Are consumers receiving a government “rebate” for their clunker paying LESS for their new car than they would have without the rebate? I know that seems like a no-brainer, but never underestimate the perfidy of car dealers. Or, to quote Shakespeare, there’s many a slip ‘twixt the cup and the lip. Equally salient (if less erudite), the laws of supply and demand can not be denied. With Cash for Clunkers hoovering-up the supply of applicable new cars, why would dealers give their best price on said new car? The statistical data on the question is out there, with hundreds of thousands of transactions logged at US DMVs. A new website and future TTAC partner is on the case. TrueCar.com will share the results of their data dive ASAP. Meanwhile, how about some anecdotal evidence or baseless conjecture from TTAC’s Best and Brightest? Did Cash for Clunkers participants get a better deal than they would have if the program had never existed?
Of the 14 C4C deals I have done, most of my customers got modest discounts on their new vehicles. The discounts were consistant with non C4C deals.
Since we don’t rely on F&I income to make back most, if not all of the money given in discounts most of my customers are willing to let us make $400 to $600 plus holdback.
Are consumers receiving a government “rebate” for their clunker paying LESS for their new car than they would have without the rebate?
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No, there isn’t such a thing as “government rebate.” I mean, the cash doesn’t come from Obama’s personal bank account.
It’s just that the government takes taxpayers’ money and give it to a very specific group of taxpaying or non-taxpaying citizens. It doesn’t generate wealth. It just transfers wealth. It’s a net loss, since there are administrative overhead.
My pure speculation based on no first hand knowledge is that a lot of dogs (like Calibers, etc) that dealers used to take thousands off of are getting discounted less and the consumer is probably paying closer to (but not as much as) what they would have without a c4c voucher. I suspect c4c vouchers probably have the most bang for the buck on qualifying models that aren’t normally discounted much, like Prius.
The people getting ripped off will be people who want to buy a fuel-efficient car who don’t have a clunker to trade in, since the market value of their desired car has risen. Best just to wait until the program ends, if you’re in that situation.
good q. My guess: car dealers know that with the rebate, they can maybe negotiate a bit harder, that is, they can take a small bite out of the rebate, but not a big bite.
In the case of permanent subsidies, I think much more of gthe subsidy gets incorporated into the price. For example, my guess is that the cost of houses is higher by roughly the amount of the mortgage interest tax deduction than it would be without it .If c4c became permanent, something similar would happen.
Buying a used truck or large car (all you B-body/Cherokee lovers): clear lose – CFC has established an artificial floor, and when CFC is over many of those cars will have been crushed, permanently reducing supply.
Buying a used compact: clear win – The CFC buyers need to buy new compacts now, even though many people with clunkers would normally buy used. The used market for non-CFC qualified used cars is now even worse (or better if you are buying).
Buying a new car without CFC: clear lose – The dealers have cleared out a lot of inventory with CFC. If not for CFC dealers would be facing the worst time of the year with packed inventory. The government used your taxes to take away your ability to take advantage of that oversupply.
Buying a new car with CFC: toss-up – If your car’s trade in value is close to the CFC credit then you aren’t getting much more for your trade-in, and you are paying more for the new car than you would have without CFC stimulating demand. Remember that the dealer gets the scrap value other than the drive train, which might be close to $1000, so your trade-in is worth more than just the government credit. On the other hand, if your car is a complete piece of shit then you probably win, especially if you’re taking the $4500.
If the question is whether these buyers are paying more for a given car than I would likely be able to pay, the answer in many cases is probably yes. But that’s probably true in most cases, so that isn’t specific to C4C.
Will many buyers have a tendency to leave some money on the table because it’s free? Probably, it’s normal for many people to get sloppy in these circumstances.
Does all of that mean that they’re being ripped off? No. Cars are a negotiated transaction; negotiation ensures that not everybody pays the same price, and some people pay more than others. The buyers may be dumb or careless, but they weren’t cheated.
The only way that I am able to pay less than average is for someone else to pay more than I am. That’s math, not theft.
It’s not a ripoff when one person pays more than other, that’s just a bad negotiation for the buyer. Ripoffs are criminal acts, such as dealers sneaking in inflated interest rates that were contrary to what were discussed, or if they use false advertising to bait-and-switch inventory. Those sorts of acts do occur, but they aren’t specific to or facilitated by a program like this. Those just happen because dealerships are generally not to be trusted.
The bottom line:
How does every $1 spent by the government return to the economy?
25 cents to the economy and 75 cents in overhead (administration).
Do the math and I’v made my point.
If you trade in a beat up clunker (in every sense of the word) that qualifies for the program and therefore get $4500 for it, instead of the $500 or so that the dealer would normally give for the car, then yes, I’d say you are getting a “good deal.”
If you’re trading a car that would normally get you $6,000 on trade in and only getting the $4500, then not so much.
Lots of variables here.
I personally hate dealing for cars (all the “well, we’ll throw in the undercoating if you upgrade the security system” BS) so my natural instinct is to say that the dealer is going to capitalize on this opportunity to clear the lots of cars that they just could not move otherwise. I further expect that when the money is gone the customers will be, too.
