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Nothing can truly open your eyes to the futility of a declining industry than a free market. In this respect, automotive retailing is really getting what it deserves. You literally now have tens of thousands of people wasting their lives away at dealerships. The parts guys waiting for the Pavlovian phones to ring. The service folk trying to serve the dual masters of near-term revenue and immediate customer service. And of course you have sales people. From the professional and decent to the human train wrecks. These folks are there to lubricate the American economy with everything from brilliance to bullshit. Is all of this “people power” smart?
Nein. Nyet. And Hell No! It’s a waste of human intellect. We are living in an era where we literally piss away millions of good minds on the parasitic and pointless. Of course, various levels of government bureaucrats and politicians serve the same exact effect on our society . . . as they do everywhere else. But the idiocy of hawking and hocking cars in the United States is truly unique.
We offer guarantees to crooks that are allowed to operate for decades with absolute impunity. Really. The courts protect them. The politicians protect them. And the stupid consumers protect them. Just type in the phrases “Bill Heard” or “Title Pawn” on Google and the reptilian elements of our society will slither onward to your screen with tongues a flickin’. But then there’s the flip side.
We have dealers and other stakeholders that work their vital organs off. I literally had an employee from a BMW dealership come to my home and fix a defective shift handle for nothing. Nearby me there was a Volvo dealership that was so helpful that I would almost always buy parts from them. Even if it cost less elsewhere. They both earned my business and my referrals.
Finally, there was that Toyota that I had for 12 years and 235k+ miles that didn’t give me a lick of trouble . . . no thanks to the local dealership. Those dealerships are dead with the exception of the bowel-laden Toyota joint. It’s really a shame. The customers and employees deserve better. As the modern day philosopher Ron Simmons would say, “Damn!”
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There is a lot of discussion about cars – the hardware. But an important element is SERVICE. The cheap, cheap, cheap crowd just want stuff cheap to the detriment of reasonable service. It takes a dealership people to deliver service. Yes the product needs to be good but the service needs to be there.
Being a believer in Capitalism and freedom, I am still offended at the state laws protecting these places to the detriment of inivation.
Let’s say a car company wants to sell cars (I know that is a foreign idea to GM or Chrysler, but hear me out). Why exactly should they have to go to a middle man to achieve that? They could very easily contract with any number of companies that repair cars to cover this very real customer need. Why can’t they buy property and set up shop to sell their own products if they want? Why can’t they sell a car straight to the consumer via the net? I understand the system was set up in a different time and world, but the market has evolved. The time for change is now. With the markets down you can affect change with the mantra of helping get the coutry back on its feet.
Look, I know it is getting to be an old argument, but it is still relevant.
Steven-never figured you for a wrestling fan
*sigh* there is absolutely no (economic/technical) reason why cars can’t be built-to-order like a Mini or a Dell.
I would have thought that build-to-order would cut dealers’ storage/floorplan costs and manufacturers’ inventory costs. And *gasp* customers might be willing to pay something closer to MSRP for the car that exactly suits them.
Anyone have any insight why more manufacturers aren’t following the Mini build-to-order model?
My first job was car salesman in the US ( I’m European) Took this after my first 2 years at the local university and made a lot of money ethically.
Why? good car salespeople have the ability to speed up the purchase process and make sure that the vehicle is bought from you rather than someone else, hence my second observation: it’s a zero sum game- Car sales people don’t sell cars, they make sure the other dealers don’t get the buyer or prevent the buyer from going home and(possibly) postpone the purchase.
At the end of the day, my income was simply the fee charged to my employer for generating cash more quickly than the other competing dealers
Steven – never figured you for an indy/foreign film fan either.
slateslate: from the perspective of a retired engineer and quality manager in a consumer products company I’ll take a shot at your question. It’s really two problems, the first is the complexity of the product line and the second is the mindset of the people making the product. The company I worked in tried in vain for years to ship from inventory based on forecasts from sales. If the forecasts are accurate there’s no problem, but forecasts are never accurate and you build a lot of inventory you then have to remainder out at discount.(Sound Farmiliar) All the while we were doing this we had a customer who accounted for maybe 5% of our sales volume for whom we built to order. Three SKUs’ in varying lengths, and really simple to make. We got the order on Thursday mid day. They picked it up the following Wednesday AM. Some people in management thought the 5% business was the hardest thing we did because of the time deadlines but once you got used to it it was really easy. The mindset part is having something right before your eyes (huge unsold inventories and the 5% business) and not being able to scale up the build to order model to product you build to a forecast. Simply put “we’ve always done it this way”
Just like all of us working in the industry, so long as sales are down, there will continue to be job losses.
However, if I were a dealer thinking that my OEM might dry up and disappear I might be on the phone everyday to my Hyundai-Kia regional sales office as well as Toyota, Honda, Subaru and others trying to win myself a new brand to retail. Interestingly, if Chrysler-FIAT manages to pull this off, Chrysler dealers might (I stress might) see some pretty impressive sales gains within 2-3 years if they can survive that long…Conversely, if I were a GM dealer, I would absolutely know without a doubt that my product lines were shrinking and that my OEM wouldn’t mind it if I went away altogether to lessen their burden…so why stay with GM as a dealer tomorrow if they’re trying to shut you down today?
