This week’s Ur-Turn comes from David Ruggles, a noted industry figure, prolific TTAC commenter and author of the Autos and Economics blog.
In my 44 years in the auto industry there have been a couple of continuing themes I have observed. First, there is never ending change. Second, consumers are uncomfortable with the negotiating process required when buying a vehicle. These days vendors to auto dealers are trying to sell dealers on the concept that “transparency” is the key to success in selling cars.
They demonize “traditional” dealers to sell their wares to those dealers who want to set themselves apart in the transparency war, as if the winners will take the lion’s share of the business. Scott Painter and TrueCar is a prime example. In our industry, there is a discussion taking place about what “transparency” actually is. I contend that true and absolute transparency has a precise definition, brought to us from the world of economics.
True market transparency is when buyers and sellers have the same information and the equal ability to interpret that information. This is called “symmetrical information. This leads to turning the product into a commodity which leads to an “efficient market.” “Efficient markets” lead to “disintermediation,” or the elimination of the middle man.
Yes. I know there are many consumers who think that would be a wonderful thing, as if buying a vehicle direct from the manufacturer could actually work on any kind of scale.
But these vendors have their own definition of transparency, which I find to be highly deceptive. I believe TrueCar and the others are trying to create the “perception of transparency” or “relative transparency,” NOT true transparency. In fact, it’s just another marketing strategy to make money on a car deal, perhaps a good one. But it isn’t “transparent.” It’s also a strategy to get dealers to participate in their own demise. We saw how that ultimately worked out with TrueCar. Dealers woke up and pushed back.
To be clear, I have no problem with dealers making money on car deals. And auto dealers should abide by both the spirit and letter of the law on “legal transparency.” But there is no other retail business I can think of where consumers feel entitled to “symmetrical information.” They couldn’t interpret it the information anyway, but that’s another discussion.
In my world, true transparency is when a consumer asks the F&I manager, “What is your cost on that Service Contract,” the F&I manager answers truthfully. If the consumer asks, “What rate markup are you charging me,” the F&I manager answers truthfully. If the consumer asks the dealer, “What is your net cost on the vehicle you are selling me,” the dealership answers truthfully. A dealer being evasive when asked a direct question like that is justified, but it just isn’t “transparent.” Consumers have the right to ask these questions. Sellers have the right to say, “It’s none of your business.” Hopefully, this is done artfully when necessary.
I think TTAC has a relatively broad cross section of consumers as readers and contributors. My question isn’t about how one thinks things should be. MY question is, “What is the true definition of “transparency.” Mine or Scott Painter’s new definition?
My definition of “transparency” involves being able to purchase something without feeling like I got bent over in the process.
I don’t buy food, clothing, gasoline, electronics or anything else straight from the manufacturer, either. They all make their money, and I know that I paid what the guy next door would have paid in the same situation. An equitable transaction is the result of transparency, however you choose to define it.
Frankly, it’s amazing that in this day and age it is still legal to charge two different people a different price for the same item, whether it’s as simple as baby formula or as complex as a car.
@cwallace
If you are trying to sell your home through any means, would you expect the highest price for the transaction?
It’s all well and good to have everything the ‘same’, but it becomes a supply and demand situation.
Say you want to buy a new Chev SS and your desire for the Chev is quite high for any reason, ie, fanboism. I come along and consider buying a Chev SS with a much lower desire. I expect if I come out with the vehicle I would pay less than you.
Because I’m more prepared to walk away (this is a generalisation).
Shopping for value vs shopping for a specific product does have it differences.
Many people who trade in a vehicle spend a lot of energy considering the unimportant values in the purchase, ie, how much will I get for my trade-in? How much will they drop from the recommend retail price?
Do your homework well. There is only one figure when trading-in that you should be concerned about, that is the change over transactionn price.
It doesn’t matter if you pay $100k for a Ford Focus and they give you $95k for a 12 year old Corolla.
Or, you pay $16k for a Focus and they give you $6k for the Corolla.
You are better off entering into the $100k transaction.
The above comment is exaggerated, but you’ll get my drift.
Fair comment, but if I sell my house, it’s mine– I’m not the manufacturer. There is no other item for sale exactly like my home, since it is not a new item.
Cars and toasters and stuff are commodities. I can find an identical Accord at probably every Honda dealership in town. I should be able to go to any of those locations, and pay the same price for it, the same way the prices for items don’t change when you’re standing in line at Target based on who’s paying for them.
No. When I sell my house, I post the price and the first buyer paying it gets it. And stop confusing auction with the sale of automobiles. The difference is, people do not bid for automobiles. They get taken advantage by the salesmen, which is different.
Consumers are so helpless. They want to play the game as long as they are guaranteed they won’t lose.
Why shouldn’t people be allowed to negotiate on the price? I start every customer at full sticker and go from there. If I’ve done a good job selling the car, then they aren’t as concerned about price. Asking ANY business what they paid for something seems more rude (and ignorant of other cost) than asking someone to pay what the manufacture suggest. We use truecar at our dealership, and it frankly just starts the customer out at our bottom price of what we are willing to sell for, but then leaves less room to negotiate trade value and any accessories. Still a customer has removed one variable by using this service with us which makes the whole transaction less muddy.
And here we have the kind of skewed rationalization and doublespeak we expect from car salespeople.
“I start every customer at full sticker [price] and go from there.” “We use TrueCar at our dealership…” These two quotes don’t really jive. You don’t offer everyone TrueCar, you accept customers coming in with TrueCar prices, and attempt to maximize profit on everyone individually.
Starting at a particular price for the new car doesn’t make the deal involving a trade-in and accessories any less muddy.
Unfortunately, most people who think they’re good negotiators don’t realize that they’re up against a team of professionals who does this every day for a living and will wring whatever they can from every customer.
The manufacturers are in on it too with their incentives, hold backs, bonuses, and inflated BS fees.
You can shout free-market capitalism all you want, but the truth is that the dealership associations bought the necessary politicians at some point, and are now preventing exactly that.
I don’t have a problem with a little back-and-forth during the purchase process. What I do have a problem with is the adversarial relationship that exists along with some of the obfuscation that takes place with the foursquaring that many dealers do.
I recently took out a loan against my Honda for debt consolidation. The loan officer at my credit union was up front about the relationship between the proportion of the loan to the vehicle’s value and the interest rate I would pay.
I compare that to my last car buying experience at the dealership where there was I-don’t-think-we-can-do-thating and let-me-talk-to-my-managering and the numbers moved around in ways that made it difficult to tell whether the deal actually improved or not.
That, to me, is where I’d like “transparency”. If I say ‘I’ll give you $X’ and the salesman returns with ‘Okay but only at y% interest’ the salesman is up front about the fact that he’s there to make a living and the relationship between the figures becomes much clearer and I can actually evaluate the offer on its own merits rather than feeling like I’m playing a shell game.
I agree. the author seems overly sympathetic to the dealers plight. It’s not as bad as that Ward’s article with the talking points about why dealers add value from the dealer lawyer, but it’s in the same direction. Flat pricing, with sales now and then for good reasons like too much inventory, and uniform customer experience would go a long way to making the car buying process as fun as buying the new iPad. It should be a wonderful experience to buy something so expensive, not an experience that makes you feel like a schmuck if you don’t ask the “magic questions” like the ones the author suggests to the F&I guy. I don’t buy into Painter’s velocity argument, so I don’t know if it’s fixable without a Tesla + Chinese invasion of mfg owned stores with no frachises at all, but one buyer’s perspective, car buying sucks. And I love cars!
The “author” is merely asking a question. “What is the true definition of “transparency.” Mine or Scott Painter’s new definition?
Perhaps I could have stated it differently. We should all know what true and absolute transparency is. In economics it is symmetrical information between buyer and seller. In actuality it is being able to ask a question and get a truthful answer. There is perception of transparency, which is what people like TrueCar try to create, while adding $300. to the dealer’s cost in the doing. There is “relative transparency” which could be when dealers take a stab at One Price.
QUESTION: Isn’t it deceptive to call something that is not truly transparent “transparent?”
Dealer’s plight? The average car dealer made about $850K last year. They probably lost money selling new vehicles.
Mr. Ruggles – This conversation has been going on since the days of Hall-Dobbs and the advent of system sales. With no apparent solution or real progress. Just look at the comments we’ll see in this commentary. The populace is all over the map on this topic. I once ran a weekend sales training gig, and had a young girl who wanted the car, but would not write me a check. Me, the so-called wizened old pro. I went and got the fuzzy cheeked newbie, who proceeded to make his first sale. I had to know, so I asked her as she was leaving. Her comment? “My father always told me never to trust a man with a beard”. I don’t know how many successful business men expected our dealers to sell their product at a loss. Many states used to actually expect dealers to submit deposits when bidding on government contracts. $850k on a $20 million investment is poor ROI. The executive who figures out how to move this dinosaur into the 21st century deserves an economics Nobel.
So buy used cars from private individuals. Then you won’t have to worry about a dealer taking advantage of you, right? A private individual wouldn’t be less than transparent, would they? And YOU wouldn’t be less than transparent with them?
Painter says we could sell another 3 or 4 million vehicles a year by eliminating the “friction” in the buying process, and he’s going to help us all out by adding $300. to the net cost of each new car. Sounds reasonable to me. How about you?
The appeal of buying from a private individual is that they, generally, aren’t a professional salesperson.
They might try to deceive you (and a lot worse than a usual car dealer), but odds are they won’t be all that convincing. Being outside the “office” setting of dealers helps some people feel more comfortable as well.
Gentlemen: I purchased a book titled,”Don’t get taken every time”. It was written by a former Auto Dealer Sales Manager, who was in the business 17 years. I would suggest reading this book, to help defeat and recognise various sales cons used by dealerships, in addtion to doing your online homework. By the way, if you think buying a car is hard, try buying a motorcycle, like I am doing now. The bike shops remind me of rug Merchants in the Middle East.
Most car dealers are only in it for the money, and take an “it’s nothing personal, it’s just business” approach. They will screw buyers if they can, but they aren’t going to take a buyer pushing back or walking personally.
I get the impression that a lot of bike dealers are still people that got in it because they like bikes, not for the money, so the deals are more personal to them. Still not a reason to overpay, everyone has bills to pay.
“They will screw buyers if they can, but they aren’t going to take a buyer pushing back or walking personally.”
Partly true, but it is also perceived as a no-prisoners game that is wrapped in a lot of ego, and they take some pride in winning at the buyer’s expense. Landing the high margin big fish earns bragging rights on the showroom floor; there isn’t much pride or sex appeal in doing a “mini”.
Yes, in many dealerships it is somewhat akin to adolescent penis measuring. But then you have to define “Screw.” I’d like to know your definition just as I’d like to know your definition of true and absolute transparency and whether or not it is deceptive to claim to be without being completely so.
Ruggles,
the very definition of “screwed” from the buyer’s perspective is getting a quote on the same car that’s higher than another guy.
Haggling sucks. When I buy chicken, I may check the ads to find the dealer with the best price. But, the store offers that chicken to all comers a that price.
I recently bought a new lens for my DSLR. I checked prices at about 10 different online and local stores, and there was a variation of more than 10% (much more than I would see for a new car).
Were 9 of those 10 camera dealers trying to screw me as well?
Even better-know those dealership sales cons, and if a dealer pulls one on you-get up and leave.
Not all dealerships use smoke and mirrors and BS. Finding the right dealership (and also the right salesperson) can be just as important as finding the right car.
I bet you were a loyal Saturn customer, right?
My parents bought 6 different cars (Chryslers and, later, Lincolns) over 25 years from the same salesman. Did they get the BEST price? Likely not. But, they trusted that they didn’t get “screwed”. the Dealerships where family-owned businesses. These conglomerates don’t seem to want to build long term relationships with their customers.
Sadly, the classic dealer, where you deal with someone who will likely still be there if you buy another car from them is fast disappearing.
Apparently quite a few were lost during the mandatory downsizing of GM and Chrysler. Instead we have high pressure sales mills attached to high pressure service department. Frankly those places give me the creeps.
Absolutely. Say NO and leave if you aren’t happy with what’s going on.
“Frankly, it’s amazing that in this day and age it is still legal to charge two different people a different price for the same item, whether it’s as simple as baby formula or as complex as a car.”
Damn shame about the USSR falling. Even if you put in some draconian price setting law the dealers will still have the trade-in and financing to play with. All it will do is screw anyone that gets a better deal than MSRP.
And a lot of poor people are going to be mad at you if they can no longer use coupons and sale hunting to get better deals on baby formula. Or does your Central State Commission on Pricing allow for coupons?
Yet, if you go to Sam’s you can buy toilet paper for less than at the regular grocery store. But with toilet paper, the store isn’t taking trade ins, fortunately.
You don’t pay the same price for a flat screen tv from store to store.
The FTC thinks it is in the consumers’ best interest to be able to bargain and negotiate. The best negotiators get the best deals. The not so good negotiators, have to pay for that to maintain a decent average return. If dealers got together to fix prices so consumers wouldn’t have to worry about some getting a better deal than others, they’d end up in jail.
Man, this is a comment I can get behind.
Folks, the best interest of the consumer really is in endorsing (allowing? tolerating?) a negotiable transaction.
Why people get all indignant over an entirely negotiable, entirely arms’ length transaction is a mystery to me.
It doesn’t really matter whether there’s total transparency in the negotiations. There rarely is in a negotiation — that’s what makes a negotiation a rational process. And to the extent that TrueCar really isn’t as transparent as it might seem to be, well, yeah, OK. If there’s outright deception, then shut it down.
But there seems to be a comment theme (subtext?) that negotiation *is* deceptive, and that is just not correct. I look at TrueCar, and I don’t think I’m being deceived because I don’t think TrueCar is making a material misrepresentation of any actual fact. When TrueCar says “great price” it is possibly a great price if you’re negotiating on a car well below MSRP and approaching actual cost. Did it deceive you into failing to negotiate harder? Maybe it is a “great price” because left to your own devices you’re a terrible negotiator and would do much worse otherwise.
Let ’em negotiate. I’m a grownup. I can negotiate right back. Children must not run with scissors, either.
I agree, how can someone get mad when you have so many choices as to where to buy. It takes about one evening of internet study to find out what price you should be paying for the car you want and what your trade-in is worth. Then buy from the guy who’ll meet that price.
Now, if you walk into a dealer with no idea what you want or what your trade is worth, bring some lube ’cause it’s gonna hurt
@ Dweller – Well said!!!
“You don’t pay the same price for a flat screen tv from store to store. ”
Slick. Way to change the subject!!
No you DON’T pay the same for flat screen from store to store. That’s competition, a good thing.
However whoever walks into a store pays the same as anyone else that walked into the same store. That’s non-discrimination, a good thing.
Discrimination? Goodness no. You mean to tell me I only offer good deals to people who meet a specific description? I make money ONLY on commission, so it’s in my best interest to make my customers happy for aspects other than price.
And guess what, not everyone pays the same price, people just negotiate less/differently at other stores. I often go in specialty shops and bring an internet ad. I recognize overhead of the shop but also the value of their presence, but price matters as well. I ask if they can meet me in the middle and they often will, or outright offer to match the price. Actually many places offer price matching. Is that also discrimination? What about discounts of age or membership to specific organizations? Equality isn’t nearly as fair or beneficial to the customer as you seem to think.
I haggle over the price of new televisions…and audio equipment, and suits, and musical instruments, and furniture, and just about everything else that involves a salesperson.
If you’re a pragmatist, then you should be, too. All sorts of things are negotiable, but you have to make the effort to negotiate them.
Change the subject? What do you think this thread is about?
No, everyone who walks into the same store does NOT always pay the same price. Who told you that?
Most advertised or posted prices for durable consumer goods such as appliances, TV’s, computer’s etc. are absolutely negotiable and many consumers pay varying prices for the same product in the same store on the same day including post sale add-ons such as extended warranty etc. Many retail operations offer “price-match”, so pricing can vary substantially from customer to customer. Bad example.
Teach your children to negotiate/compete from an early age, they will be more successful, well-adjusted, content and sociable.
So that is it, fear of not getting as good of a deal as the next guy, that is the root of the anger.
You probably think your coworkers get paid the same as you.
There is a lot of value in learning negotiation, came very late to it myself but has made a huge difference in my financial well being. Cars have been the least of it.
@ Power^ – Excellent point.
We’re getting answers to every question except the one asked. Which is transparent, where everything is disclosed and information is symmetrical, etc.etc. OR a marketing ruse to attract consumers with their guard down?
True car does offer transparent invoice cost. True car also offers customers a pretty darn transparent price. Frankly we won’t go lower than what we offer on true car. That being said, it should be noted that the price true car offers is provided by the dealership, but if we showed higher than what other people are getting it wouldn’t be very good marketing for us. When we have a true car customer we frankly need them to finance with our banks and buy a few products to make it pay for itself. If someone has military or college grad and uses true car they actually can buy most models cheaper than what dealer employees get (each adds $500 discount at ford, but you can only use one and they aren’t eligible with D-plan).
There are plenty of commodities that can be bought for less with things like coupons unadvertised sales etc. I have also negotiated better prices on computers and appliances from big box stores. It can be done if your patient and annoying.
I think the issue in the US at least where we have a culture of, “The Car Salesman is always sleazy and WILL screw you at every opportunity.” is that most Americans are uncomfortable with the concept of ‘Haggling’ and as such most are not well-versed in negotiation techniques and strategies that go into haggling and intuitively feel that these are somehow ‘dishonest’.
This is exacerbated by the dealer’s sales-staff since it’s basically their job to assume that everyone that comes in the door is themselves an expert haggler and they have to use all their own haggling skills for the benefit of the dealership, which again with most consumers not used to haggling leaves them with a vaguely skeevy feeling about the whole process.
I’ve complained about my own recent experience often enough, but one more time!
I had need of a new vehicle, one with a specific set of features. I knew what I wanted, and what I was comfortable paying, and I went and did my research. After finding the brand and trim level that would meet my needs and finding Invoice and MSRP numbers saying my top-dollar price without undue economic hardship (Hereafter referred to as Price-X) was reasonable, I went to the dealerships.
First dealership, we talked about the car I wanted, I was told the car I wanted in the configuration I wanted was available. Then the salesman said…
“And how much are you willing to pay for this?”
And I instantly said Price-X. He then came back and offered me the car at Price-X+2. Wat? I’d just said the most I was willing or comfortably able to pay was Price-X, if that was unacceptable why were we still having this conversation? He then offered me a final offer of Price-X+1.
I left dejected and frustrated, went back to the drawing-board, re-checked my finances, re-checked my need for a new vehicle, then went crawling back. Yes I said, though it would hurt I Could pay Price-X+1.
The salesman was overjoyed, but sadly he informed me that over the week it took me to re-work my finances things had changed and now their bottom-dollar was Price-X+3. I was Livid when I left.
I went to two more dealerships, two more salesmen told me they could get me the car I wanted, two more asked me what I’d be willing to pay and I told them up-front it was Price-X.. and two more salesmen insisted they could only sell me said car for Price-X+extra.
At this point I gave up pretty much, complained bitterly to my friends online, idly looked through Autotrader sighing wistfully at ‘what might have been’ when I found a car that matched my criteria and was reasonable close to Price-X on the sticker.
I told my friends about it, but oh it was hopeless and pointless, but then one told me to go for it… but advised I offer a ridiculously low starting offer when asked how much I’d be willing to pay, instead of telling them how much I’d be willing to pay.
I contacted the dealership which had the car online, it was a long distance away but not too much so. We exchanged pleasantries, I was asked what I was willing to pay for the car and I replied with Price-X/2 and Immediately felt guilty about it.
I waited for a reply, ready to beg forgiveness for lying when the inevitable, “Are you sure?” came back.. instead I got an offer of Price-X, plus some free floor-mats.
That car is now sitting in my driveway, but my initial impressions of dealerships as I stumbled like a newly-born lamb from one to the other still leave me feeling unclean.
I think.. what’s needed here is better consumer education about negotiating tactics, so they can enter the dealership knowing what to expect and not be blind-sided by a process that just feels ‘wrong’.
Our company developed a product called Vehicle Electronic Condition Report (VECR) system which will bring more transparency into used car deal. Currently, we are working with one of the national auto part dealers to setup service stations to provide a very affordable Vehicle Electronic Condition Report (VECR) services ($29.95 to $34.95) to the General Public. The VECR report reveals engine, air-bag, ABS, transmission and other vehicle specific DTC codes to avoid buying a problematic used cars. If you are interested in learning more, please let me know.
Regards,
Chin Sun
President of Auto e-Diag Service
csun@auto-ediag.com
WEB: http://www.auto-ediag.com
Cell: (512)921-5685
Excellent work Derek! As an independent buyer’s consultant True Car is one of my competitors. The major difference between the two of us is True Car is compensated by the dealerships because essentially they are a “broker.” Whereas I am paid by the car buyer, I have a flat rate system regardless of the cost of the vehicle. My objective is to create a personalized buying experience for the buyer so that they can choose a vehicle that best suites them while at the same time saving them time, money, and hassle when it comes to the negotiations.
My understanding of how it works is True Car charges the dealerships a “fee” for participating in their website in return those dealers get the leads that True Car generates. Of course those dealers have to agree to sell a vehicle at a specific price. I have found these prices to be pretty good deals, but not awesome ones. What consumers need to understand is that the sale price of the car is only one way the dealer will take your money. Often dealerships will discount a car to undercut their competition only to make the difference up with “back-end” fees and charges.
For my customers I have the sale price, tax and paperwork fees, detailed with a final cost all laid out in writing so that they can see how much they are paying.
I will say that True Car and I do share one major similarity, some dealers just won’t play ball. I have had many dealers blow me off and give me some line of BS on why it’s policy “not to send price quotes via email.” These dealerships usually have a reputation for not being the most “transparent.” However the smart ones, are aggressive with their pricing and get me the info I need quickly. They understand that even though they won’t make a ton of money off of this deal today, their interaction with me means more deals in the future.
Great points. I am a car purchase advisor for dozens of family, friends and acquaintances every year. It’s a harrowing experience that first happened to me when I was 20 and got majorly ripped off and I vowed that wouldn’t happen again ever.
I enjoy ‘the hunt’, and I relish the negotiations. We are fortunate that here in the greater Houston area we have several dealers of the same brand, so we have great choice.
I’m also pleased to say the majority of dealers are willing to work with you to land a fair sale once they clue in that you’re an educated buyer.
Several tips – be realistic about your trade in and outstanding loan; be realistic about your credit; have a preapproved voucher from your banking facility so financing doesn’t end up being an issue (but attractive as a promotion); and let the dealer make a profit. Your sales person has a family to feed and the dealer has bills to pay. You want them there tomorrow to service your warranty needs.
Just not too much profit.
I hope to figure out a way to make a living at car advising once I retire from the education circus ring.
Haven recently purchased a car, I tried the True Car path. Tom is correct that they’re nothing but a broker. That might even be going too far. They’re more like a lead generator.
They had me build a car that probably didn’t exist and placed a price on it that was higher than I could find in car sales web sites (carsoup, autotrader, cars, etc). If I had continued, the next step would have been for two dealers to contact me and attempt to find me a “similar” car for a “similar” price. How is this any better than randomly walking into a dealership?
Btw: I found dealership that was very straightforward and am very happy with the experience.
So essentially, you’re a broker! Good deal!
I’ve used a broker for my last three transactions. While it might be a couple-hundred over the absolute best cost, it saves me all the runaround and flim-flam!
(Though with my current car, I learned a lesson — see what I can get in trade through the broker first, as my transaction price (and subsequent payment) ended up a bit higher than my comfort level because despite my broker’s best effort, we got lowballed! :-p )
I am glad to see David post an article here. Since from his comments he has a different perspective to a lot of TTAC commentators – always valuable to hear multiple opinions.
I agree. I don’t always agree with him, but its good to hear his point of view.
That’s what makes ttac so great! All these differing view points and experiences.
On this topic I am biased because I was too closely associated with family-owned multiple brand new car dealerships located in four states for more than 30 years.
As to points of view, let me say this about that: those individuals who believe that sales staff and dealerships exist solely to part the customers with as much of their money as they can, are spot on.
However, I have bought a lot of cars over the decades and I do not believe in haggling. They get one shot at me, and one shot only. My approach is to ask the salesperson or salesmanager what they need to sell the vehicle I am interested in buying for. If it falls within my window of opportunity, I buy it. If not, I walk.
Works every time. I have bought more than I have walked, and I have never bought anything from my brothers. That’s just bad karma.
Thanks Mike. The only opinion I’ve really posited here is what true transparency is. I object to vendors and dealers calling some that isn’t truly transparent, “transparent.”
I have been car shopping lately, hoping to purchase this month so this issue is close to my heart. The worst thing about buying a new car is not even transparency in my opinion. There are very few things we buy these days that we actually know exactly how much the seller made from the transaction or exactly how much the manufacturer made…whatever the case may be. The seller making money off the transaction is not bothersome to me, it is how commerce works. Provided I think its a fair price, I buy.
What bothers me about dealerships is not even all the smoke and mirrors they use in the transaction process, its the fact that the same product can be sold on the same day to two different people at the same store for widely different prices. It is a business model that is designed to fleece the customer to the greatest extent possible. With other purchases in life, if I really want something, I dont get too upset if think the price is too high, I just suck it up and buy it. I dont feel taken advantage of though because that is the price everyone is paying.
What upsets me about auto transactions is that if you are not dilligent, educated, and put in a decent amount of leg work the next guy may get far different and better terms. Plain and simple, car dealerships are by and large predatory creatures. I really dont think there is such a thing as a good deal in the car world. When you get a good deal it is because the product is not in particularly high demand, thus, not a deal at all. The reality is the vast majority of us are getting varying degrees of bad deals. If we all got the exact same bad deal, at least it would take some of the pain out of the car buying process.
There are good deals in the car world. Just like you said, you have to put in the work. Some people have the patience and fortitude for it, some do not and some of those people pay me, a buyer’s consultant, to do it for them. It’s not that anyone can’t do it on their own it’s just that they don’t want to deal with the headache. I could mow and edge my lawn, but it will take me 2 hours and I still won’t do as good of a job as the lawn service. So I pay them, because my time is more important. Anyway, if you have any questions about the car buying process and would like to chat with no obligation feel free to drop me a line.
AutomatchConsulting@gmail.com
Curious what it cost for a buyer’s consultant to “cut my grass” and negotiate a price on a car? I haven’t heard of that job.
Sounds like something valuable.
This is the same thing that’s wrong with healthcare in America, right? The hospitals, clinics, etc. charge different prices to different people for the exact same service. It’s a business model that can’t last, because it’s not very stable. Let’s hope both car-buying and healthcare undergo some changes that will benefit the consumer soon.
I believe you are far too optimistic. In both cases, the consumer is there to be scalped.
And some get great deals and others pay for it. Or we get price fixing so everyone pays the same. Pick your poison.
Then I think you would agree with me on what transparency is as well as “relative transparency?”
That doesn’t bother me too much, because I can buy a loaf of bread and the next day it goes on sale (or goes off of sale), and someone else pays a different price than me. Similarly, I can buy something online for cheap while someone else buys the exact same product in a boutique store and pays a lot more.
No, what bothers me far more is the accepted practices involved with the hard sell. Helping a friend buy a car recently, I know the ‘dance’ bothered her–cornering them in an office to keep them from leaving, trying to get them to fill out credit applications as a prereq to a test drive, flat-out lying about prices/interest rates/etc., needing to talk to his supervisor, and so forth. I also am bothered by the non-transparency of fees & add-ons. “Destination charge” is one thing, but “dealer processing fees”? It’s as bad as dealing with phone companies.
As airlines and cruises and similar industries have learned time and time again, a key part of “transparency” (or its first cousin, let’s call it uniformity) is that each equal customer should receive roughly the same price for the exact same criteria. People talk, especially in the internet era, and IMHO it’s more important for dealer pricing to be consistent than to be outright aggressive.
If dealers were really scientific about it, they could be armed with the right info, such as “I’m sorry, that’s my bottom dollar. Statistically red cars with tan leather sell really well in December, so I can’t give it to you for less.”
Instead — unlike the airlines or cruises who use a supremely complex, maddeningly scientific algorithm of pricing and timing — dealers just seem like they’re making it up as they go along. At least, that’s what they present to the consumer. Another sketchy industry, banking, often uses a combination of art and science to price deals, but they present it very factually and professionally. So I suspect that’s the crux here — I’m not a fan of dealer collusion or cartel, but as a consumer I really don’t like the idea of having to guess which dealer to visit, when to visit, etc.
There is absolutely an economic value to consistency and transparency — witness the rise of Carmax and similar. You probably pay an extra 5%-10% vs a traditional dealer, but in exchange you get a more seamless and CONSISTENT experience. Financed over 5-6 years, the price difference is negligble for most people.
Airlines and cruises do NOT charge the same amount. It all depends on the “broker” you use. These days the generic internet broker makes it appear like all the prices are the same but further digging will reveal there is still wiggle room. Call a travel agent and you might get another price. Its most likely higher (due to commission), but it could be lower because they can bundle or might be offering some kind of spiff or other incentive that day / week.
I worked at a cruise line – and our prices changed WEEKLY, mostly based on inventory. It was a curve and oddly it was the opposite of the normal supply and demand. With tons of cabins the price started high and as we got closer to the sail date the price dropped in order to unload those last few cabins. In fact we often sold cabins BELOW cost knowing we could make the difference in the casino, spa or tours.
Hotels are crazy like this too, however when rooms became scarce the price goes back up again – well unless you are a reward member, they hold back (reserve) a few rooms for them at “special” pricing sometimes.
Thus travel pricing is nowhere near transparent. Given how complex the whole car buying process where inventory, floor planing, F&I, limited editions, special orders, rare models, strippers (not the dancing kind) are all jumbled up I doubt we will EVER see true “transparency”.
However I agree with you – I’d rather pay a little more for a consistent experience then “fight” the dealer only to have someone walk in behind me, say the magic words and get a different deal. Normally price fluctuations in daily transactions (gallon of gas, a dozen eggs) aren’t a major issue, we accept them as the “norm”, but when your buying something that’s $20 – 60K those differences could be thousands of dollars.
No other industry deserves it’s poor reputation as much as auto dealers. The smoke and mirrors during the negotiations, and cheap theatrics “let me ask my sales manager” to isolate the buyer and cause frustration. The F&I tack-ons. Completely outrageous initial warrantyservice plan prices. Upholstery protectors. Gaaah!
Dealers can suck it as far as I’m concerned.
Agree with carr1on. A friend who is now a finance guy tells me that once a customer agrees on a price, they move them to the finance department where they start the “itemizing” from a menu of items like warranties, glass etching, this/that. That is where they can make a killing. It’s all incentive driven. They don’t give rat’s ass about transparency and if the customer feels like they were taken after the fact. “You read the agreement and signed on the dotted line, sorry.”
There will never be true transparency. I think part of that comes for the manufacturer as well. They are not the best bosses to work for.
The finance guy I have dealt with haven’t been that bad. Maybe I’ve just been lucky. When I bought my C-Max I didn’t meet a manager or F&I guy. We had agreed to everything before my wife and I came in. I ordered the car, so that may make it different. The sales guy and I figured everything out when the car was ordered.
I bought a year old mustang gt from a Hyundai dealer a few years ago. I got a great deal on the car, and I had my own financing. When i went to close the deal i had to sit with the F&I guy. He starting pushing warranties, paint protector etc, I told him “I came to buy a car, nothing else. This deal is dead if you try to sell me anything else”
He gave me my paperwork and I drove the car home.
BTW I sold the car a year later for the same price I paid for it that day.
That tactic may work most of the time, but sometimes it can backfire.
Back in the dark ages, I was trying to buy a new 1978 Honda Accord. This was when there was often a waiting list for the car. After test driving the car I sat down with the salesman to write up the deal. The salesman writes something on the purchase order.
Me: “What’s that you just wrote?”
Salesman: “That’s the air-conditioning. $795” (That was a lot of money in 1978, especially for an enlisted sailor.)
Me: “I didn’t ask for air-conditioning.”
Salesman: “We put on all the cars.”
Me: “I don’t want air-conditioning.”
Salesman: (Tearing up purchase order.) “Then we have nothing to talk about.” At which point he got up and walked out of the cubicle and went into the back room. I was then invited to leave the dealership.
You see that attitude in other industries as well, usually when a seller has a very desirable product. This situation separates the honest sellers from those who want to take advantage of consumers.
I was building a house during a time when the market was “hot”. The builder was really jerking us around, because he felt he could. I reminded him that the market always goes up and down. In a few years when you’re hungry for work and I’m ready to build a bigger house, what are the chances that I’ll do business with you again, in light of how you’re treating me now?
Honda dealers really were obnoxious back in the ’70s, acting as if they were doing you a favor selling you a car. It’s a good thing that the cars lived up to the hype or they’d be back to selling motorcycles for a living. The dealer network certainly did Honda no favors building the brand.
When my broker made my deal for my 2006 Accord, it was contingent upon my being thrown to their F&I wolf, as normally, like a year ago when I bought my current car, he’d come to your house or meet you at a restaurant to sign papers.
He told me what to expect, and to simply state that I wanted no extra crap, just let me sign the financing stuff, and let me take the car home to start digesting the Owner’s Manual.
We get to the dealer (the same one from which he had obtained my last car, my first purchase from him, and from which I had obtained my FIRST new car via the traditional haggling method), and the F&I lady starts her spiel (VIN-etching, I think), whereupon I state “no, thanks, just the payment and keys, please.”
She continued a second time, and I responded the same way, with a little more emphasis! My broker was standing out in the hallway next to said wolf’s office, and he was starting to look unhappy!
She tried a third time! My response, loud enough to be heard by the porters out at the distant parts of the lot: “I DON’T WANT YOUR USELESS [expletive deleted] ALARM, YOUR OVERPRICED VIN-ETCHING, OR ANY OF THAT OTHER ** [cow fecal matter]!! ** YOU WILL *** CEASE AND DESIST WITH YOUR SALES PITCH, *** AND LET ME SIGN FOR THIS CAR!! [And as loud as I could yell:] **** NOW!!!!! ****”
By this time, the color had left the F&I puke’s face, and the look on my broker’s face to her could have curdled milk!! She fanned the finance and P/O stuff in front of me, and just to make her squirm, I sat and perused EVERY one like a lawyer scrutinizes a legal brief!
My broker high-fived me twenty minutes later as we walked out and he got me into my car (after receiving a bunch of stunned looks from folks in the adjacent showroom)!
Only within the past year has he begun to deal with this Honda dealer again; for my 2013, he dealt with a smaller dealer that does seem to actually work well with customers, and has an excellent service department to boot! (A third Honda dealer nearby has the nicest and most experienced salesguy in the business, but the dealer principal has gone sleazy of late.)
What causes the frustration is the fact that there is no such thing as a best price, but consumers think there is, thinks the sales person knows it, but won’t disclose it. Fact is, the sales person will NEVER know the true dealer net cost. Often, neither does the manager. Sometimes it requires a real time calculation based on current production versus a bogey. Often, each car’s true coast isn’t known until a program ends. In December, Honda offered dealers $3K additional money back to the dealer for each Accord sold over last year’s sales. How would a dealer possible know what their net cost would end up. The OEM creates these programs. Consumers blame dealers for them. Id all of this designed to keep consumers from knowing exactly what the price base is? Of course, that is part of the reason. The other reason is driving sales. That’s the world we all live in, consumers and dealers alike.
Imagine I customer buying an Accord at the end of 2013 and comparing notes with his neighbor who bought the same car at the end of November when the $3K wasn’t in play. Who gets blamed. This may be hard to believe but dealers don’t worry about this. What good would it do the? But they keep working to attract consumers by claiming a better level of transparency than their competitors even though using TrueCar adds $300 to their net.
Then don’t buy from a dealer. They’re all the same, right?
I don’t need to know what the service contact cost or rate markup is. I come preapproved from elsewhere and if the dealer can beat it, great. I can do the math on whether or not I feel that a service contract or extended warranty is worth it. On one of my cars it wasn’t worth it. On my other vehicle, a CPO car, it was worth it because the price I paid was less than compareable non-CPO vehicles.
Preapproved is the key word here.
I didn’t say you need to know what the service contract or rate markup is. I said my version of transparency is if you ask, they will tell you.
The problem of two different people paying a different price was solved years ago with the requirement of the Monroney sticker, which has the MSRP. No one pays higher than this price, unless they are at a truly unscrupulous dealer. Used of course is a different story.
My question is why do we expect a car dealer to work for and or sell for little or no profit? It would seem to me the overhead is fairly steep.
@cwallace, do you have a pet? Ever shop around for a rabies shot? Prices vary from $80 to $300 for the same service. Or you can go down to your local Tac shop and buy the needle and vaccine for $10. Same with having your dogs teeth brushed….personally I think if you want to know what it is liked to get raked over the coals, have a pet or two. But I digress.
There are several large automotive groups who have done very well with the one price model, which to me has the most transparency. The only potential disagreement point is the trade car, and that comes down to the market and if the dealer does well retailing whatever it is you are trying to trade or do they already have a handful of the unit in inventory, so on and so forth.
The F&I office is where the rub happens. Again most stores have cleaned up this area, but not all. Should every customer get the same rate on a car loan? Customer 1 could have great credit and cash down and want a 48 month loan versus customer 2 with mediocre credit, no cash and a desire for a 72 month loan. What bank would charge the same rate? Interest rate is a measure of risk. Customer 2 obviously has a higher risk loss than customer 1.
As a former F&I manager I would have deal files on my desk that would take days to get bought by a bank, hours of time spent etc. Should I have done that work for no rate mark up? I think that perhaps we sometimes forget their a lot of people who have steak and potato taste with a hamburger helper budget. Satisfying the needs and wants of these customers or any others for that matter should not be done for free.
Pet analogies? I guess you have no kids :D :D
I’ve sold cars myself (at a fixed-price place), then also worked doing risk analysis on the back end for a $500M+ indirect auto loan portfolio across all 50 states. There are a lot of people who have to make money along the chain, absolutely.
The whole industry is in a bit of disarray right now because you have internet-savvy shoppers, traditional hardcore negotiator shoppers, one-price shoppers, people pre-approved at their own bank, people seeking dealer financing, the whole gamut.
No single approach works for all of them, but I think it would be beneficial to “transparency” if nobody had a trade, everyone had their own payment, and they could all walk in and simply haggle over the car price. But this is the real world and nothing is that clean, at least for most buyers.
The issue I have with this argument is that the Monroney price is an illusion, fully padded with a huge profit margin that dealers don’t even expect to get. Save for hot high demand cars, I have never heard of anyone paying the price on the Monroney so suggesting that consumers should just pay it if they want a fixed price is insulting. I am happy with the dealer making a profit on the transaction, what i am not happy with is the amount of time and effort I need to spend just to make sure I am not being taken to the cleaners.
In a world where dealers would be prohibited from selling the same product for different prices to different people, we would see the prices in the Monroney go down to the average transaction price, as the manufactures would have to adjust their MRSPs in order to compete. It would be a huge win for consumers, but there are too many interest groups in the way of this happening.
And that’s why as a consumer I am rooting for Tesla to win all the challenges dealer lobbyists put on their way. I am not a fan of the car but I would consider buying one just to support their sales model.
“No one pays higher than this price, unless they are at a truly unscrupulous dealer. Used of course is a different story.”
This just made me think of two dealers in my area who automatically mark up every vehicle on the lot by $3,000. One Nissan, the other Subaru/Mazda. At least the S/M dealer had the “decency” to add door guards and pinstripes.