The tax for clunkers program is very popular, but that doesn’t make it a good thing :)
As no_slushbox mentioned, there are probably people who rushed into the C4C deal, wound up splitting the $4500 with the dealer by letting them raise the new vehicle price by $2000, but made out worse because their old car was still worth $3000. If there were no C4C program they would have been slightly ahead. (Actually, if there were no C4C program, they way have been far ahead because they be still driving a usable $3000 car and would have had an extra $18k in their pocket.)
Speaking from my own experience… I traded in my 91 Eagle Talon Tsi (Auto/AWD). This car was worth $2500 (at most) on the open market (trust me, I tried to sell it!). I received $4500 for it and walked out with a brand new Civic EX for less than invoice price. I consider myself quite lucky! To me, that’s what matters (that and I’m no longer paying my mechanic’s mortgage!).
The customers who got a good deal will tell you “I got a great deal,” even if they didn’t.
The dealers who are treating their customers fairly will tell you they’re treating their customers fairly, even if they aren’t.
It’s probably not the most interesting part of the Cash For Clunkers story. That Michigan has received more C4C cash than any other state is interesting when one considers Michigan also has the second highest unemployment rate in the country.
That’s your story.
That TrueCar.com site is interesting, but it falls into the same hole as many other websites that publish car prices – what to do about rebates vs special finance rates. As an example, a customer currently looking to purchase a 2009 Ford Fusion has the option of taking $1500 rebate and 0% for 36 months, $3500 rebate and whatever interest rate they can get based on credit through a bank of their choice, or no rebate and 0% for 60 months. Depending on the payment the customer can afford, amount of money down, credit history, and trade equity/negative equity any one of those options might be best for an individual customer, but all will effect the bottom line price on the automobile.
As far as prices due to C4C, most customers taking advantage of the program are definately paying less overall for the car after the voucher is considered, but more for the actual selling price of the car. Fusions, Focuses, and Rangers are regularly selling at full sticker at my dealership due to supply and demand – we have tons of people coming in for these cars, and not enough inventory to handle all of them. It’s not cheating or swindling anyone, if we have two people both trying to buy the same 2010 Fusion SE does it make sense to sell to the one happy to pay full sticker minus rebate and voucher, or the one who tries to beat us up for invoice minus holdback?
If you trade in a beat up clunker (in every sense of the word) that qualifies for the program and therefore get $4500 for it, instead of the $500 or so that the dealer would normally give for the car, then yes, I’d say you are getting a “good deal.”
Your analysis is incomplete. If you don’t play hardball on the new vehicle purchase as you normally would, then the dealer is getting the benefit of at least some of that $4000 in excess trade in value and not you. And if there’s a fear that CARS could end at any moment, then the potential for dealers to profit from clunker traders relative to other buyers only increases.
Is “incidence of subsidization” a studied economic concept?
wsn :
It’s just that the government takes taxpayers’ money and give it to a very specific group of taxpaying or non-taxpaying citizens. It doesn’t generate wealth. It just transfers wealth. It’s a net loss, since there are administrative overhead.
Well stated. Somehow I fell like I’m paying for these… Thanks Obama. (sigh)
xyzzy :
The people getting ripped off will be people who want to buy a fuel-efficient car who don’t have a clunker to trade in, since the market value of their desired car has risen.
Exactly, as I bought a Civic not too long ago as an additional car and new daily driver.
It really is a bitch to pay your own way in today’s society.
The only person I know who has taken advantage of the program had an old Suzuki Grand Vitara with no A/C (in Florida), and a clapped-out engine (200,000 miles, and burning oil so bad it reeked of it). Maybe worth $300 as a trade-in, maybe not. She got $4500 towards a new Elantra, plus Hyundai’s $2000 rebate. She’s happy.
I saw on the news last night that some states and counties are happy about the tax revenue pouring in. Here in California the consumer pays about 10% of the vehicle purchase price in sales taxes and licensing fees.
But I think the state and counties are actually losing out in the long run. The new car sale is taking place sooner than it would have, but the sale price is actually reduced by $3500 or $4500, so there is less money for the governments involved. There is also no potential taxes on the resale of the used vehicle, which means another few thousand taxable dollars. (Why used cars are taxed is beyond me, but that’s the way it works.)
re: Strippo:
“Is ‘incidence of subsidization’ a studied economic concept?”
Definitely. I even found something regarding hybrid car subsidies:
https://www.student.gsu.edu/~bchupp1/HybridPaper.pdf
Cash for clunkers is much more complex, I would argue that everyone loses except for new car dealers and people with cars worth less than $2-$3K max (the rest of the government check is going to be eaten by higher new car prices) that can afford a new car.
I’m happy with my C4C deal. I had a 1997 Mountaineer with enough issues, including a rusting frame, that made it worth no more than $1000. It qualified for $4,500 on a 2009 Ford Edge SEL.
Sticker price on the Edge was $34,300, nicely loaded. It was also a demo with 5700 miles on it. After the C4C, incentives and discount for being a demo, I paid $22,500, before taxes and fees. And got 0% financing on top of that.
