, run and pay for vehicle history reports, pay to market the car, pay interest while its in inventory and then TRY to sell it for a profit.

        Want more? Sell it yourself.

        • 0 avatar
          slavuta

          If I trade-in a car, it means it has thousands $$$ in issues. Last one had main seal leaked, struts leaked, engine burned massive amount of oil. I raped the dealer on it – they paid me straight good condition blue book value. If my car is good, I sell myself

          • 0 avatar
            TMA1

            Slavuta, that depends on whether your state gives you a sales-tax credit based on the value of the trade-in, and whether the trade-in is worth anything. Since a dozen VW dealers were willing sell me a GTI at the same price, the only thing I was worried about negotiating was the trade-in. Since the trade-in covered a almost 90% of the new car cost, I was only going to be paying sales tax on 10% of the new car’s value. Worth the leg work to me to save $1500 in taxes.

            A car that’s worth nothing though? Or even more to private sale market. No way I’m bothering with dealer appraisals then. I would have happily sold my car myself, but your average schlub off Craigslist isn’t going to come up with over $20K.

      • 0 avatar
        87 Morgan

        If multiple dealers were offering you less than the figure you have in mind for the value of your car and you feel they are all trying to walk away with the entirety of your equity, perhaps you were not being honest with yourself and them, as to the actual value of your car. This was a you problem, not a them problem.

        As stated, don’t like the offer. Sell it yourself and see how you do.

        • 0 avatar
          TMA1

          Morgan, I could have easily sold it to Carmax for less than I received. That was the first place I went. That, plus published book values, are generally a good place to start on valuing a car, don’t you think?

          Now, if two out of five dealers are offering $100 over payoff value, is the problem with me, or is the dealer being shady? I’m sure if I had told them I owed $2K more on the car than I did, then their offer would have been $2K higher.

          As it is, when a dealer is thousands below the Carmax offer, they’re trying to pull something. They even came off like they were doing me a favor rounding up the figure to the nearest hundred.

          Some people would probably fall for it too. It only takes a few suckers to make the scam worth running.

          It’s not like I had to go far for another deal. There was another VW dealer 10 miles down the road, selling the same car, same trim, for a few hundred less, and offering thousands more on the trade in.

          • 0 avatar
            Adder

            TMA1- are you using Blue Book or Black Book? The Black Book (available through Car and Driver) estimate will be more realistic. Additionally, make sure you are using the “trade in price” most sites will put that as a separate option that takes into account the cost of sale from a dealer’s perspective.

    • 0 avatar
      hreardon

      I’m with Groovy – in my line of work, our happiest clients are the ones who understand the value of what we bring to the table, and these are the clients who pay us a very, very good dollar.

      Related to that, we deliver an excellent product because we have the money to invest in our staff, make them better, and ultimately bring better solutions to the table. Our best clients truly understand “you get what you pay for,” and have no problem paying.

      They’re the clients for whom when they hit a rough patch, will call up and say, “listen, we’re going through a bit of trouble – can we extend terms from 30 days to 60?”, and we always work with them.

      On the flip side, we have clients who question every penny – and for whom we won’t do a lick more of work than we absolutely have to.

    • 0 avatar
      slavuta

      But Groovypippin,

      With everything you said… Before I used to buy Japanese-built, high quality cars with 99% Japanese part content. Now, it is Mexico-built, with 35% China part content. And you’re not selling it to me cheaper. Yes, I will make everyone miserable; because you’re making me miserable by not producing right cars in right places. What are you selling?

      • 0 avatar
        NormSV650

        Why would a Japanese made vehicle burn oil, have bad struts, and leaking rear main?

        • 0 avatar
          87 Morgan

          Because they are man made, not god made.

        • 0 avatar
          slavuta

          Norm,

          fact of life – Toyotas ALWAYS needed new struts relatively early in life – 7-8 years. This was always a weakness in Toyota. People didn’t change them but they have not operated properly. Ride became harsh, or too soft, etc. This what was happening with my car.

          The transmission in my car was 1st year production. I gambled and lost. The engines Toyotas produced approximately in 2008-14 had some major oil issues but in 2009 we didn’t know about it. And this is without mentioning failed water pump and serpentine belt tensioner.