When the new Accord came out back in 2012, the first ones had the OEM mudguards slapped on them, ranging anywhere from ~$130-$200, depending on the dealer!! (After seeing the retail price and throwing in a little profit, I had my broker get them installed for $120, giving the dealer a small consideration for labor to install (15 minutes, IIRC), and $15 or $20 in profit.
The worst ADM-sticker item I saw at a couple stealerships was the “$50 NITROGEN” entry!!
You read that right!! $50 for AIR IN THE FREAKIN’ TIRES!!! (Which come filled that way, included in the cost of the car, from the factory!)
What is a Tac shop? I’ve never heard of it and have had many pets. Thanks in advance.
Aleister Crowley
Tac shop – horse stuff I believe
Thanks 87 Morgan – But it seems you are talking “relative transparency” rather than absolute transparency. The dealer groups you mention are mostly using One Price as a marketing strategy.
@87 Morgan – But many of these guys think dealers add no value. How many times did you cram a finance deal down a lenders throat, something a consumer could never on on their own? Then the customer complains because they didn’t get an A Tier interest rate.
……The problem of two different people paying a different price was solved years ago with the requirement of the Monroney sticker, which has the MSRP. No one pays higher than this price, unless they are at a truly unscrupulous dealer….
Guess you have not tried to buy a hot car….my local stealer still wants $5K over sticker for the Stingray. He told me “its supply and demand” deal with it. I did. By walking out.
I;m ok with the pet analogies, btw. With kids, at least there is insurance. With pets, its all directly out of your pocket. Then again, no college costs!
Lets say the Delorean needs a new Mr. Fusion. I fire up Google and search for a new Mr. Fusion. I find the lowest price and buy one. I want a new (to me) Delorean. Autotrader, Cars Inc, etc have listings for new (to me)Deloreans. Wildly different prices for the same vehicle. Further reading shows $495 dealer processing fee and other BS. I just want to know the out the door price for another Delorean. I’ll take quotes from 3 or 4 dealers and go with the lowest price. It’s like the new car industry has never heard of the internet or thinnks it’s pure evil.
The auto industry lives in the Internet world. How could they not?
The brand I sell does not have a ton of mark up. They also never do any “factory rebates”. Once in awhile they might offer 0% financing, usually for a max of 36 months, and really only when its an outgoing model (next year will be a redesign), and only if you have top tier credit….which most of our buyers do.
I personally like when people use Truecar and the like, because it sets a reasonable expectation for price. An unreasonable expectation is that I can take $5000 off a car with a $1200 markup.
“Transparency In The Car Buying Process. What Is It Really?”
Here’s what it isn’t:
-Negotiating one set of terms, only to find that the contract that has been printed out by the dealership includes different terms from what were just negotiated
-Negotiating a set of terms, only to later have some other employee (invariably, a manager of some sort) interject to claim that a “mistake” had been made and the terms needed to be changed (i.e. the cost goes up)
-Running credit checks on cash buyers or otherwise running them without consent
Dealerships use tactics that are intended to mislead and manipulate — that’s how they pull more money out of deals. Consumers sense this, even if they aren’t quite sure what to do about it.
Standardized, simplified documentation would go a long way toward improving this. But the last thing that the dealer lobby wants is straightforward, simple paperwork that can be understood at a glance by a layperson. Car sales are basically a shell game, which intends to confuse buyers so that they don’t even understand what they’re paying, and no dealer wants that to change.
So you’d be a customer at a One Price store, right? OR you’d take the One Price to another dealer to shop with it?
Your profession is so dishonorable that your brethren can’t even be trusted to type the agreed-upon numbers on a contract.
The fact that you see nothing wrong with this is telling. Dealers aren’t just dishonest, they also rationalize their dishonesty.
I have no problem paying a middleman if they provide some kind of service.
While I don’t think the traditional dealership model will go away anytime soon, I have to question their value proposition. Apart from actually seeing and driving the car, in my opinion they don’t have much else to offer the consumer. OK, to be fair some people value things like road hazard insurance, undercoating, accessories and extended warranties, but most of those can probably be provided at a lower cost elsewhere.
Fundamentally they should offer that thing you can’t evaluate before you buy, and that is standing up for me when my car has a problem.
A middleman who adds value would know their product at least as well as a customer who does internet research, helping the customer find what he or she wants. Staff at an outlet mall clothing store help you find your size in the color you want. In contrast, the typical commissioned sales mercenary at car dealership ramps up the pressure to buy whatever they have with significant effort to upsell to a more expensive trim level.
And you are like a helpless lamb to the slaughter?
You nailed it: oftentimes, that salesman can’t provide the correct answer to a question about a car.
I walked into one of the Honda dealers during the 2013 Accord rollout, and asked a middle-aged, experienced-looking salesshark “what advantage does VTEC provide?” (Variable valve-timing — intake valves open wider when you step on it, and less when you’re cruising, thereby saving gas.) Basic stuff; should be foremost in Honda training literature, having been around in the US for twenty-two years! (Yes, I’m a Honda fanboi! But BMW has Valvetronic, Audi has it’s Quattro system! A Ford salesman should be able to talk your ear off about MyFordTouch! Every make has a few unique things about their cars, which should be just like political talking-points to their salesfolk! And they aren’t!)
All this guy could do was give me a blank stare, and muddle “while..gee..I’m not sure!” I thanked him and left, stifling what would have been a hysterical cackle!
The middleman does add value…to the manufacturer.
Retailing and production don’t necessarily mix, and it’s better for the producers to have someone else do the selling. The dealers exist for the benefit of the automakers.
They do because they don’t understand retailing. BUT if the dealers were displaced by the OEMs somehow, one issue could be resolved. They could charge everyone the same price so no one would feel duped.
Well, the dealer has no reason to say NO when you have a problem. The factory pays the dealer to do the repair. He has nothing to lose and everything to gain.
First, I am really pleased to see David post at TTAC.
Second, I ask that all responses are polite. Give the level of abuse we (including myself) have given him,he deserves the courtesy.
I disagree with his concept of transparency simply because it requires honesty on the part of the dealer. Commissions provide a disincentive for a significant number of people to act in their best long term interests.
I know this a broad brush and not every dealer is like that, but caveat emptor.
I just used True Car on a deal with no trade, it was fast and fair with the dealer making a profit that they were happy with. And I was in and out in 2 hours.
I see you understand what Dave does.
What exactly do you think I do?
“Las Vegas, Nevada Area | Automotive
Current:
Contributing Columnist at WARDSAUTO.COM, Contributing Columnist at Auto Finance News, Distributor at Success Insights international, President at…
Education:
Oklahoma State University, Oklahoma State University
Summary:
43 years experience in all facets related to auto dealerships and the auto industry. Eighteen years consulting and training in Japan for the wor…”
We’re both on LinkedIn.
@ Jetcall – Yes, true and absolute transparency requires the dealer to be completely open. Otherwise, there is no transparency despite people throwing the word around while making up their own definitions.
I’m the kind of guy that would NEVER claim to be transparent. I might even tell you my net costs are none of your business. Isn’t that honest?
I don’t know how this fits in, but I use Kohl’s as an example:
Everything they sell is always on “sale”. That’s a crock, though we buy a lot of our clothing from them, but we do shop around, and they generally have the best prices for certain name-brand stuff. What I laugh about is that when you check out, they always tell you that you “saved” ‘X’ amount of dollars, when you very well know almost nothing you bought is made domestically, and that they’re still making a healthy profit on everything they sell.
In other words, the house always wins. Accept it.
Retail, whether clothing, cars or electronics, has become a shell game in the race to the bottom.
I have a very good friend that works at Kohl’s corporate. While everything is always on sale, the trick is figuring out when its most one sale and timing that with a 20% off coupon. They still make money on that transaction, just not as much.
Look what happened to JCPenny when they stopped coupons. They almost died.
This is why I rarely go to Kohls, I find it annoying. Plus the quality of the clothes sucks.
You just stick to the “name brands” like Dockers, Levis, etc. Yes, their house brand is less than quality!
I do look with disdain on all of the little “you saved this much” things! Also, places like RiteAid (drugstore) that are required to ask if you want their “Wellness Card” (a dubious way for you to save a penny or two here and there on items, like a grocery reward card without the reward; in practice, all it does is get you in some database so that you get more spam and junk mail); then they go out of their way to be patronizing by (again being required by corporate) having the cashier at the nearest register to the door give a sing-songy “wecome to RiteAid” to every schlub who walks in the door, even while taking care of another customer! (A dedicated greeter, like at “Walley World,” is OK (even though I never darken their door because, IMHO, they started and perfected the “cheap Chinese crap” meme), but to demand that a CSR distract themselves constantly for “forced,” insincere greetings is, as I stated, patronizing! And before you state “don’t go there,” the Walgreens down the street has started the same practices!) Fortunately, the pharmacy there has put a note in my file to not pester me about said “Wellness Card” after I mentioned something about it; the pharmacist told me that I wasn’t the first person to whom they extended this courtesy.
I keep meaning to get down to Bed, Bath & Beyond soon, because I have a 20% off coupon that’s about to expire. Well, I guess I can wait until next week when they send me a new one.
But for a store I actually shopped at, I would never buy anything at Borders until they emailed me a 30% coupon. B&N is doing that too these days, but not as frequently. Which is why I don’t buy books there as often as I did at Borders back in the day.
This is the infamous “MSRP” price, that is why everything is “on sale”. Sometimes you’ll find a tiny disclaimer that indicates: Original price may not have resulted in actual sales. In other words: they list a higher fake price that is way more then anyone in their right mind would pay, then swap in a lower “sale” price to move the merchandise. Sound familiar?
It all because nobody wants to pays the MSRP. People want to feel like they got a deal. However if you told them a shirt was $20, they would consider it “cheap”. BUT if a $40 shirt is half off? Now that’s a “deal”. Same reason things are always $X.99 – its silly but people fall for it.
Furniture places and roofing companies are always having sales too. Looks like I have to get down to Art Van because they are having a big one time sale…..until tomorrow.
Try buying furniture from Knoll. Pretty much never on sale :)
Then there are companies that charge different people different prices for exactly the same item.
A few years ago and industrial tool company bought my name on a mailing list from one of any number of trade journals I received as part of my job. I had also previously ordered from this company as a “civilian.” As is the case with many retailers, this company always listed a “MSRP” and “their price,” which, of course, was lower.
One day in the mail I received two catalogs from this company one addressed to me, and the another addressed to me as “Plant Engineer.” And they were the same except for two things… The SKU and the prices. All the SKU’s were the same except for the last letter after the number, so they knew which catalog you ordered from. The main difference was the prices. The prices in the “professional” catalog were significantly higher than those in the “civilian” version.
Amazingly, in many cases the “suggested retail price” was also higher in the “professional” catalog. I noticed in one particular item that even though I would pay more as a professional, only I would “save” about 12% buying it as a “civilian” but a whopping 33% if I bought it as a “professional.”
I have never done business with this company since then.
I think dealerships have such a poor reputation because of the training practices of a couple old school sales managers and the high turnover rate some dealers embrace because they have too much staff, pay too little and train poorly. There are a lot of good dealerships and good salespeople though, which gets lost in the noise of internet complaints.
I don’t think dealers could give the true cost of a vehicle to a consumer, given the highly complex overhead and incentive structure that they work in. Changing floor plan incentives from the manufacturer alone would make this nearly impossible for instance. Then again, I don’t think a plumber could either (parts, labor, years of training, office costs, equipment costs, etc…). In a way it’s a silly question to ask, what you really are asking for is just the lowest the dealer will go on that particular vehicle, since I doubt they know the exact cost either.
I may be wrong on that though, I’ve never worked at a dealership.
But the question IS: What is true transparency, not whether everyone hates car dealers or not. Is it deceptive to call something transparent when it really isn’t?
Hell, you understand things better than most people working in a dealership.
Someone in here posted about “Don’t Get Taken Every Time.” Are the morning “sales meetings” (really gatherings of the salespeople at a dealer where either the sales manager launches profanity-laced screeds to “fire up” the crew, or conversely, where the crew passes around a bottle), still a staple of the modern auto dealer? Are there cameras set up to read license plates, then extract the owner’s information and have their complete financial history on a salivating sales manager’s computer (along with a summary of how much money they could extract from this person with a great deal — for the dealer, anyway — on car “x,” including repeated pulls of his credit report, which will lower the FICO score, and put him a higher, more lucrative interest rate), by the time a “green pea” (noob salesperson) approaches the potential “up” and nearly rips their door off before said schmoe even has the chance to kill the engine and unbuckle his seat belt?
I exaggerate (hopefully), but you get my point!
But there is no other retail business I can think of where consumers feel entitled to “symmetrical information”
This is so true. We don’t ask the sellers costs on ANY other transaction in life. Its a fantasy to think we would get to fixed prices where every consumer pays the same for a car. There are too many variables – options, trade value, credit worthiness etc. We don’t all pay the same price for other consumer goods either – some people shop sales, use store loyalty cards, coupons etc, some don’t.
Where people usually get fleeced is by shopping based on payment. There are so many ways to manipulate the payment number, its very easy for the dealer to inflate the selling price, interest rate, bundle in extra warranties etc. A good rule of thumb is that a 60 month car payment is going to be about $20 per $1000 financed. If its way out of line with that, either you have terrible credit or the dealer is inflating the payment.
I can’t think of another consumer product that involves a minimum of three parties on the sell side, and that includes so much renegotiation of previously negotiated terms or an inclination to write up contracts that don’t match the terms that were discussed.
I just had a DirecTV rep come to my door yesterday. Aside from essentially calling me stupid for not wanting to drop everything and sign up right then and there, he left me with a brochure that listed 4 different packages with regular vs “sale” pricing, which also included “region sports fee may apply,” “minimum 2 room set up required,” “lock in 2 years with auto bill pay,” “$19.95 handling fee may apply,” and a whole list of conditions in the fine print. How much am I gonna pay again?! Cellphone contracts are also riddled with extra costs/exceptions/conditions. It’s not just cars.
Everyone wants the ideal world of one price shopping for cars. it’s already here – pay MSRP. Otherwise, do your homework, know basic math, and pay attention.
The job of a dealership is to get everyone to pay as much as possible.
If you are foolish enough to offer sticker, then it’s more than likely that the dealer will try to get a price above sticker, as you’ve already made it clear that you’re an easy mark and it’s assumed that ones first offer is not the best and final.
In other words, a well-executed haggle does not extend the negotiation process, it just lowers the price. There’s going to be some sort of haggle, no matter what; if anything, showing a willingness to overpay will just make it worse, like a wounded antelope limping in front of a pride of lions.
Right on!
‘Cause we’re adding a little something to this month’s sales contest. As you all know first prize is a Cadillac El Dorado. Anyone wanna see second prize? Second prize is a set of steak knives. Third prize is you’re fired. Get the picture? You laughing now? You got leads. Mitch and Murray paid good money, get their names to sell them. you can’t close the leads youre given you can’t close sh!t. You ARE sh!t. Hit the bricks pal, and beat it ’cause you are going OUT.
“Now how much would you (make someone) pay??!!”
I don’t mind negotiating a price. What I hate is the multiple step process to wear me down and take as much of my money as possible. In the end the sales manager and I are going to agree to an “out the door” price, so why can’t we talk man-to-man and get the damn deal done in 5 minutes?
The dealership’s goal is try to get you to pay as much as possible, with the understanding that there is a rather wide variation for the tolerance of pain on the buy side of the table.
Some buyers will pay only a little, others a lot. They don’t want to give the skinny deal to the guy who would pay more if given the chance. It takes more than five minutes to figure out where you belong on that scale.
Exactly. This is called price discrimination in economics.
Price discrimination is a natural result of negotiation. Fixing prices would eliminate that.
Precisely. At the end of the day it’s always in the dealer’s interest to pull as much money out of the customer’s pocket as possible. Especially given that customer information has never been more widely available and new cars margins are actually pretty slim (manufacturer dependent, of course). The dealers make up the front end margins extra on the F&I side by marking up loans and offering back end services, plus the cash cow of non-warranty service.
+ 1,000,000
The dealership staff feels the same way. Why can’t they just come in, let us give them a fair price, and but the car without hassle?
Obviously the dealership is in the business of making as much money as possible. The consumer is also in the business of paying as little as possible. As much as the dealers, lies, obscures, and hides the numbers, most consumers these days lie about their credit, lie about money down, lie about the trade, and lie about where they are at in the buying process. If I had a dollar for every time I’ve heard ” this is my first stop,” LOL. It’s all a game, and the consumers are playing just as hard as the dealer. Let’s get real.
Sorry about the typos.
TrueCar is nothing more than an additional middleman as dealers factor in their commission which in turn adds to the net cost to the buyer.
Funny how consumers don’t figure in the TrueCar cut as adding to the dealer’s cost structure. Good point!
I was aware of it, but it was not obviously visible as something as I was paying for. And the final price was much lower than previous offers via email. Even paying the 300 would have put me well over a grand and a half lower then the internet price.
Easy answer…
No doc fees or other bogus fees.
Carfax/Autocheck history always available to your customers.
No hassling. No haggling. No games. No wasted time.
Answer all questions whenever possible within 10 seconds.
Eliinate the uncertainty of long-term ownership whenever possible. $20 oil changes, charging folks cost for repairs snd offering free towing within your state of business will all help. At least for me and my customers (cash and finance), transparency also equates to eliminating uncertainty and protecting their long-term interests.
Simple language on the bill of sale. Give them an opportunity to read and sign each paragraph.
Finally, in the words of Patrick Swayze’s character in the movie Roadhouse, “Be nice. Be nice until it’s time not to be nice.” Buyers and sellers are bound by the Golden Rule. If one party isn’t transparent with their practices or behavior, be nice and let that emotional wind blow somewhere else.
I have always operated under these rules and although I have lost my hair, I’ve kept my mind. I consider that a fair trade.
Most people in this country don’t have any idea what it costs to run a business and would squeeze the dealers out of business over their margins. Only those willing to order their car and wait for it would have any grounds to do so.
I find the status quo fine. As long as I have some idea what the other buyers are getting in the way of discounts I am happy to decide to buy or not. I walked away from GM last time because it seemed they were not offering me as big a discount as I believed others were getting.
My biggest complaint is the “no commissioned sales rep” scam. First, it’s a lie. Anyone getting paid extra on volume or profit is on commission. The person who agrees to the terms is the salesman. Adding a car demonstrator who will fetch you a take it or leave it price from a salesman and then turn you over to a professional negotiator being paid a bonus isn’t doing you any favors. Second, commission actually helps a reasonably decent buyer. A commissioned salesperson generally will take any deal that pays a commission at all rather than walk away and take nothing.
I often order vehicles, and I find that it is a great experience. I tend not to push the salesperson as hard in that situation. I know the vehicle was ordered exactly as I wanted it. I pick it up the day it hits the lot and everyone is happy.
Even ordering vehicles can have their pitfalls come delivery time. For example, I ordered a MINI last year, which took about 2 months for build and delivery. Although I had a pre-approval for financing from my credit union (and as a last resort, a checkbook), the F&I guy “pre-approved” me for MINI’s special 0.9% financing when I ordered the car.
Fast forward to delivery day, and all of the sudden, the “special” rate no longer applied because my delivery date was after the promotion’s expiration – despite having confirmed that I was “good to go” on the finance rate regardless of delivery date.
Long story short, I made them reduce the price of the car by the amount of money the new prevailing rate would have cost me (approximately $800). I left totally satisfied, because a cheaper price is ALWAYS better than a cheaper interest rate.
Excellent move!
The problem with the dealer business model is that they add very little value to the buying process. Apart from showing the car there is not much that they do. They make their money from obfuscating the true cost of the deal and upselling customers into dubious products and services.
Incorrect. They stock the vehicles and most people want the vehicle that day in trim and color they want. They take your trade. They get financing. They do warranty work. Etc.
This is true, carrying enough stock to appease a wide array of buyers means huge overhead.
Yes, the overhead is large. And the net on sales is low. The best negotiators get the best deals while the ones not so good pay for it. If everyone pays the same, the good negotiators would pay the same as everyone else. But I’m sure they wouldn’t bitch about that, would they? People absolutely want to play the game. They just want to be assured they won’t lose.
Right. Even if it means everyone loses. Lose/lose personalities FTL.
The dealer may stock the vehicle but they seldom “own” it. Most times, the Manufacturer has title and the dealer “leases” the vehicle, and “pays” a certain amount per month to hold it ready for sale. If another dealer has a buyer that requests that vehicle, they “trade” stock. I bought the vehicle I wanted that way.
All wrong eManual. The dealer owns the car, although he may have it financed. The Manufacturer does NOT have the title. IN fact, the manufacturer charges the dealer for the vehicle BEFORE it arrives at the dealer’s place of business. As far as dealer trades are concerned: One dealer sells his to the other dealer and the MSO (Manufacturers Statement of Origin) is transferred just like the title to a car once it is sold to an end user. The MSO or MCO (Manufacturers Certificate of Origin), depending on the OEM, is a dealer title before actual titling to a consumer. Once a vehicle is off the MCO/MSO is no longer a new vehicle and some taxing agency is looking for its sales/use tax.
Thanks for the clarification. I did misuse the word “title.”
As much as people belittle salespeople, most consumers know pretty much nothing about the cars they are looking at, and those who have “educated” themselves on the internet tend to know even less. Good salespeople help explain the features of the vehicles they sell so the consumer know what they are buying.
The information provided on the Internet is like drinking from a fire hose. Consumers have a hard time interpreting it. Symmetrical information means equal information for buyers and sellers plus the equal ability to interpret it.
Except when you come upon a salesperson that has no clue, viz. the “VTEC” example I mentioned up the thread.
If a fanboi can stump a salesman on a basic question, what does that say when Mr. & Mrs. Joe Sixpack enter the showroom?
Dealers add lots of value. An volume OEM couldn’t exist without them. Dealers exist because OEMs need them. Getting rid of dealers wouldn’t change the cost of distribution except by raising those costs. Its been proven that OEMs do a terrible job of retailing. Their inefficiency would just raise the cost of vehicles to consumers.
Here are my tips for buying a car from a guy who’s job is to buy products and services within set budgets to produce profit for my boss.
1) Define your scope – You have to know what you want before you get into the make a deal portion of the purchase. Get all of your test driving done across cars. Check online configurators to make sure you know what the options packages are. Make a list. I like to tier my lists into must haves, bonus items (cool if they have it, okay if they don’t), and things that I can go either way on (colors). At this point you should also define your budget. Get an idea from sites like true car where pricing should be around.
2) Bid your purchase – This is where the internet has made car buying awesome. Dealers all have internet sales managers now. Send them your list, tell them to find you a car that matches your list and to give you a price. Make sure you explain your list and set the terms you want them to price to (loan duration, your credit score, trade in information). Give them a date to get back to you. Let them know that other dealers are also bidding to sell you a comparable car. Always bid to at least 3 places.
3) Do the math – If you did the second step right, you should now have at least 3 numbers on pretty much the same car. check the bids to make sure they are apples to apples and they aren’t doing any funny math. Be sure to tally total numbers over the cost of the entire purchase. There’s a winner in there somewhere.
4) Pull the trigger – If the number is good call the winner up and set up your pickup time. If you are financing they will probably get your info over the phone and have the paperwork ready for you to sign when you show up. Make sure you still test drive the car you are actually buying before signing to make sure nothing is wrong.
5) Call the losers – Its important that if you have someone do work for you (like make a bid up) you thank them for their time. They will want to know why they lost as well so let them know, because they can use that information to win the next one.
Nothing brings deals to the party like competition, and nothing breeds competition like bidding. My last purchase saved my a few grand more than true car.
I like your list a lot, very comprehensive…I’m actually printing it.
Another businesses that suffers (somewhat)from lack of transparency is the mortgage business. Given the large amounts of money involved, and the long terms they are usually financed, a blink in the eye may mean many tens of thousands of dollars over the life of the loan.
This is where it really pays to have had the discipline and patience to build a very good credit record. And this is one of those traits one should instill on one’s children.
I have some rental homes that I lease. I run a credit check on all my “potential” tenants. Never ceases to amaze me how people ruin their credit scores because they left a $100 debt with Time Warner cable, another $50 to a local convenience store, another $100 in a furniture store. Beyond stupid.
The good credit history benefits, also extend to all other purchases, including cars.
Great list. This is using the dealer franchise model to one’s advantage. Sadly I think most consumers are generally too lazy to go through the effort and would rather everyone gets the same bad deal rather than having a good negotiator get the deal by doing the leg work.
RE: “Saving thousands over TrueCar. That would be a good trick since there isn’t that much markup in a new car.
This is exactly how I buy my cars and it works. The key here is knowing what you want and even having an alternate (different option package, color etc.)that is acceptable. Then using the internet to get your best price. If a dealer won’t give you his best price over the internet and wants you to come in and talk, screw ’em and move on to the next. Once everything is accomplished on line it shouldn’t take more then about 20 minutes at the dealer to sign and drive
I have utterly no sympathy for car dealers complaining that consumers now get all their cost information on new cars, which is indeed unlike any other industry.
But buying a car is, for some bizarre reason, also different than any other retail transaction, and the dealers made it that way. It’s exemplified by the classic “four-square” worksheet, which is nothing more than a big shell game designed to hide the cost of the car from the consumer. And then there’s the whole “let me talk to my ‘manager\'”, and “my manager yelled at me for this price” game. We’d never put up with this anywhere else, why is it inflicted on new car buyers?
Consumers wouldn’t feel the need to have “transparency” (i.e. cost data) if dealers were honest… it shouldn’t be this hard. I don’t give a *bleep!* how much the dealer paid for the car as long as they’ll tell me in a straightforward fashion how much it’s going to cost me to buy it.
This is how it should go:
Buyer: I want to buy that car and trade in my car.
Dealer: The car will cost you $X, and we’ll give you $Y for your trade-in, for an out-the-door price of $Z.
Buyer: What can you offer for financing? My credit union is offering %X for 60mos.
Dealer: Based on your credit history, I can get you rate Y%, which gives you monthly payments of $Z.
Buyer: Sold!
This is how it goes instead:
Buyer: I want to buy that car and trade in my car.
Dealer: How much do you want to pay per month?
Buyer: Huh? I want to know how much the car will cost!
Dealer: Will you be financing with us today?
Buyer: What the #*(&#!! Are you deaf? How much for the car?
Dealer: Well, I’ll sell it to you for $X [insert cheap number here]
Buyer: Great! How much for my trade-in
Dealer: Well… it has some body damage [points to invisible parking-lot ding], so I can only offer you [insert insultingly low number here].
Buyer: Seriously? I’ll sell it to CarMax then… the damage isn’t that bad. But let’s get going on that new car.
Dealer: Let me get my manager to sign off on the deal…
[Insert “overheard” yelling by “manager” here on how incompetent the sales drone is]
Dealer: My manager threatened to fire me if I sold the car for that much, but I talked him into letting me practically give it away for $Y/mo so you don’t feel we are taking advantage of you; we are totally taking a loss on this one!
And on, and on, and then the “four-square”, and then the finance office (“Oh, we already put the VIN etching you don’t want on the car, but we’ll give it to you for half off!”), the surprise “doc fee”, a sudden drop in your trade-in value when you decide to finance somewhere else, and so on.
Is it any wonder consumers demand better information going in, if they are going to have to go through that circus? Whatever you call it, “transparency” or something else, none of it would be necessary if dealers didn’t put buyers through this.
And, on another note, why would buying direct from the manufacturer “not scale?” How does the current franchise system enable automakers to sell more cars? From my perspective, it just inserts middlemen which take a slice of the money over which the manufacturer has little control. This means a bad dealer can ruin a carmaker’s reputation and there’s little the carmaker can do about it.
If a consumer doesn’t like what he/she gets at a particular dealership, they retain the right to leave and look for one that does. Surveys indicate, on the surface, that consumers would LOVE a dealership where one could go in and get price quotes for everything and just buy a car. But then there is the real world. A percentage of consumers go ahead a purchase from such dealers. But more often that not, they take the price quotes to another dealer to see if they can beat the price quotes. For that reason, most dealers who try “One Price” soon return to the traditional model. Ford attempted a really well financed initiative to prove once and for all that “One Price” could be successful in the market. They bought up all the Ford stores in certain cities, including OKC, Tulsa, Indy, SLC, and San Diego. YES, they did some business. But the business they did was MUCH less than the traditional dealers did before they sold out to “The Ford Collection.” The dealers who made out on the deal were the ones in the surrounding markets. Consumers would take the Ford Collection price quotes to these dealers on the outlying areas. Those dealers would easily beat the price of the Ford Collection stores and get the trade in and financing business. After losing hundreds of millions of dollars Ford pulled the plug on the great experiment and sold the stores back to traditional dealers. The moral to the story is that there just aren’t enough consumers who will be loyal to an upfront One Price dealers to make it viable as a business model.
Another example – Saturn didn’t always have the best products. But when they introduced the Aura, it was every bit the equal of its competitors. But instead of flocking to Saturn dealers for the easy no stress buying experience, consumers instead went to Toyota, Honda, etc. for the traditional treatment. Again, while there ARE those who will go to the One Price stores, there just aren’t enough out of the entire population to make it a viable business model.
Instead of claiming “One Price” the new buzzword in dealer marketing is “We’re Transparent.” They objective is to get you to come to their dealership with your guard down. I have no problem with that but let’s please call it what it really is.
I am one of the scattered few who actually appreciated the One Price stuff, having once bought a car from the local Ford Collection. And maybe I could have beaten their price ($17,400 for a ’00 Mazda 626, before $2000 on the hood) somewhere else, but I am not by nature one of those people who thinks he’s some sort of Big Time Negotiator and will spend a week’s time — about $1000 to some of us — trying to save $600 on a car.
That said, last time I bought, it was a traditional sort of deal on a used car. I set my target, offered $500 below it, listened to them laugh, and waited for them to come back from the inner sanctum. Their counteroffer was $100 below my target. One could say that I blew $400 on the deal; or one could say that I got what I wanted and didn’t feel compelled to force the issue.
Guys, I was afraid this would happen. We all know that consumers typically don’t like the car buying process, except for the ones who do because they are excellent negotiators and get better deals than everyone else. I get that.
My question is: Is it deceptive to call something “transparent” when it really isn’t?”
Vendors are using the word “transparency” as a marketing ploy. Dealers are claiming to be more “transparent” than the other guy when neither are being truly transparent. To be clear, I am NOT in favor of true transparency. Its no one’s business what my costs are. But that’s not the point. Am I more honest in telling a consumer, “My costs are none of your business?” Or am I more honest by claiming to be transparent when all I’m trying to do is get you to come to my store with your guard down so I can make as much profit as I can?
Transparency is absolutely a marketing ploy, but that’s okay as long as the consumer feels like they are finally getting a way to access information to help them make an informed decision. The fact that someone is making some money off of it in the process is the nature of our capitalist system. The issue is that people will accept the marketing ploy because they feel like they have few other options.
This system will only sustain itself for so long. What the car dealers need to do is to find a happy medium and meet the buyers half-way on their need for information. That will eliminate the need for TrueCar and similar vendors.
Buyers don’t really care about “transparency.” They just want to feel that they haven’t been cheated.
But that’s not going to happen. Dealers cheat, and the nature of the product itself encourages them to cheat. Always have, always will.
I’m not concerned about what consumers want one way or the other in this piece. Certainly what you say is true. The question has to do with the true definition of transparency and what it means when a car dealer claims to be transparent but really isn’t?
BTW, consumers are completely transparent to, right. They wouldn’t misrepresent a thing. :)
As I noted, transparency is not really the issue. It’s not what people actually care about.
Buyers want to avoid the nagging feeling that they’ve been duped. They don’t want the pain and sense of humiliation that comes from being beaten down.
What car brokers offer is the opportunity to not feel like a chump. On the other hand, dealers actually get a thrill out of squeezing extra cash out of buyers for the sport of it, i.e. precisely the thing that most customers hate.
Exactly, there is no other purchase people make that is “transparent,” not at the grocery store, not at the department store, not for their plumber, etc. But they don’t hate those transactions.
Why? They get a price, they decide if the price is worth it, they pull the trigger. That’s not what happens at car dealerships, and not surprisingly, they don’t like it.
After reading a few of ruggle’s comments, I find I really am not interested in hearing anything else he has to say on the matter: “Never before has anyone written so much to say so little.”
RE: “As I noted, transparency is not really the issue. It’s not what people actually care about.”
But its the question this thread is based on. What is real transparency NOT whether or not it is practical.
RE: “Buyers want to avoid the nagging feeling that they’ve been duped. They don’t want the pain and sense of humiliation that comes from being beaten down.”
Obviously.
RE: “What car brokers offer is the opportunity to not feel like a chump.”
Then you would think there would be a compelling business opportunity to be an auto broker IN THE STATES WHERE IT IS LEGAL.
RE: “On the other hand, dealers actually get a thrill out of squeezing extra cash out of buyers for the sport of it, i.e. precisely the thing that most customers hate.”
They get a thrill out of paying their bills, staying solvent, and making ROI. If they aren’t accomplishing that, there is no thrill at all.
Sales people are thrilled to make money based on what they produce. When they get tired of that, they need to find something else to do.
Ruggles provides good insights into the mentality at the dealership level. If you read his comments between the lines, then they are quite informative.
The moral of the story is that car dealerships are inherently untrustworthy, and it’s a waste of time and money to expect them to be anything but that.
There is no negotiation tactic or approach available that is going to help a buyer to change the system. It is wiser to just assume that the dealer is not to be trusted and needs to be gamed in order to get the best results. It is a win-lose style transaction (i.e. you aren’t interested in how the other party feels about you once you’re finished, as there is no need to maintain an ongoing relationship) and it is your job to ensure that you aren’t on the losing end.
“But its the question this thread is based on. What is real transparency NOT whether or not it is practical.”
You don’t control the comments section. We are free to address your points in ways that you didn’t anticipate.
I don’t buy into your black-and-white “transparency” dichotomy, so I’m not indulging it. Again — buyers don’t really care about transparency; what they dislike is being abused.
So buying a car is different from buying a TV, a computer or phone in that those prices are fixed. You might get “ripped off” just as much, but there is less that you can do about it, as the prices are fixed by some remote corporate behemoth. Maybe this feels less personal?
On the other hand, when you buy a house, the prices are normally negotiated. Every day thousands of house-buyers will get “ripped off” by sellers, paying more than the house is worth (yes, some sellers will also get “ripped off” by buyers). And yet people don’t feel so bad about it — is it because you were ripped off by a person rather than a dealership?
Dealers use command-and-control tactics to dominate customers, and often mislead customers in the process, suce as agreeing to a price and terms, only to write up a contract with a different price (which is invariably higher) and/or different terms (which are invariably worse.)
There’s a point in American culture when you’re supposed to stop negotiating and just get on with closing the deal that has been cut. But dealers push that envelope in a way that isn’t done with other consumer products.
People know that they’re being bullied and manipulated, and they don’t like it. Car dealerships have an aggressive culture with an element of cheesiness that can be offputting. (Personally, I find it kind of amusing, but that’s just me.)
If dealers were to suddenly latch on to this “transparency” thing no one would believe it anyway, kind of like the “transparency” in government
@Pch101 – agreed. I do not want to feel like I just got cheated. Even if I think I got a decent deal, that sensation is still present.
The vast majority of vehicle buyers walk out of a dealership wondering…”was I slipped some Rohypnol, I have a strange ache emanating from my ass”. No one likes that “just sodomized” sensation after trying to negotiate a vehicle purchase.
If you look at a list of most trusted professions, nurses, paramedics, firefighters tend to be in the top 5 and lawyers, politicians, and car salesman in the bottom 5.
@Lou_BC
Probably Rectanol.
RE: “After reading a few of ruggle’s comments, I find I really am not interested in hearing anything else he has to say on the matter: “Never before has anyone written so much to say so little.”
Then stop reading. I requested an answer to a simple question, and we ended up going down the same worm hole as always.
RE: “If you look at a list of most trusted professions, nurses, paramedics, firefighters tend to be in the top 5 and lawyers, politicians, and car salesman in the bottom 5.”
This is news? The current system, like it or not, will sell about 60 million vehicles in 2014. But here is what I can’t quite grasp. We have a bunch of amateurs here who know how it should be done. With the rampant bad feelings for dealers what on earth is keeping them from becoming one so they can make a FORTUNE showing us how its done?
@Ruggles – your reply is that of a saleman.
Why are firefighters, nurses, and paramedics trusted?
In those lines of work you deal with life and death stuff which is very personal but the way you deal with that “stuff” is what makes you trusted. We as a group do not forget that we are dealing with human beings that have wants and needs hopes and feelings.
Ever have to tell someone that they are dying? or tell a family member that their loved one is dying or there is nothing else that can be done to save them?
That is where the trust comes in, not the technical skills but the recognition of ones humanity.
Sales people for the most part are not focused on the fact that people need to feel safe and confident in what is going on. That is why people want transparency.
The sales process is adversarial and salesman who usually are adept at reading human behavior will manipulate that knowledge for their own benefit.
Any person regardless of whether or not they have training or skills in the art of interaction have an instinctual sense that something is wrong and that somehow they are being used.
That is what is wrong with the system.
You used your example of “Ford stores” with fixed pricing and how other dealers would take advantage of that. It is a “hawk and dove” situation.
A society full of hawks will eventually self destruct due to continuous combative interaction.
A society of just doves will do fine due to a mutual need for the avoidance of combat.
You throw a few hawks into the dove society and the hawks will dominate but overall the society will survive because doves will back down.
To fix the system you need to create trust among the clientele. Transparency one way to do that.
We will have people who are buyers that will manipulate and lie and play games just like sales staff will. I’m not naïve enough to say that does not happen. I’ve seen the best and worst of humanity.
Why don’t I just buy or open my own dealership? You got a 100 million I can borrow? It isn’t in everyone’s nature to run business and besides, I don’t want to go from being most trusted to least trusted.
Trust is earned and the car dealership sales system is piss poor at earning trust.
It is geared to earning money and nothing else.
I recommend the Costco buying option, especially compared to my experience with Honda of Westport when I bought my first new car years ago.
The Costco price was better than what Truecar considered exceptional. They only asked the time to sell the extended warranty, which I declined after I gave them their due.
Let Costco do the work – I highly recommend it.
@ PCH101 – So consumers don’t cheat, or its OK if they do?
Unless the customer pays with a rubber check or counterfeit money, there’s not much opportunity for a buyer to cheat a seller.
That’s particularly true because the contract and paperwork are prepared by the seller. The dealer controls the entire chain of the transaction.
RE: “Unless the customer pays with a rubber check or counterfeit money, there’s not much opportunity for a buyer to cheat a seller.”
There are MAY opportunities. Dealers have to be constantly vigilant. First, consumers don’t have the same legal requirements as dealers. Second, there isn’t a site where dealers go to complain about particular consumers, although there is some word of mouth that takes place. Consumers lie DAILY about “deals” they got at other dealers. Sales people typically believe those stories, which is why the industry needs a crusty old manager to keep the bullshit out of the buckwheat.
Consumers routinely bring in a vehicle for appraisal but when the actual deal is completed, the trade has been “stripped.” Tires, batteries, radios, wheels, etc. etc. are often carved off of trade ins IF the dealership isn’t on guard. The customer will be champing at the bit to keep things moving along at delivery so taking the time to resurvey the trade in often doesn’t get done.
Material defects in vehicles are OFTEN undisclosed by consumers. OFTEN. Yea, buyers are liars, for the most part. Its all part of the game.
Again, buyers can’t really cheat anyone. The sellers can, because they control the inventory.