An Edge isn’t worth anything near their sticker price, but I’m happy with it for this deal.
SunnyVale – It may be different in other states, but here the customer still has to pay tax on the $3500-$4500 voucher, as well as on any manufacturer rebates. The voucher doesn’t count as income, so thus isn’t taxed on the customers income tax, but it doesn’t count as a trade in either, so the customer doesn’t get a trade tax credit for it. For example a customer buying a $23000 Fusion with a $1000 rebate and a $4500 voucher still pays sales tax on $23000, not the $17500 actually paid for the car.
I have a qualifying clunker, which would be ideal for this program as its book value is about $500. I’ve toyed with the idea of trying to c4c it and I figured I wouldn’t tell the dealer I had a c4c trade-in until the price of the new car was agreed to, then I’d say something like, “oh yeah, now that I think about it I think I DO want to trade this car in and btw it’s a clunker. ”
It’s been so long since I’ve dealt with new car dealers I have no idea if that would work, or at least minimize the amount of c4c rebate that would get put back into the price of the new car.
However it’s all moot as I’m too cheap to do this, even with the temptation of getting $4500 for a 1987 Dodge Dakota that’s worth maybe $500, tops. I’d come out ahead just finding a $5000 used truck on craigslist and donating my clunker to charity.
But being financially paranoid about missing a chance that I am, I’ll keep this clunker until the program is completely over. I would really be mad if I got rid of it and then one of my other cars has something happen that requires replacement, and I had just given up a chance to get $4500 off the replacement :)
One anecdote I can speak to is that on two cars I had been tracking – a 2009 Mazda6 and a 2009 Hyundai Sonata GLS – the no haggle dealership in Maryland that sold both brands, coupled with or without the manufacturer, lowered the incentives on both cars seemingly at the time CFC was rolled out.
The Sonata GLS automatic price went up approximately $1,400 and the Mazda6 price went up approximately $1,850.
Not only that, but there were few if any, base model automatic Mazda6s (iSports) left at the dealer, so not only could you not locate one even at the higher price, but you’d have to step up to a more expensive trim level also, though there were still plenty of Sonata GLS automatics left.
Now, add to this the fact that most cars being traded in that do qualify as clunkers are worth, probably on average, $1,500 or maybe $2,000. Obviously, some are worth $500 and some are worth even more than the $4,500 maximum voucher amount, but for simplicity’s sake, let’s just agree on $2,000.
If I add that 2k to the price hikes I’ve seen on at least two models of new cars…..see where I’m going with this?
I doubt that even the average consumer with a qualifying clunker is better off than not, or that much better off.
I’m not the world’s brightest person, but I am convinced that given how terrible the real economy is, coupled with the fact that it’s getting worse (trust me; I’m in the trenches of a very broad network that puts me face to face with business decision makers) despite the BS the MSM is spreading, the car market will get worse, with or without the CFC junket, and better deals will be had down the road, and this is WITH the massive production cuts.
CFC was seemingly designed to let struggling dealers clear their lots of stagnant inventory of unpopular cars, and it’s probably going to have a one off effect.
Pch101 : Does all of that mean that they’re being ripped off? No. Cars are a negotiated transaction; negotiation ensures that not everybody pays the same price, and some people pay more than others. The buyers may be dumb or careless, but they weren’t cheated.
The only way that I am able to pay less than average is for someone else to pay more than I am. That’s math, not theft.
It’s not a ripoff when one person pays more than other, that’s just a bad negotiation for the buyer. Ripoffs are criminal acts, such as dealers sneaking in inflated interest rates that were contrary to what were discussed, or if they use false advertising to bait-and-switch inventory. Those sorts of acts do occur, but they aren’t specific to or facilitated by a program like this. Those just happen because dealerships are generally not to be trusted.
This is probably a side argument, but..onward I must.
Exactly who benefits from this system? Vehicles are a mass produced product. They are not the special one-of-a-kind flower built by coach builders of old. Why should stupidity play any factor in price?
The ONLY time that I have enjoyed the vehicle buying experience was when I had a Chrysler employee discount number (back when they could give them to friends and family). The dealer had to produce a paper showing the MSRP and the discount. No negotiation, no bull s**t. You likey, you buy. Everybody pays that number for that vehicle. Done and done.
I’ll only get another new vehicle when I can buy that way again.
/vent
That is an excellent question.
Right now, there’s no dealing at the Toyota dealer. Without C4C, there was room for negotiation. The sales manager was quite unashamed about it; they’re making hay while the sun shines. If your clunker was really worth something, the demand around the C4C excitement could be erasing your savings.
Exactly who benefits from this system?
Buyers who know how to negotiate, and sellers who know how to manage those buyers who aren’t good at it.
The ONLY time that I have enjoyed the vehicle buying experience was when I had a Chrysler employee discount number
I don’t know why you should particularly expect to enjoy buying a car. If dealers benefit from providing enjoyment, they’ll shift their business toward that.
But as it turns out, brands such as Saturn haven’t done all that well with it. Apparently, buyers **do** want to negotiate because they like the idea of paying less than other people, even if many of them fail at the attempt.