          Yes, I had nearly 100% Japanese made Toyota that failed spectacularly. At least it did so 10 years later. I wish, I could drive it 200K miles but I only got 131K out of it.

  • avatar
    Lie2me

    I think just about anybody could have guessed that this is how it works, but thanks for confirming it

  • avatar
    danio3834

    Who was it on here a while back arguing that dealers make double digit net margins and make more profit % than OEMs so the OEMs are stupid for not going all in on the retail game?

    Ask Bark, man.

    I’m just a guy on the internet.

  • avatar
    ToddAtlasF1

    I sold cars one summer in college and learned the ways of the systems house car dealership. Because of that, I have been a mercenary negotiator of car purchases since. I know all the numbers amd I can walk with the knowledge that there’s nothing unique about a new car. I paid 10% less for my car than most of the dealers I contacted wanted. I’ve been blissfully happy with it, and I sent any number of people to buy from the salesman who helped me until he moved over to selling Mercedes-Benz vehicles. Do you know what makes people unhappy? Stress about personal finances.

  • avatar
    thegamper

    Personally,

    I dont mind the dealership games at all. I would never walk away with a car thinking I got screwed. I am not brand loyal and my feet take me to where I perceive the deals are.

    My issue with the dealership experience is not that I am paying too much for a product. Most things you buy are not negotiable and many are clearly overpriced. Anything from Apple for instance.

    My problem with the dealership experience is that everyone pays a DIFFERENT amount. I dont mind overpaying for something I want, I do it all the time to get latest and greatest stuff. I do get pretty upset though that I had to pay more than the next guy.

    I am sure it happens on every car I have ever bought/leased. I didnt get the vehicle for the best deal around, I know this. I can live with a $20-30 monthly payment difference between the best possible deal and the deal I actually got. I have zero issue with that, people need to eat and keep the lights on. But I get very upset when I call the dealership in the next town over and find vastly different prices. That right there is why people hate dealerships.

    Its the potential to get totally robbed that you find in very few other places in life outside of the Apple Store but at least Apple is totally transparent about their desire to rob you in very public shareholder calls, a level of transparency that you would never find at a car dealership.

    • 0 avatar
      krhodes1

      I really don’t get the butthurt about different dealers having different pricing. It’s a new car – they are not special flowers. Just buy it from whoever has it cheapest. Don’t like the price or treatment? Walk.

  • avatar
    PandaBear

    People who complains have never run a business, and expect everything and everyone who help get the car from manufacturer to them is FREE.

    The older people tends to bargain to hell, thinking that the dealer won’t want to lose a deal because at least a deal will make them money. I’ve dealt with these old people before on car shopping, I’d just ignore them instead of helping them negotiate, because it is a waste of time.

    Then they complain about the dealer didn’t give them a deal because they bought a car from them 20 years ago, the quality of service went down (no shit, you are paying 30% more than 20 years ago but the cost of running a business and building a car doubled).

    They also complained that it cost $20 / hr to hire an undocumented worker for yard work, and thought minimum wage is still $7 / hr in 2019 too.

  • avatar
    hreardon

    I’ll drop two comments that I always use when this topic comes up:

    1. You are welcome to pay the MSRP listed on the sticker if you want a no-haggle experience. Bring your own financing, sell your old car on your own.

    2. A direct sales model is virtually guaranteed to lead to an increase in transaction prices overall. Someone (the manufacturer) will need to shoulder the costs associated with running brick and mortar stores, dealing with trades, employing thousands of additional people, etc. Oh, and it will screw with manufacturer’s most precious commodity: cash.

    As someone else mentioned: for someone to get a killer deal, someone else has to get ‘killed’ on their deal. Otherwise, in our social justice 21st century world, we all suffer in the name of “fairness”.

    I agree that the dealership, as a concept, brings very little of value to the table. The problem is that manufacturers don’t want the inventory, trade-in, service, and floorplanning headaches that dealers have.

    • 0 avatar
      ajla

      “You are welcome to pay the MSRP listed on the sticker if you want a no-haggle experience.”

