A dealer writes:
Say I order a pickup truck from the Chrysler mothership: an ’09 Dodge Mega Cab Cummins 4×4. MSRP: $59k. Invoice: $53k. Hold back: $2,400. Chrysler bills my bank for invoice ($53k). My bank gets the title and pays for truck. [ED: this is also known as floor-planning or flooring.] I take delivery of the truck, I sell the truck. Two weeks later, my floor-planning bank transfers the funds to Chrysler. First, I have to pay off the flooring liability: the Ram’s invoice price ($53k). Then I wait for the factory rebate money. That’s why it costs so much to operate a franchise dealership: the operating capital requirment is huge. We are fronting the manufacturer’s cash flow by overpaying for the units when we (the dealer) buy them from factory.
Let’s say the factory-to-dealer and factory-to-customer incentives add up to $10k. So I sell the Ram to a customer for invoice less rebates. Purchase price: $43k. Chrysler sends me the $10k rebate about three weeks after I report the unit as sold. (That’s $10k on one truck. Average incentives today are around $7k.)
Bottom line: a Chrysler dealer is looking at the number of units in stock multiplied by the $8k payable from Chrysler to the dealer. That’s IF the dealer sells all these cars in given timeframe. If, however, Chrysler files for Chapter 7 or Chapter 11 . . .
Chrysler isn’t going to pay the dealer incentives. So now my cost basis is actual invoice—which is WAY-the-NSFW too high to get the cars sold based on market conditions. In this scenario, the dealer takes it in the derriere big-time (pardon my French) as they try to sell off the remaining stock. Even if the federal government steps in and protects Chrysler customers’ warranties (so it’s safe to buy the leftovers), the rebates aren’t there. So the s**t’s still way off the money.
Consider the amount of floorplan interest paid by the dealer on the unearned rebate ($10k) alone. In other words, the REAL MSRP is/should be $49k and REAL INVOICE is $43k. But I have to pay interest on $10k of bulls**t while I owned this unit, until I receive my rebates from Chrysler.
Why doesn’t Chrysler just cheapen up the invoice amount, instead of having the dealers pay full boat now and get their rebate money later? Guess who the dealers use—or used to use—to provide the floor-planning loans? Chrysler Financial. The interest on the $10k part of the loan is staggering.
Think about the number of Chrysler units in stock across the country. [ED: At the end of January, Chrysler had 359,980 units of inventory.]
The system has worked in Chrysler and Chrysler Financial Services’ favor for decades. Now that the company is staring death in the face, guess who Jim Press wants to carry the can? The dealers. You might not have much sympathy for us, but you should have even less for Chrysler.
Who has any sympathy for Chrysler?
Couple of points, Robert:
The floor-planning bank never takes vehicle title –if they did, the vehicle would by law have to be sold as used. That’s not to say they don’t own the vehicle (it is in fact the collateral for the loan), but new vehicles are shipped with a document knows as a MSO, which allows a state to generate a new-vehicle title.
The system is certainly designed to work in the era of “stackin’ em deep and sellin’ ’em cheap!” Everything creaks to a halt when customers get spooked and inventory piles up.
So… go out and buy that Ram (metaphorically speaking! It’s a great truck, and you’d be helping — literally — millions of Americans in businesses both big and small.
Chrysler dealers cannot be closed by Chrysler because of protective legislation.
Sympathy for Chrysler is more appropriate than sympathy for Chysler’s dealers…
They may not be able to close them but they can certainly bankrupt them.
sounds pretty dead on to me, I’m glad you used the term title, talking to laymen about mso’s usually confuses everyone. Manufacturer Statement of Origin=MSO and that is the actual key difference b/w a legally “new car” and a used car. A car on an MSO has never been titled, hence it’s new. But some of the dealer repos that have occured, like the stock down in houston at lawrence mashall will end up, have been going through franchised only dealer auctions on “MSO”‘s except they do not have any rebates/incentives, and the warranty start date ticks from auction sale date. So there are scenerios out there, like the 50 T&C minivans that went throug detroit Auto Auction this week, that are selling NEW on MSO’s from Chrysler 10k back net of invoice less incentives, full warranty, window sticker. The only kicker is these units do not count for factory to dealer program/contest counts, even though they are new cars. The factories won’t let us RDR “punch” them as new when we sell them. Who cares, lots more profit on these units on ave anyway. Nice article btw
I doubt this was written by a Chrysler dealer. If it was he’s not much of a dealer, more of a crybaby. Things get a little tough and all of a sudden he doesnt like the rules. When business was better he was fine with Chrysler I guess. I also doubt that a real Chryser dealer would make comments like this on such an anti Chrysler site.