The dealer had to produce a paper showing the MSRP and the discount. No negotiation, no bull s**t.
Here’s the point, though — there is no obligation for you to negotiate. If you want to pay the dealer’s price, today, there is absolutely nothing that is stopping you. They would LOVE you if you did that.
I think that the problem is this: you want the discount, but you don’t want to work for it. What makes you believe that it is reasonable for you to expect the dealer to give you a discount without any effort on your part?
no_slushbox’s breakdown seems pretty accurate, as well as wsn’s comment about a transfer of wealth.
Say you bought a “responsible car” that gets good gas mileage and has a small engine. Only, you bought this car a decade ago. The car is beginning to break down, and you want to take advantage of the new-car marketplace. Except now your car is worth less in the used market place, because the government subsidized new fuel efficient cars. Moreover, your car doesn’t qualify for cash4clunkers because the mileage is too high.
Someone who has been driving around a fuel sucker 1997 Explorer gets the reward. You get to keep your crappy economy car or sell it for far less.
On another note, if you put aside simple fuel economy and looked at emissions, one could argue that 15-25-year old “fuel efficient” cars pollute more than a newer “guzzler.”
All this aside, perusing the ads around Sacramento seemed to indicate the pre-c4c rebates were still in place, in large part. But I don’t exactly have a spreadsheet to prove it.
Winners and loser:
Dealers win the most – making more per car than they had been plus increased sales. Taxpayers lose here.
Unions win because of artificial demand generated by government subsidy/redistribution of wealth. Taxpayers lose here.
Car makers win… increased sales with same or less advertising thanks to the government doing the advertising for them. Taxpayers lose.
Car buyers who aren’t good negotiators win because they’re buying cars at a discount to what they would normally pay thanks to the c4c scheme. Yep, taxpayers lose.
Taxpayers – Congress and the President have told you to pipe down while they insulate those at banks, auto makers, and any other business begging for the money you’ve paid into the system in most cases honestly (but not fairly).
Essentially, everyone wins but the taxpayer. So what about said taxpayer who happens to take advantage of the c4c program? Well, they lose too because ultimately they’re paying more for a car than they would have without government subsidizing what in some instances is a luxury purchase.
Who loses the most? A car buying taxpayer who is a good negotiator.
You can’t judge the transaction on the deal alone. You have to include the buyer’s after-purchase situation. If the buyer traded in a troublesome vehicle with low gas mileage for, say, a Corolla, he’s looking at substantial savings in both repair and fuel costs over the warranty period of the new car. Depending on the POS traded in, the after purchase savings can outweigh even a poor result at the dealer.
I asked before, and got no real answer.
So here it is again.
Somebody please, help me here.
The government is taking money from me so it can give it to me so I have money to spend?
?
paulie :
I asked before, and got no real answer.
So here it is again.
Somebody please, help me here.
The government is taking money from me so it can give it to me so I have money to spend?
Yes. The government is relying on your poor education preventing you from doing basic math.
…and because I already drive a Prius (paid for by me), and because I have no second car to give up, I am ineligible for the CARS program.
Therefore, my tax money is being used to benefit those who didn’t care to drive fuel efficient vehicles.
I can only relate my experience.
I clunkered my 95 BMW 540i (6 speed) with 200k on the clock. Car was running fine but a cosmetic mess. I figure it was probably worth $2500 on the open market in my area.
Now, I think the question is really meant to inquire whether, when doing CFC deals, dealers padded the retail selling price of the cars. In my case, buying a Jetta TDI Sportwagen, the price for the car was sticker. No discount.
Had I walked in with a wad of cash, they’d have treated me exactly the same. Demand for JSW TDIs has outpaced supply, and many dealers have reportedly affixed markups above retail. So I consider that I did fine on the new car price.
Add in the $2000 extra I got for my 540, and it’s clearly a success for me. Tallying up taxes, upkeep, depreciation and insurance, I’d probably be spending slightly more for the new car versus staying in the used car derby, but I no longer spend every weekend on my back under a hot car fixing whatever broke. There’s definitely value in that.
As for the Rape of the American Taxpayer: I stood by, powerless, while my tax dollars were pissed away so troglodites could watch Big Explosions in Eye-raq on the teevee…for six years and counting. And then there’s that oh-so-effective ten billion a year or so spent supporting the “War on Drugs.” I do believe I’ll partake of a little government cheese myself now, thank you very much.
I’m convinced that Pch101 has car dealer Stockholm Syndrome.
I think that the problem is this: you want the discount, but you don’t want to work for it. What makes you believe that it is reasonable for you to expect the dealer to give you a discount without any effort on your part?
WTF? Maybe car dealers can follow the model already established by every other retailer on the face of the planet by charging everyone the same price and not playing shell games with the discounts.
Maybe car dealers can follow the model already established by every other retailer on the face of the planet by charging everyone the same price and not playing shell games with the discounts.
Have you ever traveled outside the United States? Haggling is actually the traditional way that everything was sold, and it remains live and well in many places.
One-price shopping is not appealing to car buyers because they want to outperform everyone else. Almost everyone wants to pay less and do better than the other guy. Sorry, but if you want the best deal, then you need to learn how to play the game and work for it.
