Imagine over 500 cars at your disposal, and you pick the exact ones you want to test on the open road.
There are no mind games. No bait and switch tactics. Nothing but you going to a computer, figuring out the most worthy candidates, and letting a salaried employee fetch the keys and answer the relevant questions to your car search.
Sounds too good to be true? Well, it’s already happened. There’s only one problem.
The place that does it primarily sells used cars, not new cars.
Thanks in part to the inordinate hassles of buying a car, Carmax is now the largest automotive retailer in the United States. In fact, they are now bigger than the #2 and #3 automotive retailers combined. They managed to do this tall order with just a small fraction of storefronts, and without the easy access to certain financing sources that help new car dealerships move their inventory. This is no small feat given the level of hardball tactics dealer lobbies usually inflict on state legislatures.
The almost universal desire to get away from bias and manipulation is a huge challenge for millions of new car buyers. Who offers the best car? It’s hard to say when advertising is all over the place and the chance to test drive all the new cars, without blatant bias at nearly every turn, is virtually impossible.
For consumers who are often firmly entrenched in the online search for a new car, the 21st century new car buying decision still hits the thick brick wall that is the early 20th century method of retailing cars.
The inherent costs to the Carmax model, for example, is still in the several billions of dollars even though they contract out a lot of their reconditioning activities. Between purchasing 500,000+ vehicles, investing in the real estate and physical infrastructure, hiring and training thousands of employees, designing the transportation logistics and the myriad of IT platforms, and finally, looking out for shareholders, Carmax can’t afford to offer the lowest price on a routine basis.
But despite this financial handicap, they still serve a large swath of the general public without resorting to the lower forms of salesmanship. People will pay a premium for honesty. If the new car business wasn’t in a legal stranglehold, chances are a lot of the fixed costs in buying a new car would go away. Or at least consolidate to a competitive superstore / online order / specialty store world where consumers simply pick their best fit.
All of these sales channels are as common as kudzu these days for anything but new cars. Thankfully there are other alternatives; although their presence is usually fleeting.
For example, when many of us head out to the larger auto shows, we get the same unique chance to look at and test drive a lot of brand new cars. The opportunity to walk around in one place and test drive what’s out there motivates millions of people to spend their money on a show that features things that you can usually go see for free. Just not under the same roof.
If you headed out to the more rural areas of the USA not too long ago, county and state fairs used to offer folks the same opportunity to go out and test drive a variety of new sheet metal. Maybe they still do, but I haven’t seen it here in Georgia for quite a while.
Finally, there are the rental car agencies, car sharing programs, and PR events that allow everyday folks to test drive what’s out there outside the new car dealership.
Except sometimes the new car is simply not what you want, and when it comes to rental cars in particular, the vehicle may be too used to be new.
This brings me to the big question. If there was a place where you could test drive a new car, any new car, every new car, would you go? I’m sure you would so let me throw a knuckleball into that equation. Would you be willing to pay $20 for the opportunity to drive whatever you want for an entire day? Let’s keep it short drives. Fewer than 10 miles. But as many cars as you wish without being four-squared and stuck in a miserable cubicle for hours on end.
Think of it as an auto show that never ends. Would it be worth $20 to figure out which car will be your next car?
“For example, when many of us head out to the larger auto shows, we get the same unique chance to look at and test drive a lot of brand new cars.” What major auto shows allow you to drive their cars? You probably know something I don’t, but I’ve been going to the Detroit show (definitely one of the major shows) for decades and have never had that opportunity.
Cleveland. Autoshow did this year.
Chicago auto show also had a few mfg. offering off site tests
Don’t know if you’ve been in a while, but you can sign up to test drive any number of cars at auto shows these days.
The Atlanta Auto Show typically has ride-and-drive events held by select manufacturers. In recent years VW, Cadillac, Chevy, Toyota, Chrysler and Kia have shown up. You don’t even need a ticket to the show itself to participate.
i test drove a scion iQ at the orange county auto show a couple years ago. they were offering fr-s test drives too, but the line was too long.
