I can see a system where I go to a Subaru webpage, shop the catalogue of available cars and options, input all my information, view payment options, digitally sign some forms, then go to the warehouse style location to get my purchase.
I’d be a happier consumer compared to what we have currently.
There’s another approach that’s often overlooked: you can work for an automotive OEM, and then get fixed, discounted pricing on any of your employer’s products, from the dealership of your choice. Strictly speaking, dealer participation is voluntary, but nearly 100% participate, especially in Michigan.
My point was not a criticism of your utopian model of efficiency (which I agree would seem to be ideal), but rather that there already is a path available where the price is known by all parties up front and people don’t use it. It may not be the best possible price but it’s a no-bullshit price, yet most people still walk into a dealer and try their hand at negotiating. My point was about consumer preference. If consumers don’t all flock to Costco to avoid the bullshit, why would they be any more likely to embrace an entire system of transparent pricing?
For some reason this gamesmanship seems to be built into the retail car industry more insidiously than any other I can think of, except maybe Persian rugs. Even if you restructure the industry as you described I am not sure you can change the mentality of the retailers or gain the trust of the consumer.
That is exactly how it worked buying my Tesla.
Of course, it was spread out over 2.5 years, involved major uncertainty, bizarre tweets, and major media coverage of any mishap.
I bought my most recent car at a place called Blue Knob which is about an hour and a half from where I live.
They have no salesmen on the lot, no negotiations, no haggling, up front pricing, open until 10 almost every night & offer full financing. They sell used cars but usually only 4 or 5 years at the most.
I don’t know how many of these types of places are active but I found it to be the absolute best car buying experience ever. I felt like I got a great car at a great price without the hassle of doing “homework” and practicing my best haggling skills. I don’t have the energy or the inclination for that.
I was not aware of this buying service option when I had to purchase. Will keep that in mind when I need a car again.
Are you saying flat out that the invoice price you show to customers is the true price the dealer paid to the manufacturer?
I hate buying cars (perhaps why I drive a 26 year old car).
I have used Costco 3 times for my wife’s cars. It is low friction, no haggle and I can at least pretend I got a good deal.
They must sell a ton of cars. I’m about 90 minutes west of Duncansville on 422 and I see cars badged with BlueKnob all the time.
That Blue Knob place looks okay, but their used car prices are above NADA retail so they’re not that great of a deal. If you want a really good deal on a used car, check out Hertz or something similar with their retired rentals. They don’t haggle on their prices either and their prices are below what anyone is selling them for at a regular dealer lot.
I had researched Enterprise car sales a few years ago and concluded their prices were on the higher side, considering these were retired rental cars. How does Enterprise car sales stack up nowadays against Hertz?
If you’re offering a price for $1000 below your invoice, you’re getting an incentive/kickback/bonus of some type to sell it at that lower amount; therefore “invoice” is really a BS price & not a realistic number. No wonder people think something shady is going on; can you blame them?
In general, I don’t find membership clubs to be a good deal. If I work the sales at the supermarket, I can buy <whatever> at the same unit price, w/o having to buy 4 gallons of catsup or an otherwise lifetime supply that will have half of it thrown out because it hasn’t gotten used up; thereby raising the unit cost…& that’s before spending $60 for that privilege. (Yes, they may be a good for a large family or an organization but not me). Not being a member of Costco, I don’t know of the ancillary benefits of membership (which I would only use on an every few years basis.) I didn’t even know they did this before this thread.
I just bought a car the same way I’ve bought my previous two cars, through a wholesale broker. I called her and told her what I wanted. She called me back the next day with a matching car from a local dealer. The price was about $200 less than the AAA (TrueCar) price, and it will be delivered to my house. I don’t even have to set foot in a dealership to finalize the deal, which is worth a couple hundred bucks in itself.
No, but $1000 behind invoice is a really good deal.
Not sure about Enterprise but Hertz’s prices around here are dirt cheap, as they buy the cars in droves at fleet discounts when new and can then undercut everyone in the used car market once they retire them and sell them.
I mean, I get that hesitancy but man…sometimes people just can’t act either. And even if we are getting a kickback (generally in the form of a monthly volume bonus for management and ownership from the manufacturer, hence why buying cars at the end of the month is the best time to buy), what of it? It seems only in car sales is the word “profit” a dirty word. I need to make money to survive. If it weren’t for Subaru money I would have to work somewhere else!
There’s this perception out there that people are getting raped constantly and that dealers are making money hand over fist and for most customers, that’s just not true. At Subaru, we are, in dealer parlance, “giving the cars away”. This simply means that the sales managers are caving to customer demands to buy the car at an insanely low price and the only money we get to keep selling the car is our “holdback” money, which is expressed in the few hundreds of dollars, not thousands, and if I sell a car for that amount, I get paid $150. That’s it.