I’m convinced that Pch101 has car dealer Stockholm Syndrome.
That’s good comedy. I actually got banned from the Edmunds forums in large part for the efforts that I made to teach regular people how to haggle. (If some of the posts were accurate, the effort did help some folks.) The dealers who frequent the site all complained, as well as the long-standing regulars who gave awful advice, such as trying to buddy up with the “best salesman” (whatever that means.)
People have an unrealistic view of car dealers. They have a business model that works for them, and you can either play them or get played. Your choice.
Again, you aren’t required to haggle — just pay sticker if you feel that strongly about it. What you’re really saying is that you want to pay less than sticker, without having to do the work that people who play dirty and lowball (like me) have to do. Sorry, but you have to either do the work or else settle for what you get, them’s the breaks.
Last June I replaced my 1999 Deville with a 2009 Toyota Corolla.
The headgaskets on the Northstar were shot.
The Toyota Dealership offered me $500. I declined and found someone on Craigslist that was willing to buy it for $700.00
I would have appreciated C4C on that deal.
Have you ever traveled outside the United States? Haggling is actually the traditional way that everything was sold, and it remains live and well in many places.
I’ll remember that the next time I’m haggling for a Turkish rug. Not for a new car purchase in the United States.
I don’t know why you should particularly expect to enjoy buying a car. If dealers benefit from providing enjoyment, they’ll shift their business toward that.
They have a business model that works for them, and you can either play them or get played.
And that’s exactly the problem. The model works for the dealers, not the end customer. Do you not think there’s a problem when a customer should expect zero enjoyment out of buying a new car? As far as your ‘people want to haggle’ BS, there’s a large segment of the population who’d rather be able to buy a car online, with the exact options they want without all of the dealer BS. Why is it that the no-haggle dealers consistently rate the highest in customer service surveys?
I’ll remember that the next time I’m haggling for a Turkish rug.
I guess that you won’t be buying a house or getting a job, either. Home prices and salary/bonus packages are generally negotiated.
The model works for the dealers, not the end customer.
Speak for yourself. It works fine for buyers who know how to negotiate.
The world is the way it is, and you want it to change to serve your agenda. Sorry, but that’s not how it works. The world is much larger than you are, and you need to adapt or die.
The average consumer does not want a no-haggle model for car shopping. Where it has been tried, it has had very limited appeal.
Again, there is absolutely no requirement that you negotiate. You can pay sticker if you want to. Just accept the fact that someone who can negotiate effectively will pay less than you will.
Forditude – I would have no problem with no haggle pricing, assuming that no haggle pricing was fair. Currently, the average markup from invoice to MSRP on a new car is about 6%. Considering that restaurants mark up your dinner by about 80%, audio/home entertainment equipment enjoys somewhere between 15% – 50% (TVs less, speakers more), and even wholesale clubs like Costco try to maintain around a 10% mark up, 6% seems very slim, but lets just say that its fair for now. Yes, there is some holdback under invoice, which, if the dealership is lucky will cover the floorplan interest, salesman comission, tank of gas for the customer, and cost to detail the car, but that is about it. Some places also have dealer or documentation fees, but beleive it or not, it does cost money to have someone handle the title, tag, and registration paperwork. Is there a sliver of profit built in – sure, but let’s see how many people want to deal with the hassle of the DMV and title agencies all by themselves.
There is also the issue of the trade-in. People love to quote KBB, but Kelly doesn’t buy cars, so whatever it says is a loose guide at best. Auction reports give a better idea, at least there you have a clear current market value. No one ever believes their car is in the condition it is actually in though. Everyone thinks their car is Excellet, Extra-Clean, Good, or what have you, one of the best two choices in whatever book you are looking. Sure the car might need new tires, some paint work (“my buddy told me he’d do it for $150”), have a misaligned bumper after a fender bender, but it’s still in mint condition in the customers mind.
The world is the way it is, and you want it to change to serve your agenda. Sorry, but that’s not how it works. The world is much larger than you are, and you need to adapt or die.
You are the one with the agenda, which is that somehow people prefer poor treatment and outdated payment methods kept alive by antiquated franchise laws. You have provided zero evidence that people actually want to haggle, while ignoring the fact that no-haggle dealers Lexus, Saturn, and Scion are consistently rated tops in customer satisfaction surveys. Maybe you are the one who needs to adapt instead of sticking your fingers in your ears and pretending that customers want something that they have overwhelmingly stated that they don’t.
The average consumer does not want a no-haggle model for car shopping. Where it has been tried, it has had very limited appeal.
[Citation needed]
Anecdote: our 90 Volvo “clunker” was worth $421 averaged across Edmunds, NADA, and KBB. Negotiated price on our 09 Fit Base was $85 over invoice. Not bad for a small Honda. I did, however, pay full State-allowed-maximum of $190 for doc fee.
no-haggle dealers Lexus, Saturn, and Scion are consistently rated tops in customer satisfaction surveys.
Lexus dealers negotiate, so I don’t know where that comes from.
Saturn and Scion sell very few cars. The success of Scion is debatable, and you may have noticed that Saturn never turned a profit!