Central Florida show in Orlando. We drove half a dozen different cars this past fall. It’s a great way to see and drive cars without having to waste a sales staffs time or even be in a buying situation.
Most of the cars I buy are purchased online and never seen before hand. Like most here we don’t need to drive many cars but know what we want when we see it.
“Hardball tactics dealers inflict on state legislatures?”
“The almost universal desire to get away from bias and manipulation is a huge challenge for millions of new car buyers.”
It might be good to provide some kind of documentation for these statements. If buyers REALLY wanted to get away from the alleged “bias and manipulation” they’d go to a One Price dealer, a SCION store, would have supported Saturn and the Ford Collection, made Priceline a success, etc. etc. etc. The allure of the better deal drives consumers to do all sorts of things, not the least of which is to behave differently than they say they would.
GM was running a test in some major markets before the crash in 2008. One was here in LV behind the Sahara. It was a test track with a sampling of everything GM produced at the time. They received a lot of action from testosterone laced boy racers who all wanted to flog the Camaro SS and Corvettes. After the novelty wore off, GM shut them all down.
You might want to think about what your wrote. Scion is way to limited to attract anyone just based on no haggling. I live in NE Florida and do alot of test drives on different makes and models for about the last 20 years and have come across exactly zero ONE PRICE dealers you speak of. I guess the First Coast doesn’t see a need for it.
“Hardball tactics dealers inflict on state legislatures?”
Tesla’s situation and the involvement of dealerships should serve as more than enough documentation of the lengths that dealerships will go to in order to make sure their business model is legally protected from any alternatives.
“The almost universal desire to get away from bias and manipulation is a huge challenge for millions of new car buyers.”
http://www.newmediaandmarketing.com/americans-hate-buying-a-car/
There’s one survey that says 60% of people actively hate the car buying experience. There’s no source or methodology for the numbers, but the general distaste for the car buying process is well known.
Really, there’s a very simple solution to this: allow alternate business models. There is nothing inherently unique to cars that mandates enshrining the dealership in law. With anything else I have options. Depending on the brand in question I and how they choose to sell their merchandise can buy direct, online, from a big box retailer, or through a dealership. If the services offered by a car dealership really are so indispensable then they will rise to the top and continue to flourish despite alternatives. The fact that they demand legal protections and fight so hard against even the possibility of alternatives makes me suspect that they know they’re not as necessary as they claim.
Well written Mr. Chris. Also, lets through in motorcycle dealers as well. I was looking at new $8,000 motorcycle. This was added to the MRSP
$765 Freight and Set-up
$21.69 Dealer Invoice Tax
$547.75 Sales Tax
$175 Transfer Fee
20 years ago I purchased my first motorcycle. I only paid sales tax on the bike, no set up fee, no freight, no inspection, no title fees. The sales price included everything other than the sales tax. Now, look at what dealers add on, and this is common to all dealerships. One dealer wanted to charge me $400 freight. The freight charge on my car was $850 and that was for a 4,300 pound vehicle.
the costco auto buyers program also covers powersports equipment- bikes, scooters, jet skis. i plan on going that route next time i want a new toy
There is a major new dealer chain (around a dozen lots) in the DC area which sells on the one price model.
They buy on the same sleazy model as everybody else though. “Our wholesaler just called me back, coincidentally 8 minutes after you rejected our last offer, but now they’ve decided that they want this car so badly that we can offer $2000 under book instead of the previous $2500!”
Buying is easy in the internet era, I’ve never had any trouble getting a no BS price by email. This would be harder if I wanted the only car in lime green, but since I don’t it takes all of 10 minutes to get a half dozen offers on the same car and they’re rarely very different. Selling is where the variance is.
You often bring up Saturn and the Ford Collection as examples of why “one price” stores are doomed to failure.
So how you account for the apparent success of Carmax and their ability to operate stores all over the country? What about “one price” franchises that have managed to operate for many years?
I think Saturn, Scion, and the Ford Collection shows that manufacturers are not very good at consumer retailing, but it seems like there is more than one way to sell a car.
