One advantage to no-haggle pricing is less sexual discrimination.
I briefly sold cars in the early-80’s. I hated it.
When we shopped for my wife’s new car a year ago, I was heartened to find out that the style of car sales was slightly better, but the substance really wasn’t.
The salesman drew up the old four squares:
The information asymmetry in car sales is still extreme. Most of the ‘pricing guides’ that consumers have access to are actually put out by the car sales industry (Paging Mr. Incentive – Mr. Perverse Incentive !).
I was also a VP of a few different NYSE-traded retail chains. Many consumers believe that factory outlet stores [I’m invoking this as an analog to no-haggle car dealerships] are all closeouts, seconds, and irregulars, and that screaming deals can be had there.
In fact, most retail chains simply buy less expensive items and sell them through their outlet stores.
[Some chains probably have ‘true’ outlet stores, but most are either a mix, or offer exclusively items specifically bought to sell at these ‘outlets.’]
Meaning: it’s a rigged game.
So is car sales.
It’s pretty close to impossible to beat the house, no matter how much research you do.
The best you can do is the best you can do, often trying to pit a few dealerships against each other and trying to spark a bit of a bidding war – something many dealerships are very reluctant to do.
Even the whole “invoice” thing is basically a scam.
None of which is to say that there’s nothing to be gained by research, haggling, and even by considering dealers that are fairly far from home. It’s just very hard to beat the house and – for many – more distasteful than a colonoscopy.
I do not enjoy the “talk to the manager” game. I have played it well, and I have played it badly. But in every case, it was a waste of my time and generally a frustrating process. I get the well-known techniques, desire for finance and aftermarket sales. Non-haggle dealers might be better for women or other groups if it is true that discrimination against them persists. I have not gone to one and doubt it would do better than a broker or experienced buyer who has done their research.
“Back in the day” you use to be able to buy books that listed the markup on cars. they use to mark up the base price of the car at one rate and the options at another rate. You could do the math to calculate the cost of the car to the dealership. That way you could base your negotiations on what the dealer is asking as profit. So for an economy car a reasonable profit was something like $150. I started and ended my negotiations by asking a dealer what they wanted above cost. I’m not going to waste my time over a $20 difference of that number.
I actually had a couple of sales reps tell me they didn’t know what the dealer paid for the car. I then asked them how would they know if they make money on the deal (as I’m leaving). Their loss.
The first and only new car I ever bought was the result of the dealer answering me immediately with their desired markup (I had already calculated the price they paid and they showed me the invoice which was to the dollar of what I came up with). They had the exact car I wanted and handed me the keys to test drive it. Transaction done in 15 minutes.
there are other costs involved such as transportation and dealer pin striping (do they even do that anymore) but you get the idea of what I’m talking about. It’s possible to buy a car that’s below what the dealer paid for it. They get other incentive money from the factory and they may just need to get it off their lot for whatever reason. But by calculating what they paid for it you know exactly where you stand between dealers.
Not necessarily. A lot of car dealers pay their sales staff a flat fee for units sold, plus a monthly stipend to help out in a bad sales month. Doesn’t matter if it’s a luxury car or a shitbox, they get the same flat fee, and it’s not very much. The downside for the dealer on this is that there is no incentive for the sales person to try to upsell the buyer.
My experience has been that the salesman hands you off to another person, usually the finance manager, to upsell you on things like paint coatings, service contracts, and the like.
Difficulty in haggling and inability to plan a particular trip long in advance have little or nothing to do with ability to pay. Lack of time to mess around with coupons may go along with shortage of money, rather than being opposed to it.
The discrimination you’re in favor of is likely to favor the person with lots of money, who has time and energy to deal with such things and/or money to pay somebody else to do it.
Indeed. Somebody’s got to pay for producing and handling all of those coupons. So the average price of the product has to be higher.
Not in some cases. Quite possibly in others. And the cumulative damage over years is likely to add up.
Yes. This problem is more interesting to me as a social/economic one than as a personal gripe. I think I’m a decent negotiator, and I’ve had the luxury of being able to walk out on car purchases because of economic privilege. I think the dealers, over the decades, have taken terrible advantage of the naive, the dumb, the foolish, the arrogant customers, of whom they have many.
I suspect that you’re right; but I was thinking more of the cumulative damage to individual purchasers over the years, and also in the sense of smaller purchases adding up (the seriously broke rarely buy brand new cars anyway; though in rural areas they often do have to buy used ones.)
True enough. They even did that to me when I paid cash for the car! Funny thing, though: the finance guy said things to me like “I assume you don’t want undercoating or blah blah.”
You’re right, it’s just a simple comparison between the financing the dealer offers vs. what you can get from a bank, CU, etc. Pick which one is best and it could be it’s the dealer’s.