Obviously, the major brands all avoid the no-haggle model. Virtually all of the cars sold in the US avoid the no-haggle model.
But again, nothing is stopping you from paying sticker. Nothing. Apparently, you’re just irritated that some people pay less than you do. Instead of improving your own game, your solution is to cut the legs off of everyone else.
The average consumer does not want a no-haggle model for car shopping. Where it has been tried, it has had very limited appeal.
Refer to the point above. The fact that almost no one uses it, including the most successful automakers, while those that do use it sell below average volumes with it, suggests that it’s not particularly attractive. If it was such a great model, they’d be using it.
“I asked before, and got no real answer.
So here it is again.
Somebody please, help me here.
The government is taking money from me so it can give it to me so I have money to spend?”
No. The government is borrowing money from the Chinese to give to you so you will spend it.
Car dealerships always seek to maximize value on their sales, and that maximization comes either in volume or per-unit cost. Consumers always seek to maximize value on their purchases, but that value is not always monetary; it also comes in the form of perceived value (driving the “right” car, for instance), added-cost features, and low hassle (witness Saturn purchasers.)
So, we can assume that any subsidy will increase the consumer’s tolerance for a higher overall price versus paying it all themselves, and dealerships will always reap the monetary benefit of that tolerance. Period. Even if a consumer drives a hard bargain and purchases the car for an overall price that is exactly the same they would have paid without the subsidy, if the subsidy is motivating them to make the purchase, the dealership is selling one extra car.
The only exception to this will be the person who was about to buy a car for a known fixed price (say, through CarsDirect), then cash for clunkers happened, and the person managed to get the same car for the same overall price. The number of people this describes is likely extremely low as a percentage of overall CARS purchasers.
Saturn and Scion sell very few cars. The success of Scion is debatable, and you may have noticed that Saturn never turned a profit!
The automakers’ ability to turn a profit has zero bearing on whether or not the customer likes the service model, which of course they do.
Obviously, the major brands all avoid the no-haggle model. Virtually all of the cars sold in the US avoid the no-haggle model.
Of course they don’t! Why would they want a level playing field when they can obscure and play games with the true price? No dealer wants you to have the ability to compare across-the-board prices or order from the factory, because that would be actual customer service.
Apparently, you’re just irritated that some people pay less than you do.
Remind me where I said that I don’t or can’t negotiate, or that I have ever paid anywhere close to sticker. Quit projecting your own insecurities on me, please. Anyone can go to Edmunds and find the invoice and TMV of any car and send that price out to the dealer. Most dealers will agree to sell at invoice before you even walk through the door.
Instead of improving your own game, your solution is to cut the legs off of everyone else.
No, what I am advocating is a model geared toward the actual customer, without all of the dealer overhead and BS. As per your comments, customer satisfaction is a foreign concept to you and the dealers you advocate for. Let’s ask the B&B: Would you prefer a car at a non-negotiable lower price directly from the manufacturer without dealer overhead (knowing that you got the exact same deal as your neighbor), or a higher price that you can negotiate lower at a dealer (potentially getting a better deal than your neighbor even though both of you paid more vs. dealing directly with the factory)?
The automakers’ ability to turn a profit has zero bearing on whether or not the customer likes the service model, which of course they do.
You know, the members of the Manson family just adored Charles Manson. But just because his fans were fiercely loyal does not mean that he would have been able to develop widespread appeal. No-haggle buying may be more pleasant, but it is not particularly popular with the masses.
Incidentally, what you should be noticing here is that Toyota itself does not use the no-haggle strategy to sell most of its cars in the US, even with the lessons of the Scion experience. Ask yourself why that is.
No dealer wants you to have the ability to compare across-the-board prices or order from the factory, because that would be actual customer service.
I’ll bet that you have no idea what the guy who sold you your TV paid for it.
Yet you go to Edmunds or Kelley Blue Book and get, for free, very accurate pricing information on virtually every new car sold in this country. You have access to plenty of data; it’s your job to get it, not the dealer’s job to teach you how to beat him.
Anyone can go to Edmunds and find the invoice and TMV of any car and send that price out to the dealer.
That doesn’t match your complaints of the earlier paragraph. You appear to be upset that the dealer doesn’t work harder to negotiate against himself.
what I am advocating is a model geared toward the actual customer
The average customer wants to haggle, in that they would feel cheated if they didn’t get to haggle because they would assume that they paid too much.
What you seem to want are increasingly lower prices, even if they are unprofitable to the producer. If they cut prices, you’ll still complain about them — they will never be low enough.
Part of the reason for them to negotiate with you is to make you feel that you accomplished something. The average dealer who offered “no BS” pricing will find many customers simply using that price as a negotiation point with a different dealer, who will then get the sale thanks to his opponent’s aforementioned lack of BS. It’s likely that you’ll be happier with a higher price after you’ve fought for it than you would be with a lower price if you received it without a fuss.
In a universal no-haggle system, manufacturers would simply jack up the MSRP’s, so that dealers could offer “discounts” that aren’t really discounts at all. I’d rather save the money, thanks very much.