“Things get a little tough”
That is certainly an understatement.
spaceshuttle columbia was flying fine for years, Challenger (no pun) blew an o-ring. Things got a little tough there too, there were some complainers, but space program goes on….Car biz will too. T-minus 7,6,5,4….
This article describes the situation very well. I hate to think someone nit-picking semantics on the use of a layman term would discredit the validity message here.
However, keep in mind that all automakers in the USA operate in the way described here. An investor who decides to own/operate a local dealership has to play by these rules. Working capital is mostly negative for the OEMs as they delay paying cash incentives/holdback while expecting cash to come in when the car is shipped.
It’s good for people to be aware about how the business works. I still know some car buyers that believe every dealership owns the cars on their lots and has the title in some file cabinet in the back room.
I agree with mmmmmm’s comment that a dealer already knows the rules to the game when they’re going into their relationship with an automaker. It’s a bit silly for them to get pissy about the rules now.
Last I checked, thousands and thousands of dealers also had huge benefit from their relationship in years gone by. It turns out a few dealerships as well as Chrysler failed to learn how to protect their business to prepare for rough times. But I don’t blame the floorplanning relationship for this shortcoming. If anything, it’s just another gripe about them-there bailout bucks.
It still amazes me how many adversarial relationships exist in the auto industry.
Graphic description, RF, but true neverless. If anyone wonders why they steal your trade, sell you floormats and pinstriping, and charge stupid delivery fees this is it.
Not that we are supposed to have a care. If cars could be bought right from the dealer, and warranty work carried out at private repair shops with the manufacturer paying for the repair, dealers would probably not be necessary.
They have to get to a dealer free model somehow. If we can buy beds, furniture, LCD tvs, and everything else on line why not cars?
The floor-planning bank never takes vehicle title –if they did, the vehicle would by law have to be sold as used
In PA all new cars come with a B title indicting second ownership. This is because the title is held first by the dealer/bank before transfer
“Consider the amount of floorplan interest paid by the dealer on the unearned rebate ($10k) alone. In other words, The REAL MSRP is/should be $49k and REAL invoice is $43k. But I got to pay interest on $10k of bullshit while I owned this unit, until I receive my rebates fund from Chrysler.”
I thought the whole ‘holdback’ concept is that they don’t pay interest in the first 90 days – the manufacturer does (Except for high ends like Audi or BMW which don’t do holdbacks).
“Things got a little tough there too, there were some complainers, but space program goes on….Car biz will too”
Bad example. The shuttle program comes to an end this year, as they are old and worn out. And no money was spent to develop a replacement.A real lack of vision and planning. Ok, that sounds exactly like Chrysler.
