A good thing
Somehow, about a year ago, I got on an auto dealer sales “how to” e-mail list. Normally, I just unsubscribe, but this look into the heart of the beast interested me.
Now, my subject above reads more into this article by Dennis Galbraith, and is clearly biased by my firm belief that car dealers (new and used) are among the most amoral evil rationalizing humans that exist in polite culture.
I’ve always been dismayed that the same car, even at the same dealer, would cost different based on the negotiating savvy of the buyer. I recognize their right to sell that way, but it always seemed wrong because it took advantage of people that really couldn’t afford to be taken advantage of. One of the leading causes of financial distress of my employees is stupid car deals. Well, let me re-phrase that… stupid employees doing stupid car deals. Sure I know they are dumb, but basing a business model on exploiting the dumb seems… wrong.
According to Mr. Galbraith ubiquitous information about pricing, both OEM and from other dealers, means that the negotiated price sales model will become slowly dead.
With transparency into market prices, negotiating does not make as much sense as it once did. Posting a higher starting price, rather than an aggressive offer price, results in fewer shoppers contacting the store.
This is very true. I just bought a van. I used online tools to find exactly what I wanted across a very wide geographic area. I ended up scoring an excellent deal in Texas, buying the van based on about 60 photos and excellent recommends from other customers of the dealer.
There was no negotiation. The sale was pleasant, easy, and quick. Hallellujah! It only took 100 years.
Negotiated pricing is still with us. The VW place I visited here in St. George used it when I briefly considered a Jetta TDI instead of a van. But they were never getting my business. I needed to see the car. But I had, in my pocket, a smart phone with prices and options for hundreds of TDIs from here, Las Vegas, Phoenix and Southern California.
Thank you Internet!
August 26th, 2010 at 4:03 pm
Why are you hiring stupid people?
August 26th, 2010 at 7:55 pm
There’s a natural limit to your bargaining. Either the car dealers find a way to make decent profits or you will have to buy your cars from the government.
August 26th, 2010 at 7:57 pm
Well… that is a good question. They weren’t dumb in software, just in cars, and maybe other life stuff.
August 26th, 2010 at 7:58 pm
#2…. actually I have the worst of both, as usual. I get to pay the government to pay the car company AND I have to put up with their shenanigans when I buy the car I paid for twice.
I’d prefer to just buy it once.
August 27th, 2010 at 8:27 am
I believe the government’s money for the car company was an investment to be repaid at a presumed profit when the company fortunes recover. Companies do run short of capital from time to time and need investment to finance a recovery. If it works out as foreseen (hoped) you taxpayer will have paid nothing, and you will have gained another temporary excuse to complain about your government.
August 27th, 2010 at 9:08 am
hah… you’ll believe anything apparently. Oh.. and the FULL FAITH and BACKING of the government backs social security too.
August 27th, 2010 at 2:32 pm
Well, we shall see whether the government’s car company investments turn a profit. Assuming a five-year payback, the cost of the capital was the interest paid a five-year 3% Treasury note which would be about 15%. Thus if the company buys back the stock and preferred securities for at least 15% more than the amount of the capital injection, your government invested profitably. If you still remember the case in four years, look up the result. And the company has an incentive to buy it back just to get the government out of the business.