      I’ll tell that to the Ford dealer when the GT500 comes out.

      • 0 avatar
        hreardon

        Well, duh. I think that most people are talking about your run of the mill F-150s, Camrys, A4s, and the like.

        Christ, the New Beetle was carrying at $10,000 markup back in ’99 – and if you wanted one, you paid it. This went on well into late 2000.

    • 0 avatar
      eggsalad

      “1. You are welcome to pay the MSRP listed on the sticker if you want a no-haggle experience. Bring your own financing, sell your old car on your own.”

      Where?? Not in Las Vegas, certainly. I double-dog dare you to walk into any dealership in Las Vegas, and offer MSRP (less factory rebates) and sales tax, and drive out in a new car. Ain’t gonna happen, no sir.

      First, every car on the lot has the “Desert Protection Package” to the tune of $2-4k. I like to call it “Tru-Coat”. Absolutely non-negotiable.

      Then, there’s a $400 “documentation fee”. The law says they CAN charge that, but they are not legally required to, despite them pretending that’s the case. That clerk preparing your documents? She’s making $15/hr. I guarantee you it doesn’t take 26 hours to prepare documents.

      If you don’t want to negotiate, you will pay at least $2400 **OVER** MSRP (plus sales tax).

      So you’re wrong.

      • 0 avatar
        slavuta

        I love East coast

      • 0 avatar
        hreardon

        eggsalad –

        Can’t speak for Vegas, but where I live, it isn’t an issue.

        Perhaps the Vegas dealers have a line of people who just don’t like to negotiate, and are taking advantage of that fact.

      • 0 avatar
        danio3834

        If someone walked in and said they wanted an average car for MSRP, there isn’t a dealer out there that wouldn’t four square the deal so you pay exactly that, doc fees and pro-packs be damned. There’s lots of room to work that.

      • 0 avatar
        87 Morgan

        eggsalad, negotiate a deal with a store in SLC, Denver, or ABQ and buy a Frontier or Southwest ticket and ask to be picked up at the airport, which any of the stores will gladly do for you in the afore mentioned cities.

      • 0 avatar
        krhodes1

        Then don’t buy a car in Vegas. Is there a law that you can’t go elsewhere? It’s the second most expensive thing most people ever purchase, if you can save a few grand by buying a cheap plane ticket and taking a drive, why wouldn’t you?

      • 0 avatar
        jkross22

        LA is a 4-5 hour drive from Vegas, or negotiate with a dealer and have the car shipped. You’ll still be ahead by a few thousand.

  • avatar
    PandaBear

    A lot of people didn’t know that car cost to the dealers are not CONSTANT every single month, so they assume that if a friend got a discount 6 months ago means they can get the same deal now, despite the manufacturer is not running that deal now.

    You can’t negotiate much if the manufacturer didn’t have a deal NOW. You also can’t negotiate much if the dealer is not desperate in getting rid of a car sitting on a lot for 6 months. Just because a stick shift brown wagon is having a $3k discount doesn’t mean your silver automatic Camry LE (1 in 20 on the lot, 10 sold every weekend) will have the same discount on the 1st model year.

    Car buying is more like real estate, instead of a new iPhone. Many people didn’t realize that.

  • avatar
    Arthur Dailey

    When negotiating for the lease of a new vehicle in the mid-80’s I chanced on a rep at a GM dealership in the east end of the GTA. His price was better than any that I got elsewhere. His service superb.

    For our next vehicle acquisition, I contacted multiple dealerships as well as him. Again his price was the best.

    For the next 20 years, until he retired, myself, our family members, most of our employees/associates and many of our friends used only his services when getting a vehicle.

    He had a nice set-up. 9 to 5, Monday to Friday. Only leasing. Private office. If we purchased rather than leased he passed the deal on to whatever sales rep he felt needed the deal the most. But he set the price, and had the paperwork ready.

    Once he retired, I had to go back to ‘haggling’. Not a pleasant experience, although the internet and organizations like the APA and Car Cost have made it a little more palatable.

