If You're Getting Owned at The Dealership, You're Not Alone

[csjlu]

So all dealers should go away? Who handles the trade ins? Who handles the warranty work? Who does all of the other administrative duties?

Dealers can co-exist, but with competition. Not to beat a dead horse, but think about a mobile phone. You can buy it direct from the manufacturer, you can buy it from the service provider, or you can buy it from a third party retailer. These options do not exist for buying new cars. I think the dealership experience could improve with some healthy DTC competition.

A robust market for used vehicles already exists in the US. I sold my last car in 30 minutes. I researched private market transaction values online, listed it on kbb.com, had three people call me within 5 minutes, drove 10 minutes to the local lot, had three back-and-forths on price, and was given a check that was above my expectations. I had to call my wife to pick me up, but it was so much easier than dealing with a dealership, and the bids were more competitive than what the dealership was providing.

Warranty work can be handled outside the dealership, just as in other industries. When my dishwasher went on the fritz, a local service technician under contract with the manufacturer came to my house and fixed it using genuine parts. When I once had an issue with my Mac computer, I was given the option of bringing it in to the local Apple store or to a licensed third party repair shop. I cannot think of a good reason why a skilled local mechanic cannot strike a similar deal with auto manufacturers, other than to protect the revenues of service bays and parts departments of dealerships.

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[OINC]

That has already been tried and hasn't worked for a variety of reasons.

As long as you can buy the exact same vehicle from dealer A, B or C, unless all agree to hold on to a price, which by the way would be price-fixing and therefore illegal, no one can stop consumers from haggling.

Dealers would love nothing better than charge full MSRP and be done; it is buyers who drive the haggling.

Mercedes Benz tried to enforce no-haggling pricing 20 years ago; it got sued by dealer and consumer groups for price-fixing.

It absolutely wouldn't require price-fixing, and I'm not sure why you'd think it would. It does not for TVs or computers or almost any other consumer good we buy.

Dealer A advertises price PA. Dealer B advertises slightly lower price PB. Dealer A can then choose to match it and advertise price PB (or beat it with price PA'), or offer a price-matching policy like most retailers do. If they don't they only sell to people who don't know any better.

This is not the same as haggling -- Best Buy isn't going to arbitrarily discount a TV because you ask them to do, but they will match Amazon's advertised price. Once prices have reached their locally-sustainable nadir, the dealers can compete based on things they claim are their real value-add/non-parasitic role (service, loaners, experience, return policy, availability, etc).

But it would require people to shift to treating cars like TVs and computers, and price shop based only on advertised pricing and not have the expectation of negotiating the price at the dealership. It's a big cultural shift.

ETA: The dealers can stop consumers from haggling. Even if dealer B still negotiates, dealer A can advertise competitive no-haggle prices and either dealer B loses business if they don't go that low or dealer A will have to lower its prices. Dealers won't do it, though, because they make too much money from MOST people negotiating thinking they got a "good deal" when really it was average at best.

 

[aldo98229]

It absolutely wouldn't require price-fixing, and I'm not sure why you'd think it would. It does not for TVs or computers or almost any other consumer good we buy.

Dealer A advertises price PA. Dealer B advertises slightly lower price PB. Dealer A can then choose to match it and advertise price PB (or beat it with price PA'), or offer a price-matching policy like most retailers do. If they don't they only sell to people who don't know any better.

This is not the same as haggling -- Best Buy isn't going to arbitrarily discount a TV because you ask them to do, but they will match Amazon's advertised price. Once prices have reached their locally-sustainable nadir, the dealers can compete based on things they claim are their real value-add/non-parasitic role (service, loaners, experience, return policy, availability, etc).

But it would require people to shift to treating cars like TVs and computers, and price shop based only on advertised pricing and not have the expectation of negotiating the price at the dealership. It's a big cultural shift.

ETA: The dealers can stop consumers from haggling. Even if dealer B still negotiates, dealer A can advertise competitive no-haggle prices and either dealer B loses business if they don't go that low or dealer A will have to lower its prices. Dealers won't do it, though, because they make too much money from MOST people negotiating thinking they got a "good deal" when really it was average at best.

You are assuming dealers are the only ones who want to haggle. Consumers want to haggle as much or more.

Haggling stems from the economic opportunity to save thousands of dollars for a couple of hours worth.

Regardless of who wants to dictate prices, automakers, dealers, governments: as long as the opportunity for significant savings exist, people —both buyers and sellers— are going to want to haggle.

 

[OINC]

You are assuming dealers are the only ones who want to haggle. Consumers want to haggle as much or more.

Haggling stems from the economic opportunity to save thousands of dollars for a couple of hours worth.

Regardless of who wants to dictate prices, automakers, dealers, governments: as long as the opportunity for significant savings exist, people —both buyers and sellers— are going to want to haggle.

No, if you read my post, you'd note I said it would require a cultural shift.