He’s correct, it’s all of the big 3, they all use the same playbook. The difference is, that older dealers did not sign up for this monstrosity money float and interest pay. The size of these rebates have increased ten fold over the past 15 years, and the bigger the rebate the harder on cashflow. This article shouldn’t be as much a throw at Chrysler, as it’s about being a domestic car dealer in the US on today’s market conditions, and the raw fear of this carry over cash on inventory not backfilling the dealers cash if a bk presides. I’ve only been a new car dealer (GM, FMC, and Chry) for 5 years and watched the size of these rebate double during my tenure, plus an incredible price increase in trucks. Ave cost of our flooring is 33,000 per unit. Go grab 300 of those at one over prime, and cost you ten grand a lick in cash flow to sell them, see who’s complaining. WOW
Sorry. Bunch of whiners, I say. For me it’s difficult to feel sorrow or sympathy in a capitalist system (for the ones running the business, not the people toiling away under poor leadership). We’ve always had dynamic, changing business environments. Those that prepare or adapt may survive – those who don’t get weeded out. Obviously, we don’t live in a completely free market society – govt. intervention always alters “natural” market selection – but intuitively, every one in America knows the rules – stay current and provide a service or product that is viable and profitable consistently. Ever Dealer (arguably, every business owner) should be able to describe the past 5-10 years of market conditions, and, have a strong sense of the next 2-5 years. If they can’t, then they’re in over their head. If they can, and they’re still whining – shut it! These are the people who annoy every one at the dinner party. “For that last 5 years my automotive empire has earned me a 7 figure reward. This year I’m losing at least $500,000.” Boo hoo; quit complaining and go do something. If you go out of business, I’m sorry for your woes and best of luck to you in your next endeavor. If you survive, I won’t whine when your sales person, sales team leader, sales manager, fleet manager, finance manager, general manager and service tech, try to sell me: aforementioned floor-mats, under coating, pre-paid service contracts, door bumper guards, window tinting, protective clear coating, locking lug nuts, window-glass VIN etching, Lo-Jack, 10 years of XM/Sirius service, massively inflated “additional coverage” warranties and lastly, my favorite, (especially in a crashing market) additional dealer mark-up. When your people tell me how they are “losing money on this deal,” and how they at least need to make their $50 unit commission so they can feed their kids, I’ll just say, “Thanks for taking a loss on this one for me. I don’t know how you guys stay in business selling all these cars at a loss, but I sure like my deal.” All the while, you can get as rich as the market permits and laugh all the way to the bank. In capitalism, most (never all) is fair. This market doom we are currently experiencing is a natural correction in response to years of overly aggressive, unstable, and driven (that part is key) market growth. I estimate that for around 30-40 years, Americans have sown the seeds of: growing consumer debt, increasingly hedonistic/entitled/mass-consumption living, business focus shifting from market leadership to quarterly earnings, leverage against future growth (leverage against the idea that our kids will invent ways to clean up our messes), aggressive/risky/dishonest accounting practices, and more recently unregulated market investment practices (yes, trading paper against derivatives thrice to eight times removed, that over-value the original security by 8 to 10 times with no hedge (and no oversight or regulation whatsoever) seems like a guarantee to have the future reach back and slap you in the face – then, make you pay dearly for the ‘prayer’ that you might ever reach equilibrium again). I wish we had a better system with more protection for everyone – health care for children and the poor; secure retirement benefits; more accessible education; protection against atypically volatile markets, etc… But, we don’t. We have this one. Please stop whining and do your best to fix your part of it. Be fair and honest with you customers. Be firm and patient with your suppliers. Work hard, and pray. Things will get worse and I wish you the best. I know it hurts to be a dealer – there is only access to so much cash/line of credit and your float is increasing. The end is nigh. Please don’t be bitter when you sell us your final inventory later this year.
In the spirit of the original article, and the counter points in the comments, how about rather than feeling sympathy for Chrysler (may you rest in peace at the big Mopar in the sky) or for their dealers – how about we reflect on the perfect karma being displayed? The manufacturers have pushed increasingly burdensome financial constraints onto dealers (and suppliers as well, who will now fail as a result and end up pipe-bombing anything that remotely resembles the shape of a car – or a factory). Dealers in turn, have ratcheted up the pressure on what is widely regarded, as one of the least pleasant purchasing activities of the American experience (though I presume buying materials for self-administered enemas is probably still less fun). I thought (in error) that declining economic conditions would knock some sense into the process and get the dealers sales departments to treat customers with more respect and appreciation. I was wrong. I continue to witness egregious “sales behavior” in spite of it. May the model of “working your customers over so horrifically that they’d rather be at their dentists office” die ungracefully. With regret to anyone who reads this, and who makes an honest and good living as a dealer sales person, this has been coming to the rest of you for a very long time. For most people, buying a car is a major investment/decision, and your disregard for them, and for that process, has been abhorrent. Your sideways talking, manipulative tactics are now your undoing. We’ll welcome the new sales model that will let us bypass old ways, and hopefully, order directly from the manufacture (one of probably 6 or 7 globally who’ll be left standing in only a few years). Slimy sales-department people, may you rest no where near the Mopar in the sky, but rather, near the creaking, rusting Edsels, Aztecs, Aries K cars and all GM badge re-engineered products; under a hot, unforgiving sun that slowly wears you down until you, ‘sign the deal because you’re tired and you just want to go home.’