  • avatar
    Fred

    I’m a kind of a hippie looking dude, don’t talk much and yea dealers have walked away from me thinking I can’t or won’t buy their car. The one that didn’t was the Ferrari dealer. I use to buy my Lotus parts there and would look around at the cars. I asked them and they said, “a lot of hippy guys come in with suitcases of cash and buy these cars.

    • 0 avatar
      MBella

      Back at one of the Mercedes dealers I used to work at, one of our most richest customers would walk in a ratty sweatpants, t-shirt and shoes. He could have passed easily for homeless. He was also super nice. He would talk to you for a bit, and was always hoping you had some fun that day with his car. He really wanted the dealer employees to have the same joy he does. You never know who you’re actually dealing with.

    • 0 avatar
      Lie2me

      “a lot of hippy guys come in with suitcases of cash and buy these cars.”

      With the Feds and IRS in close pursuit, carrying a suitcase of cash will get you a boatload of trouble, even if you’re legit

  • avatar
    tankinbeans

    Most of the big chain dealerships around me are of the no-haggle sort and I appreciate that. Trying to haggle feels a bit gross and I don’t begrudge a profit in the least. Most times the cars that I look at are similarly priced among the franchises, presumably because they’re all competing in the same sort of climate. Minneapolis/ St. Paul isn’t a huge market and driving to a different dealer isn’t hard and they know it.

    Where I’ve found the variation is recently when I’ve been dipping my toe in the water; the dealers are all over the place on trade value. My car would likely be lot poison (2017 Mazda6 6MT, no sunroof). I’ve gotten quotes running the gamut between 10k-16k.

    Since I’m not seriously thinking about it yet, I’m happy to walk.

  • avatar
    JMII

    I know all about that South Florida automotive group that shares my initials. I worked at a place that printed some of their internal materials. Seem to be nothing but up-sell junk like VIN etching, trim packages (made up, not OEM), window tint, vehicle alarms, wheel packages, etc. It was clear to me from reading these materials (as outsider) that their focus was maximum profit per “up”. They did this by tacking on as much extra stuff as possible and hiding those nickles and dimes into the monthly payment. $5 a month doesn’t sound like much until you multiple it by 60 months of payments plus interest.

    The focus was the F&I department being the real cash cow. Everyone’s job at the dealership (from receptionist to mechanics) was to get customers to believe these add-ons and services represented incredible value. Not sure how buying aftermarket wheels, window tint, cheap mud flaps (not OEM) or fancy floor mats at a dealership added value, but these people made an art out it. Sneaking this into monthly payments was easy when customers lack basic math skills.

    What always struck me was just how was how hard they pushed extended warranties. Which tells me there must be tons of profit in those. Especially someplace selling Toyota and Lexus vehicles. Maybe a good topic for another Bark article.

    • 0 avatar
      tankinbeans

      My mom bought a Mazda3 about 2 months ago. I was along because she doesn’t like dealing with people. The salesperson kept up with the “I really do recommend the service plan and blahdy blah.” I looked him dead in the face and said that she’s not paying interest on maintenance for the life of the loan. He stopped talking after that.

      Had a guy at a Ford dealer (I used to be a consistent Ford customer) who tried to say I’d come out ahead if I bought the service plan. Told him the same thing.

    • 0 avatar
      danio3834

      F&I is absolutely the ticket to high gross per deal. It’s easy to beat down the sales guy up front as he just wants to close it, and move on to his next mini. The Finance Manager talks the bank down to get you bought, so they’re your friend. Your friend who got your credit bought wouldn’t screw you, would they?

      Protection-Packages, extended warranties, lot pack accessories like flaps, locks, steps, finance reserve on loans and rate bumps…the list goes on. Not uncommon for 100% of gross to be in the back end.

      • 0 avatar
        JMII

        I forgot about the wheel locks, total scam as they were already installed at the port thus you couldn’t decline them. Bumper guards (clear plastic or stick on rubber) and rear seat DVD players were the other big items in the accessory catalog we printed. Once again none of these “valuable items” were official OEM parts, it was all just dealer installed JC Whitney trash with massive mark ups.

        Another big item was the GAP insurance. Let’s see… more payments just to ensure your other payments are covered? Brilliant! Perfect for all those upside down loans created by the -no money down plus we pay off your old car- specials that pop up every holiday weekend.