A buyer with a trade-in can cheat the dealer on the trade-in. I would think that the dealer would be smart enough to specify what items have to remain with the car prior to the dealer purchasing it. I would think that the sophisticated repeat wholesaler would know to do that.
The trade I brought to the dealer at my last purchase wasn’t even looked at by anyone at the dealer, the trade-in value was based solely on the Carfax report and the NADA value. How could I have possibly cheated them? How could I have changed anything on the car when they took it from me on the spot?
They probably expect your car to need work, and asking you what condition it is in is often a waste of their time, as much as going through it is, so their offer will be low enough to cancel out any risk of loosing money on it, compared to the work hours to find out what condition it is in. + they can use the carfax and Nada value to set a price when selling it again.
RE: “Dealers cheat, and the nature of the product itself encourages them to cheat. Always have, always will.”
Some dealers cheat, and I hope they are caught and punished. But I suspect your definition of “cheat” is excessively broad. Regardless, a consumer’s perception of the word is all the counts EXCEPT in a court of law.
But there is a larger question. Auto retailing is a rather large market. It represents HUGE dollar volume. Why aren’t there more dealers dedicated to giving consumers what they want so they want have that feeling you describe. Surely market forces should drive this, right? Aren’t YOU convinced that if you opened a dealership and ran it based on your own strong opinions, you’d be a HUGE success? Don’t you think others have thought in a similar way? Why had the traditional model continued? Perhaps your theories have lost in the marketplace of ideas, for some reason?
I see what you are getting at, and you say this alot, but I think you are responding to a statement I haven’t seen anyone say, that they know how to fix this situation. They are merely complaining about the way it is.
The economics and motivations are just set up the way they are, for better or for worse, so we can’t have anything but the situation where it is adverse and tense between the consumer and dealer.
My take, and I have had fine dealer experiences mostly, is that there is a bit of hopelesness. Let me put it this way, I reserved a car in NJ at an Enterprise and they gave me a far worse car than a I reserved and claimed it was the same class. I didn’t care too much but found it unconformable. I called Enterprise customer line, and they had that location bring a new car to me that was acceptable. If the location was merely and unaffiliated “dealer” who can you call? The corporate mothership may not approve but the dealer is independent.
There isn’t a real drive at the dealer level to offer a great buying experience, and there is noone who takes the overall ownership expereince into account, i.e. “take one for the team this time to keep him buying Fords” like Enterprise does for me because I will rent another car again soon (from a different location). Of course the average American’s loyalty to a single car dealer is probably not that great so why would they have anyone on call to listen to his grievances.
So perhaps the divorced mfr and dealer is the issue there, like you say it offers better price competitiveness than mfr direct, but perhaps the overall customer experience suffers because more conflicts of interest.
BTW, I GREATLY appreciate everyone’s input!
The difference between buying a car and most other retail purchases is the scale of the purchase. When you’re dropping 5-figures plus on a single purchase, you want to be assured that you are not getting cheated. If you miss out on a deal and bought a can of dog food for $1.99 and it was $1.98 at the store across the street, you simply do not care as much.
Auto dealers have earned their reputations by using all manners of theatricality and ploys to gouge unwitting consumers for a long time and consumers have gotten fed up with that too. What auto dealers need to do is change how they do business and focus on building those long-term relationships with customers, rather than being so focused on the pump-and-dump routine to get people to buy cars. Perhaps if they bothered to pay car salesman a proper salary instead of being so heavily commission driven, there would be fewer stories of people feeling cheated. This should be as much about the auto dealers taking a good look at how they earned their reputation and how they can make things better as it is about consumers wanting more transparency.
Final point, if you think about car buying compared to retail, it will seem like consumers are asking a lot. If you compare car buying to home buying, however, then car buying is a piece of cake by comparison.
Housing and construction are much worse.
The customer is always getting cheated. When I prepare a bid for a job I do for someone, I figure materials plus labor. Then double it, and wonder what the hell I missed so it doesn’t cost me money.
Not exactly. I test contractors and subs on small jobs. Replacing a hosebib on a rental, trouble shooting a flickering circuit, doing a nuisance job like hanging one of those bigass microwave/range fan combos. Now I have two sets of guys in the most important trades. My dad was a commercial contractor and his success was based on never have just one guy. They know they have competition but that I am reasonable and pay immediately. I rotate between each guy. When a renter calls with something I can’t fix, I know it will be fixed quickly and well. If they open up a wall and find a surprise, bad for me but I don’t dick them around.
“If they open up a wall and find a surprise, bad for me but I don’t dick them around.”
You are a saint!
My situation is a bit different. For decades I held a contractor’s license to be able to renovate and upgrade properties purchased for rental by the real estate company owned by my wife and her family.
Spin-offs resulted from neighbors of the property seeing the visible improvements made and approaching me about similar upgrades for their homes.
For the small jobs on the rental properties I hire a local Vietnamese-American vet to do the work as an independent contractor.
I dearly wish Toyota set up Scion as a real brand with separate dealerships and management structure. As it is, the pure price sales get undermined by the mothership roaches at every turn. Even brand-exclusive products like FRS can’t fix that.
Follow the money.
One thing that hasn’t been touched on too much here is sales compensation.
Interestingly there are a lot of commissioned sales professions (mostly in B2B settings)that are well respected, yet commisioned car salespersons are universally reviled.
My contention is that every commissioned sales person – sooner or later – is faced with a situation where they could easily take advantage of a customer (maybe they have more info or the customer is against a deadline, etc).
In B2B sales however they often don’t take (excessive)advantage; why? I don’t believe they’re any more morally upright – it’s all in the checks and balances.
In many sales professions, I contend there are built-in checks and balances that temper the temptation to “screw” the customer. (ex. I once worked in a job where I was called on by manufacturers’ reps (pure commission). Some of them only had 4 customers – the respective aftermarket depts at Ford, GM, Chrysler and VW. If they burned a bridge at one mfg. they just lost 25% of their customers which worked against their being overly zealous when those situations inevitably arose.)
In car sales there are much fewer, if any, checks and balances like this. They are on commision. The pressure is intense to hit a number this month. (Forget longterm customer loyalty; they won’t be employed next month or next quarter if they don’t hit their numbers.)
The commission is a zero sum game; knock off $100 of the price and that’s $100 less for the dealership (of which $25-30?is less for the salesperson.)
Every possible incentive is in place to get the salesperson to maximize the sales price on every single car.
And there’s little or no incentive to not do this?
(Poor word of mouth from a disgruntled customer? No repeat business? The salesperson isn’t worried about that; they’re just worried about putting food on the table(via commissions)this month.
The F&I office? Same thing – all commission; same incentives.
As long as dealers (principals, GMs, sales mgrs) choose to compensate their staffs this way these fun and games will never end.
I work in B2B sales, the product we sell is typically recurring service and in any case we want the customer to come back for more. The nature of buying a car is infrequent enough for most, if you have a bad experience but get the deal done it doesn’t really matter in fact customers will endure pain to get the “deal”.
I don’t think you can really blame the commission structure other than to take issue with the whole institution of sales and commissions. I don’t know the details of dealership commissions but whether it is B2B or real estate typically the drive is to get the deal done, a small swing in price hardly makes a difference over getting the deal done vs not getting the deal done. Also typical the sales guy has little control over price, the management decides pricing unless there is a particular spiff to screw the customer.
Mr. Ruggles, since that’s apparently not just a moniker, let me first say that I appreciate your participation in this forum. Like many participants (and some TTAC authors) you bring an insider’s perspective.
“Transparency” is, obviously, a new buzzword. But what people should want to know — and what your post above says was an abject failure — is WHAT IS THE PRICE AT WHICH YOU WILL SELL ME THIS CAR? (excluding only tax you are required to collect for the state and the fee for getting it titled and licensed for me). If I have that price from you, then I can go shop some other dealer and get his price. Since two cars rarely are identical, I can take that into account and then make my decision.
So, that’s what “transparency” should be, another name for which is “price discovery.” It is not how much you are making on the deal. I could give a crap about that. Even if you are selling the car truly at a loss, that doesn’t mean its a good deal for me. Let’s say, hypothetically, you’re an Acura dealer and you give me a truly below-cost prince on an RLX. But I also shop a Honda dealer and compare a loaded Accord V-6 to your RLX. The RLX is a little spiffier, but the Honda is cheaper. Ultimately, I may decide that the additional features of the Acura aren’t worth the price difference . . . so, for me, the best deal isn’t your below-cost price on the RLX.
I have confidence in my shopping abilities and, typically, I’m not shopping just one make and one model of vehicle. But I want to throw price into the calculation, and not having a definite price makes the process opaque.
There are, as the comment reflect, a lot of people who are offended at the idea that two people may end up paying different prices for the “same product.” I’m not, unless we’re talking about a true commodity like, say, durum wheat. Because when you buy a car the “product” is not just the physical thing; it’s the time of year, it’s the condition of the dealer’s finances, its cash flow, etc. at that moment. To take an obvious and personal example, I bought a two year old, loaded CPO BMW z3 3.0 with 18,000 miles for $22,000 in 2003. When did I buy it? In January, in Washington DC. And, thanks to CarFax, I knew that it had been sitting on that dealer’s lot since the previous fall. Would someone have gotten a deal like that in May? Probably not.
While I haven’t used TrueCar, I might. One thing it does well (assuming that the numbers are honest) is that it shows what others are paying in your area for a similar vehicle and it shows price trends over time. So, if you’re worried about “paying too much” that should put your mind at ease.
It seems to me that one other benefit of True Car is that, without actually using their service, you can use their number and go shopping with it, anywhere you care to go.
Regarding your story about Ford Motor’s failed experiment in “no haggle pricing” my guess is that it was done in pre-Internet days. The outcome might be different now. Assuming the company stores were really setting a low price, the reason the indies managed to beat them is that they had enough “high-margin” customers to offset the low-margin folks whom they sold to and made money overall. The one-price company stores did not. I wonder if that would be true today.
The problem is – There is no such thing as a best price. But consumers think there is and are unhappy with a dealer if he quotes them a price and then finds out that he could have sold it for less. This is why OEMs are so lousy at retailing. They don’t understand the difference between consumer perception and reality. Quoting a “best price” is just an awful way to try to retail cars. It virtually assures you won’t get the deal. Again I cite Saturn, the Ford Collection, and numerous other failed attempts at giving consumers what they say they want.
If you have ever played poker you are probably careful to not show your cards to your competitors until absolutely necessary. If not, I want to play poker with you for real money.
We’ve had Internet since the early 1990s. Saturn began in 1991. The Ford Collection experiment was around 2000. There have been other failed “One Price” experiments since. It has mostly become a marketing strategy. Consumers WANT to play the game and the want the rules stacked in their favor. But none of this is what this thread is about. its about the difference between absolute and true transparency and perceived and/or relative transparency.
RE: “It seems to me that one other benefit of True Car is that, without actually using their service, you can use their number and go shopping with it, anywhere you care to go.”:
YES, and dealers are figuring out that they can use the TrueCar price to validate their own price, resulting in easier deals. AND they can do so WITHOUT paying the TrueCar fees.
Agree about both market price assessment and the dealer validation.
And BTW, I am amused by the demonization of the dealers here. The home improvement market in Dallas area makes the dealers look almost as saintly as a nun.
TrueCar and other similar buying services are far from transparent. The reality is they are nothing more than a referral service. They provide the illusion to the consumer of selling cars at great prices when legally all they can do is act as a middle man in the transaction. And they do a poor job of that, at least from this consumers perspective. 1) They never quote an ‘out the door’ price. Any other price is meaningless because the dealer… you know the people what can actually sell you the car … will typically pad the price with dealer fees and grossly overpriced accessories once you actually show up at the dealership and try to buy the car at the ‘so called quoted’ price. That is if they even have the car they quoted you a price on at all, which brings me to… 2) Transparancy would have them provide you with a VIN and acurate decription of that car prior to you ever showing up at the dealer. They are also quite deceptive in publishing invoice prices and implying that that is the actual cost and bottom line of the dealership for any perticular car. Invoice prices become less and less relavant every year as the manufactures tighten the spread between MSRP and Invoice but conversly provide hidden dealer incentives to provide a way for dealership to make money while appearing to the naive public to be selling every car at a loss.
Prado,
I just used the service in the DFW area. It worked fairly well. With incentives, etc. the price was very,very good. However….this does not relieve the consumer of due diligence. It saved me lots of additional emails and time. And it is precisely because of your last comment about “hidden” incentives that make it helpful to know the average transaction price.
It all boils down to this.
As long as there are no fixed prices for cars, consumers will feel cheated by dealers, and the dealer experience will be one where the dealer will need to squeeze as much money out of any customer to ensure survival.
Therefore, the current system is designed such as to ensure an extremely poor purchase experience.
In response, customers will postpone the purchase decision and drive older vehicles.
It cannot change until some common ground is reached in which buyers and sellers agree on one principle: what is a “fair” profit margin on a new car? On a used car?
Is there a fixed dollar amount, or a fixed percentage, that would make people happy?
Good point.
Borman, a multiple brand new car dealership in Las Cruces, NM, goes long way to fix the price on any car they sell. And anyone can buy it at that price.
I bought a 2011 Elantra from that dealership for my grand daughter because the price I paid was clearly marked on the windshield, as were the prices of all cars for sale on the lots.
Even with tt&l it was still less than MSRP, and came with a full tank of gas.
No haggling required. Transparency? Maybe. Maybe not. What mattered was that I did not feel cheated. No surprises or hidden fees and costs.
Same excellent experience when I bought my 2011 Tundra in El Paso, TX, and my wife’s 2012 Grand Cherokee in Phoenix, AZ. In both cases I asked how much they needed to sell the vehicle for, and what they told me was within my buying window. No pain. All gain. Everybody won.
The more dealers adopt this sales strategy, the more the buying process will cease to be adversarial.
Just bought a 2014 Jetta for the wife at the end of December. It went like this:
After buying the Fighting Chance package several months ago, I made a list of all the local VW dealers within about a 100 mile radius of me. As I was browsing the sites of the more distant dealers, I found that Minuteman VW was advertising the car we were looking for at $18752, which was quite a bit less than the $22610 MSRP. Contacted them and was given a hard time because they wanted me to “come in to make a deal” even though I was 2 hours away and that wasn’t going to happen. Eventually I got the Internet sales guy to work with me somewhat. Ended up talking to the Sales manager and he eventually told me that $18752 was the lease price, not a buy price (That was actually $19752). At 7 PM that day the SM called back and told me he had sold 18 cars that day and he would take $1000 “out of his own pocket” and sell it to me for the $18752 amount. I told him I’d have to talk to my wife about it. The whole experience felt pretty greasy because it took a long time to find out about the $1000 discrepancy even though I told the Internet guy that I’d be buying, not leasing.
So the next day I contacted the two local VW dealers in Southern Maine. One dealer said there was no way they could match the Minuteman price and offered $20688 as their best price and said he didn’t know how they were selling it so cheap. So then I contacted the sales guy I worked with in 2012 when I bought my car at the other local dealer. After some back and forth over the phone/email, he offered it for $19688. In the end we bought it for $19688 + the $349 doc fee so it ended up being $20037 before tax. They ended up doing a trade with another dealer in MA because they didn’t have the color combination on their lot. Part of me wishes I could have purchased it for the $18752 price, but things just seemed too shady and I didn’t want it to end badly if we actually drove down there and found that it was a bunch of crap.
So in summary, some dealers are shady because they have greasy employees working for them. Until dealerships can weed out their greasy employees, dealerships will always have a bad reputation. I’m happy overall with the deal I got and am glad that I won’t have to buy another car for about 10 years. That is unless the 2015 Sportwagen or Golf GTD are really awesome…
What drives car prices is not lack of information but the basic economics of supply and demand. Every potential buyer has a different demand curve with respect to each individual car which means that each buyer has a slightly different maximum price that they are prepared to pay for that car (preference, circumstance etc). It is up to a dealer to extract that price or he leaves money on the table. The buyer in turn needs to convince the dealer that he/she hasn’t reached the maximum price they are prepared to pay for that vehicle.
There is plenty of info available on the web as to average transaction prices, dealer kickbacks etc. Use it as a start and work from there.
A well written article that unfortunately uses as its basis the way things currently are as if it were reasonable to do so. It’s like those idiotic Greenpeace types knocking on the door for donations “assuming” my head is already in the same space as theirs. They become affronted when I question their most fiercely held beliefs with which I have serious reservations. We aren’t even agreeing on the basis for discussion.
I believe F & I is populated by crooks and is not needed. There’s no meeting of the minds there at all. I tend to not talk to people whose job it is to literally screw me financially. I walked out of the office when I met one of these sub-human species for the first time in 2008, an apparently elegant female ostensibly of human origin.
27 years dealing with the same salesman, who had neglected to tell me that the new dealer principal had installed one of these lizards and that I would be harassed for an extra 600 bucks for “documents”, and that I was expected to sign forms acknowledging I had been offered fabric treatment (on leather, no less!) and had refused, etc. etc, blah crooked blah blah blah.
I do not sign for something I’m NOT getting. Not one chance in hell.
Screw these crooks. Since it was a special order car ordered because that salesman had known me for so long, they were stuck, especially as I was paying by check and needed no finance.
They eventually sold me the car at the previously negotiated price and I reported the scam, because that’s what it was, to the BBB.
And now I know what to expect in the future – utter sleaze, and am fully prepared to battle thievery in what is apparently a societally condoned “business”.
Ruggles, you’re in a toe-rag industry if the idiots populating it cannot tell serious buyers from no-hopers and try to screw them anyway just as a matter of “their” principles.
Perhaps you should show them how it should be done.
Well put. Perhaps a copy of that late 80’s masterpiece Selling Retail should be mailed to him. Worked better for me to negotiate insurance settlements than most of my “negotiation skills trainings.” Read the chapter about FUDs. Now go move some product!
To answer Ruggles’ question; one can (not necessarily should) be transparent about some things while withholding information or being deceptive about other things. True Car is transparent about what the consumer can pay for the car, not why. The dealership is also transparent in this sense, EVERYTHING is disclosed in the sales contract.
The consumer and the dealership have the same goal, to complete the transaction with the best financial terms for themselves. If a consumer does not believe they are getting a fair price, they can shop and do some online research and very easily find a better price or validate the quote they were given. Consumers should also respect a dealers right to refuse an offer. A dealership cannot force the consumer to buy anything, and the consumer cannot force a dealership to accept an unreasonable offer.
Negotiation has to be a win-win for the dealer and the consumer. Anyone who agrees to a deal but says it’s unfair is being dishonest, it is obviously better than the alternative of not completing the transaction.
Transparency does not exist in the existing business model of dealerships. TrueCar does not enable transparency. I tried using it twice in the past three years for our household. While it offered a good starting point, the data further demonstrated that there is no consistency or transparency in pricing among dealers.
In 2011 I used TrueCar for price guidance on my wife’s Mazda3i Skyactiv GT. I get S-plan through my work, so I paid invoice no questions asked. The “invoice” price I paid was $400 lower than the invoice price listed by TrueCar.
I used TrueCar again when pricing a minivan a few weeks ago. TrueCar indicated that an “unusually low price” is around 12% below MSRP. I quoted six dealers in the area, notifying them upfront that I am quoting multiple stores. All six dealers beat TrueCar’s lowest price; the best bid I received was almost 15% below MSRP.
Two of the six dealers were different stores of the same ownership group, and they had price differences exceeding 3% of MSRP.
So does TrueCar offer relative transparency or true transparency? BTW, I only use TrueCar as an example because they spend a lot of money on advertising and people here know about them. The question is: “What is true and absolute transparency?” If it isn’t symmetrical information, what is it?
Why were you able to beat the TC deal? That’s because TrueCar’s new model is to enable dealer profit, not cut it out completely. After all, if they don’t bring profitable deals to dealerships, why would dealerships pay them $300. per referral deal? And they can’t do that if they don’t convince consumers they are bringing transparency to the process.
“TrueCar does not enable transparency.”
It doesn’t really claim to.
The TrueCar website offers three value propositions on its front page:
1. “Great pricing is not just for insiders anymore. TrueCar Certified Dealers have made great pricing available to everyone.”
2. “No gimmicks or high pressure sales tactics…Buying a new car should always be this easy.”
3. “Leave your worries behind…On-call support staff are always ready to help.”
In other words,
-You won’t be ripped off
-You can avoid dealing with ***holes
-You can get help when you need it
TrueCar isn’t claiming that it’s going to teach you everything that there is to know about the car sales process. Its pitch is that you can avoid dealing with crooks and avoid hassles.
In other words, Mr. Ruggles’ post is based upon a strawman. I’m not sure whether he’s lying or just doesn’t understand the marketing message, but either way, TrueCar’s pitch is not really about transparency.
We live in a conspiracy theory culture and everyone thinks they are Fox Mulder. In addition, we have a culture of folks that aspire to want to do things and think that more gear and internet knowledge will make up for experience. Everyone is but one weird trick away from finding the perfect angle to expose the secret cabal of strategies that banks hate that will somehow get them those cross country skis that will make them authentic, professional, and real at half price.
Transparency happens only when you have buyer and seller interaction. To demand transparency with a politically-connected/protected criminal psychopath “dealer franchise” middleman is a child’s notion. The only way to obtain manufacturer/customer (the only two that matter) satisfaction is by direct dealings where interests are mutually integrated. Under these conditions, the manufacturer will probably fix things for free out of warranty during scheduled maintenance just to maintain customer satisfaction and repeat car sales. A Stealership Mafia here got caught stealing from human beings by telling them they needed a complete $2000 brake job…With 20K miles on the clock…a hundred criminal complaints later and the thieving tapeworms are still in business. A manufacture would not risk the bad relations since they are in the COMPETITIVE productive business of selling cars to repeat buyers…and word-of-mouth to their friends and families.
The question is over definition, not whether or not it is practical.
RE: “Transparency happens only when you have buyer and seller interaction.”
Actually, it happens only when buyer and seller have identical information and the equal ability to interpret it.
RE: “To demand transparency with a politically-connected/protected criminal psychopath “dealer franchise” middleman is a child’s notion.”
To demand transparency from a merchant selling big ticket items is a fools errand.
RE: “The only way to obtain manufacturer/customer (the only two that matter) satisfaction is by direct dealings where interests are mutually integrated.”
And you know this how? Theory or real world?
RE: “Under these conditions, the manufacturer will probably fix things for free out of warranty during scheduled maintenance just to maintain customer satisfaction and repeat car sales.”
They already do this when the dealer goes to bat for the consumer. But the FTC doesn’t like such things as “secret warranties” so if the OEMs owned their own service facilities, who knows how that would work out?
RE: “A Stealership Mafia here got caught stealing from human beings by telling them they needed a complete $2000 brake job…With 20K miles on the clock…a hundred criminal complaints later and the thieving tapeworms are still in business.”
I’d like to see them breaking rocks for a while. What do you think your anecdote proves?
RE: “A manufacture would not risk the bad relations since they are in the COMPETITIVE productive business of selling cars to repeat buyers…and word-of-mouth to their friends and families.”
OEMs are made up of people. OEMs built the Ford Pinto, the Corvair, the Pontiac Aztek, the Pacer, etc. etc. etc. Ever check the recall schedules? What does that tell you?
Why does it have to be this way? It just seems like a colossally expensive way to do business. For one thing, the salesmen are trained within an inch of their life in principles of psychological warfare. That takes time and money. Many of them make good money, but why? Isn’t that an expense that can be cut? of course They spend hours on what might just as well be a commodity deal.
My mom once described in passing how her father, the mill manager in a small town bought a car. In those days a passenger car lasted about 50K miles or three years or so. He would call the Pontiac dealer and have them send a car around, the same way the grocery store made deliveries. I doubt he was cheated since he was a good businessman. I probably saved relatively speaking, $500 over grandaddy’s price in my last car purchase with maybe eight hours expended between me and the salesman in haggling. A very painful four hours I would say.
P.S. Maybe a hint of why it is this way is contained in the Truecar bell curve. Notice how often the modal number, that is, the single most popular sales prices, is often a fairly high price. Above the average price, and above the median price as well. If there is a one in five chance that you will be the guy on the right hand side of the bell curve, and the salesman is on commission, he has a pretty big incentive to work on you even if you turn out to be a guy on the left hand side of the bell curve.
I will dance on the grave of the current industry business model. Seen too many good, but gullible, people get taken to the cleaners. Middle class people paying thousands more than they should have, for a rusting commodity. I don’t like it and I don’t like many of the people who defend this sleazy industry. There is a reason that reading this article and the authors responses made me want to take a shower- just like a visit to the sales floor.
Then buy a dealership and run it like you think it should be run. Everyone would flock to you, right?
I don’t know what your problem is. The question is what is true transparency, my version or Scott Painters?
@ cdrmike – RE: “I will dance on the grave of the current industry business model ”
Bold words. How long are you planing on living?
I agree with Ruggles’s definition of transparency.
Maybe “knowledge broadening” is a better way to describe something like TrueCar?
I call TrueCar’s and others’ initiatives just another strategy to get consumers to drop their guard. If they were truly transparent wouldn’t they tell consumers that using TC adds $300. to the dealers’ cost? Who pays for that? Do they think the dealer absorbs it all?
Pleased to meet you, hope you get my name…I can’t quite make up my mind if Mr. Ruggles is Goebbels reborn or merely telling it like it is from the dealers’ point of view…either way, this is some of the most compellingly written ***t I have seen in years. One thing missing from the responses to this post is the dreadful danger car salespersons put themselves in by letting the unwashed masses get behind the wheel for a test drive-that alone should be worth 200 of death-lottery commission. I truly hope that Mr Ruggles should be drafted into the US State Department to negotiate treaties instead of the dingdongs at Foggy Bottom.
@ 360joules – We have a lot of opinion and emotion here mostly by people who are lifetime employees without an entrepreneurial bone in their body. I came here to ask an either/or question and only got a few straight answers. Mostly we see diatribes from people who don’t have the facts on their side. There are noteworthy exceptions but the fact is, negotiation is punishing to some folks. For those folks, I ask them why they didn’t support Saturn when it was still around? Why don’t they search out a One Price dealer? If they don’t like dealers why not buy a used vehicle from a private party?
RE: Demo drives – I broke into the car business in 1970 in Rock Island IL. Back then the term “hood” hadn’t been invented. We had hookers walking in front of the showroom and coked up pimps coming in on Saturday morning to test drive the GTX over on the lot. I was pretty sure I would die in a car crash on a demo drive. BUT I live to tell the stories. We had occasional problems but the neighborhood had adopted the dealership as well as myself. For some reason, no one down there screwed with me. It wasn’t because I was some kind of bad ass. However, my “sponsors” from the neighborhood were and they were always packing. They hood operated on some kind of code. If you fit in, you were fine. If you didn’t, you were probably dead meat.
Ruggles – Scott Painter tried the same business model in 1999 when he launched CarsDirect.com, when that failed Penske then bought the scraps of the website. Scott Painter will also fail with True Car, but perhaps not before he cashes out and leaves the company a shell of its former self…..then Scott Painter will try venture #3, perhaps that one will be the one that sticks. Dealers and OEMs are wary of him and True Car; with Edmunds.com, AAA and Costco and everyone else offering new car fixed pricing and sales leads, consumers and dealers are getting overloaded.
Now, please tell us more about the hookers and pimps you pushed Plymouths on in the hood!
Many manufactured goods are sold thru distributers and dealers. It’s often needed because there is an education process to making a good selection. Now days that education process is done on the internet and the dealer is just someone who stocks inventory for quick transaction and in the case of cars allow you to see and test the product, along with service etc. It’s a business model that is just now being questioned by a few manufacturers and by consumers who don’t like buying cars.
How it all plays out I don’t know nor do I really care. Cars are expensive and it’s difficult for me to get exactly what I want and it’s a pain to shop for. I don’t think that will ever change.
Dealers exist because the OEMs need them to exist. If you add up the combined investment of an OEM’s dealers, the OEM couldn’t begin to buy out those dealers even if they could buy them for asset value. Besides, the OEMs don’t kow how to retail vehicles although they have plenty of amateurs telling them how.
Now this one is GREAT!
RE: “The problem of two different people paying a different price was solved years ago with the requirement of the Monroney sticker, which has the MSRP. No one pays higher than this price, unless they are at a truly unscrupulous dealer…. Guess you have not tried to buy a hot car….my local stealer still wants $5K over sticker for the Stingray. He told me “its supply and demand” deal with it. I did. By walking out.”
Just so I understand this, a dealer is supposed to suffer if the market turns down on inventory he owns. He has to sell it for market even if that’s at a loss. BUT he is NOT allowed to take advantage of market conditions that favor him? Exactly how does that work and what logic supports such idiocy?
Charles Karrass – “You don’t get what you deserve in life, you get what you negotiate.”
RE: “Your profession is so dishonorable that your brethren can’t even be trusted to type the agreed-upon numbers on a contract.”
Your opinion notwithstanding, I wouldn’t advise signing a contract with ANYONE if you haven’t read it and understand it.
Again, I ask. Why haven’t market forces compelled at least a few dealers to adopt a business style that suits people like you? Dealers know there are cranks “out there” they will never satisfy.
RE: “The fact that you see nothing wrong with this is telling.”
Yea, I see reality. As long as consumers continue to flock to the traditional dealer model, and eschew the more customer friendly model, what do you think these business people are going to do? This is easy. I’m surprised you can’t figure this out.
You must not play poker much.
Are you truly this naive, or are so steeped in the dysfunctionality of dealership culture that you can’t rise above the muck for even a minute?
I understand why dealers are not to be trusted — I explained it above. (Don’t worry, I will never, ever trust a car dealer.)
But it’s quite something that you guys will lie at every opportunity. You agree to a price, then type up something else; people who have honor don’t do that, and you guys have no honor whatsoever.
Pch101 said: “I understand why dealers are not to be trusted — I explained it above. (Don’t worry, I will never, ever trust a car dealer.)
But it’s quite something that you guys will lie at every opportunity. You agree to a price, then type up something else; people who have honor don’t do that, and you guys have no honor whatsoever.”
I can honestly say that this has happened to THREE women that I know.
In one instance, the salesperson literally TRIED TO WRITE IN EXTRA CHARGES ON THE LEASE CKNTRACT AFTER SHE (The Buyer) SIGNED THE LEASE – She took a video of this with her smart phone after which there were apologies and additional concessions on the price made for her if she agreed to refrain from contacting her lawyer.
In essence, car dealers are classic sociopaths: They lie without apology, and are incapable of empathy. The only concern that they have about lying is getting caught.
Once negotiating for a car I and the salesman were $500 apart on the price of a car, as I started to walk he offered to split the difference and I agreed… He gave me another $125.00 off the car.
I laughed so hard as I asked him was he stupid or did he think I was stupid, he didn’t answer
“Your profession is so dishonorable that your brethren can’t even be trusted to type the agreed-upon numbers on a contract.”
This is too funny, I remember two such auto-purchases where the math on the contract was flat out wrong. You know those darn calculators at dealerships never work right. I tend to look at it as if you ever wondered where the people who graduated at the bottom of their class ended up, look no further then your local auto dealership. That’s assuming they graduated at all
You would hope that they would at least have better secretarial skills — it doesn’t make education or talent to accurately transcribe numbers onto a form
(It is funny that these “mistakes” always favor the dealer.)
@ brn – Thank you so much for your valid comments. You represent the VAST majority of people. Consumers have the right to shop. They have the right to become irritated with a dealer who doesn’t meet their expectations, leave and do business elsewhere.
http://wardsauto.com/blog/people-love-their-dealer-hate-yours
RE: “Have recently purchased a car, I tried the True Car path. Tom is correct that they’re nothing but a broker. That might even be going too far. They’re more like a lead generator.”
YES, they are EXACTLY a lead generator, and they add $300. dollars to the cost of a deal, something they are LESS THAN TRANSPARENT about. Shouldn’t they volunteer that information up front if they want to claim transparency?
RE: “Btw: I found dealership that was very straightforward and am very happy with the experience.”
Not all dealers are the same. Sounds like you found a good one. Being a reasonable human being means you find others more reasonable than someone with a built in negative attitude. But after years in the business, I am also on guard when shopping for ANYTHING, especially products where the price has to be negotiated. The business world is full of negotiation, as is life. We can hide from it, or embrace it.
The OLD TrueCar and the CURRENT TrueCar aren’t the same thing. Originally that site brought a pro-consumer service unlike anything people could ever get for free. Imagine that- knowing the honest-to-god dealer cost of a car, usually thousands below the “invoice” lie that salesmen peddle to customers. But now they are, as you say, a lead generator and don’t really provide more value than google.
And how is it, I should ask, that the auto industry seems to be the only place where someone can call a made up number “invoice” when that’s not what they really paid for the goods?
Author: qest
RE: “And here we have the kind of skewed rationalization and doublespeak we expect from car salespeople.”
“I start every customer at full sticker [price] and go from there.” “We use TrueCar at our dealership…”
I’m sure the author of this is capable of defending himself but I have some comments.
RE: “These two quotes don’t really jive. You don’t offer everyone TrueCar, you accept customers coming in with TrueCar prices, and attempt to maximize profit on everyone individually.”
Why would a seller automotically give “TrueCar prices” to everyone? Besides, there are a couple of different ways to use TrueCar. You can either take TrueCar referrals OR during negotiation with a NON TC customer, you can take the customer to the TC site, show the TC price, and beat it without paying the $300. fee. You “validate” your price and get the deal without giving up the $300. What could be better?
RE: “Starting at a particular price for the new car doesn’t make the deal involving a trade-in and accessories any less muddy.”
If its muddy perhaps you should take a course.
RE: “Unfortunately, most people who think they’re good negotiators don’t realize that they’re up against a team of professionals who does this every day for a living and will wring whatever they can from every customer.”
Unfortunately? Having you figured out that it is the chumps who pay for the great negotiators to get a better than average deal? Do the math. If you change the system and it goes to price fixing, everyone will get the same deal. Who will be thrilled? The not so good negotiators. Who will be upset? The good negotiators. Or perhaps you think you can have it both ways where the good negotiators still get their good deals while no one pays “too much?” Do the math on that and see what you come up with. If you fancy yourself to be a good negotiator, you should be grateful to the ones who aren’t. Its all about the average.
RE: “The manufacturers are in on it too with their hold backs, bonuses, and inflated BS fees.”
Yup, they’re all in business. Perhaps we can turn this business over to a “not for profit?”
RE: “You can shout free-market capitalism all you want, but the truth is that the dealership associations bought the necessary politicians at some point, and are now preventing exactly that.”
What part of free market capitalism is being prevented? The market is at work providing consumer the opportunity to shop multiple dealers with severe laws in place to prevent price fixing, even though that’s what consumers really want, right? Everyone paying the same price?
I can see where you are coming from on a lot of this and it is illuminating to see a dealer perspective.
One question related to :
“RE: “You can shout free-market capitalism all you want, but the truth is that the dealership associations bought the necessary politicians at some point, and are now preventing exactly that.”
What part of free market capitalism is being prevented? The market is at work providing consumer the opportunity to shop multiple dealers with severe laws in place to prevent price fixing, even though that’s what consumers really want, right? Everyone paying the same price?”
Would you support the repeal of laws that mandate an OEM from having to have a dealer network. I am thinking in particular of Tesla. I would not buy one, but I don`t see why they should be having legal issues in states like OH and TX for selling direct. Dealer associations are trying to stop them, this supports the accusation that “dealership associations bought the necessary politicians” and enacted laws to defend their system – that is not free market capitalism.
I love negotations. The game, the social interaction, the risks, all of it.It hardly even matters what I’m negotiating. I think it’s one of the more interesting parts of buying/selling cars.
And, on a brand new car (especially with the car prices here in Norway) the exact buying sum hardly matters when you divide it into monthly fees over a 7 year period(or in some cases even longer)
There are obvioulsy still a majority of car buyers out there, who like the deals they get with the current dealers, to cancel out the complaints from those who get ‘cheated’ when buying a car, or the business model would have changed a long time ago.
Honestly, if you go to a dealer, expecting to buy a car, and you end up buying a car, how the h**l can you come out of it feeling cheated?
I understand you point, but where would those who “feel cheated” go when they want a new car. It is possible to complain about a system but see no alternative to buying the product you want.
I’m sorry,but I can’t really understand why anyone would want to pay for the first 2-5 years of depreciation, or pay twice as much for a small, slow new car than for an 8 year old fast,huge car in the first place
Actually he only reason I don’t actively and publicly oppose new car buying completely, is that then I wouldn’t have any used car to choose from in a few years XD…
If you’re not willing to pay a little extra for something you really really want, then you can probably survive without it.
There are acceptable levels of “cheatedness” You know going in that there’s something the dealer’s going to “get you” on, it’s up to you to decide how much they’re going to “get you” If the deal falls within your cheated comfort zone, you’re happy. You’ve still been cheated, but not as bad as you could have
RE: “Ruggles provides good insights into the mentality at the dealership level. If you read his comments between the lines, then they are quite informative.”
You really don’t have to read between the lines to know what I think. Most people complain I’m TOO clear.
RE: “The moral of the story is that car dealerships are inherently untrustworthy, and it’s a waste of time and money to expect them to be anything but that.”
Again, you use terms like “untrustworthy” which may or may not apply depending on whose perceptions you use. BUT one thing should be clear by now. Buying a large ticket item like a car is a negotiated business transaction. IF that’s too much for you, go to a One Price store, pay a broker if its legal in your state, or take your lawyer along. You can either be one of the folks who pays for PCH101’s great deal, OR you can get a great deal. You choose.
I’m still trying to get answers to the original question which is the true definition of transparency. The question must be hard to understand.
RE: “There is no negotiation tactic or approach available that is going to help a buyer to change the system.”
Even “One Price” involves a strategy of negotiation.
RE: “It is wiser to just assume that the dealer is not to be trusted and needs to be gamed in order to get the best results.”
Go for it. When I was actually doing it I welcomed EVERYONE and was skeptical of them all. The same thing goes for dealers and consumers in a negotiating environment. Just like a game of poker. Do YOU really show your cards before its necessary?
RE: “It is a win-lose style transaction (i.e. you aren’t interested in how the other party feels about you once you’re finished, as there is no need to maintain an ongoing relationship) and it is your job to ensure that you aren’t on the losing end.”
It IS win/lose. There are ways you can protect yourself. It helps if you have an actual relationship with someone at the dealership you can trust. But trust isn’t absolute, and I advise everyone to pay attention. The best sales people and dealerships manage their business in such a way that they satisfy a larger portion of the population and build repeat business. But that’s not the only dealer business model out there. There are those who advertise for the weak credit dumb ass. They don’t want the high credit analytical buyer. They take them if they come, but that’s not their core audience.
So decide which buyer YOU want to be. Then work at it. Dealers will be fine either way.
One more thing, as somewhat of a leftie politically, I often think there are a lot of quite fierce right-wing comments on this site, and I have no problem with that, since it is after all an American website, and I sometimes like the ‘everyone fend for themselves, we want economic freedom, American dream, guns are awesome’ thing, as much as I know it wouldn’t work well here in Europe.
But mention car dealers, and dealerships, and all of the sudden there are hundreds of people almost expecting ‘comrade government’ to provide everyone with the same white Lada at the exact same price XD.
It’s quite hilariously ironic to watch it from the outside. :)
Your definition is correct. True Car is a middleman that adds to the overall transaction cost and just muddies the water..i.e is less “transparent”. No disrespect to them as many find this service valuable…Me? I would rather see the dealer and salesman split the $300 with me for a win/win…I might even go $200/$100…oh hell, just throw in a set of floor mats and let’s cry calf-rope…(see I cant help it!)