Saturn failed for more than one reason. One might be towards the end when Saturns were simply rebadged/platform cars-would you buy an Aura at Sticker, or a Malibu with a 3k rebate? Or a Traverse at a discount vs. an Outlook at sticker? I think if Saturn had continued to make vehicles that were mostly their own they might have stuck around a little bit longer.
That being said, Saturn may have been “no haggle” but dealers still played games with trade values. Oh come here we will give you $500 more for your car than the other dealer.
Agree on all your Saturn points!
Though the Outlook was better looking than the Traverse IMO.
Well now the Acadia is the Outlook. Kinda.
I agree, and it’s too blingy and incoherent in regular trims, but the all-out Denali trim is appropriate*.
*As long as not in pearl white, as that car is ghastly in pearl white.
Not taking sides, but even Carmax pricing is not really fixed. You can find the same car (year, trim, similar mileage) for a large variance in price between stores / regions.
What is fixed is they typically price $3000 above cost, around the board. Our Juke hit the lot at exactly $2995 more than the check they cut us.
If I was really interested in a car that I had no prior experience with I would rent one for the day and take the time without any pressure to see if the car was a good fit. So, yes for $20 as opposed to the $100+ to rent I would certainly be interested in such a program
Agreed. Hell, I’d check out new cars even if I wasn’t currently shopping for one.
We have a winner! The 1st person to answer the question in the article.
And yes, I would pay $20 to have a day to test drive any vehicle I wanted.
I would totally pay 20 bucks to be able to test drive different cars for comparison. The auto shows I’ve gone to (all in larger cities) offer this, but I never wanted to wait for a drive since I wasn’t seriously looking.
When I was looking to buy, I didn’t actually drive that many cars, because dealing with dealers is annoying. I limited choices to just a few cars so I would only have to put up with the pressure a few times. It would have been nice to say, “Here are my top five, now let me drive them all back to back and compare.”
>It would have been nice to say, “Here are my top five, now let me drive them all back to back and compare.”
+1,000
the problem with this is that there are many models that are just not available for renting anywhere, try to get a Honda, Subaru, VW or a Mini for example.
In search of the all-mighty CSE score, nearly all large scale service departments offer late model loaners and they can often be rented.
…and, unlike enterprise or budget, these cars are usually less beat.
Hertz has all of the above. I have had all but a Mini in the past 12 months. Could have had a Mini, but I don’t care for them.
I don’t see the current problem with just going to whatever dealer and test driving a car for free. So what if the sales drone tags along?
Yeah I would do it for 20 bucks each day. I would probably do it about twice a month since I test drive alot twice a month now anyway. I usually do three cars each time out for a total of six per month (give or take a car). This is my so called stress relief if you can believe it. I use Carmax alot when I dont want to be bothered.
Yes, and I’d probably average a visit every couple of months, whether I was in the market or not. What would you need to charge someone to kick tires?
I have never had a problem walking away from a dealership after driving a car without heading inside. Combine that with the fact that I can eliminate most cars down to a handful that I’m interested in, I don’t think I would see a benefit in the one-stop-test-drive model.
I recently went through a bit of shopping – you can see my thread on the forum. I found that the easiest way to narrow things down is to get quotes first online, see if you like the price they send, and then go test drive. I think most people can narrow down what cars they want to 5 or less without driving anything. And I don’t think going to 5 different places over the course of a few days is too taxing. I’m sure some will disagree, but for the readers here I think it’s pretty reasonable.
One of the problems I have with the Carmax model is that my experience is they don’t let you take the car out on anything but their prescribed very short route.
Shopping for a car should be enjoyable. If it isn’t I move down the road to the next dealer. Of course, I’m test driving the dealer almost as much as the car itself. This works well in a large metropolitan area, not so much rurally or with brands that have few dealerships.
The Carmax prescribed route is a bit short, but their sales staff do get extra brownie points for the test drives they complete. I’m not sure whether you can negotiate longer drives if you’re very interested / serious. I think they have tracking devices that call the authorities if you stray too far. Based on my experience, getting CarMax to make any exceptions to their standard procedures takes an act of god.