I much prefer to order cars and wait for them than to have a salesman (aggressive or otherwise) try to sell me a car on the lot. We’ve ordered and waited for the three cars in our current fleet.
The problem is TIME. People either buy cars like they buy water heaters (it’s broken, I need one right now) or like accessories (I want it in this color and these options).
Interestingly, MINI (with it’s millions of combinations) had no problem keeping their pipeline full with almost no inventory on dealer lots. (Yes, the economy has changed that somewhat.) The flip side is Honda. Back when you waited in line and begged politely for an Odyssey, you chose the color and from one of three trim lines. There were a couple of options (DVD, NAV) from the factory. Other options were added by the dealer at delivery (fog lights, tow hitch, and so on). The option list was short. Even counting colors there probably were not more than a couple hundred possible combinations.
So, if there is demand, it is easy and profitable to let/make customers order their cars. Every other approach is the same as a grocery store: stock lots of stuff and hope someone wants something from inventory.
slateslate
i think that a small inventory works for Mini because the average Mini buyer loves the product and it’s a more emotional purchase so many will build to order; whereas the average car buyer just sees their car as an appliance and just want to exchange it for a new one the same day. although the few Mini owners i know bought from dealer stock
You made me cry with “literally piss away millions of good minds” (really? we are filtering good minds with our kidneys and excreting them via our urethras?) and then won me back with “literally came to my house.”
1 for 2 is better accuracy than the vast majority of the population, anyway :)
Back on topic, my best dealership experiences – my best customer service experiences of any kind, actually – have always been at Saturn dealerships. Talk about hardworking people who deserve better….
It’s hard to conceive of a greater waste of the human element…I tried so hard to love the Astra enough to buy one. I tried, Saturn employees! Vaya con dios!
An even bigger waste of human energy is the roughly 1% of working age Americans living off cartel profits as real estate agents.
The reality of the American economy is that there are way too few people engaged in wealth producing activities, resulting in the system that allows us to buy imported goods almost exclusively having broken down.
AWD-03 :
April 17th, 2009 at 10:09 am
Being a believer in Capitalism and freedom, I am still offended at the state laws protecting these places to the detriment of inivation.
Let’s say a car company wants to sell cars (I know that is a foreign idea to GM or Chrysler, but hear me out). Why exactly should they have to go to a middle man to achieve that?
There is no law stopping them from setting up a direct distribution channel, as far as I know. Many car dealerships are, in fact, factory-owned and operated.
But selling cars through a network of independent dealers makes financial sense – the corporation doesn’t have to invest in building and maintaining dealerships.
Don’t see how any of this is anti-entrepreneurial…
slateslate :
April 17th, 2009 at 10:58 am I would have thought that build-to-order would cut dealers’ storage/floorplan costs and manufacturers’ inventory costs. And *gasp* customers might be willing to pay something closer to MSRP for the car that exactly suits them.
Anyone have any insight why more manufacturers aren’t following the Mini build-to-order model?
Slateslate –
Build to order is more common among higher-end products because the customers are pickier, and it’s feasible for manufacturers because of higher profict margins on premium cars.
For volume-selling cars, doing away with build-to-order enables manufacturers to take advantage of efficiencies in purchasing and manufacturing. In turn, this enables them to offer more equipment to the customer at a lower price. This was pioneered by the Japanese.
But selling cars through a network of independent dealers makes financial sense – the corporation doesn’t have to invest in building and maintaining dealerships.
But… GM winds up paying for all those investments and maintenance on their dealerships anyhow as well as whatever margin the dealership owner makes by owning the dealership.
Take my local BMW dealer. They make very little off of the sale of new vehicles. In fact, the sales department makes most of their profit from sales of certified pre owned vehicles (lease trade-ins that get a “100 pt inspection” wall job and a $3000 warranty bump from BMW). The rest of the income flows through the service department and the vast majority of their wrenching hours are paid by BMW of North America under warranty and BMW’s free maintenance program. In other words, a huge portion of their revenue comes in the form of a check from BMW NA every month.
The other difficult part about dealers is that manufacturers lose a lot of control over the customer experience. BMW has worked very hard to try and rid their dealers of the typical arrogance for which they are famous, but there are very few sticks or carrots the company can use to do this.
Anyone have any insight why more manufacturers aren’t following the Mini build-to-order model?
Going back to my brief stint as a car salesman in the mid ’80s, the answer is simple -people want what they want when they want it.
Things may have changed in 20 years, but I doubt it.
I have to agree with ‘juniormint’
The Saturn dealer was my best buying experience!
Whoever picks up Saturn has a really good chance of selling cars,if the Saturn standards go with it.