You are absolutely correct about lifetime “employees” (nothing wrong with that either)being unhappy and unwilling to negotiate. The difference is the best “employees” are always negotiating with and on behalf of their respective employers and tend to receive the highest compensation and positions and job satisfaction. Happy people negotiate to the best of their ability, decide yay or nay and move on with life.
Right on Dartman! You nailed it.
I agree TC could hold value for some, but to call that transparent is a joke to me. In fact, its the opposite. Its deceptive.
RE: “Dealers use command-and-control tactics to dominate customers, and often mislead customers in the process, i.e. agreeing to a price and terms, only to write up a contract with a different price (which is invariably higher) and/or different terms (which are invariably worse.)”
“Control” is a strategy in ALL sales endeavors, although in that context in means “influence” and is relative. Buyers can also exert “control.” AS far as dealers changing numbers, that only happens if the consumer allows it. As far as agreeing to terms, “agreement” has a narrow legal definition in business. There is NO AGREEMENT until both parties enter into contract. If the contract numbers are different to previously agree upon numbers, it is the consumers responsibility to pay attention. Dealers typically track the record of written negotiation and keep that record in the deal bag. Why? It is not uncommon for dealers to be mystery shopped by a variety of agencies, including the FTC and the state AG. A dealer shown to systematically “destroy evidence,” the audit trail of the negotiation, can be in really deep “doo doo.” The public dealer groups and chain dealers are under the most scrutiny.
RE: “People know that they’re being bullied and manipulated, and they don’t like it.”
So why don’t they stand up for themselves and leave? Are you describing consumers as a bunch of patsies? If so, aren’t you grateful for them? They pay for YOUR better than average deals. Maybe YOU are the problem? If you’d pay a little more perhaps THEY could pay a little LESS.
RE: “Car dealerships have an aggressive culture with an element of cheesiness that can be offputting.”
Some more than others. Trying to paint all dealers with the same broad brush is ridiculous on its face. You must be buying cheaper mass market cars. Move up to a high line and you might find a different experience. OR perhaps you have an abrasive personality that brings out the worst in your sales person? I’ve seen that happen. Word travels fast in the car business when there is a crank on the loose. You might visit a dealership and they are prepared for your arrival.
” AS far as dealers changing numbers, that only happens if the consumer allows it. ”
ruggles, I hope you carry a gun, because if one of those crackhead homies from the hood ever decides to rob you it’s your responsibility to defend yourself because the crackhead is just conducting business as usual.
Locked and Loaded.
Elderly Man Shoots Self During Carjacking
RE: “You don’t control the comments section. We are free to address your points in ways that you didn’t anticipate.”
Actually, we anticipated an outpouring of irrational emotion, so its not a surprise and I appreciate the few excellent comments and legit answers to our question.
RE: “I don’t buy into your black-and-white “transparency” dichotomy”
The question is the question. It isn’t a dichotomy in any way? If you don’t want to answer, no problem. I suspect you think there is some kind of trap hidden in the question just for you. The motivation for the question really didn’t originate with the ongoing TrueCar debate. It came from a different discussion in the different venue where vendors to car dealers are claiming to be bringing a new era of transparency to the retail new car business. I’m telling them that they shouldn’t be using the word transparency, because if they aren’t using the true and absolute definition, they are being deceptive, NOT truly transparent. It is a ruse to bring more leads to car dealerships, that is consumers with their guard down. If you think that is truly transparent, I’ll put you down on that side of the issue. You’re with TrueCar, vAuto, Edmunds, KBB, etc. in claiming transparency when it is nothing more than another ruse.
Surprised you’re fine with that, but you’ve been clear. But dichotomy? :)
RE: “But it’s quite something that you guys will lie at every opportunity. You agree to a price, then type up something else; people who have honor don’t do that, and you guys have no honor whatsoever.”
And, of course, dealers are all the same, right? You can’t be a dealer and have honor?
So why aren’t you making a fortune showing them how it should be done? It seems like such a gimmee. Why do you just carp when you could be making a fortune? Let the market speak. If you don’t have the money to start a proper dealership, SURELY there are those who think like you do who would back it. After all, it is such a sure thing if you just treat the customer like they want to be treated. What on earth is holding YOU, and others back?
RE: “Author: Lie2me – If dealers were to suddenly latch on to this “transparency” thing no one would believe it anyway, kind of like the “transparency” in government.”
Good one! Yes, who would believe it? I guarantee our President wishes he hadn’t use the word. When you have to parse the definition there is deception going on.
RE: Zykotec – One more thing, as somewhat of a leftie politically, I often think there are a lot of quite fierce right-wing comments on this site, and I have no problem with that, since it is after all an American website, and I sometimes like the ‘everyone fend for themselves, we want economic freedom, American dream, guns are awesome’ thing, as much as I know it wouldn’t work well here in Europe. But mention car dealers, and dealerships, and all of the sudden there are hundreds of people almost expecting ‘comrade government’ to provide everyone with the same white Lada at the exact same price XD. It’s quite hilariously ironic to watch it from the outside. :)”
And you are so correct. And I’m still choking from laughter on your VERY apt and hilarious remark. Excellent sum up!!! And the wit ain’t bad either! :)
Except, of course, that dealers are using government influence to protect their business model, as evidenced by the current Tesla flap. I have no great love for car dealers, although I don’t necessarily hate them either. But I don’t feel it unreasonable to believe that if the current model were really the best way, it wouldn’t require collusion between dealer lobbyists and the government to prop it up. Let’s be realistic, if every car dealer fell off the face of the earth tomorrow, the OEM’s would find alternative means to ensure that their wares ended up in the hands of people with the desire (and means) to own them.
My distrust of car dealers should not be confused in any way with a need or desire for the government to interfere in the process.
@old5.0, absolutely. Ruggles, if this is an inherently superior business model (having dealers as the middle man and the current system of non-clarity on pricing) why are dealers suing like crazy to protect it? Most of them are I am sure registered members of the Republican party who profess a deep held belief in the beauty of the free market and the “invisible hand” of economics to make everything right. Then why sue?
Why not let the “market speak” for itself. If direct sales are bad for the consumer than the consumer will not participate in them. That is free market economics 101.
@ kvndoom RE: “The OLD TrueCar and the CURRENT TrueCar aren’t the same thing. Originally that site brought a pro-consumer service unlike anything people could ever get for free. Imagine that- knowing the honest-to-god dealer cost of a car, usually thousands below the “invoice” lie that salesmen peddle to customers.”
Invoice lie? WTF? And exactly why do you think YOU have the right to know a dealer’s net cost on a new vehicle?
RE: “But now they are, as you say, a lead generator and don’t really provide more value than google.”
Sounds deceptive to me, don’t you think? They’re still using the word transparent to describe themselves and what they bring to the equation.
RE: “And how is it, I should ask, that the auto industry seems to be the only place where someone can call a made up number “invoice” when that’s not what they really paid for the goods?”
Invoice is the actual figure the OEM draft’s the dealer’s bank when the car reaches the end of the assembly line. As with MANY businesses, there are a variety of incentives to boost certain models to maintain smooth production. This often works to keep prices down as assembly line hiccups are really expensive. But the larger question is, “What makes it YOUR business?
Good counterpoints, and I see your side of the story. I think it has to do with the *amount* of the purchase that leads to the negotiation aspect.
Not many people care if walmart makes 25% profit on a $4 stick of deodorant. They just throw it in the cart and check out. But when you’re dropping 5 figures on a car or 6 figures on a house, a consumer isn’t going to see 25% as an acceptable profit margin.
I think there’s a breaking point (different in each consumer’s mind) where they go from “I’ll buy it” to “I think they can do better than that.”
I appreciate that you put up this lively discussion.
RE: “mike978 – I understand you point, but where would those who “feel cheated” go when they want a new car. It is possible to complain about a system but see no alternative to buying the product you want.”
They might not get what they want ESPECIALLY if they don’t know what they want. Can’t they search out one of those One Price stores that appeals to the nervous nellies of the world? You won’t get the best deal, but you won’t get hammered. They hope to make it up in extra volume, but never do. The folks who say they want to be treated well just want a dealer to easily quote them a price they can use to hammer other dealers. Then they complain that the One Price dealer tried to screw them when they found a better price elsewhere. And they tell their friends and neighbors, and pretty soon, the One Price guy has adopted a different mind set. Fancy that.
RE: Would you support the repeal of laws that mandate an OEM from having to have a dealer network.”
This is the question everyone wants to ask but YOU put it into words. The laws the govern an OEMs distribution network are complex. You first need to understand the logic behind them. First, if the OEMs EVER mentioned that they reserved the right to open retail operations in competition with the franchise dealers, how many franchise operators would they have attracted. For the record, for ANY OEM wanting to own its own dealer network, I am in complete support, and that includes Tesla. What I do NOT support is a mixed system, where an OEM can open a store down the street from one of its own partner dealers, and undercut price and starve them for the prime inventory to put them out of business, retaining the plum site for themselves.
If GM wants to buy out all of its dealers and take the retail business in house, all they have to do is negotiate the terms with each dealer. But then they’d need the money to pay for them all.
In fact, I have chastised NADA for taking a position against Tesla. Retail dealers have nothing to worry about, Tesla has no intention of trying to own their own dealerships long term. People just don’t get the amount of money it takes to do that.
RE: “Dealer associations are trying to stop them,(Tesla) this supports the accusation that “dealership associations bought the necessary politicians” and enacted laws to defend their system – that is not free market capitalism.”
The franchise laws were passed LONG before Tesla was a glimmer in Elon Musk’s eye. There have been egregious sins perpetrated on local entrepreneurial dealers over the decades. Examples would be the granting of franchises based on bribes paid to the OEM. Additional allocation of premium inventory based on bribes and other favors. Favoritism shown in sales contests that can determine a dealer’s actual net vehicle cost, that favored one dealer over another. Facility requirements placed on one dealer, but not his competitor. Imagine a dealer having to compete with his/her own supplier. Who would get the best colors, models, etc.? Who would get favoritism on warranty claims? Sales contest numbers? etc. etc. etc. There are MANY laws under which litigation would be pursued against OEMs attempting to do such things, mostly under the heading of “unfair business practices.” The specific dealer franchise protection laws exist for a reason.
Bottom Line – There is NO mass market auto OEM who wants to own all of their outlets. There might be some who would like to only own the plum sites, the one’s where even the OEM couldn’t screw things up. Of course, Ford thought Tulsa and OKC couldn’t be screwed up. They found out differently.
@EchoChamberJDM
TrueCar seems to be working on an IPO and at some point Scott Painter cashes out. He steps on his dick regularly and investors are sick of it. He recently announced that “friction” in the purchase process cost 4 million new car sales each year, and he is overjoyed to fix that for us for $300 a car.
since the beginning of time, rookies who come to the car business find every reason under the sun to give away profit. The justification is always the same. We’ll make it up in volume.
I have plenty of first hand stories from the hood in Rock Island, but the best come from Grand Spaulding dodge in Chicago, back in the day. They were the largest Dodge dealer in the world until Chrysler shut them down for warranty fraud. They used to have a huge conversion van operation and sales people teamed up with the local hookers to service customer and sales people from the back row of vans.
They used to have the deal to sell all of the cars to the Illinois Highway Patrol. I was in Evanston at the time, and sold a lot of local police department their squad cars. The trick was knowing how to get the most for the tradeins. I had a deal working with the Ungers from Brooklyn. They helped me get a lot of police bids. The elder Unger came out to meet me when we first started doing business. He was complaining that he lost all the tradeins he got from Grand Sapulding as some movie company bought them all. So he really stepped up to buy mine. they were headed to the Congo to be used as squad cars.
Ever see the movie “Blues Brothers?” Now you know the rest of the story. All of Ari Unger’s tradeins were crashed in the defunct Dixie Square mall for the movie.
Grand Spaulding was the Dodge store made famous as Mr. Norm’s Grand Spaulding Dodge, at the corner of “You Guessed It. Norm was one of the brothers, Norm and Lennie Kraus. They had a dyno machine in their service department. I recall driving my 67 Dodge R/T, built 440, TF, 4.56, street slicks, etc. to Chicago for the dyno tune. Of course, when I drove out of the back of the Service Department, I stood on it. When the smoke cleared, I saw the flashing lights. I must not have been the first idiot to do that. At least I didn’t have the headers open. I was barely 20 and hadn’t yet gotten into the car business. When I blew the engine on the R/T, I was afoot. I needed a job with a ride included. I found a CP store that sponsored a nationally known racer. So I took the sales job to have wheels while a looked for a real job. That’s my story, and I’m sticking to it.
@ Zykotec – RE: “They probably expect your car to need work, and asking you what condition it is in is often a waste of their time, as much as going through it is, so their offer will be low enough to cancel out any risk of loosing money on it, compared to the work hours to find out what condition it is in. + they can use the carfax and Nada value to set a price when selling it again.”
A common mistake is thinking dealers use guidebooks to determine trade values. That’s for amateurs. Unfortunately, there are increasingly more of those in the business. The people who actually buy and sell at the auctions know the real values. There are considerable arbitrage opportunities when one can buy from the know nothings and sell to those who really know, AND vice versa. The Internet and available technology has brought accountability to pre-owned pricing, whether we like it or not. If a dealers inventory is priced so high it doesn’t show up on a typical consumer search, there won’t be many “hits.” After all, who doesn’t search “lowest price first,” then go from there?
The guide books try to be a reflection of the actual auction, not the other way around. Black Book is far and away the best, IMHO. They have actual people on the ground noting sales one by one. No one else does that.
What is a car worth to a dealer? Answer: No more than they can buy the same car for through any wholesale channels. The trade in is taken with the idea that it can be cashed out at wholesale. Retail is dealership profit. Only idiots put themselves in the position of having to get retail for a car to get their investment back. But consumers typically don’t understand this and think they got screwed if they see their car on the dealer’s lot for more than they were allowed for it on trade. But like I’ve said repeatedly, dealers understand this and it is water off a ducks back. Its not their job to teach the business world to consumers.
RE: “The trade I brought to the dealer at my last purchase wasn’t even looked at by anyone at the dealer, the trade-in value was based solely on the Carfax report and the NADA value. How could I have possibly cheated them? How could I have changed anything on the car when they took it from me on the spot?”
What’s your point?
My point was to counter what you said…
“Consumers routinely bring in a vehicle for appraisal but when the actual deal is completed, the trade has been “stripped.” Tires, batteries, radios, wheels, etc. etc. are often carved off of trade ins IF the dealership isn’t on guard. The customer will be champing at the bit to keep things moving along at delivery so taking the time to resurvey the trade in often doesn’t get done.”
How could I strip a car that’s taken from me on the spot?
@ Author: Zykotec – RE: “I’m sorry,but I can’t really understand why anyone would want to pay for the first 2-5 years of depreciation.”
Nor I. That’s why my memoirs are entitled “Everyone Drives a Used Car.”
That’s one thing I agree with you on without hesitation. Unless I win the lottery or a rich relative (of which I have none) leaves me a fortune, my new car days are over. :)
RE: “Ruggles, if this is an inherently superior business model (having dealers as the middle man and the current system of non-clarity on pricing) why are dealers suing like crazy to protect it?”
Asked and answered.
RE: “In essence, car dealers are classic sociopaths: They lie without apology, and are incapable of empathy. The only concern that they have about lying is getting caught.”
Represents a HUGE profit opportunity for those who want to show us all how to do it right. What’s stopping you? Stop complaining. Do something about it if you’re sure you know a better way AND have the last laugh while making a fortune.
@ ruggles I think the comments show that we need to have a discussion about how much profit is acceptable for a dealer to make.
Isn’t that why people want transparency? So that the consumer can tell the dealer how much they can make on the deal? …while ignoring or disbelieving any claim about the cost of running the business.
Dealerships will compete for your business, if you cannot find the deal you are looking for, it means you are offering an unreasonable amount. No smart dealership will risk losing a customer and a unit-sold trying to charge thousands or even hundreds more than they know the next dealership can sell the car for. Dealerships are not allowed contact each other to fix pricing, it is illegal.
What recourse does anyone have (including the manufacturer) against criminal enterprises and their political franchise laws that protect them? With the Internet, all car manufacturers want to sell direct to customers in order to protect their own product and reputation…And also their customers from criminality! It would be a huge mistake today for any of them to bind themselves in franchise agreements. Tesla understands this perfectly.
@ Lou_BC – Comment: “@Ruggles – your reply is that of a saleman.”
No shit!
RE: “Why are firefighters, nurses, and paramedics trusted? In those lines of work you deal with life and death stuff which is very personal but the way you deal with that “stuff” is what makes you trusted. We as a group do not forget that we are dealing with human beings that have wants and needs hopes and feelings.”
And your point is? Everyone should be a nurse or firefighter?
RE: “Ever have to tell someone that they are dying? or tell a family member that their loved one is dying or there is nothing else that can be done to save them?”
WTF does that have to do with the question I asked in this thread?
RE: “That is where the trust comes in, not the technical skills but the recognition of ones humanity.”
Wow. Are you beating around the bush to say dealer should be in the auto business for purposes of altruism? After all, if they weren’t already rich, they wouldn’t be car dealers, right? AND if they are already rich, they should share that wealth with everyone? So what kind of society do YOU espouse? How many abandoned animals and poverty stricken illegal aliens live at YOUR house with YOUR family?
RE: “Sales people for the most part are not focused on the fact that people need to feel safe and confident in what is going on. That is why people want transparency.”
Then let them shop until the find the level of transparency that suits them. That’s market forces at work.
RE: “The sales process is adversarial and salesman who usually are adept at reading human behavior will manipulate that knowledge for their own benefit.”
What gave you your first clue?
RE: “Any person regardless of whether or not they have training or skills in the art of interaction have an instinctual sense that something is wrong and that somehow they are being used.”
And many think they are being used when they aren’t. But what’s your point?
RE: “That is what is wrong with the system.”
What’s keeping you and people who think like you from changing it? You must be afraid that consumers aren’t like how you say they are, at least not to the degree to ensure your success. Otherwise, shouldn’t you put your money where your mouth is?
RE: “You used your example of “Ford stores” with fixed pricing and how other dealers would take advantage of that. It is a “hawk and dove” situation.”
So tell me, in that scenario, who is the hawk and who is the dove? The multi billion dollar MNC Ford Motor Company, or the local dealers?
RE: “A society full of hawks will eventually self destruct due to continuous combative interaction.”
Again I ask, what kind of society do you subscribe to? And while you’re at it, please cite a single country/economy on the face of the earth that follows it to “prove” you aren’t just spouting theory with nothing tangible to back it up. Are you writing from Heaven or someplace like that? Do we have to die to travel there?
@ruggles – you still sound like as a salesman and the point is……. That isn’t meant as a compliment.
What part of what I am saying that you don’t comprehend or perhaps cannot comprehend?
I mention paramedics and nurses as being “most trusted” not because of skill but honesty and the ability to build a relationship for the benefit of the patient/client. Salesman tend to do the opposite, build trust for the sake of the commission. People read that and do not like it.
The fact that as you say.”let them shop until they find a level of transparency they are happy with” is part of what is wrong with the system. That is a take it or leave it attitude that contributes to the fact that people think salesman are bottom feeders. It sounds like you are saying that you will only deal with those willing to be fleeced.
If people feel they are being used when as you say they are not…… Isn’t that a sign of something wrong with the system?
I can’t wait for you answer on that one.
The hawk/dove metaphor is just a way of explaining adversarial interactions. As far as what society I ascribe to…. Looks like you broke out the “bleeding heart liberal” paintbrush on that one.
Why do you think sales staff, and dealers have such a bad reputation?
The fact that you have tried to discredit or pick apart my comments is interesting and also shows another reason why people distrust salesman.
You spray yourself with Teflon or is being greasy enough?
RE: “I think the comments show that we need to have a discussion about how much profit is acceptable for a dealer to make.”
I tried to ask that question a while back but everyone thought it was some kind of a trap. Besides, they have no clue.
RE: “Isn’t that why people want transparency?”
With rare exception, consumers don’t know what they want other than to feel good about something. Some say salesmanship is the difference between sex and rape. Do people no what they mean when they say they want transparency. Why is it a consumer’s business to a car dealer’s bare net cost information? That means I’m not transparent. I’d tell them “Ain’t none of your business BUT I CAN tell you how to find out. BUy one of these joints. Put up hundreds of thousands of dollars, signed personally for millions in capital loans, floor plan, and facilities. Then you can look at all the net cost figures you like. Until then it ain’t none of your damn business.” Yes, I’ve told people that. They mostly appreciated my honesty and actually agreed with me. Few of those folks here, however.
RE: “So that the consumer can tell the dealer how much they can make on the deal? …while ignoring or disbelieving any claim about the cost of running the business.”
Do you think there is a chance of a business person EVER letting consumers dictating their margins out of fear of offending them if they don’t? EVER?
RE: “Dealerships will compete for your business”
They already do.
RE: “if you cannot find the deal you are looking for, it means you are offering an unreasonable amount.”
That’s already the case.
RE: “No smart dealership will risk losing a customer and a unit-sold trying to charge thousands or even hundreds more than they know the next dealership can sell the car for.”
Isn’t that already the case?
RE: “Dealerships are not allowed contact each other to fix pricing, it is illegal.”
Saturn could. The Ford Collection could. I have talked about the FTC a lot. Did you miss that?
I wasn’t making an argument for or against transparency or true car in that last comment. But to be clear, I am happy with the current dealership model. In fact I think it is very consumer friendly. Which is what I was trying to say with the second half of my comment.
I agree that the direct to consumer and one price-models are almost never advantageous to or preferred by real world buyers. I also don’t understand why people expect that car prices would come down or the buying experience would change if they bought directly from the manufacturer.
@ Exit – It seems that the consumers who first told us they wanted to do business in a “customer friendly way” flocked to the surrounding dealers to sell out the customer friendly guys. For sure, some DID do business with the Ford Owned outlets. Just not enough to keep the outlets from losing big money.
Most OEMs learned a lesson from the Ford experience. There had never been any tired on such a scale in this country. There are many factory owned stores in Japan. They have a mixed system. They even have a system that makes it possible for dealers to fix prices. How do you suppose Japanese consumers feel about car dealers?
I don’t know how consumers in Japan feel about car dealerships. Hopefully they don’t see the purchase as a zero sum game and understand that they are paying for a service.
Funny enough, in my experience, the customers you make the most money on are the most satisfied and the ones that get the best deals still feel “ripped off”.
People are completely ridiculous to compare sales to violent crime or intimidation. Can any one of them explain to me how you can force somebody to agree to a deal they find unfair? Why would a customer do that when they can find the same car somewhere else or worst case, not buy it from anyone.
I have sold in traditional and one-price stores, people complain either way.
@ Author: JD321 – RE: “What recourse does anyone have (including the manufacturer) against criminal enterprises and their political franchise laws that protect them?”
Franchise laws exist because of manufacturer abuses NOT franchise dealer abuses. That said, standards are applied to franchise dealers. Exactly what criminal enterprises are you talking about? What is a political franchise law? Are you sure you have a clue what you are talking about?
RE: “With the Internet, all car manufacturers want to sell direct to customers in order to protect their own product and reputation…”
This is completely and totally false. They already know they don’t know how to retail cars. They already know they don’t have anywhere near the capital to set it up anyway. Why would they want to back stab and undermine their dealer partners. The dealer is the manufacturer’s customer. The end user is the customer of the dealer. The manufacturers set it up this way. The manufacturers went looking for dealers, NOT the other way around.
RE: “And also their customers from criminality!”
Criminality? Are you a lawyer? There are all sorts of laws against criminal activities as it pertains to the retail auto business.
RE: “It would be a huge mistake today for any of them to bind themselves in franchise agreements. Tesla understands this perfectly.”
When Tesla makes real money for more than a couple of quarters, we might try using them as a standard. Until then, they are a start up. All OEMS, including and especially Elon Musk, know how much capital it takes to operate a distribution network with a mass market product. Tesla is still a niche product. Let’s wait until they graduate to mass market. You might learn some things about business by watching.
If an OEM wants to own its own dealer network, what’s keeping them from buying out their current dealers?
What’s keeping all of the geniuses who know better how to retail new vehicles than those doing it from putting their own money where their mouth is? Its an easy business, right? Just be transparent, make sure you offer the best prices, and make it up in volume, right? What’s holding everyone back?
“What’s keeping all the geniuses who know better…..?” You know; the usual.
Capital and Experience. Lack of the latter prevents access to the former.
Kudos to you Mr. Ruggles. Your willingness to engage with the hoople-heads in a civil and serious manner should be a lesson to us all. I look forward to more of your insights
Thank you Dartman. Fact is, there HAVE been MANY investors who have backed the bid to do the car business based on “alternative” perceptions that haven’t turned out well. For example, we don’t hear Michael Dell lecturing us much these days on how we should be running car stores like a mail order computer company. Seems he must have bought in, and learned a lesson. I’ve tried to give the same advise to Scott Painter. But he seems to be more concerned these days about an IPO and cashing out.
I appreciate Mr Ruggles responding to each comment directed to him, even if we disagree on some things. His perspective is interesting and should be heard.
I agree. His perspective should be heard.
That said, TrueCar and other carbuying services are having an effect on dealers because dealers would prefer that customers deal directly with the dealers instead of having another party help fleece them.
“Franchise laws exist because of manufacturer abuses NOT franchise dealer abuses. That said, standards are applied to franchise dealers. Exactly what criminal enterprises are you talking about? What is a political franchise law? Are you sure you have a clue what you are talking about?”
Are you really that stupid?…Or just entrenched?
Franchise Laws should not even exist in a free society…Only contract enforcement. Got it? The laws create the criminal enterprises…The same laws the Dealer Association lobbies for.
I’m not the clueless one here. Franchise law IS a euphemism for contract law. Maybe you think contracts shouldn’t exist in a free society too? Well, you’ve already lost that discussion. When you use the label franchise law, you need to be specific. There is franchise law that governs the agreements that dealers and manufacturers enter into. Then there are franchise laws that spell out what dealers AND manufacturers can and cannot do. You seem to think there are laws that prevent manufacturers from competing with their own dealers. If that was true, how did Ford own all of the stores in Tulsa, OKC, Tulsa, Indy, SLC, and San Diego? The biggest barrier to factory owned stores is common sense. Dealer Associations WOULD like their suppliers to know what is in store for them if they try to undermine their business. You know the businesses they invested in based on agreements and understandings with those OEMs. These vary from state to state. TX is obviously different from some other states.
You don’t have any authority to arbitrarily label legal enterprises as criminal enterprises. At best, you’re just another asshole with an opinion, and a rather unenlightened opinion at that. Since the laws actual make dealerships legal, you should have no problem. If you don’t like it, work to change the laws. But just pretend you wake up Monday morning and there are no more laws protecting dealers from their OEMs. What do you think happens
next?
RE: “How could I strip a car that’s taken from me on the spot?”
You couldn’t, what’s your point? Did someone say you could?
You did
“Consumers routinely bring in a vehicle for appraisal but when the actual deal is completed, the trade has been “stripped.” Tires, batteries, radios, wheels, etc. etc. are often carved off of trade ins IF the dealership isn’t on guard. The customer will be champing at the bit to keep things moving along at delivery so taking the time to resurvey the trade in often doesn’t get done.”
@ Power 6
The efforts taken by dealers to satisfy new car customers is beyond measure. Granted,if you buy a high line the level of attention increases dramatically. But it isn’t always perfect. The bigger the store, the worse the level of attention you get. Frankly, I’ve never been a fan of really large stores. At about 100 car sales per month, the ability to take care of customers declines rapidly. But the manufacturer likes to push dealers into expensive facilities. They think it raises their own prestige as well as driving higher volumes.
I do buy what you are saying that dealers are putting much effort into satisfying customers, my curiosity is though, why the perception that it is not that way? I’ve never felt there is anyone I can call who will make sure everything is taken care of. The manager of a dealer knows the business is a bit adversarial, he is not going to make the whole process any different he knows how the business works.
So why are many here complaining about the experience if so much effort is put into making it great? I think my point stands here, the motivations are just set up that way. People don’t feel like they are getting a good deal if the sales staff is too happy to server them ha. Such a funny business it is.
You have a few here who are just “cranks” and could never be satisfied. Research shows they might represent 10% of the population. You have another batch who resents the fact that the price is negotiated because in addition for a chance to “win,” they could also “lose.” They blame this on dealers. Others have no understanding of business and the not knowing tends to breed suspicion and resentment. Add to that the fact that some dealerships are nothing but whorehouses that should be shut down and many sales people and their managers are less than artful, and you have a recipe for resentment. Bottom Line: You might have to shop, but you as a consumer have more advantages now than at any time in auto business history. But you still don’t have symmetrical information, which is true transparency, and you never will.
Thanks Ruggles. Your information and insight is really helpful.
I think I agree with you. Your costs are not a part of “transparency” Even if we did have accurate information on unit costs it would tell us nothing about your fixed costs.
i use every price-discovery source i can think of to buy a car. I probably come within $300 bucks of true cost anyway. Good enough.
I would never think of quoting any of those sources back to the dealer. Why should I? He knows his costs better than I do. He also has well-rehearsed comebacks to any of that stuff. Besides, what difference does it make? the price is the price a willing buyer is willing to pay a willing seller, period.
Better to couch it in terms of: “Do you think you can get me into a car like this for around ” (insert well-researched price -$200 here).”
Author: Pch101 – RE: “TrueCar does not enable transparency.” It doesn’t really claim to.”
Perhaps not in its ads directly but conversing directly with Scott Painter the word is used often along with other euphemisms. It becomes quickly apparent that what they are talking about is something between absolute transparency and relative transparency. When Painter starts talking about how bad it is for OEMs to hide dealer cost via stair steps, etc. and how the friction caused by this costs the industry 4 million new vehicle sales per year, his handlers try to quickly change the subject.
RE: “The TrueCar website offers three value propositions on its front page:
1. “Great pricing is not just for insiders anymore. TrueCar Certified Dealers have made great pricing available to everyone.”
2. “No gimmicks or high pressure sales tactics…Buying a new car should always be this easy.”
3. “Leave your worries behind…On-call support staff are always ready to help.”
In other words,
-You won’t be ripped off
-You can avoid dealing with ***holes
-You can get help when you need it”
Yes, and they are so transparent they fail to disclose that you will be adding $300. to your dealer’s cost. The dealers are the “a holes” and they aren’t. YOU need THEM (TC) to protect YOU from the dealers. They are doing this for reasons of altruism. AND the ruse is to get you to go to the dealer with your guard down to ensure a profitable deal for the dealer. Why else would the dealer pay TrueCar for referrals? IF they were truly transparent, wouldn’t they explain to you how you could take advantage of TrueCar pricing WITHOUT it costing the dealer the $300?
RE: “TrueCar isn’t claiming that it’s going to teach you everything that there is to know about the car sales process. Its pitch is that you can avoid dealing with crooks.”
Which is to say that THEY (TC) aren’t crooks, but the dealer IS EVEN THOUGH you still have to go to the dealer to get your car and finalize details.
RE: “In other words, Mr. Ruggles’ post is based upon a strawman.”
My post is a question. What is true transparency? True and absolute transparency, or relative transparency with a profit agenda? Its not that hard.
RE: “I’m not sure whether he’s lying or just doesn’t understand the marketing message, but either way, TrueCar’s pitch is not really about transparency.”
I used TrueCar as an analogy. They weren’t the real point of the post. At some point I might reveal the company I have a problem with, the one that prompted the post in the first place. Few here would even know who they are. The sum up of my question listed Scott Painter specifically, not TrueCar. The two are become rapidly separated. TC execs say they understand making profit is important and they want to help dealers make it. That new strategy is what allowed them to resign dealers who had bailed. Of course, they are experiencing a new wave of cancellations as dealers figure out how to use TC WITHOUT paying the $300.
TC investors will be glad when Painter has cashed out.
I asked a question with only one obvious answer. Relative transparency as a marketing strategy to attract more consumers with their guards down is NOT true and absolute transparency. In a rational world I would have expected 100% to agree with the obvious answer. But then we have a few cranks here who want to express their opinion rather than answer the question, which is all part of the research too.
Thanks for your participation.
RE: “TrueCar does not enable transparency.” It doesn’t really claim to.”
Well, the above is false on its face. TrueCar makes all sorts of claims about “transparency.” I didn’t once reference any of their consumer facing ads. In insider conversations and the pitch they use to sign dealers into their program the word is front and center. They also use many euphemisms with similar implications. I guess you wouldn’t know this if you only go by their ads. But if you didn’t also access to insider information, you wouldn’t really understand the issue now, would you. The last paragraph of Painter’s open letter to the industry follows:
“Is TrueCar good for all dealers? There will always be those that resist change. To our dealer partners, we applaud your understanding that truth, transparency, and customer service is at the center of success in our changing market. And, to those that still have questions, we invite an open dialogue. One of the great virtues of transparency is that we have nothing to hide.”
He only used the word twice, which for him showed marvelous restraint. Maybe they aren’t hiding the $300 cost, but they sure aren’t transparent about it. This letter was published BEFORE they change to their new model. It was also published before dealers figure out that the new model allowed them to use TrueCars number’s without paying the $300 which can benefit both consumer and dealer. It just doesn’t benefit TC for that to be commonly known.
Just a slightly unrelated question. Can’t dealers that aren’t using Truecar, just check prices on Truecar, and then offer cars for 300$ less than what Truecar says is a fair price right ? Or, I guess many already do. That would make them seem like the best deal ever, and they still make as much per car as the others :)
@ Jim Brewer – RE: “I think I agree with you. Your costs are not a part of “transparency” Even if we did have accurate information on unit costs it would tell us nothing about your fixed costs.”
Thank you for your comments. At this point its time for me to admit that there must have been something unclear in my question. Let me state my position again using different words.
IMHO it is only truly and absolutely transparent for consumers to have the net cost information. True transparency is symmetrical information between buyer and seller, as well as equal ability to interpret that information. IMHO calling anything else transparent is misleading and deceptive.
To be clear, I do NOT favor transparency except the legal kind, which I fully endorse, both to the letter and the spirit.
QUESTION: Can ANYTHING short of absolute transparency, defined by symmetrical information, be called transparency without being misleading or deceptive?
Example – Dealers can claim to be transparent by disclosing “invoice.” TrueCar and others can make the same claim. Is that in any way transparent using my symmetrical information definition? Or does it fall short and fall into the “relative transparent” category? OR is it down right deceptive, designed to get consumers to believe they’ve been leveled with and drop their guard?
@ Zykotec – RE: Just a slightly unrelated question. Can’t dealers that aren’t using Truecar, just check prices on Truecar, and then offer cars for $300 less than what Truecar says is a fair price right ? Or, I guess many already do. That would make them seem like the best deal ever, and they still make as much per car as the others :)
YES!!!!
I think it is important to note that true isn’t necessarily paid per sale or per lead. It’s illegal in some states.
@ Exit – What you said is entirely correct. Brokering is illegal in some states. It seems some brokers haven’t been upfront with some consumers and some states got rid of them. It is easier to track and regulate dealers. Many states use “mystery shoppers” to shop dealers looking for transgressions. I highly encourage this kind of action. In fact, I’ve trained mystery shopped in the U.S. and Japan. I teach dealers to mystery shop themselves to find possible problems so they can be fixed quickly and decisively.
When i was young my father purchased a new Rambler. I went along with my father the day he was to pick up the new car and upon entering the showroom the salesman told him they had a problem with the price of his trade in car. It seems that wanted to give him $100.00 less. (This was back in 1958) He told them to give him back his deposit and he would go elsewhere. I thought the salesman would faint. The owner came out and told my father quote “What would your wife say if you did not come home with a new car”. With that my father lost it and demanded his deposit on the spot they were wasting his time. I learned a lot from my father. I ran my own export shipping business for over 30 years and was always honest with my shippers. My Son-in-law runs the business now and still has the same shippers coming back.
Car dealers feel that they’ve been remiss if they don’t lie or attempt to mislead you. A dealer who doesn’t lie would be considered by his peers to be negligent, lazy or foolish.
They inhabit an odd subculture, and they aren’t able to understand anything else.
RE: “Car dealers feel that they’ve been remiss if they don’t lie or attempt to mislead you. A dealer who doesn’t lie would be considered by his peers to be negligent, lazy or foolish. They inhabit an odd subculture, and they aren’t able to understand anything else.”
Its really hard to understand why someone like you might have troubles at a car dealership. Hell, you might even have problems buying from a private individual. But one think really sticks out. IF it is as bad as you say, wouldn’t there be a HUGE profit opportunity for someone to come in and do it right? What’s holding YOU back. Why not put your money where your mouth is?
“Its really hard to understand why someone like you might have troubles at a car dealership.”
Do you suffer from genuine difficulties with reading comprehension, or are you just trying to create a strawman?
I have an easier time buying cars than most people, because I accept the fact that dealers are dirtbags, and I have fun with it. The buyers who are most miserable are the ones who yearn for a better world; I accept it for what it is, and expect no ethics to come from your side of the table.
“But one think really sticks out. IF it is as bad as you say, wouldn’t there be a HUGE profit opportunity for someone to come in and do it right?”
CarMax uses a variation of the low pressure sales model, and produces higher pre-tax margins than the average dealership. You’ll notice that CarMax isn’t particularly cheap; there is a segment of the population that will pay a premium to avoid dealing with guys like you.
To answer your question sir, I don’t think transparency has to mean open book to the customer, in fact as a dealer I wouldn’t buy transparency at all, I would want opacity I only want the customer to worry about if he thinks the price is good.
I think this “transparency” is a red herring the customer doesn’t want to know invoice price, what the dealer paid (does the dealer even know this exactly?) they just want to know what the best price is, the invoice had been a tool to gauge that. I am surprised today where I can get the exact best pricing to bid on priceline for a hotel via information sharing forums, there is not such a thing for prices paid for cars…unfortunately like every one who is up in Vegas there are so many tall tales in car buying everyone got a deal that lost money for the dealer but dealers still make money.
You make too much of buzzwords every day companies are using buzzwords to sell product. For TC it is transparency, in my business it is “cloud computing” we all talk about it but nobody knows what it means…
Indeed, Mr. Ruggles’ “whose version of transparency” question is bogus and off point.
TrueCar doesn’t tout transparency as a virtue, but claims to offer low pressure, a competitive price and support. I have no idea whether or not TrueCar is any good, but I do know that “transparency” isn’t pitched as one of its primary value propositions.
“Cloud computing” is a far easier concept to comprehend then something as opaque as “Transparency”
@ mike978 RE: “Comment: I appreciate Mr Ruggles responding to each comment directed to him, even if we disagree on some things. His perspective is interesting and should be heard.”
Thanks for the kind words. Now if I could only figure out how to respond to each comment without having to scroll through hundreds of posts to find the one I’m trying to answer. This is why I respond many times at the bottom of the page. I do a scan and if I don’t see it on the cursory once over, I answer at the bottom. If there is a better way I would sure like to know about it.
Right hand side of the ttac home page (Recent Comments) after you log on, click on the comment you wish to respond to. Takes you there, then click on Reply to add comment below it.
Thanks for the pointer but I sometimes am away for a while and when I come back I have a number of emails notifying me of comments. Trying to go from email to the exact post is frustrating considering the number of blogs I am responding to at any point in time IF I am even home to do so. I tend to be hit and run, rather than stationary for long periods. There’s got to be a better way than what I’m doing.
Ditto with me, so I completely understand. I also have a life away from the keyboard.
Difference is, with me reading ttac is therapy, a way to de-stress from my hectic life.
Alas, there is no better way to reply to comments since these are the ramifications of using WordPress for such a wildly popular website.
I appreciate TTAC allowing me to pose my question to their audience, even if I might not have made the question abundantly clear.