Like a Hoon Center? Yeah, I’d visit a Hoon Center. Patent pending*.
That’s what I’m thinking. You need someone to go with all these people on their multi-test drives, in order to prevent ruination of new cars in short order. Then the price has to go up.
And at the end of the year, you’re left with 45 cars with a couple hundred hard miles on them which nobody wants.
Realistically, you’d probably have to pay $200, but get $180 refunded if you ended up buying one of the tested cars within a two week or so period. $20 for a no obligations ‘Ring lap in a Lambo (or in anything) just isn’t all that realistic.
I’d jump at the chance as I spend a lot more than $20 driving from dealer to dealer under the current system.
I always tell my indecisive customers, “Look, if you’re not sure what you want, go to Carmax, spend the day, drive EVERYTHING. Then come back and see me and I’ll get you the exact same car for at least three thousand less” ’cause I can…and I do.
You might be hearing from me next year then. I like the sound of that.
That’s some nice deferral of overhead costs.
Do you find that Carmax ends up snagging a good number of your customers in spite of your offer? I’ve definitely seen customers piss away 3 grand for even less required effort.
A great concept but the practical application would be a challenge. As a manufacturer, I want my product presented to the customer in the best possible condition (clean, no broken/damaged bits from hooning). Hard to control this aspect in a cost-effective way in your scenario. As a buyer, I like the idea, but would need more than ten miles to make a purchase decision. To be fair, perhaps your short test drive is simply a way to “thin the list” before scheduling a more thorough test drive at a dealership.
After a long interval of buying used iron, I recently visited a half dozen new car stores to look around. I have to admit I was pretty surprised that 5 of 6 were operating just like the 1980s. (One salesman even dressed and talked like the 80s). No wonder people get turned off bigtime.
Being retired, I ventured out mid-day. The interesting part was that the 5 old school places were dead, no customers, nada. And the one place that was low pressure, and presented the best deal right up front was busy as heck.
Had this exact same experience on my last time out as well. I couldn’t believe that places like this could still survive with such an outmoded business model.
All the dealerships around here leave their lot lights on 24 hours a day. If I’ve ever wanted to browse things w/o driving them I always just go when they are closed and look around w/ no staff there. They way they lay out their inventory at night suggests they expect this type of thing.
$20? Gladly, and frequently!
Unlike Norm, I have realized that I don’t always REALLY know what I want by reading about cars.
My last car buying adventure narrowed things down to three vehicles, one of which I really only included to keep me honest, and after driving it, I chose that over the two others (3 separate test drives of the top two vehicles on the same days, and the exact same test loop — a rare opportunity, I know).
Interesting .
I don’t see any new cars I’d want these days .
Maybe a basic 1/2 Ton short bed pickup but I am not flu$h so no point in test driving .
The last time I wanted to buy a new car was in 1992 or so , no new Air Cooled VW Beetles available so I went to Mexico and bought one there .
-Nate
Went to test drive an Audi A3 on saturday and to my surprise the salesperson just game me the keys to the car and said bring her back in one piece. It was really nice driving and evaluating without having him along and just points to the little things that can make the car buying experience a positive. Online purchase may have its advantages but if done correctly so can a walkup.
Isn’t it awesome? When the new optima just came out I went in to a KIA dealership with my brother and the salesman did the same thing for us. So naturally we found an empty parking lot full of potholes and slalomed that thing for 15 minutes. (Helped me decide against it BTW.)
It’s just way too awkward for me to crank the stereo and bang the doors when there’s a sales rep in the seat next to me giving me cheesy reasons to go through his dealership.
“Test drives” aren’t worth much, except to sort the “no ways” from the “maybes”. The time and expense of renting finalists for a weekend is, I think, worth it.
I’ll be purchasing soon and got my credit union to pre-approved me.
I’ll be visiting the local CarMax for several reasons. One is that they do have a huge variety of cars and with a pregnant wife I don’t want to go all over and visit 10 different dealerships. Another plus is if you drive something and like it but it is missing one “got to have it” option, it is not hard for CarMax to get what you want from another store. Heck in my part of the country there are at least 3+ other stores they can get the car you want transferred for less than $100.
