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Totally understand that the dealer has to make a profit/pay for overhead and I am all for paying a good commission to a salesman that does an outstanding job. The original point was that the MSRP price is usually thousands off from the actual price the dealer paid from the manufacturer. For an identical car, they might make $5k profit on one person and $500 profit on another.
It just seems to me that the system is stacked against the ordinary consumer who just wants a new car. The end price paid is significantly lower for someone who negotiated versus someone who didn't. I'm sure a dealer might knock off a little to the unsuspecting buyer to make them think they got a good deal. Or, give them a "better" price on their trade, but not budge from msrp.
So a consumer that puts in the work (research, negotiating) may benefit from a lower price?
How's it different from, say, a coupon clipper and the "ordinary" supermarket shopper?
So a consumer that puts in the work (research, negotiating) may benefit from a lower price?
How's it different from, say, a coupon clipper and the "ordinary" supermarket shopper?
Seriously, coupon clipper? Not even remotely comparable. A lot of people I know would have no clue where to begin researching vehicles/prices to gain enough knowledge to negotiate.
Seriously, coupon clipper? Not even remotely comparable. A lot of people I know would have no clue where to begin researching vehicles/prices to gain enough knowledge to negotiate.
Ignorance is no excuse. All the info is out there for anyone who wants it. It's not up to the seller to educate the buyer or facilitate the best deal for them.
A couple years ago I was about to donate a printer because the ink cost nearly as much as the printer did, and I was out of ink. On a whim I put the printer on craigslist, where it sold the next day. I sold it for $10 less than a new one could be bought for, and about $10 more than the replacement ink. I almost felt bad for the buyer, who obviously didn't see this for themselves, but I was honest about everything. Had he spent ten minutes researching it I doubt he would have bought it. Was that my fault? Did I have an obligation to him to explain that he wasn't making the best financial decision?
The world does not need to be dumbed down for those who are unwilling or unable to participate in it as it is.
Maybe you shouldn't have allowed that to happen. The last new car I bought was wrapped up in less than an hour and a half from the time I set foot on the lot to when I left, and I felt even that was unnecessarily long.
Exactly. The car I bought last month, the price was done entirely via email. I stopped off at the dealer on my way home to work on the trade in price, didn't like it and walked out after half an hour. They called me back with a better trade, I went in the next night on my way home to sign paperwork, I was there less than an hour. Was only with F&I for 15 minutes start to finish and all my paperwork was done. Car was delivered the next day, I was at the dealer long enough to transfer stuff between cars, get my tags transferred and hand over the keys to the trade.
3 hours at the dealer is BS. I did that one time, never again.
Ignorance is no excuse. All the info is out there for anyone who wants it. It's not up to the seller to educate the buyer or facilitate the best deal for them.
I don't think it has anything to do with ignorance. Folks have lives to tend to, they might not have a weeks worth of time to research new vehicles, prices and such. I don't fault them for that.
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A couple years ago I was about to donate a printer because the ink cost nearly as much as the printer did, and I was out of ink. On a whim I put the printer on craigslist, where it sold the next day. I sold it for $10 less than a new one could be bought for, and about $10 more than the replacement ink. I almost felt bad for the buyer, who obviously didn't see this for themselves, but I was honest about everything. Had he spent ten minutes researching it I doubt he would have bought it. Was that my fault? Did I have an obligation to him to explain that he wasn't making the best financial decision?
"Not your fault"? The reason you "almost felt bad" is because you had a moral obligation to not take advantage of someone like that. You knew it was wrong, but did it anyway. I'll reserve my own personal opinion of that as I don't see it necessary to turn this discussion into an argument about morals.
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The world does not need to be dumbed down for those who are unwilling or unable to participate in it as it is.
The world does not need to be dumbed down, but something like buying a new car shouldn't have to be as complicated as it is. It's a big purchase for most, but the whole price game by dealers is unnecessary and exploits certain consumers.
Seriously, coupon clipper? Not even remotely comparable. A lot of people I know would have no clue where to begin researching vehicles/prices to gain enough knowledge to negotiate.
My wife spends around an hour every week perusing the sales circulars, clipping coupons and finding ways to stack her coupons on the sales. She shaves around $50-$75 off of our grocery bill by doing it.
With the plethora of resources and websites out there that give you at the very least the "posted dealer invoice" and information on all the incentive programs, it doesn't take much more then an hour to thoroughly research the pricing range on a new car. Saving a couple grand versus MSRP isn't worth an hour of your time?