@ Author: highdesertcat – RE: Comment: I agree. His perspective should be heard. That said, TrueCar and other carbuying services are having an effect on dealers because dealers would prefer that customers deal directly with the dealers instead of having another party help fleece them.”
Instead of having another party help fleece them? Are you sure that’s what you meant to say? Actually, TrueCar IS helping fleece the customer. And dealers have figured out how to get the deal AND save the $300. fee TrueCar charges consumers. But here we have another example of a word used with a blurry definition. There are so many perceptions of what the word fleece means, why even use it? But since you used it, I’ll turn it around on you.
The dealers resent having another party like a broker or carbuying service help them to fleece the customer. The dealers would prefer to fleece the customer all by themselves.
There’s nothing blurry about fleecing a customer. It means parting the customer with as much of their money as a dealership can get away with. Getting additional fleecers involved reduces the take for the dealerships.
I regret to have to admit that I taught many sales staff members at my brothers’ dealerships the art of fleecing over a period of more than thirty years. Mea Culpa. (And I am deeply remorseful)
BTW, if you’re interested, visit wordpress.org to learn more about wordpress. It’s free, and they say it is priceless.
@ Author: Power6 – RE: “Comment: To answer your question sir, I don’t think transparency has to mean open book to the customer, in fact as a dealer I wouldn’t buy transparency at all, I would want opacity I only want the customer to worry about if he thinks the price is good.”
Damn! Great minds think alike, don’t they? :) I agree wholeheartedly. I’m damn sure not in favor of absolute transparency. And I think relative transparency is deceptive. As I mention repeatedly, I am a complete backer of legal transparency in both the letter and the spirit.
A good deal is as much a state of mind as anything. The very best prospect a dealer can have is one who knows a good deal from a bad deal. They can do business quickly, then go on about their business. But those customers are rare, especially in blue collar regions with domestic brands. The better educated buyers tend to buy imports in greater quantity and buy more upscale vehicles where the purchase experience is often improved not only by the fact that the sales people are better compensated because the gross profits are higher, but because they work with much more reasonable consumers.
Interesting, so in your experience “blue collar” areas and/or brands are harder to deal with compared to more affluent brands or areas? If so, is this because of a relative lack of information (like using Edmunds)to allow for a realistic price expectation?
Dealers are scum, and the best way to get a fair price is to be worse scum.
So to get a reasonable deal, you waste their time. This means negotiating their best price, by threatening to walk out unless they give you a better price. You do this for two hours plus, then YOU ACTUALLY WALK OUT.
This is very, very hard to do, they’ll try to make you feel bad.
But you’ll never know you got a good price unless you walk, that’s the way you’re sure they can’t go lower.
Also give them a few days, half the time they call with a better offer.
In terms of transparency, they could give you the actual transaction cost of their last 10 similar sales. That would do it for me and save a lot of time.
Interesting we have another who has figured it all out here. They’ll certainly not remember you when you come in for warranty work. They aren’t that smart, right?
“This means negotiating their best price, by threatening to walk out unless they give you a better price. You do this for two hours plus, then YOU ACTUALLY WALK OUT.”
In a way that gives you the ultimate control, doesn’t it? Which is why it’s really hard to get worked up about all of this, because after all the BS all a customer has to do is say, “Hmmm… Nah” and walk
It shouldn’t make you feel bad at all. I have found it to be quite empowering a very good feeling
@ scott_314 No seller with an ounce of negotiating ability will continue to drop the price without the buyer committing to a price at which they will buy the car.
No buyer should use this technique. The only thing it guarantees is that you will waste your time.
You’re right to presume that dealers are some variation of the stuff at the bottom of a pond.
But dealers are well prepared for confrontational tactics. You’re better off using tactics that they aren’t expecting.
And two hours is at least an hour too long. A good haggle should go faster than that. You aren’t likely to get the best price in five minutes, but there comes a point at which the amount of time spent haggling begins to work against you.
RE: “Indeed, Mr. Ruggles’ “whose version of transparency” quetion is bogus and off point.”
My question is the question. If you don’t want to answer it, don’t. Maybe its a difficult concept for you to understand.
RE: “TrueCar doesn’t tout transparency as a virtue,”
Yea they do. The last time you replied you stated TC doesn’t even claim transparency, citing some advertising. You must think advertising is all there is with TC. I replied with a Scott Painter quote that uses the term transparency word twice in a single paragraph. Funny, no comment from you on being refudiated. :) Good thing cuz I was fixin’ to BURY you with quotes, videos, articles, columns, clippings, etc. where Scott Painter not only brags about bringing transparency to the car buying process, but most certainly touts it as a virtue. Doyou think he bring it up as an evil because ……. ?
RE: “but claims to offer low pressure,”
He can claim anything, he ain’t the dealer.
RE: “a competitive price and support.”
IF a dealer agrees to a certain TC price, ON the same car, the price agreed to is the price agreed to as always. Support? Does Painter think the dealer’s work for him? IS it transparent to not divulge the increase in the dealer’s cost? Who does the consumer think pays for that?
RE: “I have no idea whether or not TrueCar is any good, but I do know that “transparency” isn’t pitched as one of its primary value propositions.”
You are obviously working with woefully incomplete information. I just sent you an exact quote from Painter’s letter to the industry. How much more do you want?
If you want to understand what a company does to market itself to consumers, you’re best off looking at the marketing materials that it directs toward consumers.
In the future, I will ignore any of your replies that aren’t posted in the appropriate place in the thread. Have a nice time talking to yourself.
BTW, I didn’t start this to make it about TrueCar. I started it to out people claiming they are bringing transparency to our business when they really aren’t. BUT some here want to talk about TrueCar, so WTF.
http://www.truecar.com/static/references/TrueCar_Dealer_Portal_FINAL.pdf
Scott Painter – Dec 2001 – “We also believe that transparency is the centerpiece of trusting relationships.” In 2012 he says he lost $78 million due to dealer push back now being investigated by the FTC. More –
“TrueCar’s mission is to bring transparency to car buying … monthly report, providing clarity into consumer buying trends and auto manufacturer performance.”
I think it is clear that transparency is not only in their value proposition, it’s in their mission statement. But I can bring a LOT more.
RE: “I have an easier time buying cars than most people, because I accept the fact that dealers are dirtbags, and I have fun with it.”
And I’d love to have YOU as an UP, especially if I didn’t have anything else to do and was bored, which is rare.
RE: ” The buyers who are most miserable are the ones who yearn for a better world; I accept it for what it is, and expect no ethics to come from your side of the table.”
Good. You’ll get exactly what you deserve from me.
RE: “CarMax uses a variation of the low pressure sales model, and produces higher pre-tax margins than the average dealership.”
You are comparing a strictly pre-owned operation to new car dealerships. As an amateur I can understand why you might not understand why your comparison is invalid.
RE: “You’ll notice that CarMax isn’t particularly cheap; there is a segment of the population that will pay a premium to avoid dealing with guys like you.”
Again, used car dealers and new car dealerships only have their used car departments in common. BUT it IS TRUE that a segment of the population will pay extra to avoid certain things. It probably won’t be me, but it is true that Saturn lasted for a while as did the Ford Collection even while losing millions. I suspect that’s the real reason you don’t put YOUR money where your mouth is and buy your own dealership. But you’ve said we’re all scum. But you cite Carmax as an exception. Make up your mind. Which is it.
RE: “No seller with an ounce of negotiating ability will continue to drop the price without the buyer committing to a price at which they will buy the car. No buyer should use this technique. The only thing it guarantees is that you will waste your time.”
Actually, it might also guarantee that the sales staff and management will screw with you.
That’s the whole point of walking, the customer already feels that you’ve screwed with him long enough, once he walks out the door he can no longer be screwed with. Game Over
And then what, you don’t buy a car? Who lost, who won?
Your technique sets you up for a “low-ball”. The dealer will offer you a deal good for right that second only. You figure you can do better than that final offer somewhere else or worst case come back a couple days later and still get the offer. You will not find a better deal and when you come back to the dealership, whose time you wasted, first demanding and then begging for the deal they offered you, you won’t get it! If they even still want to do business with you, you will have to begin negotiating all over again.
Or you could have saved time and tried to find a win-win middle ground that first day. When you treat people with respect, you get it back.
“When you treat people with respect, you get it back.”
Car dealers don’t see the customer as a peer to be respected, but as a mark to be conned, an inferior who deserves to be bullied, shouted down and manipulated into submission.
It’s absolutely foolish for the average car buyer to treat a car purchase as a win-win deal. That’s a recipe for overpaying, and should be avoided.
@pch what is overpaying? Someone would have to be a fool to pay over sticker unintentionally.
The value of the product must exceed the value of the money for a transaction to occur. Any deal both parties agree to is fair.
I think consumers would have a better time if they focus more on what they are buying and how much they are spending instead of obsessing about how much the dealer is making.
“what is overpaying?”
Paying more than is necessary. The concept should be pretty obvious.
“Any deal both parties agree to is fair.”
And car dealers aspire to strike a deal that the buyer doesn’t understand.
“I think consumers would have a better time if they focus more on what they are buying and how much they are spending instead of obsessing about how much the dealer is making.”
Of course you believe that. You’re a car salesman — it helps you if buyers believe such nonsense.
Understanding the dealer’s inventory costs is useful because it helps buyers to make a better guesstimate of what the lowest price point could be. A buyer who has no clue about what things cost is more likely to pay too much.
The last place that car buyers should get guidance for car shopping is from car salesmen. The “advice” is invariably bad for the buyer; car salesmen have no desire to make sure that you get the best price possible.
The “walking” scenario is a tactic used when there’s been a last minute “gotcha” pulled that you weren’t expecting, like when the contract to be signed has different figures then what was previously agreed to. Don’t automatically assume that it’s a customer stunt to get a lower price, but if there is no “meeting of the minds” then there is no contract, so what else would you do except walk?
I think ruggles and I were responding to scott’s motivation for walking. Which was to intentionally waste the seller’s time, demanding better deals then walking away anyway, no matter the deal he is offered.
Just trying to explain why it’s a bad idea.
It’s a very good thing that either party can end the transaction if they think the other party is not being fair.
OK, I see the difference
Scott’s point was that he expects to get a phone call after doing The Walk.
He’s has a point. That can be an effective tactic (although I would suggest that spending two hours at the dealership prior to walking out is a bit too long.)
RE: “There’s nothing blurry about fleecing a customer.”
Yea there is. I a dealership makes an average deal, about $3K, some will feel fleeced while some won’t.
RE: “It means parting the customer with as much of their money as a dealership can get away with.”
The only way to average $3K is to charge some extra and some less to meet the average. Maybe we should fault the screws who get the better deals someone else has to pay for? OR maybe someone should legislate equal results for everyone? If dealers knew they could make a decent average per deal, they could focus on other things. DO I hear a vote for “price fixing” or is everyone fine with the current system?
That’s why my method of buying a new vehicle works best for me. After deciding that I want to buy something, all I need to know is what the dealership needs to sell it for.
They only get one shot at me. And only one shot. I tell them that upfront. I don’t haggle. If it is within my window of buying opportunity, I’ll buy. If not, I’ll pass and go elsewhere.
And I have never bought anything from any of my brothers in the business. That would just be bad karma.
BTW, I’m not against a dealer making money. That’s the way for them to stay in business. But dealer efficiency is the factor that drives the margin. There is no way to be transparent about that since every dealership has its own unique fixed expenses and overhead.
When my brothers retired and sold the dealerships to one of America’s largest wholesalers they found out just how inefficient their individual dealerships were because the new owner not only cut staff and brought their own “people” on board, but is able to sell at less fixed margin than at any time prior to sale.
http://www.mnn.com/green-tech/transportation/blogs/guaranteed-low-prices-truecars-transparency-riles-dealers
RE: “That’s the whole point of walking, the customer already feels that you’ve screwed with him long enough, once he walks out the door he can no longer be screwed with.”
And the dealership is often glad to see them go. This happens a lot when a consumer is a blowhard and is on a particular car that is in short supply. All the sales people will have appointments with folks to come in to see and transact and the blowhard walks in to do us a favor by taking it off our hands for some cheap price. Yea, we might screw with him if they get abusive. A favorite is to have someone walk over and put a sold tag under the wiper while the blowhard is pontificating, asking him, “Should we call you if the financing doesn’t go through?” OR there are some other ones you might be able to afford but if you want one for this price there are some brown ones with green interiors out there. Dealerships generally know how to send certain people DDR. (Down De Road) If they exceed the G&A quotient, (Grief and Aggravation) they’re gone. We’ll rarely call them a son of a bitch but we might ask, “Are you sure your parents got married?”
Like I said above if there is no “meeting of the minds” then there is no contract. If the dealer pulls some last minute surprise to get more money out of the customer then the dealer is screwing with the customer and he should walk. There are many examples of this already given in this thread and my point was that walking is the ultimate option of the customer if he is not comfortable with the transaction. He can find the same or similar car elsewhere, but once the sale is lost, it’s lost forever
A dealers net cost price on a particular unit can vary from day to day. For example, people who bought a certain Honda at the end of November probably paid $3K more for the same car than someone who bought at the end of December. Consumers hate that. Manufacturers don’t care. They know the consumer will blame it on the dealer, NOT the manufacturer.
So exactly how does a dealer provide a locked in price quote expected to be good for days?
@ mike978 – re: “Interesting, so in your experience “blue collar” areas and/or brands are harder to deal with compared to more affluent brands or areas? If so, is this because of a relative lack of information (like using Edmunds)to allow for a realistic price expectation?”
Any place where credit isn’t aces, straights, and flushes is sometimes harder to make deals but it is mostly because the payments are higher than expected, its more difficult to gain financing at all, and the consumers aren’t the most sophisticated. They tend to blame everything on the dealer because they don’t know any better. If the payment is high because of the interest rate, they don’t understand it is the lender driving that. If the current rebates are less than last week, who gets blamed for that?
I once had a lady to tell me to “just switch the window stickers” when the car she wanted had one higher than one next to it. She was serious.
The most fun I ever had in the auto business was in Evanston IL, the North Shore, so to speak. The people there had mostly old money. They wanted you to make a profit so you’d value their business when they came into the shop. They knew enough not to expect more than they had coming. It was an absolute joy. Most of them understood business, which made things much easier. EVERYONE financed. The rates were subvented and real world rates were around 16%.
The Toyota business in Kansas City KS was the worst. Every deal was a grind and had to be made back up in F&I. We often delivered vehicles for a front end loss. But it wasn’t my store, so I didn’t make the rules.
@ PCH101 – Someone must have burned you good. I get that you hate car dealers. What is so interesting is your assertions that they are all they same. Common sense would say that’ just wrong. Yet, you cling to it with ever more broad brushing arbitrary statements. Of course, we all know you aren’t presenting opinion as fact. And you are entitled to your opinion. But whomever got you must have really done a job on you.
I don’t hate car dealers.
I’ve never been burned by a car dealer (although they have certainly given it their best shot. Fortunately, it’s easy to spot the cheap tactics from miles away.)
Frankly, I’m surprised that very many people are burned by dealers, as they are so predictable, unsophisticated and hamfisted that it’s a surprise that consumers haven’t figured out how to deal with them. It’s a game, and people should learn to have fun with it instead of resenting it.
Nonetheless, it’s obvious that many people have been burned by car dealers, and the internet is full of car dealers who provide bad “advice” that only encourages buyers to overpay.
Believe it or not, I’m probably one of the only posters here who doesn’t hate you. As I noted, one can learn a great deal from you if your comments are read between the lines.
It doesn’t take clinical knowledge to recognize your level of vitriol. Yes, there are a handful here but mostly a lot of the kind of lack of understanding that exists in “consumerland.” There are many who don’t have any idea what constitutes “burned.” Painting all with the same broad brush lacks all credibility, but youreally aren’t here for the credibility. But it absolutely IS a “game.”
“In life and business, you don’t get what you deserve, you get what you negotiate.” Charles Karrass
If you don’t want to run with the big dogs, stay on the porch. Hire an attorney or maven to do your negotiating for you. Never grow up and take responsibility.
You have yet to define “over pay.” But you use such terms as if everyone knows what it means.
I didn’t come here to be liked or disliked. I came to get an answer to a question about transparency. It was more a survey exercise than anything else but I enjoy the back and forth.
There’s no vitriol. I understand that you want to reclassify this as some sort of personal discussion, but I’m merely pointing out that car dealers are inherently untrustworthy and should be treated accordingly.
What’s funny is that you’ve confirmed my assertions. You’ve gone on record here, blaming consumers when the dealer writes up paperwork with inflated numbers that don’t conform with previously negotiated terms.
The fact that you don’t have enough honor to be entrusted with even basic secretarial skiils says far more about you than I could possibly say. You haven’t done your side any favors; you’ve come out of this looking worse than when you started.
“What is the true definition of “transparency.”
Mr. Sgruggles is the winner.
Although some lipstick was lost in the course of the discussion.
@ruggles – “you still sound like as a salesman and the point is……. That isn’t meant as a compliment.”
Maybe I sound like a sales person because I AM one? Was that ever in doubt? As far as it not being a compliment, I’ll not lose any sleep.
RE: “What part of what I am saying that you don’t comprehend or perhaps cannot comprehend?”
What’s not clear? There are plenty of cranks like you running around.
RE: “I mention paramedics and nurses as being “most trusted” not because of skill but honesty and the ability to build a relationship for the benefit of the patient/client. Salesman tend to do the opposite, build trust for the sake of the commission. People read that and do not like it.”
FLASH! We don’t care. Who do you think makes the payroll if stuff doesn’t get sold? Sorry the basics of business have escaped you.
RE: “The fact that as you say.”let them shop until they find a level of transparency they are happy with” is part of what is wrong with the system.”
Then what is stopping you from putting your big mouth to work with your OWN FUNDS to show us all how to do it? You’d make a fortune, right? Why not reap the rewards of your wisdom?
RE: “That is a take it or leave it attitude that contributes to the fact that people think salesman are bottom feeders. It sounds like you are saying that you will only deal with those willing to be fleeced.”
I don’t make deals if I can’t make money, period. Shocked? Let’s see what you do if and when you decide to show us how it should be done. Until then, you’re nothing but a back bench second guesser. Probably a lifetime employee. I’m not picking up any entrepreneurial vibe from you.
RE: “If people feel they are being used when as you say they are not…… Isn’t that a sign of something wrong with the system?”
If they feel they are being used, why did they agree in the first place?
RE: “The hawk/dove metaphor is just a way of explaining adversarial interactions. As far as what society I ascribe to…. Looks like you broke out the “bleeding heart liberal” paintbrush on that one.”
You have to understand something before you can explain it. So what’s the answer to the question? Equal results or equal opportunity? Pick your poison, but don’t be shy.
RE: “Why do you think sales staff, and dealers have such a bad reputation?”
I don’t worry about it. It isn’t important. Why do employees always second guess their boss or owner, and think they could do a better job? Why do so many employees envy and resent the owner’s toys.
RE: “The fact that you have tried to discredit or pick apart my comments is interesting and also shows another reason why people distrust salesman.”
The pick apart stuff didn’t take a lot of effort.
You spray yourself with Teflon or is being greasy enough?
@Ruggles – You are educated so you know what a paradigm is and what is required to cause a paradigm shift. You are obviously trapped within the retail sales paradigm.
Do Certified Behavior Analysts have a governing body that self regulates the practice of its members or deals with public complaints against its members?
You are very defensive about any criticism and have jumped to all sorts of conclusions about me. It is rather amusing really and your replies do reinforce every stereotype of individuals employed in the sales portion of the auto industry.
Any “professional” i.e. member of a self regulated professional body when confronted by comments from people shining a negative light upon that profession would ask why they feel that way and what experiences led them to that point of view as opposed to shooting the messenger.
You comments are interesting and the part that I find hilarious in its irony is that one of the individuals I have to deal with professionally makes virtually all of the same comments you do when he is confronted about his “life choices”. That individual happens to be a drug dealer with a history of violence and in currently incarcerated. He does have a rather interesting personality disorder that views himself as blameless and of course, blames everything on everyone else.
Car dealer…………. drug dealer…………. drug dealer …………car dealer…………..
Now there is a metaphor that I find amusing.
He does aspire to the entrepreneurial model that you defend.
That would be running a business designed to extract as much money from his clientele as possible while minimizing risk. The primary purpose is to move as much product as possible with minimal regard to the clientele. Ultimately they don’t care because their will always be a steady volume of repeat customers since the rate of addiction to the product sold is very high and there is a take it or leave it mentality in regards to selling the product.
You missed a golden opportunity to improve the image of salesman and the auto industry but instead you have done the opposite.
There is a side of me that expected more but since I’ve been dealing with people of all stripes my entire career, your replies were expected and my comments were designed to fish out your character.
That is what happens when one fishes at the shallow end of the swamp.
No one likes to be played.
Looks like you totally blew the “personality assessment” of this poster.
@Lou_BC Did ruggles get under your skin? Push your buttons? I think his public persona is very much a facade and his replies are meant to elicit a reaction.
He has an agenda and it is not necessarily to present himself, the sales profession, or dealerships in a positive or even accurate light.
Consider he simply wants people to react negatively to him, it seems to have motivated a lot of people to comment on his article, just look at the post count. What’ that saying in retail? A happy customer tells 3 friends, and angry one tells 30, or something like that.
I am also curious to hear what your “personality assessment” is of me, also a car salesman. Do I seem narcissistic/sociopathic? Why or why not?
The whole auto sales industry has a bad rep, but often those at the bottom are working a job just trying to get by. It takes a concentration of those attributes to work up the ladder in a competitive pool of pathology, so draw your own conclusions about how Ruggles lasted so long in that field.
Mr. Ruggles is a consultant to the retail side of the car business, and a true believer in the cause.
And anyone who is familiar with dealer training programs should recognize the rhetoric and the sentiments that he expresses. He ain’t kidding, and dealers hate it when they can’t control the dialogue.
@Exit – no he didn’t.
The point is that there is a very poor perception of car sales staff and the industry in general.
The industry needs to look at that.
If Mr. Ruggles is in fact putting forward a “blog persona” as you imply, I’ve already pointed out that he has confirmed every pre-existing assumption of individuals in the auto retail industry.
I also have pointed out that he missed a golden opportunity to dispel those myths.
He is a behavioural analyst by education so why didn’t he explain from that professional viewpoint why the auto sales industry rates so poorly? He mentions right off the bat at the start of his comments:
” This week’s Ur-Turn comes from David Ruggles, a noted industry figure, prolific TTAC commenter and author of the Autos and Economics blog.
In my 44 years in the auto industry there have been a couple of continuing themes I have observed. First, there is never ending change. Second, consumers are uncomfortable with the negotiating process required when buying a vehicle. These days vendors to auto dealers are trying to sell dealers on the concept that “transparency” is the key to success in selling cars.”
The auto industry retail segment already has much success in selling cars but poor success in relation to perception of the industry and trust in those who do the selling. As I pointed out in my “drug dealer” comment, clientele want, need, and desire the product. They have to go to a dealer to buy a vehicle. The infrastructure of the USA is patterned around the motor vehicle. They basically have no choice. Auto dealers have a captive audience and any dealer that does not go with mainstream orthodoxy (industry paradigm) will be at a disadvantage.
@ PCH101-You have made another series of wild and baseless and arbitrary statements. You can start by showing anyone where I’ve gone on record about dealer “secretarial skills” in any way or blamed consumers if it happens.
You think I came here to enhance my image? :)
The only side I defend is the facts. Everyone has their own opinion. I don’t deal much with opinions.
“MY question is, “What is the true definition of “transparency.”
The answer is, it doesn’t matter because it doesn’t exist when it it comes to the actual cost of the car. It’s not just the what the dealer pays the OEM, there’s the portion of what it costs to run the operation that must be factored in to each car sold and since those costs are fluid it would be almost impossible to determine what the actual cost is of each car sold for the sake of transparency. As far as I can tell companies like True Car only add another layer to those costs but are useful to the most naive of car buyers who would get totally screwed without some outside assistance. If you’ve ever visited a third world resort area without a guide you get the picture
What is transparent is the extremely deceitful, but obvious lengths a car dealer will go to to get every penny from the buyer it can grab. If it wasn’t so comical in it’s juvenile execution it would be insulting. Foursquare was a game of dodgeball in grammar school, ironic name for their main selling model. Will it ever change? No, what used to be Gypsies and carnival shysters are now car dealers and should be dealt with in the same manner, but enjoy circus there are more clowns then ever
Lie2me, unless a person is actually a component within the business, like an owner, sales manager, salesman/woman, it is next to impossible to get a true look into the operation of any selling enterprise.
Notice that I leave out the beancounters, bookkeepers, and other non-selling members of the dealership staff here, because those people are a part of the fixed costs and overhead of any dealer enterprise. They don’t make money for the store, but they sure cost a lot to keep around.
So the bottom line remains in that the dealer has to sell in order to make money and stay in business. Some of the comments that were offered here in response to Dave Ruggles’ question clearly were from people who never had to make payroll.
So in that sense, the best any buyer can hope for when it comes to transparency in any carbuying venture is about as clear as mud.
I applaud Dave Ruggles for his background research of polling the great unwashed masses to reflect the vox populi when it comes to buying cars. Valuable stuff, all these inputs.
@pch do you prefer fixed pricing? Are you willing to pay more so that other people can pay less? The current system allows people who care more about discounts to get greater discounts.
Do you feel cheated when you buy a car? Why do you assume other consumers feel any different from you? It seems you think car dealers constantly defraud their customers. Is it so hard to believe that in an overwhelming majority of dealerships consumers are treated with respect and honesty?
Dealerships know that you can shear a sheep over and over but only skin it once. The money is made in the service department, they cannot alienate their customer base and believe it or not, they want their customers to recommend their dealership and come back to buy more cars.
The internet is full of complaints from a vocal minority of consumers. Some of them, like you, will even make baseless accusations and generalizations just to hop on the “I hate dealerships” bandwagon.
Will someone who has actually purchased a new car in the last ten years please reply to this post and explain how they were scammed, conned, or cheated by the dealership they bought their car from? Only personal experiences and please be detailed. Let’s count the number of responses.
“do you prefer fixed pricing?”
I’ve made it quite clear that I don’t.
“Are you willing to pay more so that other people can pay less?”
A car dealer isn’t going to pass on higher prices paid by me to benefit other customers. A price increase charged to me wouldn’t help anyone except the dealership.
“Do you feel cheated when you buy a car?”
I’ve never been ripped off, because I know what to expect and how to deal with it. But it’s a bit insulting to the intelligence to watch them try — if you’re going to cheat me, then at least try to be a bit more sophisticated and clever about it.
“Is it so hard to believe that in an overwhelming majority of dealerships consumers are treated with respect and honesty?”
Yes.
Sorry to have come to the party so late. I believe the only meaningful deffinition of transparency is the one given in the post. I don’t agree that it’s impossible in a car purchase. The information should be available to those who look. When it’s frequently framed in intentionally misleading or uninteligible forms, there needs to be standardization even (gasp) legaly required and regulated labeling. If you want to sell “paint protection & undercoating” follow the laws for insurance and market it as such. If I go to Whole Foods and buy a major market brand product only to find out I paid more than someone who went to a discount grocer, I’m not offended. If I find out he went to the same store I did but had a lighter skin tone, nicer haircut, was taller etc. and paid 5% less, I’m offended.
Mr. Ruggles believes that the car sales business is so competitive that it is absolutely necessary to be cutthroat and disceptive, and to play things close to the vest.
Furthermore, he doesn’t believe that anyone who isn’t in the car sales business is in a position to say otherwise.
It’s the teenager’s old refrain: Everybody hates him, nobody understands him.
Actually, Ruggles believes a dealer can run his place of business however he wants to. If he wants to give consumers what consumers want, he is free to do so. And you Mr. PCH101 are free to open your own dealership and make a fortune giving consumers what they want. I wonder what’s stopping you. You’d make a fortune, right? Giving consumers what they want would make them all flock to you and send their friends and relatives. You couldn’t spend all the money you’d make…. but altruistic dude that you are, you’d probably give it all away and make it up in volume and high CSI scores.
This line of argument of yours is pretty weak sauce, I hope you know.
I can imagine dealing with you in a restaurant. “Well, Mr. Ruggles, tough s**t if you don’t like your meal. If you don’t like it, go open your own restaurant.”
It would be amusing to see you get bad service at the local Fed Ex office. “Well, Mr. Ruggles, if you’re unhappy that your package arrived late, then open your own damned package delivery service.”
Etc., etc. Come up with a more substantive retort; only a kid wouldn’t be able to see the obvious problem with your “argument.”
Do you expect Ruth’s Chris service at MacDonald’s or MacDonald’s pricing at Ruth’s Chris? Auto dealers have been shaped by the market. Consumers historically haven’t supported one price stores or those with no pressure sales.
Is there some reason that you guys keep throwing out this “one price store” nonsense?
Not only have I not suggested such a thing, I’ve actually argued against it.
Again, try using an argument that isn’t completely contrived or based upon something that I never said.
exit, you’re conflating the product with the often negative value provided by the dealership.
The real question is why consumers continue to suffer frequently poor experiences in order to obtain the desirable cars. Some reasons were provided:
1. Many people simply don’t do that much research even for this large transaction, which you should be well aware of.
2. Convenience of location. If laziness results in 1, it’s just as applicable here.
3. Very infrequent transactions lessens the resolve to do better.
In many ways this is a classic case of information asymmetry manifest in market economies. Certainly given perfectly rational/informed consumers predatory dealers wouldn’t exist, but that rather begs the question.
Apologies if this was mentioned somewhere in the middle of the comments, I might have missed it.
In response to ‘But there is no other retail business I can think of where consumers feel entitled to “symmetrical information.” ‘, that is categorically incorrect. In a vast swath of the computer and related marketplace I can see the list of parts that make up my device, say an iPad, and the rough wholesale price of those parts. We know with a reasonable degree of accuracy what the BOM on an iPad air is, ($274).
With desktop PCs, I can even build my own from roughly the same parts as Dell does and compare my costs against theirs. I have a huge amount of symmetrical information at my fingertips.
Since I’m dealing with the manufacturer in these cases, the information is the price of manufacture, with a car dealer, it would be the wholesale prices of the car and the price of any “extras” (financing, extended warrenty).
There are other markets where this sort of information parity exists (luxury watches), but scarcity and less tangible effects drive prices in strange ways (see Rolex Steel Daytona prices)
JSP
Yep. And he has apparently also never heard of stock, bond and commodities markets, either.
If you want to know the current price of a stock, commodity, etc. on a major exchange, then you can find out that price immediately, within seconds. One can debate whether it is a good deal, but there is no argument about what other people are paying for that item at that moment, in real time.
One could argue that this makes markets better for everyone, since it removes the ambiguity from the price of the trade. But car dealers usually benefit from asymmetry and earn less when the buyer is informed, so I can see why they don’t want it.
I’ve never heard of stocks and bonds? Really?
Yes, car dealers benefit from the asymmetry. That’s the point. Efficient markets do not support middle men. Middle men is what dealers are. Get used to it. They aren’t going anywhere. Whether or not everyone here gets it or not the service provided supports their existence. Getting rid of dealers raises the cost of new vehicles to consumers, not lowers them.
This conversation might go somewhere with business people but lifetime employees will never understand it.
“Efficient markets do not support middle men.”
Stock brokers are middlemen.
The issue here isn’t hard to understand. Buyers simply want a straightforward price such that they can decide whether it’s justifiable, just like any other purchase. The only reason they even bother to find “invoice” prices is to level the asymmetrical negotiating field. If dealers weren’t so predatory in the first place, few would take the effort since it can be reasonably assumed the stable market rate is fair (just as they don’t for other purchases).
That said, to be fair to the dealership business this is a classic case of the Tragedy of the Commons whereby the well is so poisoned by the unethical dealers that it’s difficult for an honest one to survive. The whole industry would benefit from “true” pricing, yet each one is too selfish/greedy to give up a little to benefit collectively.
Yes, dealers know consumers want to come in and easily receive a shopping price. Dealers would also like to know their own net cost but OEMs keep them in the dark. I don’t expect consumers to understand this and frankly don’t care if they do or they don’t.
Consumers will never understand that some have to pay more so the mooches can pay less. The system is set up that way and it won’t change until the FTC allows price fixing. It is a given that most consumers are lifetime employees and will never understand business. Being overly concerned about it won’t cure anything. So beyond a certain point, dealers don’t care. Part of consumer negotiation is the threat of being pissed off if you don’t get what you want. That’s negotiation 101. We’ve heard it all.
In a capitalist economy consumers don’t need to know how “business” works, only how the market works. Currently dealers provide little to negative value to the purchasing process. This is only sustainable in a market when no alternative exists. That’s why dealers are combating tooth and nail against alternatives like Tesla’s dealerless initiative.
RE: “If Mr. Ruggles is in fact putting forward a “blog persona” as you imply, I’ve already pointed out that he has confirmed every pre-existing assumption of individuals in the auto retail industry.”
It was never my intention to try to convince a few people on a blog one way or another about auto dealers. The fact is, dealers aren’t concerned about a few cranks and don’t stay up nights if there are a few feathers ruffled. There IS concern about a few bad actors among car dealers that we would all like to weed out but the fact is, many people think they were wronged and weren’t. At the end of the day, we get up the next morning and do it all again. There is never a dull moment. And I certainly do not speak for all car dealers. Active dealers aren’t likely to be as candid as I am.
RE: “I also have pointed out that he missed a golden opportunity to dispel those myths.”
See above.
RE: “He is a behavioural analyst by education so why didn’t he explain from that professional viewpoint why the auto sales industry rates so poorly? He mentions right off the bat at the start of his comments:
” This week’s Ur-Turn comes from David Ruggles, a noted industry figure, prolific TTAC commenter and author of the Autos and Economics blog.”
BTW, I didn’t write any of that. TTAC wrote it. I asked them if it was okay with them to pose a question to the group and they permitted it. The fact that many took another opportunity to complain about auto dealers was just a sideshow. I have no desire to defend car dealers. IN the big picture they need no defense. They are typically local merchants who do a lot of business, generate a lot of tax revenue for their locale, provide very useful services in a competitive atmosphere, and satisfy enough people to sell around 35 million new and used vehicles yearly. For those who don’t want to play the game I suggest they hire a nanny to go with them on their car search or go to a One Price store. If they were really serious, they could have supported Saturn.
You know, you could write a book based on all the comments you have elicited with this article and it would be a must-read for anyone in the business. Thar’s some pure gold in these comments, fer sure!
The book will be entitled “Everybody Drives a Used Car.”
Glad you appreciate candor.
You could bypass your first million and head straight for your second million bucks.
Candor is what it is all about, and some contributors, as you have found out, simply cannot stand to have someone hold different values and beliefs from theirs.
But that is what makes the world (automotive world?) go’round.
I love reading articles by people who were actually part of the business and were in the arena to do battle every day.
When reading the replies and comments offered by others in retort I have to smile since many of those people clearly think in the theoretical, and not in terms of the practical real world, where having to make payroll is one factor they never had to consider.
It’s all so easy for them to stand on the sidelines and cast stones, and to never have been part of the decision-making process that drives the business.
And that’s the difference between the decision-making line-staff, and the support-staff of bean counters, administrative help, and other ancillary employees who do not generate income for the store.
You are correct that the values of customers and the dealers in this aren’t aligned. However, push comes to shove the necessity of one over the other is not in question.
Treating the necessary part of the business poorly doesn’t exactly endear Ruggles and his kind to others in the industry either. They’re *at best* a necessary evil for now.
agenthex, are you in the business?
I’m sorry if you have previously outlined your affiliation with the industry, I have been unavoidably occupied with other real-world matters and may have missed it.
I was only loosely affiliated with auto. I don’t think many would disagree with the sentiments expressed by most readers here, though. Outside of dealing with sales depts of dealers (and maybe the UAW for political rather than practical reasons) most customers tend to have positive view of the auto industry.
Well said.
I have said repeatedly that I don’t speak for dealers, certainly not active dealers. I’m semi retired and write about the industry. It seems I have found a concentration of consumers who feel they have been abused, and think that since they are in the majority on this blog, their numbers are of equal percentage in the real world. The industry is in a nice state of balance at the current time. Dealers are netting their historical 3% net to sales or so. Consumers have never had so many advantages and have never complained more loudly. If that doesn’t tell you something, you’ll never get it.
agenthex, yup, people continue to go to the dealers to buy that car that they want, be it new or used.
Of course, current laws being what they are, the buyers really don’t have any other place to go. Elon Musk is hoping to change that, but he will fail.
And as long as people are forced to go to a dealer to buy a new car, they are fair game, forced to go there like sheep to a shearing. And most of them allow themselves to be scalped.
I’d like to see a return to factory-direct buying, but that will never happen. I bought two new cars that way, factory direct, when I was in the military and it was a pain-free, excellent experience. Checked off what I wanted on the purchase order and it was built to order, delivered to my place of choosing.
I was drafted against my wishes into the bid’ness but I learned a lot over the decades.
IMO, best way to buy a car is haggle-free by asking the dealer what they need to sell it for, and if it is within my buying window, buy it. If not, walk away.
By buying window I mean the amount of money I am willing to pay after I do my due diligence and research, for that vehicle.
As an example, the dealer cost is roughly 86% of the MSRP, not counting factory/distributor to dealership incentives and hold-back, if any. Then decide how much of that 14% you want to allow the dealer to make.
Popular models like the Grand Cherokee often sell 3% – 5% over MSRP, plus all the dealer-installed crap no one wants or needs. It’s called padding.
And the dealers get away with it because they can. Many people allow themselves to be talked into parting with all that money because they buy on emotion, not out of necessity. Like wants vs needs.
The sole purpose of a dealership is to part the buyer with as much of their money as they can get away with.
But people always have the option to walk away. Most don’t, and like Dave wrote, “They pay for it.”
RE: The point is that there is a very poor perception of car sales staff and the industry in general.”
True. I have posted Steve Finlay’s fine piece on the subject and will do so again.
http://wardsauto.com/blog/people-love-their-dealer-hate-yours
RE: “The industry needs to look at that.”
The industry HAS looked at that. The industry is quite large and knows there are some bad actors. There are even a lot of not so artful practitioners. And there are hordes of attorneys and regulators scrutinizing the business, which I applaud. But one fact remains. What consumers think they primarily dislike isn’t going to change so the industry isn’t looking at that very hard. The industry has tried various ways to give them what they have wanted and consumers haven’t supported it. But consumers are free to support other One Price dealers if they can find them. I suspect they won’t support them to the degree they need to to flourish. If they don’t flourish, capital will flock to the ones that do. That’s how it works.
I’m not sure what the point of this whole exercise has been given it has only reinforced the ingrained stereotypes of dealers as apologetically predatory to the point of unscrupulous (and sometimes beyond).
As to what the future holds, these dinosaurs are battling startups with new ideas like Tesla not just on the market but the legislature. The old dealership model can persist since people are willing to put up with a bad experience once every few years at most for a compelling product. The current cost of figuring out alternative paths is overriden by its seldom nature, but the greater availability of info through technology will continue to push down the cost of research to consumers.
As it stands, it’s pretty obvious the car shopping experience is so unpleasant that dealers are milking their middlemen cut from a negative value. There’s certainly efficiency to be gained there in the long term.
@ Agenthex – Where on earth do you get the “apologetically” part?
What do you think happens if OEMs start opening their own dealerships in competition with their own franchise dealers? You really haven’t thought this through, have you. You put out opinion as fact. Are you another abused consumer who needs a nanny to go with you when you buy a car? You certainly don’t negotiate business deals which eliminates you from consideration for business executive status. Another lifetime employee?