The whole haggle no haggle thing is interesting.
It’s true that few companies use it, but it’s also true -judging by what I hear people say- that it creates the “Bazaar” atmosphere which makes people hate buying a car.
It’s true most people want to haggle, (Just ask any Saturn dealer) but it’s also true (seemingly, unless people are lying) that people hate the process.
Having spent some time in Thailand, where you must haggle about the price of an orange, and again on the price of a tee shirt, and again on the price of a Coke, and again, and again, and again, I am not much in favor of haggling.
But I only buy a car once every 5 years, so it’s worth doing, even if it’s not enjoyable.
A loud portion of best and brightest seem pretty bitter about all this ‘govment intervention.
MY tax dollars this, MY tax dollars that…
You have a choice to not pay your taxes
You have a choice to try to emmigrate to a country with a ‘weaker government’ and most likely less taxes, less roads, a weaker, less stable currency [historically] and an all around weaker quality of life
If you choose to participate in life and the ‘merican economy you need to accept that life isn’t always fair.
Alternatively, you could build a cabin in the woods and tend to a small hobby farm…
But then there would be complaining that your neighbour got a better deal from the blacksmith for his horse shoes, etc…
@Dynamic88 – If you lived in Thailand and spent your time haggling over the prices of oranges and t-shirts, well, sorry to say, but you could have been spending some time haggling over something that would’ve left you a lot happier in the end…
All kidding aside, everyone wants a deal, and no matter what price you put on the windshield of a car, 90% of the people are going to think they can do better. Now, customers don’t actually want to haggle as much as they want to come in and say ‘Give me your best price, don’t waste my time, I’m going to go around to all your competitors and see who has the best deal’. That’s all well and good if certain dealers want to play that game, mine doesn’t, and I am in full agreement. If you want to pay a no haggle price, find a Saturn dealership and be happy. If you want to negotiate and get the best price on a car, find one you like, bring your papers, sit down and go at it, but be willing and ready to drive that car home if and when the dealer hits the price you want.
I actually got banned from the Edmunds forums in large part for the efforts that I made to teach regular people how to haggle.
Really? I thought it was Edmunds’ site that I read an ‘expose’ on the inner-workings of car dealerships. The dude had gone out and gotten a job as a salesman, noted all the intricacies of how deals are made from the dealership’s end, and laid it all out on the internet tubes for the world to see.
That’s why I’m surprised that a site that put that out would ban you for doing pretty much the same thing from the buyer’s end.
Of course, maybe it was another site, but I’m pretty sure it was Edmunds.
I thought it was Edmunds’ site that I read an ‘expose’ on the inner-workings of car dealerships.
Same place. That was a good series, too, so yes, it was ironic to get banned for doing something similar.
The car buying advice forum threads there are dominated by car salespeople, and their relationship with the forum management seems pretty cozy. They were always shouting me down (except for one guy who was quite good at wearing both hats — he should post here), and they were obviously unhappy with my presence.
I suppose that as their business model evolves away from selling price guides in bookstores to giving away content online, Edmunds has migrated toward focusing on ways to generate fees from their various dealer-oriented programs, such as their referral business. They know who butters their bread, and I wasn’t providing a whole lot of butter.
forditude: “I’m convinced that Pch101 has car dealer Stockholm Syndrome.”
Congratulations, that’s the sentence of the week! Pch101 defends the existing system of verbal and psychological arm-wrestling because he’s comfortable with it (he doesn’t mind haggling; might even enjoy it) and probably is one of the few who can beat the pro’s at their game. (More commonly, buyers just think they can. Such thinking also results in deciding to pick certain stocks rather than investing in index funds.)
When Ford, under Jac Nasser, bought up most of the metro OKC dealerships and made them no-haggle stores I liked it. I bought two cars that way. But one dealer held out, saying buyers preferred to bargain. That dealer survived, while Nasser’s scheme is long gone.
I think the truth is that most (not all, to be sure) Americans are culturally disposed to prefer no-haggle buying. But when they buy a car, they feel compelled to bargain. The reason is not that they want to “pay less than the other guy.” Rather, they fear they’ll be suckers if they don’t haggle. They want to keep their self-respect by having gotten a “good,” i.e., “fair” deal.
Dealers don’t make exorbitant profits selling new cars. The margins are too low even at MSRP. Most of the flim-flam that permeates the new car biz would evaporate if cars were sold direct from the manufacturer to the consumer at the posted price, and “dealers” were limited to fees for prep and delivery services, and reimbursement for warranty work. The used car business (both selling and buying) would remain a La Brea tar pit for consumers, but I see no way for that swamp to be drained.
One of the side effects of C4C is certainly going to be firmer pricing and fewer rebates on hot models. A further side effect is also improved resale value for lightly used similar cars. When the real transaction price of a new Ford Focus goes up by $1000, the value of a two year old Focus probably firms by $800.
Figuring out all the ramifications of this thing is almost impossible. A good mathematical model of the relationships would be a task worth of a PhD candidate.