The last piece of the puzzle is the local dealers almost all have a negative reputation for trying to play “bait and switch” on financing.
DTS 4 U!
I checked out Ebay today, and boy the bottom has really fallen out of DTS prices here lately for some reason. Maybe because of the XTS.
If you are considering cars from multiple manufacturers, $20 is easily worth it to save the aggravation of driving from dealership to dealership.
I agree with others that said you need something more than a quick test drive to make a decision though. If Enterprise/Hertz/etc can’t help, hopefully a dealership can rent you a loaner very similar to what you have in mind.
My trite saying is that no one drives a new car, some people do buy them though. With that in mind I’m more interested in what the car is like a couple years in even if I’m buying new. I was about to complain that the nearest CarMax is 600 miles away, but in proving it to myself I found out that I’m getting a couple nearby in the next 4 months. I will make use of it.
On the question, yes. The $20 would be well spent. I like ride and drives, car shows, whatever. I like finding out when I’m wrong about a car.
Narrow your choices down to three to five and then Rent them .. either at home or on vacation and for a minimum of three days . It’ll be the best money you ever spent .
Alternatively … if you’re up here in the Premium bracket [ Mercedes BMW etc ] … its surprising how many dealers will give you the car you are considering for at least a couple of days . Usually pick it up on Saturday and bring it back on Monday
I love CarMax; I bring the car I’m selling there to get my rock-bottom sale price before advertising it for a private sale. While they’re looking over my car, I check out versions of the car I’m interested that are sitting on their lot. You can get an awful lot done in 60 minutes at CarMax. Haven’t bought a car from them yet.
One downside to taking test-drives at multiple dealers is that many (all?) of them will run a soft credit check before or while you are out driving. My credit score took a 5-point hit over the couple months I was test-driving cars. This despite being a cash buyer.
I’ve been to the DC-regional dealers that use “value pricing” one of the variations on fixed pricing. I’d buy from them, but their prices on the cars I was interested in were not very good. Also, being able to confidently say that I’ve never paid too much for a new car, I arrogantly believe I can get a better deal than average by buying intelligently and negotiating. Since we won’t tolerate below stellar school grades of our kids, we figure it’s only fair that we show how we don’t pay more than the best deal in our market.
A 5 min test drive tells you zilch about a car, you need at least a couple of days driving different speeds and roads.
Actually, I don’t mind dealers at all.
They serve a useful purpose, especially if you have done your “homework” via Internet beforehand, and just have a few “top-up ” question to have them answer, before you take a vehicle for a test drive.
In other words, YOU are in charge, not the dealer. If they try “bait-&-switch”, walk.
Also, this initial dealer interaction gives you a chance to do a bit of an interview process with the SERVICE organization to see how qualified and friendly the really are. That will count in the long run, and does affect my purchase decision as much as the vehicle itself.
—————-
Car Dealerships are the last bastion of mom and pop sales businesses. Don’t get me wrong, many of the new dealerships are corporate-held entities and even the family own ones are large but they still operate largely as they did 100 years ago, basically as uninhibited actors that control the market. I don’t have a problem dealing with pressure though, I have no emotional connection to these people and in some respect don’t even like these people so giving them the business isn’t a huge deal.
I have no problem with Carmax as a model because they’re playing on people’s unwillingness to be confrontational and strong to gain a bonus in profits.
Dear CarMax,
Some of us have sensitivities to strong smells, or allergies to perfumes.
So please, go easy on that reconditioning air freshener you liberally spray into the carpets, headliners and floormats of all your vehicles.
Seriously, when I open the door of any Carmax vehicle, especially on a hot day, my eyes water and my stomach gets queasy. My wife gets a headache before we’re even out of the parking lot.
Try this instead: If a car isn’t smelly, don’t apply any freshening spray. If it is, use less. Or maybe let the customer choose how much, and what flavor/scent.