It’s not surprising that someone with such a poor professional attitude is working with car sales. It would be difficult to find other businesses willing to tolerate such a demeanor.
I’m generally the one accompanying others to deal with those such as yourself. It’s pretty easy once the customers learn to stop treating them as ethical businessfolk.
BTW, I meant “unapologetic”. Like most of these issues it’s not hard to figure out.
RE: “The part of the dealership which provides some value is the showroom. The subsequent buying experience as it stands now presents a negative value.”
Arbitrary. Do you have actually credentials? Facts? Data?
RE: “Your contention is that the parasitic nature of the latter is somehow necessary for the entire operation to function.”
You can characterize it however you want to. If you don’t want to engage in commerce, don’t.
RE: “This is trivially untrue given just about any other industry manages to function without it.”
In case you haven’t noticed, vehicles and gadgets don’t have a lot in common. Perhaps the government should take it over to make sure everyone pays the same price so no one gets their feelings hurt. Is that what you want? Price fixing works for you? I suggest you actually learn how the current system works before setting yourself up as expert enough to “fix” it.
RE: “Therefore it’s incumbent upon you (not anyone else) to present a compelling argument for its existence. Bilking customers to stroking your own ego is not a compelling argument.”
Man, you are full of the arbitrary aren’t you. NOTHING is incumbent on me. The current system works. That’s all you need to know. And its not going anywhere.
RE: “I would acknowledge that often inefficiencies exist in business for historical reasons simply based on inertia. Sometimes the cost of overcoming a cancer can be high. However this also not a compelling argument if we’re to believe in a market economy.”
So what exactly would a market economy look like to YOU?
RE: “As to whether or not I understand the business, note that the very simply change of empowering customers with invoice costs has drastically cut into margins of the new car sales business (for at least those customers). The way that dealers have forced the customers’ hand it wouldn’t be long before this becomes more pervasive incl for used sales as technology marches on.”
And if it comes to pass it is no longer profitable for dealers to exist because their current 3% net is more than the market deems as fair, what do you think happens then? How do cars get distributed? Serviced? Do you think Tesla is going to show us all how its done?
It’s also worth noting that most of society doesn’t operate (nor would tolerate operating) like dealer sales depts. Therefore the application of your experience is fairly limited to the world at large as I’m trying to observe things.
Someone in that insular bubble should look to see how and why things work elsewhere where customers are mostly pleased, instead of expecting everyone else to come around to their point of view where just about everyone hates them.
RE: “Author: agenthex Comment: In a capitalist economy consumers don’t need to know how “business” works, only how the market works. Currently dealers provide little to negative value to the purchasing process. This is only sustainable in a market when no alternative exists. That’s why dealers are combating tooth and nail against alternatives like Tesla’s dealerless initiative.”
Well, this is kinda funny. First, only a few auto dealers are pushing back against Tesla’s initiative. I’m not one of them. Most dealers could care less. Tesla has plenty of challenges left and the dealer model isn’t threatened in the least.
http://www.autonews.com/article/20140113/OEM/301139981/audacious-growth-plans-will-stretch-tesla-beyond-its-comfort-zone#
Some of the Tesla boosters here might want to read the article at the link to bring them back down to earth.
If dealers didn’t care, then surely there’s no need for the franchising laws they themselves pushed (ie paid) for in every state. It’s difficult to argue that dealers aren’t the weak link in the automotive chain (ie highest cost for lowest return), and this was evident enough during the domestic manufacturer bankruptcies. There’ll likely be far more reliance on protecting their business via franchise laws as the last throes of an obsolete model.
Dealers don’t want manufacturers to compete against them, poaching their customers or otherwise cherry picking the best locations.
The problem is particularly worrisome for the dealer because (a) it costs a lot to open a store, (b) that store is most likely dedicated to selling only the manufacturer’s brands (it’s not a normal retail business with a wide variety of suppliers) and (c) the OEM can control the flow and selection of inventory.
Dealerships are million dollar businesses that deal with multibillion dollar international OEMs. It’s a David-Goliath scenario, except David just so happens to be a jerk.
The funny thing is Ruggles is well aware of this despite acting so antagonistic on the issue of franchising, so at this point I’m not sure if he’s just being contrary for the sake of it or actually has some worthwhile argument.
I mean, if Tesla is successful with their sales model (and having been in their showrooms it’s hard to argue otherwise), that must be pretty appealing for others to follow.
Ruggles is right about this one. Retailing is generally a rathole for the OEMs; it’s a low margin part of the business and a distraction, and they don’t want to dominate it.
Which is the problem. The OEM would like to be able to cherrypick just the best locations for themselves, leaving the dogs for the franchisees.
Tesla isn’t much of a worry to the dealers. What they don’t want is Tesla creating legal precedent that would help the major automakers.
And company-owned stores are not unusual outside the US (and the consumer abroad is rewarded for this with higher prices.) Tesla’s model is not particularly innovative. and if Tesla is to become a large company, then it will also end up franchising.
That was rather my point about Tesla. They aren’t worried about a boutique electric maker as they are about their legal protections against Tesla’s sales model.
I think everyone agrees on the basic facts of the case: dealers aren’t terrible due to competition on price, but rather the systemic failure of franchising/inertia/etc which protects unscrupulous business practices. When it comes to alternatives it’s the classic case of the honest saleman competing against those less so: the well is so poisoned they all get tared with the same brush. The momentum necessary to overcome this is non-trivial, but at the same time often inevitable because no-one willfully chooses to be dupped.
The average dealer is terrified that if you leave his showroom without a car, you will never come back.
Meanwhile, the average salesman gets no compensation at all if you fail to buy on the first day that you meet.
Accordingly, they will do whatever they can to get you to buy THAT DAY. And it all goes downhill from there.
I think people more likely buy Teslas in spite of their sales model than because of it.
What advantages does Tesla’s buying process really offer?
Would consumers rather get a car the same day or in several months?
Would they rather have the option to trade in their current vehicle or just be referred to someone else that will buy it?
Would consumers rather a non commissioned, interchangeable product specialist be their point of contact if they have an issue or a professional, commissioned, advisor whose future success relies on their satisfaction?
I could go on and on and really haven’t talked to anyone in the industry that is worried about Tesla’s business model. The disadvantages for general consumers would be more obvious if they weren’t selling a highly desirable, low production, luxury good to early adopters. Teslas seem like cool cars though, I’m definitely not a hater.
Tesla model’s main advantage is that the sales staff answers to the manufacturer. For the latter the impression of the brand is just as important as the sale.
For logistics of the sale itself, a lot of people are willing to wait a bit to get exactly what they want. It’s certainly one of the nicer perks of buying a new car. As for satisfaction, I don’t think any more needs to be said given they instantly went from zero to nice fraction of that segment despite the obstacles, so it can’t possibly be a hurdle.
It’s the sort of overall experience that makes you want to shop there and not despite it.
This “professional, commissioned, advisor whose future success relies on their satisfaction” is a fictitious character.
Car salesmen need to sell TODAY or they don’t get paid.
Chances are high that the salesman who sold you a car won’t be there when you buy your next one. There is no relationship to worry about.
On the other hand, Tesla needs to convince people that EVs are worth buying. That’s the primary reason that Tesla wants to control the retail network — third-party commissioned sellers aren’t sufficiently motivated to be the type of product evangelists that Tesla needs.
Read the most recent piece in Automotive News about TESLA from Mark Rechtin. Its a great piece of reporting and writing. He hits all the notes. Actual market participants understand these things intuitively. Theorists? Not so much.
RE: “If dealers didn’t care, then surely there’s no need for the franchising laws they themselves pushed (ie paid) for in every state.”
First, I said most dealers don’t care about Tesla. Second, the dealer laws were devised to protect dealers from their suppliers.
RE: “It’s difficult to argue that dealers aren’t the weak link in the automotive chain (ie highest cost for lowest return), and this was evident enough during the domestic manufacturer bankruptcies. There’ll likely be far more reliance on protecting their business via franchise laws as the last throes of an obsolete model.”
Watching the auto restructuring the uninformed reached many inaccurate assumptions. You seem to have plenty of those. Last throes of an obsolete model? Bold prediction. The average dealer made $850K last year. Dealers are strong than ever before with the advent of the publicly traded groups. There will be challenges, but certainly not the ones you imagine. But indulge us for a moment. If you think this obsolete business model is in its death throes, exactly how do you think it will die? Do you imagine OEMs starting up a direct sales model to compete with their own dealers? Or how else do you think it might come to pass? Will the OEMs try to buy out their dealers? Do you imagine a state by state takeover?
The fact is, you really don’t have a clue how any of this works.
The part of the dealership which provides some value is the showroom. The subsequent buying experience as it stands now presents a negative value.
Your contention is that the parasitic nature of the latter is somehow necessary for the entire operation to function. This is trivially untrue given just about any other industry manages to function without it. Therefore it’s incumbent upon you (not anyone else) to present a compelling argument for its existence. Bilking customers to stroking your own ego is not a compelling argument.
I would acknowledge that often inefficiencies exist in business for historical reasons simply based on inertia. Sometimes the cost of overcoming a cancer can be high. However this also not a compelling argument if we’re to believe in a market economy.
As to whether or not I understand the business, note that the very simply change of empowering customers with invoice costs has drastically cut into margins of the new car sales business (for at least those customers). The way that dealers have forced the customers’ hand it wouldn’t be long before this becomes more pervasive incl for used sales. Your best argument thus far has been that there’s always more suckers to meet profits; this is not necessarily the case on the whole as technology marches on.
RE: “You are correct that the values of customers and the dealers in this aren’t aligned. However, push comes to shove the necessity of one over the other is not in question.”
Well, that’s more than a little vague. I’ll tell you how the priority works. If I own a product, I can either sell it or not sell it regardless of what a buyer wants or doesn’t want. You see, the buyer wants what I have. If you as a buyer want it, but don’t want to pay my price, you can shop another seller OR become a producer/seller yourself.
And as a consumer, if you want to show us all how it works in reality, you are free to put your money where your mouth is. We have way too many theorists here who are scared of their own shadow but certainly not afraid to give real entrepreneurs advice on how to run their business.
And here you are unsuccessfully attempting to crap on TrueCar. “Real entrepreneurs” couldn’t care less, right? Hilarious.
Also, why group yourself with actual “producers”? Let it be known that no one actually making the car (ne, no one period) willingly associates with such a poisoned occupation as car salesman.
Something else well worth mentioning is this sort of high pressure sales environment was far more prevalent back in the day (and in fact you see it more often in raw developing markets for things other than cars). However “real entrepreneurs” reformed those businesses by demonstrating value in decent customer service.
Put another way, most people are probably willing to pay *something* not to deal with Ruggles’ sort. It’s only a matter of time before someone takes advantage of that arbitrage as has happened for selling just about everything else.
Some might pay more for better service. I think most consumers when presented with the option between a lower price and better service will choose the lower price on a purchase so large and infrequent.
If online shopping is any indication, this is true in general. At some point the cost of service (eg showrooms for Amazon and the like) is only becoming more straightforward.
Availability of information which is a one way arrow with respective to time is inevitably pressing the matter. In addition, evolutionary pressure in a capitalist economy tends to push the uninformed to the margins.
RE: “Availability of information which is a one way arrow with respective to time is inevitably pressing the matter. In addition, evolutionary pressure in a capitalist economy tends to push the uninformed to the margins.”
This might be why you find yourself in the “margin.”
RE: “However “real entrepreneurs” reformed those businesses by demonstrating value in decent customer service.”
If you were a real entrepreneur you would know the difference between negotiating the deal and customer service. They aren’t they same thing.
RE: “Put another way, most people are probably willing to pay *something* not to deal with Ruggles’ sort.”
Actually, Ruggles was pretty artful at the negotiation thing and perception drives everything. What IS clear is that NOT enough people have supported the so called “consumer friendly” model or Saturn and the Ford Collection would still be alive.
RE: “It’s only a matter of time before someone takes advantage of that arbitrage as has happened for selling just about everything else.”
What’s stopping YOU from putting your money where your mouth is?
TrueCar crapped on themselves as evidenced by the pullout of the thousands of dealers which forced a change in their business model with a new focus on dealer profit. Then there was the $78 million Scott Painter says they lost in 2012.
There is always upset in corporations from those people who resent the sales people who pay for everything else going on in the company. Its nothing new and won’t change soon. The deal makers make things happen while everyone else is along for the ride. That’s just how it works. Yea, every now and then a product comes along that creates a market and sells itself for a while, requiring only order takers and clerks. In those cases, the design and development team deserves all the credit, but once the “new” wears off, the sales team takes over. And there is a difference between sales people and sales clerks. There are many items where the terms have to be negotiated. You wouldn’t put a sales clerk into that scenario and you wouldn’t put a practiced and artful negotiator into a sales clerk position. Negotiation skills are the most important skills one can have in business.
I don’t have a problem with dealing on a product. I do my homework and will negotiate at several dealerships and the best deal will get my money.
The problem lies in the sales staff. They are under pressure to move product. Those products are not just vehicles but paint and protection packages, theft kits, warranties, maintenance agreements,dealer provided finance and what ever makes money for the dealer.
I’ve had deals almost made and salesmen try to convince me that trading in was better, or their finance was better than mine or a whole list of ad hominem sales pitches that insult my intelligence. That is the part that gets me. Someone lying straight to my face even though I have just explained to them why their “retail to retail” trade value sucks.
How can one fix that?
I’m not the industry insider… BUT…. The need to constantly “push” “the product” causes much animosity. Doing it even when the buyer expresses no interest in “it” makes it worse. Better training in the realm of interpersonal relations may help. A system that takes some pressure off in relation to “pushing” products might help.
It has already been pointed out about the “poisoned pool” and it may be too difficult to change or too late.
A person stuck in a paradigm often cannot see any other way. That is why thinking outside the box is so difficult. The box are the walls of the paradigm. An outsider can often see more clearly than the one inside the box.
I am sure that industry HAS looked at this but may not care as long as they continue to make money.
The “lifetime employee” comment keeps popping up…… is that supposed to be some sort of insult or does it come from someone rationalizing the inability to hold onto a job?
The problem is that from a systemic point of view the incentives are to be unscrupulous. The sale to each consumer is infrequent so the first to make the sale “wins”, with little recourse for repeat business, so the salesfolks are willing to do whatever it takes. This makes even honest people bad or at least pushes them out of the profession.
This can normally be handle in the market by customers blacklisting bad sellers but the problem here is that when honest dealers are rare they will also get pushed out of the market. Honest businesses play the long game and time is against them when everyone else will utilize high pressure/etc to nab that one sale. Basically get with the game or get out.
The irony here is that this sort of poisoning of the commons is detrimental to the business/industry as whole even if it makes selfish sense to each participant.
“Lifetime” employee is probably just Ruggles stroking his ego as a “job creator” or something vs lower level salary/commission worker.
RE: “The problem is that from a systemic point of view the incentives are to be unscrupulous.”
Hyperbole with a seed of truth here. The incentives are complex and you need to understand them all to make such a statement.
RE: “The sale to each consumer is infrequent so the first to make the sale “wins”, with little recourse for repeat business, so the salesfolks are willing to do whatever it takes.”
Repeat business is still a factor with the best sales people make an extremely good living because of it. But many auto sales people get into the business to tread water while they look for a “real job.” That would describe me 44 years ago. The ones who get caught up in the business side of it, rather than just the cars that pull in so many, last in the business for a lifetime and love it. The idea of working a corporate “job” is incomprehensible to me despite the fact that I was raised by lifetime employees to be exactly that. Once an entrepreneur, always an entrepreneur especially if you achieve some success along the way. Most who have made a career out of the business have done so by doing things mostly the right way, regardless of what a few cranks think. Yes, I can think of some dealers I have been HAPPY to see bite the dust. One was Jimmie Long, the world largest Chevrolet dealer. Long was a nice guy on a personal level, but his managers took his store in a direction that ended up with an expensive thud. They once sold 38K new vehicles in a year, as I recall. Another was the Bill Heard group. They pretty much personified the whorehouse moniker. We used to have a Bill Heard outlet here in LV, but the entire chain is dead and buried. We have a couple of other high profile really bad dealers here in LV, which will go nameless at the moment. For the most part, the dealers here are really good.
RE: “The “lifetime employee” comment keeps popping up…… is that supposed to be some sort of insult or does it come from someone rationalizing the inability to hold onto a job?”
The comment makes the distinction between employees who work for a paycheck and the entrepreneurs who took the risk so that paycheck can exist. Inability to hold on to a job? No. Its about NOT having a job in the first place.
@Ruggles – Thanks for the straight answer. That is a big distinction. Front end sales staff, the dude sitting across from me in the sales booth isn’t the “entrepreneur”. He is collecting a commission. It isn’t his cash that built the business. He does stand to loose his job if he does not perform or meet quota’s. Long gone are the days (or at least I don’t hear of it anymore) of firing the guy with the poorest sales every month. The pressure to perform isn’t isolated to sales staff. It is present everywhere except maybe in union shops. Trade unions are great at protecting the lowest common denominator.
I have a stable job but that stems from investing in my own education as opposed to investing in a business. I have to meet professional standards and prove that I am competent on an annual basis. That is different than working to keep a business running but it still requires effort on my part.
@Pch101
RE: “Is there some reason that you guys keep throwing out this “one price store” nonsense?
Not only have I not suggested such a thing, I’ve actually argued against it.
Again, try using an argument that isn’t completely contrived or based upon something that I never said.”
The one price store exemplifies that the thing consumers ask for, such as a no haggle, no pressure buying process, is not necessarily what consumers will support with their money. I can give other examples if you like.
I think most consumers don’t just want dealers to not take advantage of them, they want to be able to take advantage of dealers.
Do you object to the current dealership model? If yes, why specifically? How would you like to see new car distribution and servicing to work?
Also, I am curious, what is your profession? My bias is obvious as not only a salesman but one within the auto industry. I wonder, past being a consumer, what else affects your views on the discussion?
You do realize that I’ve already addressed these points, right?
I couldn’t care less that cars are sold through franchisees. If it works for donuts, then it can work for Dodges.
I just find it amusing that dealers use sleazy gimmicks, then express astonishment when customers get upset about them.
Much could be accomplished if we could simply get dealers to type up paperwork that reflects the terms negotiated five minutes earlier, or if one can show up on the day to take delivery without being informed by a manager that a “mistake” has been made and that the price must be increased.
(And please don’t deny that those things happen, because they do. Don’t pretend that it’s a fiction – the denials only confirm that you guys lie even when in situations you have nothing to gain from it, such as here with strangers on the internet.)
Mistakes are bound to happen on paperwork with the high volume of business and complexity of deals.
I have never known a dealership that has purposely changed a contract to try to make more money by hoping the customer wouldn’t notice. I can’t imagine a place like that would be in business long.
@ exit – I know where some of these comments are coming from, and I agree to a point. I agree that very few dealers will purposely change the numbers from a worksheet to the printed final sales agreement. Even if they do, the final sales agreement is always signed off on by both parties.
HOWEVER, I have a REAL problem with DOC fees by some dealers in some states, where they are allowed and are unregulated. As a consumer, I have entered into a sales agreement to buy a vehicle over the web, sight unseen, under the condition the vehicle would be “as described” when I arrived. They tried to slide in a $295. DOC fee on me. There was also a material issue on the vehicle that should have been disclosed to me before I flew from LAS to PHX. Needless to say there was a serious problem at the dealership, an independent high line pre-owned operation. I ended up taking the vehicle, obviously did NOT pay the DOC fee, and exacted additional concessions from them while not mincing words about their low life ******** tactics. I regard these kinds of things as an embarrassment to the industry but IN NO WAY would I try to paint all dealers with the same broad brush.
In fact, I spend MUCH more time castigating our industry’s bad apples than I do defending dealers against brain dead consumers who want a guaranteed outcome in a free market world. I also spend a lot of time defending dealers from their own OEMs. Non market participants have no idea how it works. OEMs don’t speak with one voice. Their internal incentives to executives and employees includes all sorts of rewards for the screwing of their own dealers to further their own career aspirations.
As an interesting but related aside, many merchants were furious when Amazon and its peers first started featuring customer reviews on their products. The source of that outburst is “sales” is used (and in fact its purpose) to controlling the dialog of how the product is presented. Now most savvy, esp younger consumers can’t imagine life before this schism.
This is the sort of info/tech inevitability I mentioned before. There’s more friction in the auto world given the regulatory/legis hassles, but this sort of change is only matter of time. A lot of buyers already get most of their info before coming to the dealer and that trends won’t reverse.
Something I’ve noticed about trends is the don’t continue at the same rate at which they begin and tend to plateau. Trend followers often lose interest in one trend to follow the newest one. They then sit around and commend each other for being so smart.
I applaud reviews although a new cottage industry has sprung up to manipulate reviews that now requires regulation.
The constant is the human nature that drives it all.
@ruggles – “The constant is the human nature that drives it all.”
That is 100% true and unfortunately it is human nature (whether we want to admit it or not) to take the path of least resistance.
We also will try to get away with as much as we possibly can. That can be viewed as part of my preceding comment or a completely separate line of thought.
Sales staff are under pressure to perform and they often will take what ever measures that work to move product.
Those looking for a deal will often use what ever tactics that will get them the best price. Many will not chose to put the work into researching a product or negotiating with multiple dealers, they will outright lie or use “selective dissemination of information” to get what they want.
It is a double edged sword. Front end staff get burned out by dealing with “cranks” and do not trust. That gets compounded by pressure to perform.
Consumers who do their homework and expect some respect because of it get mistreated and that causes more hard feelings.
It ultimately becomes a vicious circle.
Who is responsible to correct it or at least temper it?
The negative stigma is the industry’s burden.
Are they willing to change it?
or can they change it?
If I want a new vehicle I have no choice but to set foot on a dealership lot. Email or electronic transactions are a way to avoid direct face to face negotiation and/or conflict. I prefer face to face because email or online communication looses 95% of the message.
RE: “Is there some reason that you guys keep throwing out this “one price store” nonsense?”
Yes, because it is a euphemism for a selling strategy that gives consumers what they say they want.
To take this a step farther – “Transparency” is the new industry buzz word and IMHO it is DECEPTIVE on its face to claim to provide it when you really don’t. IMHO it is a STEP BACKWARDS for our business. I’m going to tell you our cost are none of your effing business. If that makes me a “jerk,” I don’t care. I’m damn sure not going to tell you I’m being “transparent” if I’m only selling you the illusion or perception of transparency.
There are some good points and some absolute inaccuracies in this piece from Roger Quinland of the ABA:
http://www.americanbar.org/publications/franchise_lawyer/2013/summer_2013/has_traditional_automobile_franchise_system_run_out_gas.html
First excerpt: “In the early twentieth century, independently owned automobile dealerships were a rarity. Automakers sold vehicles through department stores, by mail order and through the efforts of traveling sales representatives. The prevailing delivery system was direct-to-consumer sales.
In 1898, automobile enthusiast William E. Metzger established what is generally believed to be the first car dealership, a General Motors franchise. See, The First Century of the Detroit Auto Show, p.265, Society of Automotive Engineers Inc., Pennsylvania, January, 2000. Today, tens of thousands franchised auto dealers conduct business across the United States.”
Ruggles writes: This is market economics. The OEMS desperately needed a distribution system and lacked the financing and/or local market understanding to accomplish it. They attracted capital from entrepreneurs to invest in distribution of the products based on a particular set of premises and agreements. Among those include the understanding that entrepreneurs won’t have to worry about waking up one day to find their own supplier has opened a competing outlet. Of course, the OEMS readily agreed. At the time, the last thing on their mind was trying to compete with their own distribution system. As time wore on certain OEMs showed a desire to pluck off the very best outlets for themselves. An OEM might try to drive a dealer out of business in favor of another by starving one dealer for inventory or only supplying the worst slow selling vehicles while favoring another with the hot moving stuff. There are many laws that prohibit “unfair business practices” that have nothing to do with a “managed economic system” or represent any harm to consumers. Claims that the franchise system somehow violates free market economic principles is ludicrous on its face. The so called “free market” created the auto dealer franchise system in the first place. But for a moment, imagine there are no franchise laws in place and OEMs simultaneously decide to open their own points in violation of their formal agreements with their partner dealers and in contravention to less formal understandings that go back over a century. Exactly how would that take place? Would the OEMs get together to plan a scheme to BK their dealers and somehow take them over? If not, which OEM might go first? Or would they try to buy them out honestly?
Imagine a world where Toyota, to pick an OEM, suddenly announces they will sell direct to consumers, who will now will be able to bypass their dealers. What happens next in a world with no dealers franchise laws. Does the factory undercut MSRP? Do they provide a discount from MSRP? Who delivers the vehicles? Who services the vehicles? Does Toyota suddenly build thousands of locations around the country to stock inventory, or do they go to a build to order model? Larger questions include, “Where would Toyota get the money to do any of this?” “What would their current dealers response be to such an announcement?” “If that response is negative, what would be the impact on Toyota?” “What would happen to the group of executives to approve such a plan? NOTE: NONE OF THIS has anything to do with TESLA.
Second Excerpt: “Direct automaker-to-consumer sales are now prohibited in almost every state by franchise laws requiring that new cars be sold only by licensed, independently owned dealerships. The specific prohibitions in these laws vary from state to state, but most are based on two underlying principles. The first principle is that allowing automakers to sell cars directly to customers will endanger the businesses of automobile franchisees, which presumably do not have the economic resources to compete with manufacturers on vehicle pricing. The second principle is that consumers need a knowledgeable, independent sales intermediary who is capable of guiding individuals through the buying process and can later be called on for support in the event of difficulties with the vehicle.”
These are legal issues. The bottom line is OEMs lack the capital to establish their own distribution network. They can’t get it without starving product development. If you can’t do the math on this you really don’t belong in this discussion.
Conclusion Excerpt: The likelihood that Tesla will successfully convince federal courts to invalidate the various state auto dealer franchise laws in their entirety is remote. In the author’s opinion, Tesla’s greatest chance for success lies with convincing the courts that narrow exemptions from state regulations should be tailored for the company, based upon its unique status in the automotive marketplace.”
Ruggles writes: I FULLY SUPPORT TELSA’S BID TO OWN THEIR OWN OUTLET. IF THEY INSIST ON LEARNING THE HARD WAY, I SAY, “LET THEM GO FOR IT.” The larger issue is whether or not traditional OEMs should be allowed to try a mixed system. But they have already made their deals when they needed to attract entrepreneur investment in the beginning. Why would they want to attempt to betray their partner dealers? First, it would all blow up in their face. Second, their credibility would be completely blown.
More Conclusion Excerpt: “Ultimately, plotting a course through the state patchwork of laws governing new auto sales will be extremely difficult for Tesla. Perhaps in recognition of this fact, Musk recently told Automotive News magazine: “If we’re seeing nonstop battles at the state level, rather than fight twenty different state battles, I’d rather fight one federal battle.” Amy Wilson, Tesla’s Musk: I’ll Take Store Fight Federal, Automotive News, Apr. 15, 2013. Although left unsaid, perhaps Mr. Musk is planning a lobbying effort of his own with the goal of federal legislation exempting Tesla from the patchwork of state auto dealer franchise statutes.
In a conflict between political influence and free market forces, established auto dealership interest groups have thus far been able to sharply restrict Tesla’s ability to market its products directly to consumers.”
Ruggles writes: Now this is complete bullshit unless one thinks a “free market” means that market participants are free to make deals, and then renege without consequence. I say this in the context of the larger discussion. But as I have consistently mentioned, I do NOT view TESLA’s bid to own its own outlets as a threat to the deals already made between the traditional OEMs and their partner dealers.
RE: “The auto dealership associations have, to date, been able to convince state legislators to protect their franchisee constituents from direct-to-consumer sales by automakers.”
Ruggles writes: More bullshit here. TESLA already owns its own outlets in MANY states. Additionally, OEMs have been allowed to own their own outlets under narrow and defined conditions. There are many OEM dealer programs where the OEM owns the point, takes in an invested partner, and allows that partner to buy the OEM out over time. Second, the Ford Collection was an experiment by Ford to own all of its own outlets in several large markets, including Tulsa, OKC. Indy, SLC, and San Diego. Ford was free to show everyone how to satisfy consumers by giving the consumers what the consumers said they desired. For some reason, it didn’t work out to well and Ford was relieved to be able to sell those dealerships back to private dealers.
Conclusion Excerpt: “Only time will tell whether Tesla can overcome this hurdle to market, and whether it will become the next direct distribution success story (like Amazon) or another casualty of market inefficiencies and entrenched special interests.”
Ruggles writes: There are only a few states where TESLA is banned from owning its own outlets. If TESLA fails it won’t be able to blame those few states for the failure. The ill advised dealer association obstacles to TESLA aren’t really about TESLA. Dealers don’t want their own OEMs to get any bright ideas about trying to go back on the underlying premise of their partnerships. The OEMs would fail even if they were crazy enough to try, which they aren’t. But there would be a period of chaos. Business people have disdain for unnecessary chaos. and upheaval
RE: “Lifetime” employee is probably just Ruggles stroking his ego as a “job creator” or something vs lower level salary/commission worker.”
Yes, “lifetime employee” and entrepreneur are two different animals. You know who you are. Theorists or actual practitioners. Big difference.
RE: “I think most consumers don’t just want dealers to not take advantage of them, they want to be able to take advantage of dealers.”
VOILA! Exactly. Consumers DO want to play the game. They just want to be guaranteed a “WIN” and will pout if they don’t.
RE: “The average dealer is terrified that if you leave his showroom withhout a car, you will never come back.”
WTF? Terrified? REALLY? :) Hall of Fame hitters typically made an out 2 out of 3 times they went to the plate? I wonder if Babe Ruth was “terrified” when he went to the plate?
RE: “And company-owned stores are not unusual outside the US (and the consumer abroad is rewarded for this with higher prices.) Tesla’s model is not particularly innovative. and if Tesla is to become a large company, then it will also end up franchising.”
Now there are, in fact, some nuggets here. Thanks for debunking the commonly held position here that factory owned outlets create some kind of better deal for consumers. IN fact, after “disintermediation” takes place when an “efficient market” becomes a reality, higher prices to consumers inevitably takes place.
And YES, there is no possible way TESLA becomes more than a niche OEM trying to own its own outlets. Musk is merely trying to maintain as much control as he can in the beginning while holding an asset he hopes to sell for large multiples down the road to fund product development.
RE: “I mean, if Tesla is successful with their sales model (and having been in their showrooms it’s hard to argue otherwise), that must be pretty appealing for others to follow.”
Exactly how would another auto OEM go about trying to do this?
RE: “I’d like to see a return to factory-direct buying, but that will never happen. I bought two new cars that way, factory direct, when I was in the military and it was a pain-free, excellent experience. Checked off what I wanted on the purchase order and it was built to order, delivered to my place of choosing.”
Even these days there are many so called “factory direct” options for certain groups, especially for military. But there is still a “middle man.” Even those Viet Nam era deals required selling through a dealer as do the huge national fleet deals.
“Even these days there are many so called “factory direct” options for certain groups, especially for military” I didn’t know that. I thought those programs all died in infancy. I know they were not available to my sons when they were in the military (1985-2012), because I asked.
When I bought my 1968 Mercury through the factory-direct buying program, I had to designate a dealer in my home town where it would be delivered. But the total cost of the purchase was way, way below MSRP, like 20% below sticker, delivered. All that was necessary was to hand over the PO and drive off.
When I bought a Euro-spec 1972 M-B 220D in Europe, it was delivered to the International Airport at Schiphol, the Netherlands, tax free, complete with oval Customs plates. Again, just hand over the PO and drive away.
I considered those purchases to be “transparent” by any definition since I knew up-front exactly what I was buying, what it cost me and not a cent more. No haggling!
When I bought my 1977 Toronado through the BX system at Rhein-Main, I had to pick it up at the port in Antwerp, Belgium, because that’s where GM had pre-positioned stock — no dealer involved.
But it was a disaster upon delivery since the car had not been prepped, and wasn’t road-ready for my drive back to Germany where I was stationed.
I improvised and got back without incident.
Stock brokers are “facilitators,” not “middle men.” The Chicago Board of Trade is a facilitator. Auto dealers are “middle men.” There are often more than one level of “distribution.” Even Toyota sells to “distributors,” who then sell to dealers in certain parts of the country.
RE: “This line of argument of yours is pretty weak sauce, I hope you know.”
If you say so.
RE: “I can imagine dealing with you in a restaurant. “Well, Mr. Ruggles, tough s**t if you don’t like your meal. If you don’t like it, go open your own restaurant.”
Actually I have also had experience in restaurants and understand the difference in the two businesses. There is a whole lot of difference between a meal and a new vehicle. I would have thought you might know of some of most salient differences. One might have thought you would understand the difference between a candid discussion and a real world situation. Perhaps you can’t handle the truth? (Sorry Jack)
But let me restate myself: Since you regard the current practitioners in auto dealerships to be incompetent, what’s keeping YOU from putting YOUR money where YOUR mouth is and showing us all how to do it? Surely you’d make a fortune since you would give consumers what they want, they would all flock to you, and you’d make a fortune, right? Let’s take it a step further. Perhaps you don’t have the money to put where your mouth is but you DO know how to actually run a car dealership. Aren’t there many others just like you out there to finance your venture? There’s a fortune to be made for the theorists here, but they stay on the bench “secure” as employees of others, but always critical of those who took the risk.
Only a kid wouldn’t understand the difference between “put your money where your mouth is” and whatever that blather is you posted.
NOW this IS A really TOUGH ONE!!!!!
RE: “Someone in that insular bubble should look to see how and why things work elsewhere where customers are most pleased, instead of expecting everyone else to come around to their point of view where just about everyone hates them.”
Oh my! How can I decide? A business model that makes everyone happy but loses me money or one that pisses everyone off but actually works? So hard to decide.
> Oh my! How can I decide? A business model that makes everyone happy but loses me money or one that pisses everyone off but actually works? So hard to decide.
You keep saying this with quite poor supporting anecdotes. In the realm of science tests are run with controls and preferably only one variable. Fortunately there’s a good recent example of the same car sold in both fixed price AND traditional dealerships: the fr-s/brz. Subaru has ~7 times the annual sales figures of Scion and commemorate level of exposure/dealer/avail/etc, yet the Scion model whose only major diff is dealer network sells at twice the volume of its nearly identical twin.
I hope this hasn’t been too theoretical for our entrepreneur over here, who will no doubt proceed to evaluate this simple yet revealing analysis via if I make more money than he does.
Probably the worst example you could have picked. As part of the Subaru-Toyota agreement, only one BRZ is built for every three Scions. Neither brand could keep them in stock and for a long time, people were paying a premium for the Subaru.
Per unit allocated, the Subaru dealership was making more profit. Variable price won.
I worked on the SCION roll out in CA briefly. I offered up the report I had submitted to Toyota Corporate in Japan which essentially stated that One Price works quite well if there is commitment from the OEM to limit production to slightly less than demand. But OEMs don’t work like that. Since SCIONs are Japanese Toyotas they are better able to limit exports to the U.S. while still using push marketing in Japan for the exact same models. SCION is but another example of another failed experiment of an OEM attempting to give consumers what consumers say they want. The OEMs and dealers who try such stuff always find takers, but never enough to sustain the program without huge financial loss.
Maybe our theorist will call this an anecdote.
Not really, US numbers: http://www.autoblog.com/2012/06/20/subaru-brz-scion-fr-s-lead-list-of-fastest-selling-cars/
High initial demand for sports cars models is pretty common, which subsides pretty quickly. Both were plenty available after the first few months. Subaru was initially even offering a rebate.
You’ll have to validate your claim that Subaru ever offered a rebate on the BRZ. Here we are in the dead of winter and no rebates are showing. In fact, I have never known Subaru to offer a consumer rebate. They tend to follow the import mantra that dealer trunk money is a better way to incentivize. But feel free to back up your claim.
Certainly SCION offering the same model at MSRP instead of a markup over MSRP on a Subaru model adds market pressure to Subaru dealer pricing. All that happens is that both tend to now price at MSRP. Any volume differences between the two makes are controlled by build rate agreements and allocation.
I do find it amusing that some here think a dealer should only be harmed when market forces are detrimental and should not profit when they favor him/her. Can someone explain this to us? It seems like there is supposed to be some rule that says the consumer should always win and they merchant should always lose…. must have something to do with the theory of the deep pockets. Yet, these same folks will stand in line to pay the top price for the latest gadget without a whimper.
rebate:
http://content.usatoday.com/communities/driveon/post/2012/07/scion-frs-subaru-brz-price-discount-trim-rival-dealers-/1
https://www.thetruthaboutcars.com/2014/01/the-case-for-killing-scion-and-letting-prius-live/#comments
One might wonder why there is conversation about killing SCION, since its so successful. One might wonder why a successful brand gets starved for product. One might conclude the sales model doesn’t work ala Saturn. Just because a few people will come out to take the nanny approach to buying a new car doesn’t mean enough will to actually support a brand. The best way for a dealer or OEM to curtail its appeal is to adopt the “Moral Motors” way of doing business. Your customers, few and far between as they will be relative to the market overall, will be thrilled with their purchase experience while you die a slow death and your competitors pick of deals you could have had but didn’t get. You see, consumers really want to negotiate. They’ll just complain if the game isn’t more rigged in their favor. I’ve said repeated, the automotive consumer has NEVER had it so good. Selection and available information has never been better. Yet, they have never been more dissatisfied. The more they get, the more they want.
RE: Rebates
What do you think you have proven?
How does TrueCar get access to data they say they have access to? This author claims TrueCar has access to transaction data. He doesn’t mention they have access to SOME transaction data, not all of it. How exactly do you determine a “transaction price” when there is a trade in?
Do you understand dealer DMS systems and how they work? Do you understand you’ve been tricked by careful word parsing?
Do you know the difference between incentives and rebates? Obviously not.
Do you understand the difference between the Toyota dealer network and Subaru’s?
Do you understand the impact of allocation on sales?
Do you understand the idiocy of trying to extrapolate long term trends from short term numbers?
Do you understand you know just enough to think you know a lot more than you do? Again, what do you think this one piece “proves?” The article seems to indicate Subaru dealers made about $3400 more gross profit per car. Looks like the Subaru dealers might have made about the same gross profit selling a lot fewer vehicles. Seems like that might be the objective if you weren’t allocated enough vehicles to meet demand.
The point is to at least compare selling the exact same thing so that we’re not analyzing apple to orange sales.
I’m sure there are pedantic details as there always will be but unless your argument is that Subaru can sell 2x (or what should be more given brand penetration) of the brz than currently the result is quite clear that the sales model isn’t a hurdle.
RE: “I’m sure there are pedantic details as there always will be but unless your argument is that Subaru can sell 2x (or what should be more given brand penetration) of the brz than currently the result is quite clear that the sales model isn’t a hurdle.”
I am sure there will always be details you won’t be aware of as a sideline sitter. You can’t understand what you don’t even know about. As I’ve mentioned previously, “One Price” ONLY works when supply is short of demand. Seems YOU are trying to extrapolate an anecdote and have fallen woefully short based on facts on the ground. And you again seem to think business is about volume sales rather than gross profit. But then, in your defense, so does the author of the column.
Again, the point is that sometimes the test is so overwhelmingly illustrative that the details don’t matter, as it is in this case. Scion will almost certainly *continue* to outsell Subaru on this same car even when this initial sports model demand subsides. They’re certainly not selling anywhere above MSRP anymore at Subaru dealers if you want to do the legwork yourself.