God Bless America. If you don’t like God, then may a tree or Darwin or qi/chi bless America. Hopefully car loving Americans will pull together to support whatever automotive/transportation model comes out of our current condition. For the Americans who don’t love cars, what’s wrong with you? Kiss my rear bumper.
I wonder who’s doing better in this case. The mega dealer with a 100 acre lot or the small town storefront with 10 cars on the lot. We have both here.
per- it’s not an understatement, car sales have been bad before.
I’m pretty sure a friend of my brother went out of business selling VWs in the early 90s because their cars were not selling at all. The guy never paid the floorplanning loan.
Too bad, if he had been able to hold out until 1998 when the Beetle had come out he would have done OK.
What’s wrong with floor mats? I bought two sets.
Some of the pin striping looks nice, makes the car stand out. Accessories make a car.
I don’t see much of the paint sealant/vin etching thing here in NY anymore. Maybe the AG sued all the dealers?
Have you heard that luxury car dealers usually provide better service? That’s because luxury car buyers don’t look to buy a car for 20% under invoice. That extra money is used to pay for better (and more)people to work at the dealer.
So don’t buy a car like you’re shopping at WalMart.
Was this blog post a tear jerker? This is America. The franchise contract was signed by a capitalist with financing in place and signed while his eyes were open.
I don’t know any major car dealers who live in a trailer behind the lot (they’ve done OK till now.)
I don’t feel any worse for the guy who owns the Burger King franchise because the McDonald’s franchise owner has a slightly better margin.
The economy stinks and people will be out of work. Some will be previously successful business owners that will be declaring bankrupcy. Some of these will be Chrysler Dealers. For those whose sales/business ethics have been abysmal and you (and I) know who you are, good riddance. Some will survive and I look forward to buying my 2011 Fiat Abarth from you.
Let Chrysler die. We are throwing good money after bad.
Forget the emotions here. What the blog said was that it costs money to sell your cars and trucks. Dealers have to be able to float the factory rebates plus take in a heavy valued trade. Let’s say the truck sells for $50K and the factory rebate is 10K, a typical trade on this could be 20K. Now the dealer is financing 30K assuming all of the profit is tied up in the trade and the factory rebate. If the dealer is lucky enough to move say 10 of these big units a month, he has $300K tied up in these deals. Plus he is carrying the normal floor plan interest of say $300.00 on each unit times 10 for the month, thats another 3K. Now he pays the salesman each week and all of the advertising and fixed expenses. Yes, it was always like this, but the amounts per deal today are staggering and the credit to keep all of this afloat is now much more expensive. Yes, again dealer made lots of money in the past, but most are putting it back in to stay alive hoping that the light at the end of the tunnel is not an on-coming train.
The cattle finally escaped eh? Told you those cowboys from the first pic were no good.
This is a very good article in that it points out that although the manufacturer’s plight is serious, the dealers’ situation is just as dire.
A recent tour of a local auto mall showed that the Ford dealer had plenty of inventory on the lot. OTOH, Chrysler and GM dealer lots are sporadic, at best. One local GM dealer had lots of vehicles to choose from (craptacular as they might be). Yet other GM and Chrysler dealers had very little in the way of selection, almost as if they’d completely given up and were just waiting for the inevitable foreclosure.
If the dealers are spooked and/or unable to get new vehicles onto their lots, how are the manufacturers supposed to sell the egregious amounts of vehicles they have sitting in their sales banks?
Its nothing new, manufacturers “lean” on dealers, dealers “lean” on customers it keeps on going.
If a manufacturer pays suppliers in 90 days, and pays dealer rebates in 90 days, who is funding who in the automotive industry?
When there’s a ton of money going around everyone is “uncomfortably happy” when the money dries up different story.
Its encouraging to see manufacturers pushed to the wall become blatant about their “playbook” which was usually a little discreet, often referred as the price of doing business.