But, as you mention, the key is to talk about financing only after the final price on the car has been agreed on (with the trade-in being compartmentalized and totally separate, too). And that’s where the problem lies–car salespeople want more you to conflate the car price with the financing details so they can hook you with low monthly payments (and charge more for the vehicle).
That is what I’m getting at when I say never do the dealer financing. It’s more the games they play with the 3 “prime numbers” (price, trade-in, financing) than the loan terms although those are normally going to be worse as well.
It’s a distraction game. They get you hypnotized by one (or two) of the three factors being fantastic then kill you with the others. No reason why the financing can’t be the “loss leader” it’s just usually not.
IOW, it’s possible that a dealer could offer you better financing than the bank but if they can do that they’re probably not going to give you a good price on the car (and/or stiff you on the trade-in).
We bought my car through USAA’s car buying service maybe eight years ago. We chose the car we wanted, then got emails and phone messages (I think - maybe just emails) from dealers with their offers. We called a dealership we liked and asked if they would match the best offer. They beat it, so we went with them. We went in with financing arranged, too. It looks like USAA isn’t offering the service any longer, which saddens me. I can’t stand haggling and back and forth.
Thinking about these two posts together:
I don’t see how Czarcasm can possibly know that. However, the way car dealers deal, some ethnic/gender/disability difference, in average cash left on the table, seems to me unavoidable.
Airlines presumably know what the price will be tomorrow. So airlines have a little pricing information advantage over me. But when it comes to today’s bottom line price, the airline tells me that, and the car dealer keeps it secret. So, dalej42, I don’t think the airline example is a defense for American auto dealer pricing.
Tesla is an exception – but they are doing it by skirting state auto dealer laws.
As I said before, my preference is independent dealers who compete on price but sell the same car, same day, same dollar and cents total, to all customers. Whether that’s important enough to enforce by law – probably not.
Clearly car dealerships prefer the system if almost all of them use it. I have a grandfather who owned a dealership, and he was a tough cookie.
You may not mean it this way, but saying “skirting state auto dealer laws” implies it’s a bad thing. In reality, it is a fantastic thing. Car dealerships are ridiculous antiquated businesses that are protected by law for no good reason other than the political clout of the dealerships owners. Everyone, from consumers to manufacturers, would be better off if the whole system of dealerships up and died.
I never thought about it this way.
The Saturn and Scion business models didn’t bother me. Then, they are gone, and game-playing dealers trying, with secretive pricing, to get me to leave money on the table, remain.
I guess many dealers are local crony capitalists. Then, Tesla disrupting their employees’s two-career families with the move to Texas — because of California trying to save lives during an epidemic! — seems at least as bad.
Haggling is fine if the product already exists. If you haggle about a service or a project, the provider will likely cut corners.
For me, at the end of the day, I feel like even if I get a “good” deal, I could possibly gotten a better deal if I had said the right magic words or certain words often enough. So I leave the dealership unsatisfied. I am completely willing to do research as to who has the best deal and prices, but I don’t want to, once I get to dealership, have to deal with going through all the options and prices again.
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A four-square only works if you are getting a dealer loan.
Last time I was looking for a car I saw an interesting car at a dealership and stopped to try and find the price. I was completely clear that I was going to be paying cash, but it must not have registered with the salesman because he pulled out a four-square anyway. I gave him my information to start filling it out due to curiosity. He filled out the top part, then stopped.
The look on his face was kind of priceless when he suddenly realized this wasn’t going to work. He wrote ‘cash’ on it, then set it aside and never referred to it again.
I did not buy a car there.
The missing piece here is that in a car-purchase situation, the bottom line for both parties is much less straightforward than it would be on a house. The dealer may be way overstocked and underwater on a certain item. You might be richer than you look, you might be obsessed with certain features or models. There might be a lot full of similar, lower-priced cars down the street. The only way to discover the true price is to research and haggle.
The alternative is for dealers to say “the price is the price”, and set it higher so their income is more predictable. But if they do that, then you’ll definitely either pay more than you should, or you’ll take that offer to a haggling competitor who will definitely work to undercut them.
Home-buying is much less affected by those factors. All parties have information about what the inventory is. The offer contains up-front information about the buyer’s means to pay, so the seller and bank don’t waste time with unreliable offers that might end up in an expensive foreclosure or lost opportunity. The only unknowns are which party wants the deal the most, whether financing comes through, and whether any undisclosed defects turn up in the inspection.
Don’t get me wrong, I’m not a fan of the process. It could probably be improved, there are some bullshit laws that put the thumb on the scales of dealers. But there are some structural reasons why it’s different than buying a house or a stereo.