I don't actually think consumers WANT to haggle; it's a DEEPLY ingrained cultural expectation that to get the best deal at a car dealership you have to negotiate. If that were not the cultural expectation, I think most of us would NOT want to.

 

[aldo98229]

No, if you read my post, you'd note I said it would require a cultural shift.

I don't actually think consumers WANT to haggle; it's a DEEPLY ingrained cultural expectation that to get the best deal at a car dealership you have to negotiate. If that were not the cultural expectation, I think most of us would NOT want to.

I read it. But that is just your opinion.

The laws of supply and demand tell us that in a free market prices find equilibrium. As long as there is opportunity for economic gain from haggling, people will negotiate.

 

[OINC]

I read it. But that is just your opinion.

The laws of supply and demand tell us that as long as there is opportunity for economic gain in a free market, prices will find equilibrium --in this case through negotiation.

Oh, agreed that prices will find an equilibrium.

But your opinion is that negotiation is the best and only way for new car prices to reach that equilibrium. I disagree with your opinion on both counts — there’s absolutely nothing special about the new car market, so I think we can use the way we use for nearly every other consumer good, but cultural bias, inertia, and short-term dealer motivation will not allow us to get there.

I think we will just have to agree to disagree.

 

[Ridgway Jeeper]

If you don't trust the government, how do you trust anyone? I don't listen to doctors or anyone! Death of the expert! Thanks internet for telling me, I'm now the expert hahahahaha

So your contention is that people in government are somehow more trustworthy than people you actually know and the things you can actually see? You go ahead and keep "trusting the experts" and "putting faith in your government". That to me is truly hilarious. Good Luck with it.

 

[ds1919]

What about purchasing a new Jeep through a broker? My friend used to do this back in the 1980's and would get a really good price, in comparison to the local dealership. Not sure if this is an option anymore?

 

[aldo98229]

This is a seller’s market; brokers don’t have hold sway in these conditions.

I looked at 4Xes through TrueCar a few weeks ago. It put me in contact with my local Jeep dealer, among a few others. When I dropped by, the “Internet Manager” was too busy staring at his phone. Barely looking at me, he proceeded to tell me that everything on the lot had a $10,000 markup. I thanked him, got up and left.

He seemed relieved that I decided to leave.

TrueCar normally follows up with customers a few days later to make sure dealers are sticking to their end of the bargain. This time it didn’t bother. TrueCar must know well that dealers’ level of ass-holicity is off the charts right now.

 

[UtahDirt]

Yeah those car selling type people oughta be working for free, yeah!!

Everyone is entitled to make money, if convincing people you are saving them money, in addition to the other scams dealers run, is the choice. Well don't expect gushing praise. Just like getting fleeced by those dirtbags is. All those beautiful shiny buildings full of commission employees is where Vegas dreams come true

 

[UtahDirt]

You are assuming dealers are the only ones who want to haggle. Consumers want to haggle as much or more.

Haggling stems from the economic opportunity to save thousands of dollars for a couple of hours worth.

Regardless of who wants to dictate prices, automakers, dealers, governments: as long as the opportunity for significant savings exist, people —both buyers and sellers— are going to want to haggle.

The stuff dreams are made of, and countless forum posts bragging on haggle skills.

 

[UtahDirt]

Lean manufacturing, continuous improvement, best practices, commonizing parts, leveraging volume....

Sure has dropped prices of a Tesla, along with eliminating the middleman dealer network. Not to mention cost of minor accident repairs on one.

 

[HungryHound]

Sure has dropped prices of a Tesla, along with eliminating the middleman dealer network. Not to mention cost of minor accident repairs on one.

Price and cost are two separate things. Teslas are market priced based on high demand. Ever notice during the Jeep sales events, it typically doesn't include the good Jeeps. Just the Renegades and other base midels?

 

[xylodan]

That has already been tried and hasn't worked for a variety of reasons.

As long as you can buy the exact same vehicle from dealer A, B or C, unless all agree to hold on to a price, which by the way would be price-fixing and therefore illegal, no one can stop consumers from haggling.

Dealers would love nothing better than charge full MSRP and be done; it is buyers who drive the haggling.

Mercedes Benz tried to enforce no-haggling pricing 20 years ago; it got sued by dealer and consumer groups for price-fixing.

For a few years I was pretty deep in the bike shop industry, and while the bicycles weren't $50,000 items, we did sell bikes up to $12k and as the manufacturer we did enforce that dealers sold products at MSRP. Each dealer had 2 weeks every year where they could hold a sale (they would have to tell us of this before the event) and discount product but other than that, it was MSRP or suffer consequences of losing our brand in their shop.

It can be done and what this did was actually funnel more bicycles through the shops with better service who took better care of their cyclists and helped create a better image for the brand. It can and does work. It just comes with some growing pains.

 

[LITTLE WILLYS]

You people crack me up. We are the consumer. We are what makes or breaks a company. End of story. Do not forget, we are the boss in the world of commerce, and we are the boss of our government. Not the other way around.

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