A figure that gets thrown around a lot at my dealership (and unfortunately I don’t know where it comes from) is that most people will buy a car within 72 hour of visiting their first lot. Based on that and the customers I have worked with, I don’t imagine most would be willing to wait for a custom ordered car with exactly the options they want, especially when most people will be just as happy in the long run with something that is pretty close (you may really dig red the day you go into buy the car, but green or grey may grow on you).
As sales have slowed down the number of salespeople have simply dwindled. Many of those in it for a quick buck who screwed over customers assuming there would always be a steady supply have left for other pastures, and those who have built up a strong referral business from treating people right are still doing OK.
I sell cars because I am a bit obsessed with them, and I wanted to work in the auto industry. Not being into the idea of manual factory labor, not having an engineering degree (mine is in education) and not living in NYC, Detroit, or L.A. where the auto journalist and peripheral jobs abound, left working the lot is pretty much the only option. I get to try out all the new toys, I get to share my love of the vehicles with my customers, and I get to make a decent wage in the process.
A good dealership and salesperson can be a big help to most customers, as they really don’t know what they need, just what they need or want to be able to do.
NulloModo:
I sell cars because I am a bit obsessed with them, and I wanted to work in the auto industry.
I share your obsession and I looked into selling cars a long time ago. Unfortunately, having the social skills of an East German border guard isn’t an asset in Sales.
Best of luck in this economy. Good sales people should always earn, but today’s numbers gotta test your faith.
If a venture capital team decided to start a new car company, I think they’d separate the sales function from the warranty/repair function. Although I wonder if certain states’ auto franchise laws wouldn’t mandate they kickbackdeal with traditional, established dealers.
One of the problems for a lot of customers is the trade in game. Years back I got screwed by an Acura deale who dropped the value of my trade in over the 30 days it took for the car to arrive. I didn’t buy his !$@#!#$ car of course, but I didn’t get the car I wanted either. He stood there and told me the market had changed and my trade in value had dropped more than $500. I’ve always figured that he had another customer for my car (Integra’s were hot in 1988).
Steven, if you hate car dealers as much as your article describes, I am surprised you have choosen a profession where you must lower your standards daily. I hope none of the reptiles at the dealer auction read this and take you behind teh building to squeeze you to death before they eat.
Now you are going to respond with your “I love car dealers speech for the cYa effect, please save it for a non reptillian reader.
The parts guys waiting for the Pavlovian phones to ring. The service folk trying to serve the dual masters of near-term revenue and immediate customer service.
Advice for the parts guy. Lower your markup from 300% to the 50-100% range and watch the business roll in. I know it can be done because I can order the same parts from a remote dealer via the internet and cut the cost in half.
Advice to the service manager. When the owner’s manual calls for oil change and tire rotation at 22,500 miles for $39 don’t push the 40 item checklist service (mostly check belts, fluids and brake pads)costing $189 on your customers.
Until you have instituted these reforms you can continue to live on the government dole.
Incidentally I have really never had a serious problem with the car sales guys but then I have never really had to “buy” a car I was looking at and thus could be straightforward about the purchase process.
You need to re-read my article…
I defend good dealers and lambaste the bad ones. As a lot of folks here do as well.
I also believe that many of the laws (and politicians) are designed to uphold the unethical practices of certain dealers and make life far more difficult for everyone else… on BOTH sides of the fence.
If you want to defend the Bill Heard’s of the world that’s fine. It’s a free country. Just don’t expect to me to defend them. You can make an honest and very good living off of retailing cars without screwing the general public.
If you want to debate the merits with me, that’s fine. If you want to threaten folks with veiled threats… ‘thetruthabouthormoneimbalances’ is likely an open domain name. I suggest you go there. By the way, your IP address that you used to post is traceable. I also know of the Toyota dealerships you use for your pseudonym. They’re good folks (I used to travel to Kansas City for a sale) and though I seriously doubt they have a woodshed for your activities, I KNOW they retain legal counsel.
As the famous impressionistic author Mick Foley would say, “Have a nice day!”
Right now, I’m looking at the site that this guy’s username links to and I’m figuring “if this asshole represents this place…no freakin’ way I’m buying from here”.
And it’s a Ford/Dodge dealer, to boot. I never abide by arrogant assholes.
@tced2:
“The cheap, cheap, cheap crowd just want stuff cheap to the detriment of reasonable service. It takes a dealership people to deliver service. Yes the product needs to be good but the service needs to be there.”
Exactly!!
@NulloModo:
A good dealership and salesperson can be a big help to most customers, as they really don’t know what they need, just what they need or want to be able to do.
So true..
As for why we have this system of franchise dealers vs a factory direct option:
There are many industries that have built up their current business models through anti-competitive legislation. Everyone has a vested interest in their particular industry, and lobby the government for protection. look at real estate agents, look at the insurance industry, look at unions. It sucks that we are stuck with so many archaic rules and regulations that make things unnecessarily complicated and expensive, but good luck undoing them.
“Take my local BMW dealer. They make very little off of the sale of new vehicles.”
Really? Do you have first hand knowledge of their actual gross profit per unit retailed? If they are even an average BMW retailer they are making a few sheckles on new car sales. And they are entitled as well…