      • 0 avatar
        CapVandal

        A little late to this thread. But I just wanted to mention that a lot of dealer groups are public companies and a lot of financial information is disclosed in SEC filings.And it generally supports your observations. In terms of profit, the rank order is parts and service, F&I, used cars, and then new. New cars are commodity like and there is a lot of competition. All used cars are unique regarding condition. Everyone’s financial situation is unique, although there is competition for loans. Parts and Service are franchises and subject to the least competition. They have a virtual lock on warranty work. They are specialists in your make of vehicle. Etc. Sure, there is plenty of competition.

        But beyond that, it isn’t like an owner can pick and choose what departments they want to own. You wanna be a dealer, you have to have them all. Plus, some costs have to be allocated to profit centers. There are rules and conventions regarding cost allocation, but it’s still somewhat arbitrary. Like if you make money selling a condo, it doesn’t make much sense to say, “I made money on the second floor and basement, but just broke even on the floor.”

        Regardless, dealer group stocks aren’t that appealing to me. The head of Auto Nation wanted to come up with their own brand of parts.

        “AutoNation also has launched its own line of maintenance and repair parts, starting with batteries made by Exide, wipers and chemicals used by service departments. The Precision Parts brand is scheduled to expand this year to include filters, cleaning products and maintenance and mechanical parts.

        In the future product portfolio are brakes, tires and suspension and collision parts. Berman said the parts will be competitively priced.” To that end, I like ORLY.

  • avatar
    hreardon

    General thought on the subject: I always find it an interesting discussion when someone brings up the topic “what is a fair profit?” We never talk about how much someone walks away with after they sell their home (owned outright? underwater?), how much markup there is in jewelry (upwards of 700% in many cases), a restaurant markup on a bottle of wine (50 – 100%), your local dentist, or a trial attorney who receives 30% of a settlement.

    “Fair” is in the eye of the beholder, and trying to determine what is fair is a game that will only make you jealous in the end.

    When selecting contractors or buying cars, it’s great to have a competitive market. I generally elect to go with the vendor who demonstrates they have my back and will help expedite things when I have an issue. That’s worth the premium in my book.

    Try getting that basement priced contractor to return your phone call when you discover something wrong.

    • 0 avatar
      wayneoh

      Scheduled my 92 YO Mother’s yearly Air Conditioner maintenance so I could be at her house when it was done. The tech holds up a run capacitor for the inside blower fan and says it’s weak and he recommends replacement. I say ” OK, how much ?” I nearly fell over when he says $150. I took a quick photo of the label with my phone and checked Amazon. $9.63 !
      Needless to say, I declined him replacing it and ordered one from Amazon.
      Now that’s a mark up !

      • 0 avatar
        AtoB

        “Scheduled my 92 YO Mother’s yearly Air Conditioner maintenance so I could be at her house when it was done. The tech holds up a run capacitor for the inside blower fan and says it’s weak and he recommends replacement. I say ” OK, how much ?” I nearly fell over when he says $150. I took a quick photo of the label with my phone and checked Amazon. $9.63 !
        Needless to say, I declined him replacing it and ordered one from Amazon.
        Now that’s a mark up !”

        Our A/C went out last summer. A bit of internets pegged the capacitor as the most likely suspect. I opened the access panel and yep, it was leaking goo just like an old Lucas coil. Just like you I found a replacement on Amazon for under ten bucks with free two day delivery. Two days later the capacitor came, I put it in and all was right again.

        OTOH if I lived in Phoenix and the A/C went out in August I *might* be more willing to pay that $150.

  • avatar
    MBella

    Aren’t you forgetting reason number 4? The incentive bonuses that the dealers receive from the manufacturers? They might not make much up front, but they’re ok with the bonuses at the end.

    • 0 avatar
      hreardon

      MBella,

      And this is precisely how my wife and I were able to get a screaming deal on a Grand Cherokee Overland about a year ago. Last day of the month, last day of the quarter, and my wife was genuinely on the fence – didn’t need a new car.

      Dealer made us such a ridiculously good deal we would have been idiots *not* to take it.

      The quarterly bonus for the dealership was massive – they’re a very large volume player.