On “profits”, the only people who care about *dealer* profits are dealers. Manufacturer move volume to amortize staggering costs of r&d/tooling/facilities/etc. In the long run should they be in competition, volume always wins. Boutique profits are at best a niche, not that car dealers see much of any.
You do realize that only 1 BRZ is imported for every three FR-S regardless of demand right?
If they are imported at 3:1 and sold at 2:1, does that really seem like a victory?
The link is for import numbers, which should be accurate. I don’t know how accurate that production “agreement” rumor is but it’s reasonable to assume that the ratio is more offset in countries where the Toyota (GT86/AE86) has much better name recognition than a new Subaru. In light of that, I wouldn’t come to the conclusion that Subaru is leaving too much on the table.
The fact that the BR-Z had a $400 incentive near the launch date, while its twin did not, would be a pretty clear indication that there was a bit of an inventory glut for the Subaru, i.e. sales were below expectations.
The BR-Z is positioned at a higher price point, which could explain some of the difference.
RE: “You keep saying this with quite poor supporting anecdotes.”
Actually, I’ve only said this once and have offered NO supporting anecdotes except the reality in the actual marketplace.
RE: “In the realm of science tests are run with controls and preferably only one variable. Fortunately there’s a good recent example of the same car sold in both fixed price AND traditional dealerships: the fr-s/brz. Subaru has ~7 times the annual sales figures of Scion and commemorate level of exposure/dealer/avail/etc, yet the Scion model whose only major diff is dealer network sells at twice the volume of its nearly identical twin.”
And you think this “proves” what?
RE: “I hope this hasn’t been too theoretical for our entrepreneur over here, who will no doubt proceed to evaluate this simple yet revealing analysis via if I make more money than he does.”
Money made has nothing to do with ones perspective as an actual market participant versus one with only a theoretical point of view. Your “devastating” example comparing a Subaru model with a SCION is a perfect example. If you had any real knowledge of the market you’d know how foolish your analysis is. Fortunately we have a contributor that has quickly cited once of the MANY differences in the two scenarios. I’ll add another hint. Neither dealers or OEMs make money on volume. They make it on gross profit. Saying someone sells more than someone else misses the point of being in business. One can’t pay their employees with volume awards.
> Actually, I’ve only said this once and have offered NO supporting anecdotes except the reality in the actual marketplace.
No, you’ve been repetitively harping on about the failure of one-price for quite a while. It’s recorded above for posterity. This Saturn you’ve brought up about a dozen times is for example a nice anecdote. If this usage is confusing please consult a dictionary.
> And you think this “proves” what?
One-price seems to move cars quite well enough. It certainly does outside of the US and for all other material purchases. Of course it may be in each dealer’s selfish interest to negotiate. But just as developing markets all move from the haggling of the bazaar to modern shops, the most consumer-friendly models eventually prevail.
> If you had any real knowledge of the market you’d know how foolish your analysis is.
It’s too bad you arguments lack the basic substance to demonstrate much. An appeal to authority only works on the uneducated. Who exactly do you work with on a regular basis?
> Neither dealers or OEMs make money on volume. They make it on gross profit. Saying someone sells more than someone else misses the point of being in business.
On a small-time scale of each dealer perhaps, but manufacturing/production is predicated on volume. In any case, just a bit back you were complaining about your 3%, yet at the same time bragging about profits; which is it? Again, it really helps sometimes to step outside that insular bubble; the rest of the world has moved on from predatory haggling and such.
FLASH: The failure of One Price IS the reality of the marketplace. It has NEVER succeeded and never will. It that isn’t reality to you I don’t know what is. But as a “theoretical” you aren’t expected to know this. If One Price is so successful why did Saturn fail. Why do dealers who try it go back to a more traditional sales model, despite the fact they usually continue with a One Price/TruePrice marketing message? Why did the Ford Collection Fail? PriceLine? Green Light? etc. etc. After a while these become a little more than a series of anecdotes. SCION is languishing and would have been dropped if not for the deep pockets of Toyota. Their dealers are PISSED!
BTW, dealers are in business for selfish interests. So is the company YOU work for.
You wouldn’t know if my arguments made sense one way or the other. Your example of the Subaru/SCION is living proof. I really don’t need to compare resumes with you. You are free to continue on thinking you know enough to teach when you haven’t graduated kindergarten.
Complaining about my 3%? Its a fact and it doesn’t help those who argue that dealer’s take more than they add. But since it isn’t going to change, its academic at this point. Accuracy isn’t your forte but feel free to point out when I “bragged” about profits. It IS the point of taking the risk to go into business.
If the rest of the world has moved on from predatory haggling and such why is the traditional sales model still alive and well here. I might also ask how YOU would know what the rest of the world does as it pertains to auto sales? Enlighten us. And feel free to put your money where your mouth is and show us all how its done. Take some risk and show us how consumers will flock to you since you know so well how to satisfy them. Good luck trying to borrow money from a real lender unless you have a track record of success in the industry, but since there are so many of you out there that “KNOW” what consumers want, just pool your resources and open a dealership. Spend some time in the “insular bubble” and actually learn the business before thinking you know a LOT more than you do. That’s how you get the bullshit out of the buckwheat.
Frankly, I’m surprised to see you reappear after your ridiculous posit on Subaru and SCION. And it wasn’t even me who pointed out the obvious idiocy of your premise. But we’ll give you points for balls even if you continue to show an extreme lack of basic understanding of the business. You might have noticed it was actual market participant who pointed out one of your glaring errors. Other asides include the fact that Toyota holds ownership in Subaru, not the other way around. Something Mr. Exit didn’t mention, but certainly could have, is that the Toyota dealer network is vast compared to Subaru. And MANY SCION stores are “dualed” with Toyota stores with a LOT of natural traffic. Trying to compare the SCION dealer network with the Subaru network is like trying to compare a lit match to Haley’s comet. Your conclusion that the SCION sales volume on the same model is somehow proof that it superior to Subaru’s because YOU can only identify a single “variable” speaks volume about your understanding of the market. But you do have balls for trying.
You seem quite insecure about getting called out on a myriad of inconsistencies and logical fallacies. Unfortunately doing more of the same is not the answer here.
It would be to your benefit to study abstract but informative subjects as game theory, where pop aphorisms such as the tragedy of the commons are formalized. Just like physics, formal/theoretical investigation here allows us see unintuitive realities of which the most classic prisoner’s dilemma is good example.
The situation in the US is that rabid (sometimes even ruinous) competition between dealers drives down prices/profits overall, which is good for the consumer, yet they still often have a poor experience in the sale. A lose-lose scenario in your lexicon. Again, this sort of bazaar haggling is the norm in any developing economy if you ever get to travel much, but not so in developed states where people have learned to both increase margin and customer satisfaction by deriving value from a pleasant sales experience.
Suffice to say US dealers are often not at that point yet (luxury dealers for example do better), and it should be your job as an entrepreneur to ponder how to get there instead of defending a poor status quo: abusing customers while complaining about meager profits. Some theoretical education might be a good first step.
“You seem quite insecure about getting called out on a myriad of inconsistencies and logical fallacies.”
He seems to be worried that his profession may not be so relevant, after all.
There is a place for dealers because they reduce the OEM’s risk and cost exposure to the retail side of the business. Retail margins are low, which makes the retail side generally unappealing to the automakers.
But the cutthroat tactics and unethical behaviors can compromise the brand reputations of the OEMs, so that risk mitigation does come at a price. The move to tie holdback payments to CSI scores would suggest that the automakers aren’t oblivious to the problem.
RE: “When I bought my 1968 Mercury through the factory-direct buying program, I had to designate a dealer in my home town where it would be delivered. But the total cost of the purchase was way, way below MSRP, like 20% below sticker, delivered. All that was necessary was to hand over the PO and drive off.”
These deals work like employee purchase deals. The dealer delivers the car at an upfront loss and then waits for the factory incentive to make the break black. Most new car deals are delivered to day for less money than the dealer has to pay off at his bank if he has his inventory floor planned. Yes, the OEM floats on the dealer for a spell. “Courtesy deliveries are a different story. The car is order by one deal who pays for the car even if it is delivered elsewhere. The selling dealer receives the prep allowance, then makes a deal with the delivering deal to prep the vehicle and deliver it.
RE: “When I bought a Euro-spec 1972 M-B 220D in Europe, it was delivered to the International Airport at Schiphol, the Netherlands, tax free, complete with oval Customs plates. Again, just hand over the PO and drive away.”
A U.S. spec European vehicle is a similar story. The selling dealer in the U.S. pays for the car. This worked differently back in the day when there were European spec vehicles all over the U.S. But that was pre EPA and DOT.
RE: “I considered those purchases to be “transparent” by any definition since I knew up-front exactly what I was buying, what it cost me and not a cent more. No haggling!”
If you had shopped those prices and beaten them with other dealers would you have still called the process transparent? Relatively speaking it was relatively transparent and you probably received the best price available, possibly better than the best price a dealer might get. But I remind you that Saturn had a firm price program and it wasn’t supported by consumers to the degree it could continue without OEM subsidy.
RE: “You seem quite insecure about getting called out on a myriad of inconsistencies and logical fallacies. Unfortunately doing more of the same is not the answer here.”
You seem quite bold to enter an arena you know next to nothing about. There are no inconsistencies, only things you don’t understand. But continue to show your blatant lack of knowledge on the issue. You certainly aren’t the first to presume to give actual market participants advice on a business they understand and you don’t. .
RE: “It would be to your benefit to study abstract but informative subjects as game theory, where pop aphorisms such as the tragedy of the commons are formalized.”
It would be to your benefit to actual learn a business before trying to discuss it with someone who has done it their entire life.
RE: “Just like physics, formal/theoretical investigation here allows us see unintuitive realities of which the most classic prisoner’s dilemma is good example.”
This ain’t rocket science, but I’ve done it and you obviously haven’t.
RE: “The situation in the US is that rabid (sometimes even ruinous) competition between dealers drives down prices/profits overall, which is good for the consumer, yet they still often have a poor experience in the sale. A lose-lose scenario in your lexicon. Again, this sort of bazaar haggling is the norm in any developing economy if you ever get to travel much, but not so in developed states where people have learned to both increase margin and customer satisfaction by deriving value from a pleasant sales experience.”
Really! If I ever get to travel I’ll try to pay attention. If you ever graduate into the big boy world of business you’ll notice that negotiation is a critical part of business and those skills are what set executives apart from employees. If you are trying to tell us that negotiation isn’t part of buying a car in other developed countries we can have that debate EXCEPT for the fact that not only have I been in many of these countries as a tourist or inhabitant, I’ve actually consulted and trained for auto dealer groups, including one of the world’s privately held Toyota dealer groups. You are so far away from that world, as evidenced by your amateurish assertions, it won’t be much of a discussion. In fact, it will probably model this one where you have left all the logical questions I’ve asked you unanswered. One might get the impression you don’t know the answers.
RE: “Suffice to say US dealers are often not at that point yet (luxury dealers for example do better), and it should be your job as an entrepreneur to ponder how to get there instead of defending a poor status quo: abusing customers while complaining about meager profits. Some theoretical education might be a good first step.”
Again you stretch what I’ve said while not understanding the facts on the ground. Some actual experience in the business might help you see how far you miss the mark.
If you’re going to assert the expertise of perspective on a subject, it’s best to *demonstrate* than simply boisterously making the claim. Maybe this is a side of your particular business I don’t really grasp but at least outside of auto sales knowledge can be concentrated and compiled into digestible form such that it can be understood. I believe they’ve even opened schools to specifically teach business.
I mean, here you are bitching about low margins in the biz while at the same time treating customers so poorly, so outsiders can’t grasp why self-proclaimed entrepreneurs have such trouble putting two and two together. I’m sure there are good reasons why (and I’ve take my stabs above) but shouting without providing substance or insight only makes it seem that even the insiders are pretty clueless.
RE: “The fact that the BR-Z had a $400 incentive near the launch date, while its twin did not, would be a pretty clear indication that there was a bit of an inventory glut, i.e. sales were below expectations.”
Who says there was an incentive? A columnist? TrueCar? Our poster called it a “rebate.” TrueCar took incomplete data and tried to make conclusions from it. They often conveyed that bogus information to consumers who came to dealers with expectations that weren’t to be realized. That’s only one of the reasons they took a huge hit when dealers pushed back and changed their business model. I seriously doubt there were any incentives on the BRZ when it was introduced. That would defy all logic. It is possible there might have been something that was a part of an overall stair step program, but that doesn’t make it an incentive specifically on BRZ. Subaru doesn’t do rebates.
You seem very threatened by this TrueCar thing. Are they a competitor to your business? Is that what made you write a whole nonsense piece on the semantics of what “transparency” meant?
RE: “”You seem quite insecure about getting called out on a myriad of inconsistencies and logical fallacies.” He seems to be worried that his profession may not be so relevant, after all.”
The entertainment value of all of this is boundless. It isn’t the first time to encounter experts on a business with no actual participatory experience. Practitioners of my “profession” are on their own. I limit myself to writing for trade publications and occasional consulting and training. Even my trips to Japan are leisure trips these days, although I still stay in touch with business friends and associates. I do spend a lot of time castigating the bad actors. In fact, the purpose of this thread in the first place was to expose certain dealers and vendors who claim transparency while only providing the perception of transparency, something I consider deceptive. I’d prefer to look you in the eye and tell you my proprietary information is none of your business than try to convince you I’m being transparent when I’m not.
RE: “There is a place for dealers because they reduce the OEM’s risk and cost exposure to the retail side of the business. Retail margins are low, which makes the retail side generally unappealing to the automakers.”
Finally a couple of nuggets.
RE: “But the cutthroat tactics and unethical behaviors can compromise the brand reputations of the OEMs, so that risk mitigation does come at a price. The move to tie holdback payments to CSI scores would suggest that the automakers aren’t oblivious to the problem.”
More amateurism. Hold back has NOTHING to do with CSI. Never has. Never will.
I officially retire from this thread. I have given you the opportunity to benefit from a lot of years of knowledge and experience and you don’t even get the basics. Hold back and CSI? Are you kidding me? The Toyota and the SCION? WTF?
There are always those who come to kindergarten and think they know more than the teacher. The geniuses here can carry on supporting each other in your opinions based on incomplete facts and the lack of experience to interpret the facts you actually get right. You know who you are.
To sum up – Dealers have never had it so good. The average dealer made around $850K in 2013. They are under no pressure from TESLA. The chances of OEM direct sales are slim and none. Consumers have never had it so good, yet we can some find who are quite vocal in their dissatisfaction even though the actual rancor is nothing like what is asserted here. Read Finlay’s piece again.
And the experts here are free to put their own money where their mouth is and prove to the world there is a better way to run a car dealership. One wonders, given their inflated sense of confidence, why they don’t take the plunge.
Thanks for the comments.
So TrueCar are the true bad actors here rather than the openly unscrupulous dealership practices? At a basic level it shouldn’t be hard to grasp why others have trouble putting much faith in your judgements.
TrueCar poses a threat to salesmen. In the worst case scenario, it could turn salesmen into irrelevant order takers.
Despite Mr. Ruggles’ protestations, TrueCar is a data information provider ala Edmunds, Polk, etc., and is therefore in a good position to provide credible information about transactions and incentives.
If you lease a car, it is quite likely that your payment will be partly determined by TrueCar, as it is the owner of ALG, which calculates the residuals for car leases. It isn’t just a one-man car brokerage service; the company has access to information.
True car makes the salesperson more necessary, at a true car affiliated dealership it is important to “switch” the customer to a higher profit buying option or sell high profit aftermarket “products”. This takes talent, not order taking.
True car does not offer transparency, it is third party validation meant to make the customer feel more secure and less defensive.
If that’s true, then you should be thrilled, embrace it as an opportunity to show off your fantastic sales skills, and stop whining about it.
The fact that you’re complaining about it to no end betrays your real sentiments.
I don’t think I’ve ever complained about it, certainly not here. I use true car almost daily.
In that case, perhaps you should take Ruggles out for a drink or six, and show him the error of his ways.
I don’t think ruggles claimed that truecar was bad for participating dealerships. His biggest point was that true car marketing “transparency” is deceptive.
I would have a drink with ruggles, sounds like an interesting guy.
Transparency… I’d take simple honesty. I spent most of yesterday negotiating for a CUV that has promotional pricing. I have a 2010 4Runner with low mileage as my trade. I went to 3 dealerships with the same story. “I want to do the promotional pricing on the vehicle. I need to know what you are offering for my trade. I intend on doing the same with the other 2 dealers in the area.”
Dealer 1: Yes, we can give you the promotional price for the vehicle, but using that promotional price means we need to recalculate your trade-in lower versus not doing the promotional price.
Dealer 2: No problem, here is the promotional price, this is what we value your 4Runner at, here is what your price would be when all is said and done. Head over when you decide and we’ll get the vehicle that you want from our partner dealer.
Dealer 3: We really need a starting point to know what you want on your trade even though you keep telling us that you just want a trade number. Oh, we can give you $xx,xxx, and when you include the sales tax benefit (WV only pays taxes on the difference between the new car and trade), it is pretty much that number you said! Oh, wait, you are leaving? Call later: What do we have to do in order to get your business. I rely on this sale to put food on my table.
Dealer 3 was a full $1,500 lower on trade in value than dealer 2. Why should I GIVE you my business (and an extra $1500!!!) when you kept trying to force a number out of me when I wanted to be as clear and transparent as possible with you? Dealer 1 is clearly too incompetent to do business with. Dealer 2 was up front, no pressure, and gave me all the paperwork I’d need with an actual trade-in value sheet listing my vehicle and the VIN. I called them later that evening and did the deal. I go sign the paperwork tomorrow. I love cars, but man I hate buying the things because the dealers can’t follow the simple concept of me asking individually of 3 dealers to give their best price and I’ll choose the one with the best price. I didn’t set the dealers against each other trying to drive the price down.
Anyway, I can’t believe how well 4Runners hold their value. $5k in depreciation from what I paid 46 months ago for it new off the lot. It is just a great truck and I’ll miss it. My wife had a momentary lapse of judgment and OK’d me getting a sports car, so the 4Runner has to make room.
RE: “I don’t have a problem with a little back-and-forth during the purchase process. What I do have a problem with is the adversarial relationship that exists along with some of the obfuscation that takes place with the foursquaring that many dealers do.”
If you have an objection to being offered a price, a trade in allowance, a down payment, and a monthly payment, just find a dealer who doesn’t provide that to you. That’s the beautiful thing about the market. With a little effort, you can shop for what you want. After all, you making a major investment. If you want to buy a gadget, you’d probably go to Amazon.
RE: “I recently took out a loan against my Honda for debt consolidation. The loan officer at my credit union was up front about the relationship between the proportion of the loan to the vehicle’s value and the interest rate I would pay.”
Of course, why wouldn’t they be? Besides, those types of loans typically do not involve risk based pricing for interest rate as with the tiered system that exists in auto finance.
RE: “I compare that to my last car buying experience at the dealership where there was I-don’t-think-we-can-do-thating and let-me-talk-to-my-managering and the numbers moved around in ways that made it difficult to tell whether the deal actually improved or not.”
If it is more than you can handle on your own you should take a trusted adviser with you. If you don’t know how to take control in a business negotiation, where you’re holding all the cards, you need some assistance. You can always look for a dealership where the salespeople have all of the information and don’t require management supervision. Good luck with that, though.
RE: “That, to me, is where I’d like “transparency.”
Of course, consumers would like it to be easy to shop one dealer against another.
RE: “If I say ‘I’ll give you $X’ and the salesman returns with ‘Okay but only at y% interest’ the salesman is up front about the fact that he’s there to make a living and the relationship between the figures becomes much clearer and I can actually evaluate the offer on its own merits rather than feeling like I’m playing a shell game.”
If you enter a dealership and expect it your experience there not to include a profit motive, you really do need to take along an adviser. When you go to WalMart do you think their business isn’t about making profit?
The more you don’t understand, the more like a shell game car being seems. The less astute you are in business, the more likely you are to pay a higher gross profit than average, which also pays for the cheap deals some of your other consumers receive. If everyone received the same deal, it penalizes those who put in the time and effort to do the work to get good at it. And those who don’t pay for it. Isn’t that the capitalistic way of things?
This thread is incredibly long… looks like the subject of negotiating with a dealership haa really struck a common nerve.
My approach to avoiding this nightmare is to buy USED only, from private parties. The car I bought last month cost me less than 7% of the original sales price, and should last at least another 50K, and probably much more than that. It came with a complete folder of every maintenance receipt since new, and it’s close enough to brand new to make me happy.
Someone else can pay the finance charges, comprehensive insurance and suffer the depreciation loss. I just want a decent car to get around in, which is pretty what any car with over 5,000 miles on the odometer is, anyway!
Everybody drives a used car.
But to think negotiation is avoided by avoiding a dealer is a little naive, don’t you think? You’re just negotiating with a different party than a dealer. You don’t have the same recourse against a private party, nor are they bound by the same rules dealers are.
Ruggles is correct, although depending on what you buy you’re more likely to get a realistic price from a private party.
The main difference and the reason why this thread gets the attention is that dealership negotiation is an exceptionally unpleasant experience for most people compared to just about anything else.
The author likes to throw around the blame, but when the common denominator of antagonism is you, well…
What does, “throw around the blame” mean?
The author asked a question about what real transparency is.
Debatable about the price issue. Private owners often try to get over market for their car because they frequently have to cover the trade in credit on sales tax they lose when they don’t trade their car in.
BTW, the new edit feature is cool.
I think the real problem is most people do not understand what the car is worth whether they are they buyer or seller and perhaps also hoping to recover costs such as tax (which is unrealistic). Most buyers depend on online resources such as Kelly Blue Book whose values are mostly fiction.
RE: “Most buyers depend on online resources such as Kelly Blue Book whose values are mostly fiction.”
Tru Dat! Most car shoppers think the dealer should give them retail for their car so they can sell it for retail to get their money back. This for the privilege of selling them a new car for $50 over cost.
And we wonder why there is friction in auto retail.
Very much agreed. I think its a mix of consumerism and a general lack of education in society.
I too agree with ruggles on this one. If you’re looking for a CPO or even a small dealer warranty to sweeten the deal on a used car, you can’t get anything like that from a private party and that’s something I’ve come to expect on newer used cars
> What does, “throw around the blame” mean? The author asked a question about what real transparency is.
Much of the tread has been folk describing/relating poor dealership experiences, and you blaming the customer instead. This is obvious enough so it’s unclear why my claim was confusing.
> Tru Dat! Most car shoppers think the dealer should give them retail for their car so they can sell it for retail to get their money back. This for the privilege of selling them a new car for $50 over cost.
It really doesn’t matter what shopper expectations are; they exist for very merchant out there. It does matter why dealer experiences are reflected to singularly worse than any other shop, and it has little to do with transparency.
Transparency is just a tool to get around a lot of games played. Consumers resort to it because the experience is almost unbearably bad for them otherwise. Dealers brought that on themselves, but also don’t seem to be the sort to take blame for anything.
Yes, we’ve heard some emotional anecdotes. The industry sells about 45 million vehicles a year, including private sales, via negotiation. How bad can it be? If consumer perceptions were the most important element the business would change to adapt to it. Consumer perceptions must not be the most important element. But you’re free to enter the game and show us how it should be done.
“Throw around blame” and “blaming the consumer” are two different things. Thanks for clarifying. Consumers are free to go to a ONe Price store to buy. They are free to seek out a sales process that pleases them. That must be happening a lot since millions of cars get sold every year.
RE: “It really doesn’t matter what shopper expectations are; they exist for very merchant out there. It does matter why dealer experiences are reflected to singularly worse than any other shop, and it has little to do with transparency.”
It has everything to do with the fact that consumers DO want to “play the game” but want to be guaranteed a win. Exactly how do consumers resort to “transparency?” How would they do that? Dealers brought what on themselves?
Negotiation, by its very nature, is a game. If you don’t want to play, don’t.
> But you’re free to enter the game and show us how it should be done.
Seems like TrueCar is entering the game to show us something. Your disapproval would imply that they’re doing that something right.
> They are free to seek out a sales process that pleases them. That must be happening a lot since millions of cars get sold every year.
Ah, then dealers have no problem with customers shopping around. Their showroom tactics imply otherwise but let’s take your word for it instead.
>It has everything to do with the fact that consumers DO want to “play the game” but want to be guaranteed a win. Exactly how do consumers resort to “transparency?” How would they do that? Dealers brought what on themselves?
Again, every other thing in life they buy demonstrate otherwise. How do you personally reconcile this cognitive dissonance? By ignoring it as seems to be thus far?
> Negotiation, by its very nature, is a game. If you don’t want to play, don’t.
Seems most buyers coming in armed with all the info to shortcut the game much as possible agree.
So why don’t you enter the game and show us how its done?
Really? So criticism is only valid upon switching careers or whatever rather than a convincing argument? I hope people aren’t paying for this level and quality of reasoning.
RE: “Seems like TrueCar is entering the game to show us something. Your disapproval would imply that they’re doing that something right.”
My disapproval of TrueCar has to do with Scott Painter trying to make money off of changing a business he hasn’t yet learned. His BOD and investors also disapprove of him and of the fact he lost $78 million of their dollars in 2012 alienating dealers. My further disapproval involves dealers who haven’t figured out what TC is up to. But not to worry. TC has changed their business model to help dealers maintain profit. They’ve told you consumers about that, right?
Increasingly, Dealers have figured out how to use TrueCar’s consumer facing website to validate their own prices while avoiding the TC $300 charge. How many consumers know that the dealer has an additional $300 TC charge added in to their car deal? If TC was “transparent,” they’d all know about that, right?
We get it that you want the least informed customers possible, but trying to make the competition look bad doesn’t make you look good.
Again, this doesn’t seem like the level of analysis worth paying for.
RE: “Ah, then dealers have no problem with customers shopping around.”
What difference would it make if dealers had a problem with customers shopping around. That’s the whole point of the system the way it is set up. Consumers can shop to their heart’s desire.
RE: “Their showroom tactics imply otherwise but let’s take your word for it instead.”
Are you an expert in dealer showroom tactics, as if all dealers operate the same way? Guess what, they don’t. Each is free to operate as they see fit, within the bounds of the law.
I’ll ask again. Exactly how do consumers resort to “transparency?” How would they do that?
Dealers brought what on themselves?
> I’ll ask again. Exactly how do consumers resort to “transparency?” How would they do that? Dealers brought what on themselves?
It should be clear enough from the 3 or 4 times I’ve already repeated this: consumers are only taking considerable effort to do cost research because dealer have such a terrible rep for sleazy tactics to rip off the uninformed. If this isn’t clear, please speak up now instead of repeating the question again later.
> Consumers can shop to their heart’s desire.
Not according to the salesman who’s only offering this deal that the customer’s already wasted hours on if he doesn’t leave. L O L
> Are you an expert in dealer showroom tactics, as if all dealers operate the same way? Guess what, they don’t. Each is free to operate as they see fit, within the bounds of the law.
I don’t have anything to do with the terrible reputation your industry has earned.
> Very much agreed. I think its a mix of consumerism and a general lack of education in society.
So car buyers are uniquely uneducated compared to consumers of everything else? They sure don’t dislike other shopping experiences nearly as much.
So what other big ticket items do consumers like to buy that also include a trade in and complex financing issues, where the FTC prevents price fixing? I’d like to know?
There’s only relevant number for the price, and one main number for the financing. How is this fundamentally different than financing a kitchen remodel down at home depot?
The only reason why it can be considered “complex” is due to the games car dealers specifically play to confuse the customer. To cut the blame off at the pass, that’s not on the customer, that’s on you.
RE: “There’s only relevant number for the price”
And what would that be?
RE: “and one main number for the financing.”
And what would that be?
RE: “How is this fundamentally different than financing a kitchen remodel down at home depot?”
We can start with the fact that Home Depot is one company who can fix prices so they aren’t competing against each other on the materials.
RE: “The only reason why it can be considered “complex” is due to the games car dealers specifically play to confuse the customer.”
Just because you don’t understand the complexities doesn’t mean they don’t exist. You can put your kitchen remodel on your Home Depot card, pay cash, or use a different credit card. On a car loan there are 4 different tiers, plus near prime and sub prime credit tiers. Each lender doesn’t use the same criteria to establish its tiers. Each lender has its own DTI requirements in addition to credit score. Some require documentation of income, some don’t. Each lender has it’s own advance parameters. With trade ins, things get even more complex. As a consumer, if you want to bring in your own money, you can deal with this stuff on your own. As a practical matter, only a small sliver of consumers have a simple task of financing on their hands. Less than 20% of the buying population is “fast trackable.”
RE: “To cut the blame off at the pass, that’s not on the customer, that’s on you.”
What’s your issue with blame? It is what it is. You can blame who you want for things you don’t understand. But that’s on you. We don’t care.
This is a good example of the games that dealers play.
It’s pretty obvious what the numbers in question are and or that Lowes across the street offers more or less the same stuff, but it’s a game to those in the industry to confound these simple issues rather than clarify them. It must get to the point they can’t describe things simply which is why the article itself is so many words to say so little.
> Just because you don’t understand the complexities doesn’t mean they don’t exist.
Why does any of this matter to the customer? That’s your job to figure out those details. The customer pays one price for the car, and as separate issue possibly divided into price/month for X months. That’s certainly how simple financing a fridge or house or anything else in life is.
> You can blame who you want for things you don’t understand. But that’s on you. We don’t care.
Oh, it’s pretty easy to understand when you take away the game. You don’t have to care that the dealers come out looking bad, that’s just the reality of it, remember?
The car business is a pretty simple one. I wonder whether this appeal to the complexity god is an effective sales tactic, when it should induce laughter among any informed buyer who is on the other side of the table.
RE: “Again, every other thing in life they buy demonstrate otherwise. How do you personally reconcile this cognitive dissonance? By ignoring it as seems to be thus far?”
First, your statement is false on its face. Every buy real estate? Ever buy a business? Ever sell a business? Ever sell real estate? A Boat? An airplane? A piano? A new roof? A motorcycle?
.
RE: “Seems most buyers coming in armed with all the info to shortcut the game much as possible agree.”
How would you know how most customers come into a car dealership? But consumers are free to gather all the info they can. They are free to become financially sophisticated enough to understand the issues. They are free to go to negotiation school. I can recommend Charles Karrass. They can bring in an attorney or another advisor. Consumers have many advantages these days, more than they ever have. And they’re still cranky. How will they ever be satisfied? They more they get the more they want. That should tell you something.
I’ve bought plenty of things and can confirm that car dealers, esp used cars, employ some of the slimiest tactics, and your nonchalant attitude here only confirms this is the norm. That reputation didn’t come out of nowhere.
> And they’re still cranky. How will they ever be satisfied?
People will complain about bad treatment even if they end up with a good deal. The two are not necessarily intertwined; surely that’s not confusing to someone so knowledgeable about business.
RE: “Really? So criticism is only valid upon switching careers or whatever rather than a convincing argument? I hope people aren’t paying for this level and quality of reasoning.”
Reasoning? What are you talking about? I’m still trying to figure out how consumers resort to transparency. People are getting a headache trying to follow your level and quality of reasoning.
> Reasoning? What are you talking about? I’m still trying to figure out how consumers resort to transparency. People are getting a headache trying to follow your level and quality of reasoning.
“LALALALALA, I’m rubber and you’re glue”. We got ourselves a thinker here.
RE: “This is a good example of the games that dealers play. It’s pretty obvious what the numbers in question are and or that Lowes across the street offers more or less the same stuff, but it’s a game to those in the industry to confound these simple issues rather than clarify them. It must get to the point they can’t describe things simply which is why the article itself is so many words to say so little.”
Arbitrary claims with no basis in fact is a waste of my time. If things are so simple, why do you not understand them? You obviously don’t understand the question posed in the article. How would a consumer resort to transparency?
RE: “Why does any of this matter to the customer? That’s your job to figure out those details.”
Its not my job to do anything except what I want to do. Its the function of a dealership to satisfy enough potential buyers to break even and make a profit. Dealers made an average of $850K last year. So they must be accomplishing that.
RE: The customer pays one price for the car, and as separate issue possibly divided into price/month for X months. That’s certainly how simple financing a fridge or house or anything else in life is.”
Car dealers don’t control the financing UNLESS they are engaged in BHPH. They facilitate it on behalf of both borrowers and lenders. Dealers don’t create the complexity, another example of understanding you think you have, but don’t.
An auto dealer isn’t concerned about the image of the industry as a whole. Why should they be. If all are the same, no one has an advantage. If its so easy, why aren’t you doing it. Wouldn’t you make a fortune since you know how to satisfy all of those consumers? Or is yours the world of theory, where you in theory can know more than actual practitioners?
Would it be possible to at least get some coherent arguments instead of a list of arbitrary diversions? For example, what does how much a dealer makes a year have to do with anything? You seem to repeat that one a lot, and not a single instance where it’s relevant.
I’ll make it easy, just use this form: A dealer can’t show a clear price during negotiation, because ______.
RE: “It should be clear enough from the 3 or 4 times I’ve already repeated this: consumers are only taking considerable effort to do cost research because dealer have such a terrible rep for sleazy tactics to rip off the uninformed. If this isn’t clear, please speak up now instead of repeating the question again later.”
That isn’t “consumers resorting to transparency.” It might be consumers trying to impose transparency on dealers, but it sure as hell isn’t “consumers resorting to transparency.”
When playing cards you’d like your adversaries to be more transparent, wouldn’t you?
> That isn’t “consumers resorting to transparency.” It might be consumers trying to impose transparency on dealers, but it sure as hell isn’t “consumers resorting to transparency.” When playing cards you’d like your adversaries to be more transparent, wouldn’t you?
Imposing transparency on professional tricksters when you’re not one yourself is the correct course of action to level the playing field. Again, you seem awfully motivated to avoid why customers pull out all the stops for car dealers; it wouldn’t have anything to do with their rep as tricksters, would it?
Here’s one reason why I do well negotiating with dealerships: I’m not easy phased by these trite little diversions.
RE: “The car business is a pretty simple one.”
Sure it is. And you know because you’ve done it successfully, right?
RE: “I wonder whether this appeal to the complexity god is an effective sales tactic, when it should induce laughter among any informed buyer who is on the other side of the table.”
Sales tactic? Why would anyone care if an “informed buyer” understands the business? What does that have to do with anything?
RE: “We get it that you want the least informed customers possible.”
What I want? What I would want is all possible prospects.
RE: “but trying to make the competition look bad doesn’t make you look good.”
Trying to put words in my mouth? Never said that.
RE: “Again, this doesn’t seem like the level of analysis worth paying for.”
You’re really not making sense.
> What I want? What I would want is all possible prospects.
Nice try. The claim is that you want these prospects to be as uninformed as possible. It’s like you’re trying to solidify this reputation of sliminess.
> Trying to put words in my mouth? Never said that.
Yes you were trying to drag TrueCar down with you, in direct reply to claims that dealers are awfully slimy. Ie by definition a diversionary tactic.
> You’re really not making sense.
Just above you were bragging that others pay for your analysis. Make sense now?
Personally, I’d like to get a coherent, logical explanation of what allegedly makes car sales so baffling and complicated to everyone who hasn’t pitched mop-n-glo or worn a bad suit.
But I’m sure that this won’t be forthcoming. The only thing that is exceptional about the car dealership business is the degree to which aggressiveness plays such a prominent role in the sales process. (“Rough around the edges” would be the polite way to describe it.)
RE: “Not according to the salesman who’s only offering this deal that the customer’s already wasted hours on if he doesn’t leave. L O L”
As I said, consumers can shop to their heart’s desire.
RE: “I don’t have anything to do with the terrible reputation your industry has earned.”
Good for you. No wonder you know little or nothing about it.
> As I said, consumers can shop to their heart’s desire.
Sure, once the dealer “finds the keys” to the car they drove in to trade.
> Good for you. No wonder you know little or nothing about it.
How does it feel that a relative outsider can trivially reduce you to this?
RE: “I’ve bought plenty of things and can confirm that car dealers, esp used cars, employ some of the slimiest tactics, and your nonchalant attitude here only confirms this is the norm. That reputation didn’t come out of nowhere.”
So find yourself a non dealer to buy from, you know, private sale where you don’t have to negotiate with anyone or use TrueCar, an nanny/advisor, or someone else to hold your hand. Perhaps CarMax or a One Price store will make you happy? There’s something out there for everyone. Aren’t you happy?
Oh, I have no problem dealing with shysters. That doesn’t mean I won’t call them out. Again, two separate things.
I’m still trying to figure out how consumers resort to “transparency.”
Who’s transparent, the dealer or the consumer? If you want us to know what you mean, you have to say it. Does the consumer use transparency as a negotiating chip or something? OR better yet… The sales person asks, What’s the most you’ll pay” and the transparent customer provides a truthful answer?
Can you point out the specific part of this sentence you’re confused about?, seems pretty clear to me: “Imposing transparency on professional tricksters when you’re not one yourself is the correct course of action to level the playing field. ”
> Does the consumer use transparency as a negotiating chip or something? OR better yet… The sales person asks, What’s the most you’ll pay” and the transparent customer provides a truthful answer?
Customers aren’t ones dicking around playing games up and down, as again evidenced by every other consumer business on the planet. One day maybe you’ll see how business works outside of auto sales.
RE: “Would it be possible to at least get some coherent arguments instead of a list of arbitrary diversions?”
I don’t think you’d know the difference. You’re a know it all on a business you’ve never been engaged in.
RE: “For example, what does how much a dealer makes a year have to do with anything?”
That, plus the number of vehicles sold each year under the system you say is broken, might indicate you don’t understand the big picture.
RE: “You seem to repeat that one a lot, and not a single instance where it’s relevant.”
The system ain’t broken. Consumers being unhappy with it isn’t holding anything back from a commerce perspective. Or are you trying to say more cars would be sold if there was less friction in the process. The reason I provide the per store profit stat would be obvious to you if you understood ANY business, not just the car business. HINT: Its not about unit sales if there isn’t any profit to go with it. The industry and the system of retail provides a balance of volume and profit. Reduce the profit and the volume might go up, but why? What would be the point? Its about the equilibrium.
RE: “I’ll make it easy, just use this form: A dealer can’t show a clear price during negotiation, because ______.”
I’ll make it easy for you. All are free to do so and some do. Find one of those and be happy. Now it might help to know on what day you intend to do business, because the cost structure changes constantly. But if you knew the business, you’d already know that.
> I don’t think you’d know the difference. You’re a know it all on a business you’ve never been engaged in.
My expertise has little to with your thrift on coherent arguments. In fact, expertise is generally denoted by ability to make coherent arguments.
> That, plus the number of vehicles sold each year under the system you say is broken, might indicate you don’t understand the big picture.
Sales in spite of an objectively poor sales experience would suggest a product compelling enough to compensate. Even you would agree cars are a compelling enough product to get away with a lot of bad behavior during the sale. In fact, dealers are professionals at knowing how much they can get away.
> Or are you trying to say more cars would be sold if there was less friction in the process. The reason I provide the per store profit stat would be obvious to you if you understood ANY business, not just the car business. HINT: Its not about unit sales if there isn’t any profit to go with it. The industry and the system of retail provides a balance of volume and profit. Reduce the profit and the volume might go up, but why? What would be the point? Its about the equilibrium.
I’ve mentioned several times why individual dealers act poorly even though as a collective they would probably benefit from a better reputation, aka tragedy of the commons. Everyone suffers from a poisoned well; it makes every last drop of profit progressively harder to squeeze out even with a product as easy to sell as cars. It makes every dealer more desperate and aggressive against increasing guarded consumers. This is a systemic problem and as such not easy rectified by either me or pch101 getting into the business as you keep suggesting.