As for making all cars a flat price or having a handful of demos and then ordering a car, the industry simply doesn't work that way and most likely never will. It has in fact been tried before and people didn't like it. MOST (well over 90%) people buy a car off the lot and often it's the one they test drive. As cars are generally the second most expensive thing most people buy, there is still a desire for the tactile experience of "trying it before you buy it".
Outside of that, the manufacturers need the dealers to stock inventory. Given the long lead times and production schedules, the manufacturing process has to be planned out well in advance and there is little room for "custom ordering" though it can be done and those "jobs" have slots in the overall production process planned for. Finally, it is simply not in the manufacturers interest to retain the inventory. There is a huge financial benefit to them to sell the cars to the dealers and allow for the diffusion of inventory and placing that burden on the dealers. Dealers are also much more in tune with what their local market wants in terms of trim levels and options.
Car sales are a "pushed" sales model where a certain inventory is produced and then they try to sell them to customers. The other model is a "pull" model where the customer specifies what they want and it is built on demand. You simply can't build cars in a "pull" environment given the complex production.
Ultimately, dealerships don't really make money on selling new cars themselves. The profit margin is generally 2% or less once you factor in all of the costs. While it is a relatively large source of revenue, it is not a gross profit generator. The most profitable areas are the service center and the F&I department that is selling financing, warranties and insurance products. After that, used cars are far and away more profitable then new cars and given that the used car market is roughly three times the size of the new car market, it is also where most of the volume is.
Thanks for the response NJGOAT. Couple things that come to mind... In Europe, most cars are ordered, not bought from dealer inventory. Seems to work well there, wonder what the margins are compared to selling cars in the US?
Also, I've heard that when folks order cars in the US, they have to pay a higher price than if they had bought from inventory.
I don't think it has anything to do with ignorance. Folks have lives to tend to, they might not have a weeks worth of time to research new vehicles, prices and such. I don't fault them for that. Ignorance, laziness, inability, whatever you choose to call it. If people want the best price, they need to do the work. It's the same for almost everything people buy.
"Not your fault"? The reason you "almost felt bad" is because you had a moral obligation to not take advantage of someone like that. You knew it was wrong, but did it anyway. I'll reserve my own personal opinion of that as I don't see it necessary to turn this discussion into an argument about morals. It wasn't wrong. I felt bad that the guy, for whatever reason, was not prepared to make the most logical purchase. Maybe he had a reason beyond the obvious. But do not mistake the transaction as me taking advantage of him. I did not. Again I ask-am I responsible for educating the buyer?
The world does not need to be dumbed down, but something like buying a new car shouldn't have to be as complicated as it is. It's a big purchase for most, but the whole price game by dealers is unnecessary and exploits certain consumers. Why not homes? Most home prices are negotiated before purchase. There is no bigger purchase for the vast majority of people.
People need to take responsibility for their own actions. Car buying isn't that complicated.
Thanks for the response NJGOAT. Couple things that come to mind... In Europe, most cars are ordered, not bought from dealer inventory. Seems to work well there, wonder what the margins are compared to selling cars in the US?
Also, I've heard that when folks order cars in the US, they have to pay a higher price than if they had bought from inventory.
Europe is not a sales market I have much experience in other then hearing about the BER - Block Exemption Regulation competition rules that they imposed in 2003 that will take full effect in 2013. Eventually it seems that there may not even be third-party dealers for new cars, but simply manufacturer owned outlets that will be the only source of where you can buy the car. Of course, the argument there is that, when you're only source of buying a car is the manufacturer and their wholly owned dealer, how much negotiation do you think there will really be?
It's technically a myth that you "pay more" for a car that you order versus taking one from inventory, however, in practice you often do end up paying more. Most rebates and incentives are only applicable to cars in dealer inventory. So that, $2,000 cash back from the manufacturer can't be used on an ordered car in most cases. Additionally, the dealers are less open to negotiating the price of an ordered car versus one on the lot that they are paying floorplan on. In general, I think you can get a better deal buying from inventory in most cases, but there are times where ordering nets the same price. For instance, if you custom ordered a Boss 302 Mustang, you may have paid less then someone who bought a car out of inventory with a dealer markup. So, lower volume, popular cars, it ends up being a bit of a wash. High volume and less popular cars you are usually better off buying out of inventory.
On the topic of ordering though, given how regimented and bundled options are these days it's rare to run into a case where you can't find exactly what you want at a dealer within a reasonable distance. If you want a Fusion SE with rapid spec 101A which is among the most popular choices, you can find dozens of them easily.
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