  • avatar
    slavuta

    “But the ones who feel the most violated are typically the ones who got the best deals!”

    This is about me. I feel raped every time I rape the dealer

  • avatar
    sirwired

    I can’t say I’ve had any complaints about how much I’ve paid for my new cars. What does, to no end, piss me off is the F&I gauntlet. The overpriced paint protection, VIN etching, tire protection, bad extended warranty, etc. is downright awful. (On my last one I had to specifically say I wanted one fresh off the truck, before they could apply a few hundred in stupid add-ons to it.)

    I realize that all those stupid add-ons is where they make their profit, and that’s where the satisfactory price comes from, but it’s not entirely fair to take care of the trusting and uneducated that think all those add-ons are actually a good deal.

  • avatar
    dwford

    Every word of this is 100% true.

    And if you think other businesses don’t also follow the ” In order for some customers to pay too little, some customers have to pay too much” model, you are dead wrong. Uber’s algorithm learns your habits and gauges how much you are willing to pay for a given trip (you didn’t think you only got charged for the exact time and miles like a taxi, did you?). The cable company will happily let you keep paying full price, while offering discounts to those who call and complain. And there are people out there still renting their home phone (the actual phone!) from Ma Bell.

    • 0 avatar
      hreardon

      dwford –

      Spot on about Uber, and it again proves that what people are complaining about is ultimately: convenience. Uber is extremely convenient, but if you’re using it with the idea that it is cheaper than a cab – you’re almost certainly wrong. Early in Uber’s life it often times was cheaper, but it sure isn’t any longer.

      Car buffs want to buy from the factory with the idea that they can customize the car six ways from Sunday. The aggregate market seems to think that “buying direct” leads to huge savings by “cutting out the middle man!” Think of how many local advertisements you see for furniture, cabinet, and jewelry sales where they tout that line: “buy direct, and save!”

      • 0 avatar
        TMA1

        Uber/Lyft are still winners as far as I can tell. I use those services to get to the airport (~$50), but am forced to use a taxi to get back home ($115). It helps that their are so many drivers available in my area.

        • 0 avatar
          ToddAtlasF1

          Where isn’t Uber cheaper than a taxicab? Maybe with surge pricing, or if you request a premium service, but otherwise it has always been remarkably reasonable in my experience. I’ve only used them places where they have to compete with Lyft though, so maybe that keeps prices down to the point where the drivers are worse paid than ever.

  • avatar
    poggi

    Had a auto retailer with 28 stores. At a sales meeting, the owner said, “The only reason we sell new cars is to sell used cars.”

  • avatar
    Maymar

    I worked at a dealer for a couple months (I’m no good at selling), and the sales manager would typically show a prospective customer the invoice early on, and offer the invoice+$500 deal. It didn’t lead to scads of sales, most customers would just go to another dealer in town offering the same car for $200 less.

  • avatar
    Felix Hoenikker

    “This is the worst business. The absolute worst. I invest $30,000 to make $500

    I’m no MBA, but this statement is lacking a very important variable that is turnover. Making $500 on a thirty thousand dollar investment results in a staggering return if you could sell one a day. If you sell one car a month at this margin, you are grossing $6000 a year which is a 20% return before expenses, Doing this one a week is a 80% gross return. The lesson here is to minimize the cost of sales to keep more of the gross profit. It’s not what I see when I visit my local car dealerships,

  • avatar
    jammyjo

    Scion’s and Saturn’s failures had as much to do with their line up. Try that with a high volume, mainstream brand like Honda and let’s see how they do. Why wouldn’t manufacturer’s want to sell directly to consumers especially today. They would move more cars, cutting out the dealers and their shenanigans that foster ill will. Dealers stunt sales growth, destroy and knock people out the new car market for years. BMW would like for you to spec and order a car rather than overproducing and making costly inventory mistakes that sit on lots until incentives are piled on them. Who wants to be a car salesman these days anyways?

    • 0 avatar
      Dave M.

      One of our 7 local Honda dealers tried the no-haggle gig about 10 years ago. It only lasted a year, but I’m not sure of why it didn’t work out.