The captive finance makes more money by floor planning a larger amount (higher than the selling price)and the dealer having to pay out more money than the proceeds from the sale.
rcornia: That was an enjoyable, and truthful, read. I would just like to add that the import dealers are just as crooked and manipulative. I still remember going to a Nissan dealership as a kid with my dad many years ago. When expressing interest in a new Maxima, the sales guy didn’t even get off his ass. All he said was we have 10 in the back, one will be brought in by tomorrow, and I’m telling you right now they are going for $1,000 over list.” Dad didn’t end up with a Nissan. Any wonder why Saturn got off to a good start with average products? Most dealers are opportunistic scum. And for all those times where the public was raped because the market conditions allowed it, well all you dealers out there, here’s the other end of the stick. Suck it up. I would love to see several I’ve dealt with die.
I guess this means the car dealers can all sit around the country club and complain to the doctors and lawyers about how bad business is now. It almost brings a tear to my eye.
@ rcornia great read one of the best.One would be hard pressed to find sympathy for car dealers.
Just like the rest of us, car dealers have got to adapt to the new world.
So it sounds to me the manufacturer incentives work like a mail-in rebate for the dealer, almost.
I’m surprised they don’t just pass this on to the customer…..”we’ll give you your $10k back + a small amount (less than the interest we’d have paid on the $10k) after the manufacturer reimburses us”
two years ago I tried to buy a “aged” (1yr) new car from an out of state dealer. Through several phone calls, we got within $500. The salesman went to the GM to get approval to bend that last $500… and suddenly their price jumped $1,500, because, and this is a quote, “it was obvious I wanted that car”. I actually talked to the guy that bought that same car FROM ANOTHER DEALER, four months later. He paid 2k under my last offer.
I don’t have any sympathy for car dealers.
rcornia
a little long and ranty, but you are spot on.
Dealers knew the rules before they got in the game so i have no sympathy for them, or the manufacturers.
ENOUGH! I can’t read this vitriol anymore. With this much hate flying around, things aren’t going to end well. I can’t believe some of the attitudes presented in these comments.
There seems to be little understanding of free markets, capitalism, competition, nor any concept of fair profit for value provided.
It will serve us all right when we become like Cuba and there are no…none….zero new cars available and we have to keep fixing up what we have for the next twenty or so years. Meanwhile, have fun trying to get your car fixed when all the dealerships have closed. Your local independent shops will then make you look back on our recent past as the golden automotive years.
Making our own effing parts will do wonders to make us appreciate what we used to have, and we will have a different perspective about who we thought was screwing whom.
We had better all start learning how to run lathes, etch microcircuits, read wiring diagrams, acquire shop manuals, and organize our tools.
The stone age is coming soon.
In defense of the dealers, does anyone really think it would be FAIR for Chrysler or anyone else to get someone millions of dollars in hock on some vehicles, then turn around and cut them off?
The dealers should have some protection, but there should also be an orderly wind up process so that car companies can kill dealers without it being too hugely expensive and without leaving the dealer up sh** creek.
Unfortunately its beyond that point now for a lot of companies, but in the future it would be a good way to go.
It seems to me that the process of buying a car by negotiating for a mutually agreeable deal is the essence of capitalism.
I hear people over and over again crowing that the Big Three should be allowed to FAIL!!! as this is how a true capitalist system works.
But when it comes to buying a car, nobody wants to get their feelings hurt by some car salesman? It’s my money. I don’t just give it away because someone tries to squeeze me for some extra cash with a four square, etc.
@GS650G
Thanks for the tip on PA titling.
Each state is left to its own devices to regulate how “new” cars are let into the market.
Automakers “sell” a new vehicle to dealers, together with the MSO (Manufacturer’s Statement of Origin). The bank finances the deal, and state and banking laws dictate the rest.
I believe the term used by retailers is “velocity.”
The rest of us usually call it “inventory turns.”
When the Great Big Auto Machine slows down, profits disappear faster than the oil level in a Mazda rotary engine.
dougw :
February 8th, 2009 at 11:06 am
ENOUGH! I can’t read this vitriol anymore. With this much hate flying around, things aren’t going to end well. I can’t believe some of the attitudes presented in these comments.