You’re misunderstanding the complaint.
There is a feeling, that everyone should pay about the same amount for the same product or service. If Bob can buy an apple for about $1, then I should be able to buy an apple for about $1. If there’s a difference between Bob’s price and my price, I want it to be easy to understand (e.g., Bob had a coupon). With car buying, the feeling is that Bob may be getting a price that’s a significant amount of money (thousands of dollars) less than the price I got, because of ??? - for the exact same item. Now, to you, “a monthly volume bonus for management and ownership from the manufacturer” is as straightforward as a coupon. But to a car buyer who purchases a car once every 8-10 years… that’s weird and confusing and not something that they could do to get the same price that Bob did. (And that’s only one of the things that you mention in the thread). People don’t complain because car dealers are making a profit; people complain because car dealers seem to be making prices up as they go in order to treat some people better than others.
You see the same type of resentment around airfare. People are extremely resentful of the airlines. They know that the person in the next seat who is getting the same service (transportation from point A to point B) might have paid 50% less and it pisses them off. You’ll see the same feeling behind the complaints.
It’s not that dealers are making a profit. It’s that they are making more of a profit off me than they are off Bob when we both drive away with the same car or fly to Los Angeles. It makes me feel like a sucker. And it makes me dislike the person who made me feel that way.
I agree completely with your explanation of why people are pissed off about car dealer practices.
But are people really resentful of airfares for the same reasons? I’m certainly not - it’s easy to understand why if you prepay for an early non-changeable seat you get a cheaper price, and that it’s logical for prices to go up as a flight starts to sell out. I mean, hotels and car rentals are exactly the same, it’s sensible that prices adjust to supply and demand, and desirable - because on occasions when you need to do something at the last minute, there’s usually something available if you pay up. It’s also beneficial for less wealthy people, because they can get cheaper prices by being more diligent about shopping around for the cheapest date and booking earlier, subsidized by others who pay more for greater convenience. Variable pricing is not undesirable so long as it’s transparent and everyone is on a level playing field.
amarinth explained it well IMHO. I’ll also add: when I go in to buy a refrigerator, as soon as I look at the item, I know what it’s going to cost me. That becomes part of my purchase decision. I can compare models and prices. When I go in to a dealership to look at a car, I have no idea what it will cost me. I have to sit through the arcane hours-long “negotiation” process before I can even get a realistic price to consider. And then the dealer insists that I have to buy the car RIGHT NOW or the price will change.
It’s not a stable equilibrium.
Imagine we started with a system like that. Someone would realize that they can hire some guys who are good at convincing people to spend money, obfuscate the numbers a bit, and do two things:
It’s basically saying “Wouldn’t it be nice if there were no price discrimination”. If there were no price discrimination, then someone would be along to invent it.
Costco’s not what he wants though. Costco’s system is just hiring an experienced negotiator and paying them a small fee to negotiate on your behalf. The whole imperfect system still exists, you’re just paying a small tax not to deal with it.
My experience, having bought a car a few years ago, is that the bullshit still exists to a tremendous amount.
I did all the things you’re supposed to do. I looked up values that the models I wanted were selling for online. I waited until the end of the month when the newer model year was out. I contacted multiple dealerships. It was all incredible bullshit from start to end.
Most dealerships I contacted via email simply failed to respond with anything more than trying to get my phone number or have me “come down to the lot to talk about it”. The remaining ones just gave me MSRP. Best they could do.
I put specific trim models into the TrueCar, and got a handful of dealerships come up with specific reasonable-ish prices. Sweet! I thought. I had to then give them my contact information, only to receive lots of attempts to sell me higher trim levels and an ultimate realization that it was apparently just a bait and switch. None of those dealerships actually had the model they had quoted me a great price for.
One dealership played the “take his keys to move his car” game and then conveniently disappear for a while so he can’t leave. Another one tried it, but I had learned my lesson.
Finally, after weeks of phone calls in which I eventually got a price a bit below the “fair” price that the internet suggested, we went out to buy the car.
It took hours. I showed up ready to write a check. We had to talk to like 4 people. They all of a sudden realized that they’d already put the tinting on the windows of the model we wanted. No, we weren’t going to pay $300 extra for that. They tried to charge us like $80 for the locking lugnuts. Don’t care, take 'em off. They insisted that I had to sign the thing called a loan application, which I was suckered into and probably dinged my credit. I had to spend something like 15 minutes sitting in an office being recorded on video as they asked me to agree to a bunch of upsold bullshit like seat treatment and undercoating and satellite radio and who knows what else (I did not).
I did eventually agree to pay like $35 that they assured me was a fee required by the state but which I later found out was not. So, good job guys. You got me.