      Every a year I help a dozen or so people negotiate and buy a car. CarGurus is a tremendous starting point resource.

    • 0 avatar
      krhodes1

      BMW builds every one of their cars to order already. Whether that order came from an individual or a dealer for inventory matters not at all to them. And if the dealer orders a flaming pink M3 that sits on the lot for three years, not their problem. And they make it very easy to order a car your way. If you pick it up in Munich, you even get a nice discount and some other bennies for doing so. The dealer gets a discounted invoice price on that car too, and of course, no carrying costs for it – win-win.

      Not to say that BMW doesn’t still use incentives to juice sales, of course they do.

  • avatar
    Jerome10

    Someone else touched on it… it is the uncertainty of it. Yeah Apple might be stealing your money but the guy with the XR next to you paid the same outrageous price.

    And the haggling is just annoying. Just tell me the price, if I feel it is fair I buy, if Honda has a better value on their set price, I go there.

    Airline tickets are varying price. But at least I have a take it or leave it amount. I don’t call United and haggle. Either I’m willing to pay $320 or $815 for the same flight or I’m not. If not, I shop at Delta. So yeah prices are different but I know what they are and I take it or leave it.

    Not knowing If you get ripped is a big problem. And this will probably tick off those here who work at dealerships but look how many comments are about consumers want their cars for free or they want to screw the dealer. To me that says the dealer isn’t doing it’s job of selling a car to a HAPPY customer. Want me to be satisfied? Don’t make me jump through a million hoops and F&I games etc and then still not know if I got burned. Those happy customers that overpay? They’ll be happy too if they save $2000.

    And to those mentioning scion and Saturn, I maintain that the model wasn’t flawed, it was that they were still too greedy for the quality of product sold or the volume desired. Saturn set the price. Then you can haggle at Chevy in a Malibu and get the same basic car for less. The Saturn dealer experience wasn’t special, so not getting anything there. Scion…. I can go get a BRZ for less. Don’t blame the model blame the garbage pricing they used. Offer something others don’t or put more cash on the hood. Of course you could argue not haggling is worth some money but a weak argument in my book. You’re hoping people will pay more just to avoid something that shouldn’t exist in the first place.

    Price from factory. Add any cash a dealer might wanna throw on the hood, I shop the vehicle and the dealership. I can buy same model Samsung TV at Best Buy, Walmart, Amazon, or Bobs TV. Let me choose if price is everything or I will pay a little more because Bob has great service and donates to the local church.

    But god just stop the stupid games. All you do is make customers wonder if they’re getting screwed or not.

    • 0 avatar
      hreardon

      Jerome10 –

      The sticker price *is* the price of the vehicle. If a dealer wants to add all kinds of junk to the MSRP that you don’t want, you walk to another dealership. Outside of some special models and really crappy dealers, I am certain that if you walked in the door to virtually any local shop and offered them MSRP, they’d take that deal with a smile.

      When you walk into the Apple Store you can choose to buy AppleCare, and finance with their Barclay financing option. Don’t want those things, don’t buy them. Same goes for the dealership.

      I just checked, and there are 20 Ford dealers within one hour of my home. I can walk into any of them and the MSRP on the window will be the same, plus/minus a few dollars. They all will charge varying amounts for documentation fees, etc., but I can easily purchase from any of them.

      If you want everyone to pay the same outrageous price so that you are not inconvenienced, pay the sticker.

      Cars are not fungible like iPhones, as someone else said, they’re more similar to homes than consumer electronics. Bestbuy can stock thousands of iPhones and Samsung TVs, and they can quickly and easily move them between retail stores and ship overnight to your house. You cannot do that with a $35,000 automobile that takes up significant physical real estate and is relatively expensive to move to a different location.

      I have never once in my life had a bad car buying experience – but I have walked into dealerships that left a bad taste in my mouth. I choose not to do business with those shops. My last purchase, a GTI in 2015, was conducted purely via text message. I took my trade to CarMax to get some perspective, then told the dealer what I wanted. The dealer came back within $500 of CarMax, which was good enough for me. When the car (shipped from another dealer) arrived, I walked in, the paperwork was ready, I signed, and was out the door in 45 minutes.