Sorry for the emotion. It was late last night. I was trying to poke fun, not purvey hate. Hopefully the points stand, aside from the included emotion. Rich
“dougw :
February 8th, 2009 at 11:06 am
ENOUGH! I can’t read this vitriol anymore. With this much hate flying around, things aren’t going to end well. I can’t believe some of the attitudes presented in these comments.”
If you can’t stand the heat…
Anyway, all this “vitriol” is just karma coming back to bite the manufacturers and dealers in the ass. After years and years of getting screwed over through the car buying process and having to deal with car salesman weasels, and then getting told by the manufacturers to go pound sand when trying to get repairs done under warranty, I can understand why consumers don’t feel sorry for the manufacturers or their dealers. Maybe if they didn’t show sociopathic tendencies towards their customers, and worried more about how to keep car buyers long-term through proper customer service, they would be so hated.
This doesn’t just help manufacturers, in most states it means that the customer overpays the sales tax on the vehicle too.
Good article and excellent comments by the industry people here. I didn’t realize that the rebates also have to be floated by the dealers, which of course explains their popularity with the manufacturer in preference to simply reducing the invoice price. When all of these costs and their attendant risks are considered, it is easy to see why many dealers find their used car resale and service departments more profitable than new car sales. While the auto business model may seem cumbersome and perhaps even offensive to some, no viable alternative has yet come forward.
Saturn was GM’s attempt to respond to focus group fantasies that people should be able to buy cars just like any other appliance so they set up “dealers” in shopping mall retail locations. The problem with that was that people don’t buy cars like they do toasters. They want to trade in the old car and they have to have the new car serviced.
The finance industry is one where rules don’t apply anymore. (Lose your shirt? Here, let Uncle Sugar give you a truckload of new ones. Run a giant Ponzi scheme? That’s okay. Just stay in your penthouse; we’ll only jail petty crims.) The dealers should band together and form their own flooring bank. You know and I know that eventually the rules will change again and banks formed after Feb. 1st will be granted access to TARP and no investor in the United American Dealers’ Bank will go wanting.
it sure does suck to be a dealer. the only thing worse in the auto world is having to buy from them.
well that, and bailing out the manufacturers.
and boy howdy those white collar guys kinda screwed the pooch – they suck.
and those unions kinda suck.
maintaining a car kinda sucks, too.
insurance is a scam unless you actually use it, but then you get penalized with higher rates.
and car payments. those aren’t fun.
Chrysler has a five or six month supply of cars and trucks at current sales rates. They have no reason to reopen their plants for the next couple of months.
The huge inventory is forcing Chrysler to offer huge incentives which aggravates the problem of the dealers’ financing Chrysler’s earning interest on the float. A big part of the problem is the number of 2008 models still on dealer lots, 25% of the vehicles sold in January were 2008 models. Chrysler has to put incentives on the ’08 models and then it cascades because with so many ’08s around they have to put incentives on the ’09s.
Chrysler has done a good job of clearing out the ’08 Rams as they roll out the all new ’09. They sold about 12,000 ’09 Rams in January, and only have 5,400 ’08s left in stock. The rest of their lineup, though, still has way too many ’08s left in stock.
Right now, Chrysler has about 360,000 units on hand. Why not have a real sale? The cars aren’t doing anyone any good just sitting there, might as well get some revenue out of them instead of none.
In retail, the magic words are “50% off”. I don’t know what it would do with their accounting, but if Chrysler announced they were having a half off sale, I bet they’d move a lot of metal. Dealers would benefit from parts and service – that’s where most of them make money anyhow.
MY lifetime is probably ending this spring. That would be the Lifetime Limited Powertrain Warrantee on my ’08 Chrysler. Life is indeed short.
I’d go buy another Dodge tomorrow if they had a true 50% off sale. Other than that, forget about it. MSRP on their new POS are way high. Why would I buy an inferior product at inflated prices. It’s too bad for the Dodge dealers. They are the main reason 4 of my last 5 vehicles have been dodge or jeep. My latest work truck is a Ford. I just can’t buy from Cerberus.
In retail, 50% off sales clear out old inventory to make way for the new. This won’t work in auto retail. Yes, the dealers would sell a ton, but they would be replenished with exactly the same inventory they just cleared out. Why are the new units not also worth only 50% of MSRP?
Vehicles with large rebates rarely become suddenly popular allowing the manufacturer to reduce the rebate.