Ultimately, I ended up saving something like $1000 for maybe 8 hours of “work” dealing with a bullshit system designed to extract money from people who hate every minute of it. And I’ll do it again, too, because I don’t have $1000 to waste on not doing 8 hours of shitty work in an inhumane system.
I wanna buy a car in the Magical Realm where FoieGrasIsEvil works. Or, even better, see self-driving fleet transportation on demand take over and never buy a car again.
You are right that the proposed price transparency system would reduce price discrimination but I don’t see why that couldn’t happen. Price discrimination allows dealers to capture a portion of the consumers’ surplus but it comes at the expense of paying salespeople and F&I guys for their skills ripping off consumers. If those labor costs are higher than the amount of consumers’ surplus dealers can capture, the price transparent model would be more profitable. Everyone’s experience today shows that in today’s world, dealers largely believe that they can profit more by using sales people to capture consumers’ surplus, so that is the prevailing model for car dealers. I don’t think this is an immutable law of economics though.
I agree that bad dealers could still prosper on suckers but if enough suckers catch on, those opportunities shrink. This is what happened to most consumer goods in America when stores started putting prices on all their goods. Retailers lost the ability to haggle with customers to extract the last penny from the desperate but retailers who priced their goods fairly gained tremendous volume. To compete, other retailers had to adopt the same strategy. Basically every store operates on a price-transparent price-competing model today, although there is limited price discrimination with things like irregular sales, loyalty cards, and coupons.
Furthermore, if car dealers cut their labor expenses by cutting out sales people, they could offer cars at prices that would be hard for price-discriminating dealers to match. Undercutting price-transparent dealers might be tough. There is a new car dealer around me that does this and I see plenty of their tags on the back of new cars.
Price-transparent dealers might also be able to extract slightly higher average prices because consumers implicitly value not having to put up deal with dealer bullshit. Carmax, for instance, employs transparent no-haggle prices and they are the largest used car dealer in the country. Greater differentiation in used cars probably makes it easier to implement no-haggle pricing because a competing used car dealer with a similar car will never have exactly the same car but I believe that the same strategy could work for new dealers as well. The new car dealer I mentioned above offers customer service and a car-buying experience superior to most new car dealers. I have already decided that I will buy my next new car there if they are within $300 of the next best price I can find. That is the explicit price I am willing to pay to avoid rewarding dealers who exploit bullshit sales practices.
I expect that I will also rate my next new car buying experience there better than I would have rated any competing dealer. In past interactions, some dealers managed to lose my business forever. Unless those dealers are clearing out cars in a bankruptcy liquidation, I will never return to them. They forfeited their opportunity to compete for my business based on price because I don’t trust them.
I just purchased a 2016 Mazda CX-5. My criteria was pretty specific: less than 25k mileage, no accidents, AWD, moon roof, mid-tier model, and had to have the upgraded Bose speakers. I wanted blue, but settled on silver.
I first tried the “authorized” Costco dealer. Right off the bat, he complained about the Costco program, saying that many dealerships were opting out because they couldn’t make any money on them. Then he tried to screw me by upping the starting price $1000 and then deducting the Costco discount. My husband called him out on it, and showed him the print-out we had, and then he tried to say that the print out was a mistake. Uh huh.
Anyway, we left and went to a non-Costco dealer. Negotiated what I thought was a very fair deal as it beat KBB by about $1000. And it was a certified used car, so it had brand new tires and brakes, plus a 100,000 powertrain warranty.
So in my limited experience, it wasn’t worth anything.
It’s not an immutable law, but I don’t think it’s likely to change any time soon.
I think the difference is mostly one of price and standardization.
It’s not worth anyone’s time to haggle over the price of a gallon of milk, but there are very few products that cost over $1000 where you can’t find a salesman who will cut you a deal. I can’t think of any that cost over $20000 where you can’t. in fact, many things that cost that much don’t even have listed prices, just a “contact our sales department” suggestion.
Prices became standardized in retail outlets as mass production kicked into gear which meant that competing stores had the exact same products, and they were effectively much cheaper as well. At that point trying to gouge the customer is mostly a losing battle.
Car dealerships mostly don’t have to deal with that. It’s harder to directly compare across makes, and most dealerships are regional fiefdoms. No direct competition in the local area. Those things could change, of course, but I don’t see what would make them change.
Also, salesmen do perform useful services for customers. Good salesmen who know their stuff will help people (most of whom don’t really know what they need) find the right product for their needs, which makes customers much more satisfied. And I think everyone not in the sales industry underestimates how much value there is in regularly asking for the close. You are very unlikely to sell many cars at all if you don’t have a smiling person calling the customer by name and asking them about every five minutes if they’re ready to buy the car. A no-haggle dealership might not be able to cut their sales labor by that much.
Agreed. I like my car and I think I got a decent price, but I’m never buying another one from the dealership I bought it from.