To the sales tax point: In California at least, customers pay sales tax on the full price. Any mfg. rebates, trade-in allowances and/or C4C voucher money all comes off the bottom line, not the top line. The customer pays sales tax on the whole shooting match. Maybe dealers get around the mfg. rebate sales tax by counting that as a dealer discount and then requiring assignment of the rebate. I’m not an insider, so I’m not sure how that accounting is done.
The AP has another story on sudden shortages thanks to all the demand for small cars:
http://finance.yahoo.com/news/Carmakers-rush-to-replenish-apf-2366967261.html?x=0&.v=4
Guess what: I bet Saturn dealers are finally going to get a chance to clear out the backlog of Astras on their lots. Some of those suckers have been on the lots for over a year now. Come make a deal on your brand new 2008 Astra today!
For the most part I bet that the people who got the best deals on popular C4C new vehicles are the ones who jumped on it in the first few days when dealers were still eager and mfg. rebates were still plentiful. BTW, now Honda will get a chance to sell the Insights which started to pile up because Toyota is going to run out of Prii.
It may be different in other states, but here the customer still has to pay tax on the $3500-$4500 voucher, as well as on any manufacturer rebates. The voucher doesn’t count as income, so thus isn’t taxed on the customers income tax, but it doesn’t count as a trade in either, so the customer doesn’t get a trade tax credit for it. For example a customer buying a $23000 Fusion with a $1000 rebate and a $4500 voucher still pays sales tax on $23000, not the $17500 actually paid for the car.
Yep all that is true in my corner of NorCal. In addition the actual Tax + Reg + Lic + Fees adds up to about 12% on a 23K car in my County. Plus anuual registration will go from $80 on a Clunker to $400-500 on a modest new ride. Insurance will go from simple liability to the full monty. When I looked at replacing a dependable older car with a new 25K car I realized that the Taxes/fees and insurance over the first 2 years would equal cost to replace any two of engine/transmission/paint (modest job).
I read people here talking about individual “Winners” and “Losers”. C4C is in no-way a micro-economic measure.
If you look at individuals and as PCH101 has said, some will pay more or less than an average. That fact would be no different without C4C, and is meaningless with regards the aim of C4C.
As I’ve stated before; if you had the multiple goals of sending expansionary money out into the economy, didn’t want to favour individual manufacturing companies (Bailout Alert!) and wanted to remove fuel inefficient vehicles you would arrive at something like C4C.
@ 50merc
Interesting comments there.
I think the truth is that most (not all, to be sure) Americans are culturally disposed to prefer no-haggle buying. But when they buy a car, they feel compelled to bargain.
But that’s the bastard child selling environment the Debt3 have fostered. Specials, promotions, “access” to “Employee Pricing”, massive rebates, on and on. Debt3 buyers had been trained to concentrate on The Deal.
One of Mullay’s first acts was to say that Ford would be less and less about “the deal”.
Toyota, BMW, Ferrari etc… have made the first order of importance on a potential buyer’s priority list more often The Product rather than The Price.
If, in durable goods manufacturing like cars, you lead with price only, as the Debt3 discovered, you will fail.
Pch101 defends the existing system of verbal and psychological arm-wrestling because he’s comfortable with it
Honestly, I don’t know why some of you insist on putting this into such black-and-white terms.
I’m not defending anything, I am simply addressing reality. The reality is that the system is what it is, and you will be most successful if you begin by accepting that premise, and that you will have to adapt to the system to make it work for you.
The free market couldn’t care less what you or I believe. It is what it is, and you’ll be far better off if you just get used to it. Fighting reality because it’s unpleasant will provide you with no benefit whatsoever; it’s a waste of time, and there is no reason to commit any energy to it.
In any case, horse trading has been with us for millenia. If you want the process of buying a car to be similar to that of buying groceries at the supermarket, then just pay sticker or buy through a service such as Costco or an auto broker, and stop whining about it.
This is a fun discussion.
I’m firmly in the “I hate to do the BS haggle dance” camp. I drive a 91 Civic, and purchasing it was a pleasant experience. But not pleasant enough that I want to repeat it anytime soon.
(By the way, I purchased this Civic because an Acura salesman was a total jerk-off to me, I had thought I wanted an Acura)
I don’t expect the culture of car sales to change anytime soon, but I do think the internet has helped inform a lot more people about all aspects of the deal making.
Toyota, BMW, Ferrari etc… have made the first order of importance on a potential buyer’s priority list more often The Product rather than The Price.
Toyota and BMW dealers negotiate, too. The exotics don’t have to, but pretty much everyone else, including the Germans and Japanese, does.
Americans like to get a good deal. We are a price-sensitive people. We may say that we don’t like to negotiate, yet we want all of the benefits of negotiations. You can decide for yourself whether that’s greedy or lazy.
@ Pch101
No doubt. I’m meaning the Debt3 have created for themselves an army of Price Motivated Buyers. The transplants have more successfully made “The Product” a focus in decisions.
Haggle away in the USA!
OK, here’s a question – do they haggle in all other markets as well? That is, do the Germans, Japanese, Italians, Koreans, Dutch, Brits, etc. all haggle. Is “horse trading” universal?
Good for some laughs:
C4C Anectdotes at CNN Money