BTW: Hyundai just jacked up the dealer cash on the 2008 leftovers. How does $4k off a new Elantra sound? I am going to sell sooo many cars this month.
“In other words, the REAL MSRP is/should be $49k and REAL INVOICE is $43k.”
My thoughts exactly, although I find it hard to feel sorry for ANY car dealer.
Carmakers have been trying to change the way cars are sold for decades, and car dealers have been fighting them every inch of the way.
Dealers wanted to remain independent entities, buying cars from the manufacturers and then reselling them.
In the good old days, you guys loved your kick-backs from the factories, becuase that allowed you to sell to us “at dealer invoice” and still make thousands on a sale in kick-back fees.
This is the way you wanted it, bub. So eat it.
The recent spate of price rollbacks and rebates has, oddly enough, made me LESS inclined to buy a new car. The $35,000 F-150 quad cab I was looking at a couple of years ago is now a $25,000 truck, with all the incentives, rebates, and whatnot.
So what does the darn thing cost? Maybe this new price is a joke, too, for what is essentially an empty steel box.
Why is it I can go to Wal-Mart and buy a flat screen TV for $699 and pay the same price as the guy next to me, but when I go to a car dealer, number theory takes a holiday and suddenly nothing has a fixed price and everything is a multiple of the square root of minus one?
Heck, it’s easier to buy a HOUSE than a car from a dealer. I can close on a house in a half-hour. It takes 5 hours at the local dealer, for some reason.
It is a shame that GM is talking about pulling the plug on Saturn, because the pricing scheme, when not corrupted by trade-in games, was a decent one. Put a number on the car, that’s the price, that’s what everyone pays. PERIOD. If you have a sale, you put the car on sale and everyone gets the sale price, PERIOD.
Instead, the concept of buying a new car is one approached with as much glee as root canal without anesthetic. You have to reseach, research, research the prices, and then as soon as you go to the showroom, some “salesman” will try to keep you there for 5 hours while he tries to pile on “Tru-Coat” and floor mats.
(And not suprisingly, women and minorities get the worst prices on new cars. Class-action suit anyone?)
YOU GUYS DID THIS TO YOURSELVES. You made buying a car so unpleasant. No one likes to do it, and rarely does anyone go back to the same dealer twice, the experience is so bad.
So pardon me if I don’t feel sorry for a car dealer.
robertplattbell:
I agree with you about Saturn. The pricing model WAS Saturn. The company’s failure should not be allowed to obscure the fact that the dealer – customer model was a HUGE success. But it has and will.
There will be a reformulation of the American automobile industry after Chrysler, GM and (yes) Ford are allowed to go bankrupt. Yes, allowed.
The road to hell is paved with good intentions. We should have learned THAT lesson during the last Depression.
@ Ronnie Schreiber, I agree wholly. They are going to have to put the 08’s on the money, whereever the money is to force action now! If they can’t afford to, then the trustee is going to do it, just at a much deeper discount. We went through this last july when fuel spiked so high, and my used truck inventory lost a third of it’s market value in just a few weeks. As my radio commercial sale said “I set up a tent on the highway, these liquidation units have X on the windshield and we’re going to shoot them in the head and blow em up to the highest bidder, regardless of cost. We sold more trucks than my store’s history, but took a 200k wholesale loss. BUT but but, that was better than the 400k wholesale loss we would have realized taking those same units through the dealer auction.
These 08’s in chrysler inventory are getting whiskers on them. Quesion, does GM and FMC have the same 08 model inventory issue that chryCo does? anyone, anyone…bueller bueller?
The difference today vs. several years ago is that the auto manufacturers are hammering both the dealers and suppliers like never before. 2/10 net 30, universal in business, is now “120 days with a discount of our choosing, take it or leave it.” for Detroit.
It’s the General Motors and Chrysler dealers and suppliers financing the automakers.
Damn fools.
Drag them involuntarily into bankruptcy and be done with it.
Since, for now, Chry-slur-berus has our taxpayer monies, wouldn’t now be a great time to do a nationwide roll-out of a (say, 30% off) sale on old stock, then fix prices at 25% off once the plants start moving – only manufacturing their viable products, and announcing “Saturn style” fixed prices? It’s not like GM is going to use the concept any more.
