No-haggle car dealerships? Good or bad?

Franchise laws started out with good intentions. In the early days of motoring, prospective car dealers gave automakers money to set up operations and start production in exchange for exclusive sales territories. Franchise laws were intended to protect these investors from unfair competition by the automakers. If automakers weren’t prohibited from competing with local sellers, the automakers could just set up their own dealerships and drive the franchise dealers out of business by refusing to sell cars to them on fair terms. This franchise law rationale only makes sense if the automaker sold local franchise dealerships, which Tesla has never done, but some of the laws prohibit automaker-owned dealerships altogether and at least one state (New Jersey I think) modified its franchise law to prohibit Tesla from owning its own dealerships.

Haggling is standard out of tradition and because it is worth it, at least for some consumers, to haggle.

No haggle pricing has taken off a bit with used cars but each used car is unique in its own way. If I see a particular car at Carmax, it is very unlikely that I am going to find the same car in the same color with the same options, mileage and condition at some other nearby dealer. Carmax has a monopoly on that car, and they can set the price without fear that some other dealer will beat them by $25. Tesla, and Saturn before them, had some success with no-haggle pricing but that was only because every dealer selling Tesla or Saturn cars participated. Again, no one could just undercut them on an identical car.

I’m not sure that no-haggle new car dealerships will ever be able to take off as an industrywide practice. As others have noted, if you get a great no-haggle price from a fair dealer, you can use that to get a better price at a competing dealer. I guarantee they will beat it by a few bucks at least.

Even if it did take off, it might not be to customers’ benefit. If everyone goes to no haggle dealerships, the dealerships all have perfect information about every other dealers’ prices. Ideally that will lead to a highly competitive market where every dealer fights tooth and nail to save a buck it can pass on to consumers. Or maybe it leads to dealers using freely available market prices to signal to each other that they can keep pushing consumers’ prices higher and higher.

Traditions change.

For me, I’d estimate that the last time (and I hope it was the last) I bought a new car, I spent two weeks on research, visited 3 local dealerships a total of perhaps 8 times, at an average of an hour per visit, and ultimately got the dealer’s price down a few hundred dollars (maybe) from his first highball offer. Per hour, that was not a good use of my time. And I did know that I could shave a few extra hundred off the price i paid if I were willing to invest a few more hours, but I had a life to live.

I did all my haggling over the internet, visited the dealers as few times as I could – once for the car I bought, twice at one dealer (where I thought I was going to buy the car. I had fully paid for it and even brought Mrs. Charming and Rested), and one other dealer. I still feel like I spent the same amount of time haggling and the time savings was only in the time otherwise wasted driving between dealers.

The biggest thing many people buy is their house. The second biggest thing is usually their transport, which may also be the biggest thing for renters.

So real estate and car buying are the two areas of the economy where haggling and deceptive tricks are common. Most other prices are fixed.

Admittedly, these are competitive industries. Margins are said to be low, but this is questionable at best. There exists some degree of consumer protection but possibly not enough. There is little apparent political will for change although it would be enormously popular, and it is (in sone cases) hard to understand why this is. Sure, due diligence is required, but should only be at an ordinary level. The playing field should be essentially as level as possible.

Tesla isn’t moving any families. Their headquarters move is essentially just on paper; it’s not much more than “where is Elon right now,” which is currently in Texas due to his SpaceX activities.

The plant in Fremont isn’t closing; it will grow by another 50% in the coming years, but it’s really tight quarters already. Their big engineering teams aren’t leaving California. They need to grow in other states but they aren’t shrinking anywhere.

As far as the topic goes, the way Tesla does it is the only sensible way as far as I’m concerned. You go online, you order the car for the same price as everyone else, and a few days or weeks later it shows up at your house. Should have been like that decades ago.

The lack of haggling doesn’t prevent the price discrimination that Chronos mentioned. Instead, they have a set of vehicles and options that get much higher prices as you go up the ranks. A cost-conscious person will get one of the standard models; someone with more disposable money will get one of the higher end models. They make more money at the high end and that’s used to subsidize the development of the lower-end ones.

Works the same way in many other industries, like computers. The best bang-for-buck is never at the high end, because that’s where companies are trying to extract as much money as possible from rich consumers. Take a step or two away from the high end and you still get a good product for a much lower price.

A friend of mine works for Tesla, in customer support; his division is located in the Salt Lake City area (though they’ve been largely working from home for the past year-plus).

I seem to recall that SLC is home to quite a lot of customer support. Not sure why.

To be honest, I think Musk is also using this as a way to ingratiate Tesla to Texans. Take a minor spat with CA officials and turn it into an anti-California thing, which Texans just eat up. Tesla doesn’t need to sell themselves to Californians; it’s already hugely popular here. But they can’t even sell their cars directly in Texas, due to their pro-dealership, anti-capitalist laws. What better way to turn the lawmakers to your side than to move in and pretend you’re a good 'ol boy?

Good point; the wife of another friend, who used to live in the SLC area, worked as a customer service rep for JetBlue for a while. That airline specifically wanted people from that area for customer service, because it was their impression that the locals were particularly helpful and nice.

I remember reading that part of the appeal of the Salt Lake City area was that Mormons learned foreign languages for mission trips.

I guess that is a good point. Houses and cars are the only things I can think of off the top of my head that regular people pay five figures for. It is a lot of money, so it will be done by haggling. For smaller purchases, the regular person deems it more efficient to have up front pricing because it would be wholly impractical to haggle over every item in your grocery cart.

But haggling over a car purchase remains because people simply expect that the price listed on the car is not the price they will pay, so to be successful, you must mark the price of the car higher than you will sell if for and therefore must haggle. If you don’t, too many people will be walking out the door.

I’m reminded of JcPenney a few years ago making the decision to quit bullshitting customers with their never ending “sale prices” and said that they were just going to level with people and have their honest to goodness lowest price right there on the sticker—and they did----and almost went bankrupt. If people see an item price at $100, they are “meh” but if they see the very same item priced at $200 but NOW 50% OFF FOR TODAY ONLY then they can’t buy it fast enough.

I guess we should only blame ourselves.

Maybe. It will interesting to see if Tesla’s business model thrives. I’m rooting for them. Maybe I’ve got another car purchase left in me.

A fact that, allegedly, wasn’t lost on the CIA either.