      I don’t care what other people pay, I only care about what I consider to be reasonable in my book.

      • 0 avatar
        krhodes1

        I disagree. NEW cars, at least non limited edition ones, are completely fungible. When I bought my 2017 GTI there were 10 of them in the exact same spec and color available within 100 miles of my home, at 8 different dealerships. And that is a relatively oddball car. If I wanted a white or silver Camry there were probably 200 of them. So if you don’t like the current dealer/deal, walk.

        Houses are like used cars – every one is a special flower.

        Personally, I don’t mind the game. I do my homework and know what a good deal is on the car in question before I set foot in the place. I don’t expect to get the last nickel out of the dealership, and F&I isn’t getting a penny out of me (I always have my own financing, which they are welcome to beat). I’ve bought a new car every other year for the past decade, and a used car most of the odd years – I currently have six in my garages, three bought new, three bought used.

        Yes, I should probably join caraholics anonymous, but you can’t take it with you and I don’t like my brother enough to leave him anything.

    • 0 avatar
      krhodes1

      20 minutes on the Internet will tell you if you are getting screwed or not.

  • avatar
    pale ghost

    What is the car sales model in other advanced countries? For example is there as much haggling? Are there the grifting tactics in F&I offices – loan markups, dubious product sales, etc? How are trade ins handled?

  • avatar
    427Cobra

    My last 3 vehicle purchases have been a mixed bag. When I bought my 2016 Ram 2500, I dealt with the internet manager- it was the best/smoothest purchasing experience I’ve ever had. Well, mostly… once we got to the trade-in discussions, things came to a halt. They wanted to give me $1500 for my 2000 SuperDuty. At that point, I told them I’d be back after I sold it myself… which took all of 3 days… and for a LOT more money. Yes, it had a salvage title, but I also knew what the truck market was doing. Without the trade, it was a MUCH easier process. I was very happy with the deal- which had less than 5 minutes of negotiation, there was no up-selling in the F&I dept… I was done in about 25 minutes. I bought for almost $11k off of MSRP, with financing below 2%.

    My 2004 Corvette Z06 came the following year. I bought through a private individual, and paid what I thought was a fair price, considering he was the original owner, & the car had 8600 miles on it.

    My 2017 Focus ST (ST3) was next, & a totally sucky buying experience. Once again, they low-balled me on the trade… $1500 for an immaculate 2008 Mercury Grand Marquis with 36k miles on it… I don’t think so. I sold it for 4x that amount… I had 6 people lined up to buy it within hours after the ad went up. Even without the trade, the process was still awful. I had dealt with this dealership before… they employ the make ’em wait/wear ’em down tactic. I had leased a Ford Edge Limited from them in 2013, when they tried to talk me into a lease at $450/mo… and that was with a credit score of 843. I told them “why should I pay MORE than the Red Carpet Lease amount?” Finally got them to meet the $400/mo lease deal.

    This go-round, the vehicle in question was a leftover Focus ST. It was a ’17… and they had nearly sold the remainder of their ’18s in stock. After about 7+ hours of (impatient) waiting, I finally got the ST for a little over 25% off MSRP, tho they hosed me on the financing… 5% APR with a credit score over 840… gimme a break (they told me the deal was contingent upon using THEIR financing… riiiightttt…) But I bit on it… and re-financed it through my credit union 2 weeks later at 2.75%, as soon as I got the DMV paperwork. This dealership always seems to have exactly what I want… tho I absolutely hate dealing with them. I really had to resist the urge to roast them on the survey, but knew that would only screw the salesman- whom I had no beef with. I feel kinda sorry for them having to use this tired old sales model.

  • avatar
    pwrwrench

    An interesting anecdote. About 15 years ago some guy around Socal was pretending to be Willie Nelson. The photo that was in the news looked much like the real Nelson.
    The fake Nelson pulled off some serious, retail, con-jobs. He got several dealerships to give him some top priced pickups. I don’t know what he told them to get the keys, but I got a laugh reading about it.
    IIRC all the trucks and other stuff was recovered.
    Maybe the dealers could mark them up, even more than usual, “Driven by Willie Nelson!”


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