I walked away from a done-deal car in your inventory because your detailers couldn’t un-freshen the interior. Loved the car, just couldn’t stand the overwhelming freshener smell — and it was in every car we tried. Yuck.
Last year, there were about 15.5 million new car deliveries and over 40 million retailed used cars. (I presume that the 40+ million figure does not include private party sales.)
In its most recent fiscal year, CarMax moved about 527,000 units. That’s less than 2% of the total used car market. I wouldn’t make too many generalizations based upon that.
I would say comparing the used car business to the new car side is not fair. A new car is basically a commodity where a used car is not. If I want a new Camry I know that each dealer will have to compete with each other to earn my business. The cars don’t change much other than color and package. A simple email to each internet manager and I am set. A used car entails overall condition, millage, and selection. It is not as simple to cross shop a used car with 50 other dealers in a 100 mile radius because of all the variables.
I absolutely agree. Used cars and new cars are different animals. For new cars, once one narrows down to two or three choices, extensive test drives of demo units may be in order. Maybe even an overnight test drive. If a dealer balks, adios MF.
A related problem arises once you buy a new car. What if you get a lemon? You really need to check out a new car store’s reputation for service. It really does matter.
Warranty service is very profitable. I’ve never had trouble buying from one dealer and getting service from another.
I’d pay to rent a test drive. Would be nice if part of the cost was refunded at the time of purchase.
$20? Hm, yeah
Just two comments:
1. I don’t understand why many people, who accept price variations in other products, get so irate when they see these in cars. (Yes I know, cars cost a lot of money. But I don’t hear many people telling someone who just bought a new house, “Man, I coulda got you a house just like that, in the same neighborhood, for a lot less! You idiot!” And houses cost a lot.) Why do people pay $X for a scarf at Target and two times $X for the same thing at Nordstrom? Facility, treatment, brand, etc. Same applies in cars. As the Brits say, “Horses for courses.” Are you great at working on your own car? Buy a battered 100,000-mile Malibu for $5,000 at Howie’s House of Wheels, no warranty, as-is. Got some disposable cash and a kid at college halfway across the country? Send them to CarMax where they will pay $3,000 more for the same car, but at least get a 30-day warranty. Got plenty of time and willpower? Scan Craigslist for weeks and get it for $4,000. Different channels, different purposes, different prices, different costs to shop.
2. And to further emphasize the success of the CarMax model (and note that CarMax itself says that no more than 15% of used-car buyers will ever consider CarMax): KMX has about 130 stores doing essentially only used cars and financing of same, revenue of about $12.5 billion — with market cap of $10 billion. AN has over 200 stores doing new used parts service financing and collision repair, revenue of about $18 billion — and market cap of about $6.5. It may be a business model many do not like, but it sure generates shareholder value.
“I don’t understand why many people, who accept price variations in other products, get so irate when they see these in cars.”
There’s more money on the line, which means that there is also more ego on the line.
Steve, this business model already exists for new cars:
http://www.tred.com/
It is $39 per car delivered, with 30mins of test drive time.
Interesting, but being a buying service kind of puts it on the same level as just going to the dealer for a test drive
If Tred’s revenue source is the test drive fee rather than getting you to buy a car, then (hopefully) their incentives are skewed against giving the customer the hard sell and run-around. I haven’t tried the service myself, however.
Actually, I’d think that Tred would be incentivized to have you test drive as many cars as possible, since they make a fee on each test.
If I were them I’d say “Thanks for test driving the Camry and Accord. You know, the Subaru Legacy, Mazda 6 and Ford Fusion are also good cars, how about I bring those to you?”
I haven’t tried the service myself, but if Tred’s revenue source is the test drive fee rather than getting you to buy a car, then (hopefully) their incentives are skewed against giving the customer the hard sell and run-around.
Actually, I’d think that Tred would be incentivized to have you test drive as many cars as possible, since they make a fee on each test.
If I were them I’d say “Thanks for test driving the Camry and Accord. You know, the Subaru Legacy, Mazda 6 and Ford Fusion are also good cars, how about I bring those to you?”