For right now, “maybe” the
Dodge Compass, Challenger, Charger, Caravan and Ram.
Jeep Patriot, Wrangler, Cherokee and Grand Cherokee.
Chrysler Town & Country and 300.
Dump the 2.7 V6 entirely. Upgrade the interiors NOW.
Include the scheduled services for the first 3 years as part of the price, including car washes. You get to see your customers and they get to see you AND the newest cars every few months that way. Duh!
Then do an honest, one-time good deal GI price with no holdbacks for all of the remaining dealers, except that for them to get the A (best) price, meaning an extra 1% profit margin the dealer has to agree to a new contract which allows a dealer contract to end with a one time payout if the franchise is found to be excess of requirements, and mandates certain business standards and base wages for sales and parts staff, as well as the modern equivalent of the Dale Carnegie course on how to properly treat your prospects and customers. B price dealers also cannot get 5 star ratings, and any dealers only (say) getting 2 stars, gets starved of good future product. And knows it up front.
Then Cerberus? Match the funds we the taxpayers have put in with new funds of your own, not as a loan, but a GRANT for Chrysler to use in order to tool up the Chrysler 200 rear wheel drive cars, finish tooling up the Phoenix V6’s, and tool up Fiat based cars including a Fiat (Alfa Romeo 159) based mid-sized Dodge front wheel drive sedan. Oh yes, and the electric and hybrid cars, too.
One more thing. Bring in some of the ex-AMC executive talent, give them a free reign, lose the execs now there and get out of the way.
Has anyone else noticed that nothing is on sale anywhere? Sure, there’s a lot of claiming that things are on sale, but when it comes down to trying to get a deal on anything you actually want, it’s like pulling teeth.
Now, I realize that this is a bit of hyperbole, but the signal-to-noise ratio is higher than I’ve ever seen it in the retail world.
We’re now actively shopping for a certified ’06-08. It’s a difficult, time-consuming process. And no one is budging on price, not even a little.
@menno:
” ex-AMC executive talent”
You may need a shovel.
@bunkie
“Has anyone else noticed that nothing is on sale anywhere?”
I agree, salespeople don’t even bother and whenI pressed (09 LTZ Suburban) there really was no deal.
@ bunkie, my email is jwolfe@gowolfe.com, shoot me a note of what you want and I’ll get you some pricing. http://www.gowolfe.com
bunkie: I’ve noticed that outside the automotive world. All this talk of gloom and doom, yet very few clearance sales at various retail stores. Heck, the Going Out of Business prices at our local Circuit City are higher than what you can get the same stuff all day long from Amazon.com for.
Groceries and other items which were jacked up last summer due to “high oil prices” have not come down.
Copper plumbing pipe is still crazy expensive at Home Depot even though the market value of copper has dropped more than 70%.
Weird, eh?
bunkie: I’ve noticed that outside the automotive world. All this talk of gloom and doom, yet very few clearance sales at various retail stores. Heck, the Going Out of Business prices at our local Circuit City are higher than what you can get the same stuff all day long from Amazon.com for.
Sorta. Look closer, and on a recent trip to Home Depot, Walmart, Circuit City and Best Buy, I noticed the same things…very thin shelving. The shelves are “full”, but it is one product taking up a whole row (does anyone need a 100 dollar HDMI cable ?), not a variety of products.
All the big box retailers (CC is an exception) are showing very, very thin stocking. They all look like different stores compared to say, November of 2008.
Home Depot just sucks. Back when we had two other home retailers, prices were good and there was a variety of products. Now that they killed the other two, no selection really and high prices for a lot of items.
I saw a new 4 door Hyundai sedan on the “strip”, new with a 14k price. I didn’t actually try to buy it, but they are stocked to the gills-front lot, lawn, and pretty much stacked up on the roof.
Boo-hoo! Since when did a car dealer give a rat’s hiney about economic ethics? It’s a two-way street, bub.
Auto dealers come up close to dead last in any survey of the public’s least trustworthy/ethical businesses that they deal with. Usually, only lawyers rank lower. There’s a good reason for this. I’m glad the chickens are finally coming home to roost.