RE: “Imposing transparency on professional tricksters when you’re not one yourself is the correct course of action to level the playing field.”
So why didn’t you say that instead of “resorting to transparency?”
RE: “Again, you seem awfully motivated to avoid why customers pull out all the stops for car dealers; it wouldn’t have anything to do with their rep as tricksters, would it?”
You think you are a mind reader. I already told you I welcome ALL consumers, or did before selling out and semi retiring. Most dealers I know feel the same way. Exceptions would be dealers who advertise for the less sophisticated buyer. Again, you seem to think car dealers are concerned about the general perception. They aren’t. Is that YOUR negotiating strategy? Give me what I want or I won’t like you?
RE: “Here’s one reason why I do well negotiating with dealerships: I’m not easy phased by these trite little diversions.”
Except you wouldn’t know if you do well or not. You don’t even know why a dealer might need to know when you will do business before providing you a price quote. How would you know a good deal from a bad deal?
> Again, you seem to think car dealers are concerned about the general perception. They aren’t. Is that YOUR negotiating strategy? Give me what I want or I won’t like you?
They should be. A bad rep for the industry means more guarded customers, which feeds into more aggressive/desperate sales strategies and so on. The problem is that *individual* dealers don’t care about *individual* customers, even though they all poison that well and make it harder for the collective.
> Except you wouldn’t know if you do well or not. You don’t even know why a dealer might need to know when you will do business before providing you a price quote. How would you know a good deal from a bad deal?
Generally getting cars for some amount under invoice-rebates-holdbacks implies a good enough deal. The interesting thing is I’m the quintessential buyer who otherwise doesn’t care about squeezing out every last cent, but does the price research/prep *because* of the aforementioned rep. I doubt I would come even close to that level if the industry were viewed more positively.
RE: “Nice try. The claim is that you want these prospects to be as uninformed as possible. It’s like you’re trying to solidify this reputation of sliminess.”
That’s not my claim, it’s yours.
RE: “Yes you were trying to drag TrueCar down with you, in direct reply to claims that dealers are awfully slimy. Ie by definition a diversionary tactic.”
Trying to drag TC down? You dispute what I said. You think you have a better handle on TC than I do? No refudiation of their $300 charge? You think they work for free? A diversionary tactic, although perhaps unintentional, is not knowing what you are talking about and making stuff up.
RE: “Just above you were bragging that others pay for your analysis. Make sense now?”:
And where was that? But since you brought it up and I rather published and have cashed more than a few consulting checks, a few more than you I gather.
> That’s not my claim, it’s yours.
Yes, it’s my claim and it’s entirely true. The salesperson who doesn’t want customers to be less informed (esp about their prices) is lying.
> Trying to drag TC down? You dispute what I said. You think you have a better handle on TC than I do? No refudiation of their $300 charge? You think they work for free? A diversionary tactic, although perhaps unintentional, is not knowing what you are talking about and making stuff up.
Are you actually confused about what the diversion here is? It’s bring up some TC exec or whatever strawman to the point at hand, and then accusing others of a diversion when they don’t take the bait. Are you doing this because you can’t do better or don’t want to?
> And where was that? But since you brought it up and I rather published and have cashed more than a few consulting checks, a few more than you I gather.
So “don’t want to” is the right answer?
RE: “Sure, once the dealer “finds the keys” to the car they drove in to trade.”
Now you really have gone off the rails. Are you afraid of that?
RE: “How does it feel that a relative outsider can trivially reduce you to this?”
If it ever happens, I’ll let you know. This ain’t it.
You really do need to take a nanny along when shopping for a car.
So tell us, if you were a dealer would you provide transparent pricing? In your theoretical world, that is?
See, in that car salesman mind you like to assume everyone who mocks these practices are easy prey to them. On the contrary, the people who talk openly about this are the ones who see through it. This is basic psychology: it’s the pathological salesman who has to psych himself up to be the alpha predator vs. the customer as prey to do his job effectively, and I’m surprised someone who claims to be an expert is naive to this.
RE: “My expertise has little to with your thrift on coherent arguments. In fact, expertise is generally denoted by ability to make coherent arguments.”
You’re right, your lack of experience has nothing to do with my understanding of the auto industry. Your inexperience DOES explain your inability to recognize it, your own deficiencies. You wouldn’t know a coherent argument on this issue if it bit you in the ass.
RE: “Sales in spite of an objectively poor sales experience would suggest a product compelling enough to compensate.”
If you are correct, there should be opportunities for you to make your fortune showing us how to do it, right? What’s keeping you from putting your money where your mouth is? So you belong to the Scott Painter “No Friction 20 million SAAR” club?
RE: “Even you would agree cars are a compelling enough product to get away with a lot of bad behavior during the sale. In fact, dealers are professionals at knowing how much they can get away.”
That might be part of negotiation. You know, consumers have their own strategies, but that’s ok, right? The fact is, consumers have choice and can select a dealer without a gun to their head. There’s competition in the marketplace and truly bad actors will fall by the wayside, right?
RE: “I’ve mentioned several times why individual dealers act poorly even though as a collective they would probably benefit from a better reputation, aka tragedy of the commons. Everyone suffers from a poisoned well;”
Who exactly is suffering? You mentioned some opinions a few times. Don’t portray them as fact.
RE: “it makes every last drop of profit progressively harder to squeeze out even with a product as easy to sell as cars. It makes every dealer more desperate against increasing guarded consumers.”
Increasingly guarded consumers? Compared to what?
RE: “This is a systemic problem and as such not easy rectified by either me or pch101 getting into the business as you keep suggesting.”
If you got into the business the LAST thing you’d be worrying about is the overall reputation of auto dealers. If you were great, and your competitors weren’t, why would you want to give away your advantage?
Think about it. :)
Entertainment time just got replaced by supper time.
> You’re right, your lack of experience has nothing to do with my understanding of the auto industry. Your inexperience DOES explain your inability to recognize it, your own deficiencies. You wouldn’t know a coherent argument on this issue if it bit you in the ass.
This is a good example of a lack of any coherent argument.
> If you are correct, there should be opportunities for you to make your fortune showing us how to do it, right? What’s keeping you from putting your money where your mouth is? So you belong to the Scott Painter “No Friction 20 million SAAR” club?
Why would anyone except the pathological or desperate want to work in an industry so universally reviled? Logic would dictate that short of charity that those with the benefit of talent and creativity are attracted to more positive fields.
> That might be part of negotiation. You know, consumers have their own strategies, but that’s ok, right? The fact is, consumers have choice and can select a dealer without a gun to their head. There’s competition in the marketplace and truly bad actors will fall by the wayside, right?
Someone in your position should know that customers are hardly on a level as negotiators who’ll stoop to anything, so why pretend? Who are you fooling?
> Who exactly is suffering? You mentioned some opinions a few times. Don’t portray them as fact.
Was it too difficult to read the next line which says it’s the dealers whose sale is only more difficult against more guarded and informed customers? Especially since you replied to it?
> Increasingly guarded consumers? Compared to what?
Compared to customers who aren’t wary of slimy salesmen.
> If you got into the business the LAST thing you’d be worrying about is the overall reputation of auto dealers. If you were great, and your competitors weren’t, why would you want to give away your advantage?
It guess it takes people who can’t grasp the rather simple concept of tragedy of the commons to get into the business? Just because something is in everyone’s personal interest doesn’t mean it’s in the collective interest. The car industry makes less as whole due to guarded/informed customers, so the “better” dealer will take their slice of a smaller pie.
RE: “Again, you seem to think car dealers are concerned about the general perception. They aren’t. Is that YOUR negotiating strategy? Give me what I want or I won’t like you? They should be. A bad rep for the industry means more guarded customers, which feeds into more aggressive/desperate sales strategies and so on. The problem is that *individual* dealers don’t care about *individual* customers, even though they all poison that well and make it harder for the collective.”
You have it all figured out, don’t you.
RE: “Except you wouldn’t know if you do well or not. You don’t even know why a dealer might need to know when you will do business before providing you a price quote. How would you know a good deal from a bad deal? Generally getting cars for some amount under invoice-rebates-holdbacks implies a good enough deal.”
Why should you get a better price than the dealer gets?
RE: “The interesting thing is I’m the quintessential buyer who otherwise doesn’t care about squeezing out every last cent, but does the price research/prep *because* of the aforementioned rep.”
Good for you. If the industry didn’t want you to have all of that info, you probably wouldn’t have it.
“I doubt I would come even close to that level if the industry were viewed more positively.”
And your point is?
> You have it all figured out, don’t you.
It’s exactly why others ask me to nanny them. Surely the dealer would do better without me there, and I probably wouldn’t be if they didn’t have their rep.
> Why should you get a better price than the dealer gets?
Because I can after doing the research. Again, an informational asymmetry that probably wouldn’t be in my favor if only the industry had a better rep.
> Good for you. If the industry didn’t want you to have all of that info, you probably wouldn’t have it.
It’s certainly not in their favor.
> And your point is?
How many times does it need to be repeated?
RE: “Personally, I’d like to get a coherent, logical explanation of what allegedly makes car sales so baffling and complicated to everyone who hasn’t pitched mop-n-glo or worn a bad suit.”
Okay, I’ll develop a little quiz for you to see how YOU do.
Let’s start with your explanation of “hold back.” Seems you flunked that one last time.
Then, explain to us a car deal and how its calculated. But from a sellers point of view.
Then, let’s hear how you’d go about buying a dealership. What would you be paying for? How would you finance it, you know, a pro forma. Let’s take a store projected to do 100 units per month with a PV of 1200 and a UIO of 4800. I’ll give you a set up and you take it from there.
What inventories will you carry for parts, new vehicles and used vehicles?
How many employees will you need for each department? How will you pay them?
The bank will want to see a pro form P&L so you’ll have to project sales. Sadly, they will want to know your gross profit, regardless of whether your customers and employees are happy about you making profit or not.
What will be your advertising strategy? How will you establish your marketing budget?
Who will you floor plan through. Will you need a cap loan? How will you go about getting a dealer’s license?
Will you buy your facility or lease it? How much working capital will you need? What will you do if your OEM comes in and demands that you replace the tile on the floor and replace it with granite. They also don’t like the ceiling tiles, and the signs on your bathroom doors don’t fit their image program.
They want you to buy $50K of extra special equipment, over and above the hundreds of thousands you already have or they want ship you any of the aluminum F150s. Yes, you’re a Ford dealer. So you pony up the $50K only to find out you can’t get any volume of F150s if you don’t also take some of the slow moving Fiestas they need to move. What will you do?
Your customers are pissed off at the industry, so you decide to price all of your inventory “fairly.” A few still buy, but most of them take your price to your competitors, who beats your posted price, takes the trade, and gets the F&I income.
Your competitors in the repair and body shop business want to buy parts from you. They want to pay you once a month. Of course, they want a wholesale deal. Will you sell the parts and carry them, thereby financing your own competitors, or will you tell them to take their business elsewhere, knowing that if you do they will speak badly about you around town.
Will you take in investors? If so, will you sell them on this new way of doing auto sales and use it as a carrot to attract investment?
Will you pay TrueCar $300. per car sale? Will you be transparent with your customers and tell them about the $300?
What will YOU geniuses do?
Just answer the questions who think you can. I’ll have 150 more really simple ones if you pass these.
Hey genius, I’m not going into the car selling business despite your many invitations. I dislike buying for friends as a favor enough as is.
It’s perhaps appropriate here to reiterate what “expertise” means. It doesn’t mean spewing random facts about a subject which have nothing to do with anything. It means the ability to apply domain knowledge to accurately explain and resolve questions. For example, if you claim that sales prefers informed rather than stupid customers, offering insight into the reasons why: short turnover, taking advantage of overconfidence, etc establishes relevant expertise. Steering off into floorplanning and not really saying much doesn’t.
Christ it’s like talking to a teenage learning this for the first time.
RE: “This is a good example of a lack of any coherent argument.”
Flash: Coherency isn’t your strong suit either. Doubtful you’d know coherence on way or the other. You don’t have enough knowledge to know if you have an argument or not.
“RE: “If you are correct, there should be opportunities for you to make your fortune showing us how to do it, right? What’s keeping you from putting your money where your mouth is? So you belong to the Scott Painter “No Friction 20 million SAAR” club? Why would anyone except the pathological or desperate want to work in an industry so universally reviled? Logic would dictate that short of charity that those with the benefit of talent and creativity are attracted to more positive fields.”
Why? Don’t you see the advantage to being the only enlightened dealer in a competitive world full of schlubs? I thought you thought you were bright enough to recognize a business opportunity. Perhaps you’d prefer to remain an employee so you can second guess everyone else without having to take any risk yourself.
RE: “That might be part of negotiation. You know, consumers have their own strategies, but that’s ok, right? The fact is, consumers have choice and can select a dealer without a gun to their head. There’s competition in the marketplace and truly bad actors will fall by the wayside, right? Someone in your position should know that customers are hardly on a level as negotiators who’ll stoop to anything, so why pretend? Who are you fooling?”
Consumers are restrained by no where near the legalities as sellers. Consumers are NOT on the same level as dealership staff. They aren’t supposed to be. Why should they be? The biggest challenge in auto sales is stupid consumers. The ones who actually know what’s up are easy.
RE: “Who exactly is suffering? You mentioned some opinions a few times. Don’t portray them as fact. Was it too difficult to read the next line which says it’s the dealers whose sale is only more difficult against more guarded and informed customers? Especially since you replied to it?”
Your opinion, not fact. You think dealer’s are suffering. How would YOU fix that. Again, if YOU come up with the FIX, why not put it to use in the competitive market while changing the world? What could be more challenging and rewarding?
RE: “Increasingly guarded consumers? Compared to what? Compared to customers who aren’t wary of slimy salesmen.”
We could eliminate the “fear” by giving everyone the same profit margin price. Would that satisfy you and make you happy?
RE: “If you got into the business the LAST thing you’d be worrying about is the overall reputation of auto dealers. If you were great, and your competitors weren’t, why would you want to give away your advantage? It guess it takes people who can’t grasp the rather simple concept of tragedy of the commons to get into the business? Just because something is in everyone’s personal interest doesn’t mean it’s in the collective interest. The car industry makes less as whole due to guarded/informed customers, so the “better” dealer will take their slice of a smaller pie.”
Oh, I see. The better dealer who gives his customers what they want won’t win the lion’s share of the business? Is that what you are afraid of, a little competition? If you’re better, shouldn’t it be obvious to consumers?
> Flash: Coherency isn’t your strong suit either. Doubtful you’d know coherence on way or the other. You don’t have enough knowledge to know if you have an argument or not.
You keep appealing to this authority that has poor track record of producing any argument much less a convincing one. Does this work elsewhere?
> Why? Don’t you see the advantage to being the only enlightened dealer in a competitive world full of schlubs? I thought you thought you were bright enough to recognize a business opportunity. Perhaps you’d prefer to remain an employee so you can second guess everyone else without having to take any risk yourself.
Again, being the only honest person in a dishonest business is a terrible choice. You get smeared same as the rest only to have less to show for it with the honesty. It’s curious how someone who can’t grasp this can be so full of themselves.
> Consumers are restrained by no where near the legalities as sellers. Consumers are NOT on the same level as dealership staff. They aren’t supposed to be. Why should they be? The biggest challenge in auto sales is stupid consumers. The ones who actually know what’s up are easy.
The smart customer pays closer to invoice-extras than the stupid ones, and generally aren’t so easily tricked. Maybe as an expert you can explain how that works out.
> Your opinion, not fact. You think dealer’s are suffering. How would YOU fix that. Again, if YOU come up with the FIX, why not put it to use in the competitive market while changing the world? What could be more challenging and rewarding?
If I had a desire solve intractable problems with minimal individual benefits (ie systemic) as charity it certainly wouldn’t be for car dealers. Would you?
> We could eliminate the “fear” by giving everyone the same profit margin price. Would that satisfy you and make you happy?
Most people would be satisfied with the same kind of price competition akin to what other consumer good industries uses.
> Oh, I see. The better dealer who gives his customers what they want won’t win the lion’s share of the business? Is that what you are afraid of, a little competition? If you’re better, shouldn’t it be obvious to consumers?
I’ve never had more trouble explaining tragedy of the commons to someone. Maybe you should rethink this self-confidence.
RE: “See, in that car salesman mind you like to assume everyone who mocks these practices are easy prey to them.”
Well, you are easy prey.
RE: “On the contrary, the people who talk openly about this are the ones who see through it. This is basic psychology: it’s the pathological salesman who has to psych himself up to be the alpha predator vs. the customer as prey to do his job effectively, and I’m surprised someone who claims to be an expert is naive to this.”
Take the test and I’ll tell you if you are an expert or not.
> Take the test and I’ll tell you if you are an expert or not.
What are you talking about?
RE: “Yes, it’s my claim and it’s entirely true. The salesperson who doesn’t want customers to be less informed (esp about their prices) is lying.”
As a dealer, we’ll take all comers.
RE: “Trying to drag TC down? You dispute what I said. You think you have a better handle on TC than I do? No refudiation of their $300 charge? You think they work for free? A diversionary tactic, although perhaps unintentional, is not knowing what you are talking about and making stuff up. Are you actually confused about what the diversion here is? It’s bring up some TC exec or whatever strawman to the point at hand, and then accusing others of a diversion when they don’t take the bait. Are you doing this because you can’t do better or don’t want to?”
Some exec? How about their frontman CEO. Strawman? Who do YOU think TC is. TC is Scott Painter. Again you show your ignorance of the subject matter.
RE: “And where was that? But since you brought it up and I rather published and have cashed more than a few consulting checks, a few more than you I gather. So “don’t want to” is the right answer?”
I really don’t know what you are talking about. What claims are you saying I’ve made? Having said that, its no secret what my background is. Its obvious I know somewhat more about the issue than you. I’m waiting for your answers to the quiz, but doubt you’ll venture in to show your ignorance.
> As a dealer, we’ll take all comers.
This is another good example of diversion (or maybe senility). The claim is you prefer customers uninformed about pricing/etc, not who you won’t sell to.
> Some exec? How about their frontman CEO. Strawman? Who do YOU think TC is. TC is Scott Painter. Again you show your ignorance of the subject matter.
Again, the topic isn’t about Scott Painter or his girlfriend or how much you hate them, but rather businesses which provide information. Edmunds for example also does this.
> I really don’t know what you are talking about. What claims are you saying I’ve made? Having said that, its no secret what my background is. Its obvious I know somewhat more about the issue than you. I’m waiting for your answers to the quiz, but doubt you’ll venture in to show your ignorance.
You seem paranoid. Expertise should be self-evident from the quality of your arguments. Maybe focus on that instead of whatever the hell you’re doing now.
Let’s see how you do on the quiz. After all, its a very simple business, isn’t it. Until then you can fantasize about your dealer world where everything is transparent. In the meantime, certain information is probably non of your business. You didn’t even know using TC adds $300 to the dealer’s cost. You thought, and perhaps still do, that TC is the friend of the consumer. Question genius: How much do consumers pay TC? Now where does TC get its revenue? Maybe you can figure that one out.
If you think TC is transparent, you ARE easily duped.
I don’t use TrueCar, so I’m not sure why you think I care as much as you apparently do about how much they suck and their girlfriend is ugly.
RE: “Personally, I’d like to get a coherent, logical explanation of what allegedly makes car sales so baffling and complicated to everyone who hasn’t pitched mop-n-glo or worn a bad suit.”
Okay, I’ll develop a little quiz for you to see how YOU do.
Let’s start with your explanation of “hold back.” Seems you flunked that one last time.
Then, explain to us a car deal and how its calculated. But from a sellers point of view.
Then, let’s hear how you’d go about buying a dealership. What would you be paying for? How would you finance it, you know, a pro forma. Let’s take a store projected to do 100 units per month with a PV of 1200 and a UIO of 4800. I’ll give you a set up and you take it from there.
What inventories will you carry for parts, new vehicles and used vehicles?
How many employees will you need for each department? How will you pay them?
The bank will want to see a pro form P&L so you’ll have to project sales. Sadly, they will want to know your gross profit, regardless of whether your customers and employees are happy about you making profit or not.
What will be your advertising strategy? How will you establish your marketing budget?
Who will you floor plan through. Will you need a cap loan? How will you go about getting a dealer’s license?
Will you buy your facility or lease it? How much working capital will you need? What will you do if your OEM comes in and demands that you replace the tile on the floor and replace it with granite. They also don’t like the ceiling tiles, and the signs on your bathroom doors don’t fit their image program.
They want you to buy $50K of extra special equipment, over and above the hundreds of thousands you already have or they want ship you any of the aluminum F150s. Yes, you’re a Ford dealer. So you pony up the $50K only to find out you can’t get any volume of F150s if you don’t also take some of the slow moving Fiestas they need to move. What will you do?
Your customers are pissed off at the industry, so you decide to price all of your inventory “fairly.” A few still buy, but most of them take your price to your competitors, who beats your posted price, takes the trade, and gets the F&I income.
Your competitors in the repair and body shop business want to buy parts from you. They want to pay you once a month. Of course, they want a wholesale deal. Will you sell the parts and carry them, thereby financing your own competitors, or will you tell them to take their business elsewhere, knowing that if you do they will speak badly about you around town.
Will you take in investors? If so, will you sell them on this new way of doing auto sales and use it as a carrot to attract investment?
Will you pay TrueCar $300. per car sale? Will you be transparent with your customers and tell them about the $300?
What will YOU geniuses do?
Just answer the questions who think you can. I’ll have 150 more really simple ones if you pass these.
RE: “Personally, I’d like to get a coherent, logical explanation of what allegedly makes car sales so baffling and complicated to everyone who hasn’t pitched mop-n-glo or worn a bad suit.”
Okay, I’ll develop a little quiz for you to see how YOU do.
Let’s start with your explanation of “hold back.” Seems you flunked that one last time.
Then, explain to us a car deal and how its calculated. But from a sellers point of view.
Then, let’s hear how you’d go about buying a dealership. What would you be paying for? How would you finance it, you know, a pro forma. Let’s take a store projected to do 100 units per month with a PV of 1200 and a UIO of 4800. I’ll give you a set up and you take it from there.
What inventories will you carry for parts, new vehicles and used vehicles?
How many employees will you need for each department? How will you pay them?
The bank will want to see a pro form P&L so you’ll have to project sales. Sadly, they will want to know your gross profit, regardless of whether your customers and employees are happy about you making profit or not.
What will be your advertising strategy? How will you establish your marketing budget?
Who will you floor plan through. Will you need a cap loan? How will you go about getting a dealer’s license?
Will you buy your facility or lease it? How much working capital will you need? What will you do if your OEM comes in and demands that you replace the tile on the floor and replace it with granite. They also don’t like the ceiling tiles, and the signs on your bathroom doors don’t fit their image program.
They want you to buy $50K of extra special equipment, over and above the hundreds of thousands you already have or they want ship you any of the aluminum F150s. Yes, you’re a Ford dealer. So you pony up the $50K only to find out you can’t get any volume of F150s if you don’t also take some of the slow moving Fiestas they need to move. What will you do?
Your customers are perturbed with at the industry, so you decide to price all of your inventory “fairly.” A few still buy, but most of them take your price to your competitors, who beat your posted price, take the trade, and get the F&I income.
Your competitors in the repair and body shop business want to buy parts from you. They want to pay you once a month. Of course, they want a wholesale deal. Will you sell the parts and carry them, thereby financing your own competitors, or will you tell them to take their business elsewhere, knowing that if you do they will speak badly about you around town.
Will you take in investors? If so, will you sell them on this new way of doing auto sales and use it as a carrot to attract investment?
Will you pay TrueCar $300. per car sale? Will you be transparent with your customers and tell them about the $300?
What will YOU geniuses do?
Just answer the questions who think you can. I’ll have 150 more really simple ones if you pass these.
My reply is above. You know, learning how to hit the reply button at least once in a while makes it a lot easier to see what you’re referring to.
This is just an idea, but maybe putting that effort into an actual expose of insider insights would produce better results. This is literally the least amount of info I’ve gotten from a so called expert over like 100 posts.
He does that as a gimmick in his effort to control the dialogue. He wants you to follow him around and he wants to lead each thread.
Personally, I wouldn’t indulge him. If he refuses to reply in the appropriate place, then ignore him until he does.
So he’s using some two bit sales tactic on an internet forum, omg that’s sad.
It really does illustrate how deeply engrained these command-and-control tactics really are. They aren’t confined to the sales lot.
No dealer or salesperson wants to be “the nicest guy you never bought a car from”.
If a dealer shows all their cards without an offer/commitment to buy from the customer, the customer most likely will go elsewhere with the information to try to get a better deal. Even if they don’t find a better deal, they will usually not go back to the original dealership because it is, at that point, more convenient to buy from the second or third dealership. It is important to realize that there is no such thing as a set “best price”.
Sales managers train their salespeople to “ask for the sale” which some would interpret as “pressure”. Dealerships exchange information for commitment, for example “If I can get this payment for you, will you buy the car?” vs just “This is what the payment will be, now what?”.
True transparency is impossible to provide and transparency is an ineffective selling tool. Validation is what the customer wants and what dealerships use to sell cars. Transparency and validation are very different things. It is validation that is being offered by TC and other buying services, if they market transparency, they are being dishonest.
A consumer and most dealership employees will never know how much more money a dealership would have lost to make the deal(maybe just one more penny or maybe thousands of dollars). If you ever get a great deal, you should thank your salesman for “closing you” skillfully and providing that “you won!” feeling, there is always a better deal out there.
Personally, I measure the quality of a deal by how long I can use a car and still make money on the resale or at least break even. Usually this is much easier on a used car. Obviously I will try to pay as little as possible but I am not concerned with how much money the seller is making or losing as long as they will accept the deal.
> If a dealer shows all their cards without an offer/commitment to buy from the customer, the customer most likely will go elsewhere with the information to try to get a better deal.
This makes no sense for a tactic largely designed to keep people in place. If your price is truly the best one, a customer will come back; they’re obviously cross-shopping anyway. You’re not really rescinding the offer should they leave. If your competitors “match” your price, the smart customer will no doubt call you back to see if a better one exists. It’s not as if a customer “commitment” without a price on it means anything, other than a cheap hook.
In any case, the most important thing to remember as a buyer is that time is on your side, they want to sell more than you need to buy. Establish that you’re not there to waste their time, but you’re prepared to leave if they waste yours sets the tone for getting out of there quickly and perhaps with a decent deal.
> Obviously I will try to pay as little as possible but I am not concerned with how much money the seller is making or losing as long as they will accept the deal.
For the most part the average customer doesn’t care either. They mostly care they’re not taken advantage of. It doesn’t matter that TC or their kin market it as “transparency” or “validation”, it’s clearly of some value to the client.
That’s why Edmund’s target price (and perhaps TC’s) was a smart move to capture the mass market buyer: customer feels satisfied, dealer gets enough to not fight it much.
There is no “best price”. If a competitor will beat the offer by $100, will the customer buy from them instead? There is value to the dealer for spending the least amount of time on each deal.
If you are trying to get the lowest price, time is not necessarily on your side, you do not know what kind of time pressure the dealership is under to get your deal. Sometimes if you wait to long, the deal gets worse. Dealers will absolutely rescind their offers if the deal no longer makes sense once the customer leaves. Dealer cost is not static, on the most basic level, dealer/customer incentives from the manufacturer can change on a monthly, weekly, or daily basis.
I agree that TC and others offer value to the “no-haggle” consumer. Most customers however, will use the info as a starting point and shop the competition anyway, the TC dealerships have an extra expense to consider and will make less profit offering the same price. TC is supported by its dealer members, they are not on the consumer’s “side”.
> There is no “best price”. If a competitor will beat the offer by $100, will the customer buy from them instead? There is value to the dealer for spending the least amount of time on each deal.
There is a price point under which the dealer won’t accept, and whatever time already spent is a sunk cost. In bargaining in general, whatever is offered when you’re leaving (and not coming back!) should be reasonably close. That last $100 isn’t the concern here; I’ll take $100 over that point if the car is the right one.
> If you are trying to get the lowest price, time is not necessarily on your side, you do not know what kind of time pressure the dealership is under to get your deal. Sometimes if you wait to long, the deal gets worse. Dealers will absolutely rescind their offers if the deal no longer makes sense once the customer leaves. Dealer cost is not static, on the most basic level, dealer/customer incentives from the manufacturer can change on a monthly, weekly, or daily basis.
I’m aware that it’s not static for all time; I’m referring to the sales gimmick of “price only valid now”. I got my current car on the last day of a large incentive. It was probably their last chance to sell before the next model year rolled around and stuck with “outdated” inventory, so they’re willing to sweeten it more than usual. The overall point is that time is on your side because the buyer is under no such pressure; minus time sunk you always win in a war of attrition.
> TC is supported by its dealer members, they are not on the consumer’s “side”.
It’s an industry that should make all outsiders leery. Frankly I’m not sure how trustworthy those used car buying services are for getting that uncommon manual wagon/shooting brake.
A salesman will attempt to move the discussion away from bottom-line price, and shift the focus to the other terms (i.e. monthly payment) and reasons to buy.
Centering the entire discussion around price is the very last thing that they want to do, as that turns all of that new car smell and excitement into just another commodity, which probably results in a lower price and a minimal commission.
Hence, all of these pretensions about the car sales business being so allegedly complex and baffling. The car sales business isn’t inherently much different than any other retail business, and it certainly isn’t necessary to know how to manage that store in order to buy from that store at favorable terms.
If I thought you’d recognize insight I might provide you some. I notice you haven’t replied to a single question I posed that might indicate you have some basic business understanding. Discussion with people who think they have standing on an issue, but don’t, is a complete waster of time. You really need to get past the student phase first. Otherwise, you just embarrass yourself.
Frankly I didn’t even read it.
Didn’t expect you to. You wouldn’t have understood it anyway.
So you typed up an essay to prove to yourself no one will read it, oh wow that’s sad.
It is bad form to use yourself as an example…but that never stopped me!
When I want a new car I start watching ads online and in the papers. Never rush, sit back and study. When I see generally good prices by a dealer I go in. I make the best deal I can, one that I feel good about, and enjoy the car. No sense in worrying that I could have saved 500 dollars.
I have purchased my last 3 new cars from the same dealer and salesweasel, I feel I get treated quite well. But, I see a dealer in Dallas has a car I am interested in at a VERY good price…
>When I see generally good prices by a dealer I go in.
This can be a mistake. As noted above, they’re trained to never show their cards. Part of the advantage of having time is that you can always walk away. Salesfolks need their paycheck (and dealer move inventory) more than you need their car. Psychologically it’s important to remember it’s really you who are doing them a favor and not the other way around as they are trained to frame it.
If you’re going to put in the effort anyway, might as well make the most of it.
The price is the price; I never lose track of that. Like you said, I can always leave, and I have a couple of times. One time at a Dodge truck dealer who always used the “market value” tagline…that was many years ago. Bought two Dodge…Ram…trucks since, and got a great, straight forward deal each time. The other time, the salesweasel approached me, stuck out his hand, and his cologne would knock a bull down. I did not shake hands, told him is cologne was over the top, and left. Seriously, it got to my nose.
This thread began as an exercise. There are a host of vendors, including TrueCar, who claim to be bringing transparency to the auto business. Mind you, they aren’t doing this for altruistic reasons, they are doing it to make a buck. My premise is that to claim transparency, and then not to provide it is deceptive on its face.
I am not a self proclaimed ambassador for auto dealers. I could give a rat’s a** if anyone likes them or not. I hope that doesn’t disappoint anyone. I don’t even like a lot of them and would be glad to help pillory the bad ones. But the fact is, until the Federal Trade Commission (FTC) outlaws price fixing, the business model that exists in the auto business will remain whether consumers or dealers like it or not. Dealers are free to be as transparent as they want to be. If some want to post a “fair price,” and stick to it, I say, “Go for it.” History has proven that that is a wonderful way to make one into a human Pi**ing Post,” but more power to them. I don’t care. They’ll either learn or they won’t.
We have a few here who know just enough about the business to be dangerous. Not to me or the industry, but to themselves. They claim to know the best way to sell cars to today’s consumers. Yet, their actual experience was sadly wanting. Regardless, despite the venting about dealers, I think I’ve proven my point to actual industry participants who want to come here and read. They’ll find out there are some who despise them. Now that will be quite the revelation and I’m sure will reduce some to tears. Others will discover that as always, consumer perceptions are all over the map and there is not a “one size fits all” sales method that will satisfy all consumers.
My beef is with squirrelly car dealers who will pay good money to vendors who denigrate them and promise consumers to protect them from the same dealers they denigrate, while raising the costs in the transaction itself. My beef is with TrueCar for claiming to bring transparency into auto retail while not disclosing their $299/$399. fee. That’s deceptive in my book. Some here might agree. Some don’t. This exercise was about gauging the numbers. It was already known that there are many consumers who don’t like auto dealers. The dealers don’t care because the FTC doesn’t care. If anyone wants to “fix” the issue, I suggest you start with the FTC first. But be careful what you wish for…….. you might get it.
> I am not a self proclaimed ambassador for auto dealers. I could give a rat’s a** if anyone likes them or not.
This is a pretty bold lie given you’ve staunchly & unquestionably defended their quite shady business practices, to the point of deflecting criticism with “We don’t care”. It’s pretty clear who the “we” is referring to.
It seems that targeting consumers with the article didn’t quite work out, so now you’re pretending this was really meant for “actual industry participant”. While I’m sure they appreciate your hard work, next time please be more upfront who’s side you’re advocating for.
Ironic, that TrueCar is the prominent sponsor of this page. I wonder if they are aware. They are in their quiet period in advance of an IPO. I expect Painter wants to get some money out and be gone. I imagine his investors might be happy for that to happen. Maybe Scott will actually buy an auto dealership so he can learn the business he is trying to change.
As an apropos illustration of how the conversation went, when many above pointed out various ethical failings your main response was that the bad actors made bank and haters are just jealous. Everyone should let the character of such a reply sink in.
Now consider your article claims what a company you don’t like calls “transparent” isn’t transparent enough by your standards. It should be pretty obvious what’s going on here.
RE: “This is a pretty bold lie given you’ve staunchly unquestionably defended their quite shady business practices, to the point of deflecting criticism with “We don’t care”. It’s pretty clear who the “we” is referring to.”
Sorry, your reading comprehension is as suspect as your “reasoning.” What part of “I don’t care,” and “they don’t care” is unclear to you. Does it bother you that we don’t care? Is that your beef?
RE: “It seems that targeting consumers with the article didn’t quite work out, so now you’re pretending this was really meant for “actual industry participant”. While I’m sure they appreciate your hard work, next time please be more upfront who’s side you’re advocating for.”
Targeting? It was an exercise. What do you think didn’t work out? Do you think I posted here to gain sympathy for dealers? REALLY? You ARE naive. The people I began this discussion with don’t care one way or they other if I worked hard or got some entertainment value from the exercise. This all began on Facebook in a closed industry group. TrueCar wasn’t involved. vAuto and some others you’ve probably never heard of were. It continued at the recent NADA convention. But I’m sure you know better what’s going on than anyone. Should I put you down as one who prefers the perception of transparency over actual transparency? Ironic that TC was kind enough to sponsor this, though.
Advocating? I advocate for the facts. Consumers don’t like the process. This isn’t news and is a fact. Seems like I mentioned it in my first paragraph. “Consumers are uncomfortable with the negotiating process required when buying a vehicle.” Second line of the intro. Maybe you missed it.
The FTC won’t allow the “fix” consumers say they want. That’s a fact. Dealers are free to be as transparent as they want. That’s a fact. Consumers are free to shop. That’s a fact. Consumers are free not to like it and complain. That’s a fact.
I suggest you re-read the original thread premise again SLOWLY. Maybe then you can comprehend it. And feel free to show us where I’ve EVER defended “shady business practices.” EVER. Anywhere. The fact is, instead of trying to get you to drop your guard by promising you transparency but not delivering it, I’ll look you in the eye and tell you something is none of your business.
You keep speaking as if anyone believes you’re being truthful. Not a single person has asked for dealers to “price fix” any more than electronics stores should, yet that continues to be your talking point. There’s a certain guilty pleasure to exposing lies and liars, but at this point it’s become trivial.
https://www.mediabistro.com/prnewser/ladies-buying-a-car-with-truecar-com-is-so-easy-you-dont-even-need-a-man-to-help-you_b75955#disqus_thread
Consumers say again and again the don’t like the idea that they might be paying more than someone else. How exactly do you fix that if not through fixed prices. AND if you review this thread you’ll find where some here said exactly that. Hell, Saturn, SCION, and the Ford Collection were established based on that precedent. They must have found some people who felt that way. So they fixed prices legally. What did it get them?
RE: “You keep speaking as if anyone believes you’re being truthful.”
This isn’t a real concern. What I say stands on its own. It makes no difference who it is coming from.
RE: “Not a single person has asked for dealers to “price fix” any more than electronics stores should, yet that continues to be your talking point. There’s a certain guilty pleasure to exposing lies and liars, but at this point it’s become trivial.”
You’re showing your ignorance again. There has been a lot of conversation on this very thread about SCION, Saturn, AND the Ford Collection. But you seem to think everyone thinks like you do and wants to “resort to transparency,” whatever that might mean. I take it you have the remedy that will make consumers like dealers? Whatever that might be, how would you implement it? In your world dealers would do better if they were better liked? Right? So how should they achieve that. OR would it be better if only a few achieved it. Then they could kill the bad dealers, right?
Sure, let’s pretend you’ve never set foot in a store that doesn’t sell cars to know how any of them work.
We get it, you have some allergy to honesty. No need to need to keep reinforcing this.
RE: “Sure, let’s pretend you’ve never set foot in a store that doesn’t sell to know how they work.”
HUH? Are you trying to say something here?
RE: “We get it, you have some allergy to honesty. No need to need to keep reinforcing this.”
Honesty? Well, I’ll tell you when something is none of your business. How about that for honesty. It might be better than pretending to be “transparent.” But YOU are the customer. YOU get to choose. Ain’t it wunerful?
BTW, should I score you an “Incomplete” or an “F” for your quiz on knowledge of the industry. Perhaps some basic knowledge isn’t required to have an opinion, right? Just some guy off the street can have one of those. Heck, you can just make stuff up and there’s no accountability.
OK, I”m done here. Project completed. Perhaps I can lure some industry insiders over here to screw with your mind.
So would you say that the rest of your claims are more honest, less honest, or about the same as trying to pretend that customers actually want dealers to price fix?
You probably need to focus on what I’ve said rather than who said it. You are remarkable piqued because auto dealers don’t care if you like them or not. I wonder how much sleep attorneys lose over the same issue. You remind me of a child who threatens not to like his/her parent if they don’t get what they want.
Mosie over to some of the TESLA discussions for sentiments about price fixing. How exactly would YOU solve the issue? From a dealer’s standpoint, that is.
Pointing out that someone habitually distorts the truth is a matter of fact, not unlike pointing out the sliminess of many in the car sales industry, or that the sky is blue.
People state facts not because they’re concerned about how the sky or liars feel, but because facts illuminate the topic at hand.
For example, it’s a fact that I’ve covered that question above, and you’re just feigning interest. It’s a fact you play these little games, just as you told TTAC this article was about posing a question to customers when you never cared what they thought in the first place; it was just an opportunity to post a hit piece against a company you dislike.
In the end, this whole tread only reinforces the prevailing reputation of an industry buyers should always be cautious when dealing with.
> Heck, you can just make stuff up and there’s no accountability.
Never thought I’d hear that from a car sales industry rep. What good is knowledge when you can’t tell the truth?