Someday the car manufacturers are going to realize that people are tired of the games that their dealerships play with buyers. Just look at this article, loaded with warnings about how you could get taken to the cleaners during vitually every step of the car buying process! What does that tell you about the integrity of the whole class of businesses that sell cars?
While the internet appears to be helping buyers, I'm finding that many dealerships view it merely as a toll to gather sales leads which they then want to lure into the same sordid sales process. Price quotes are many times meaningless. It's hard to get dealerships to compete on an out-the-door price on the "same vehicle", because there is such a wide variety of trims, options, and add ons.
Perhaps the answer is more customers knowing exactly what make and model they want, and being flexible about colors and minor cost options in the hope that within that spectrum there are cars that fit their needs at almost every dealer within a reasonable distance, then insisting on going to the dealer only to take delivery.
I'm trying to do this right now. Hopefully it will be the first time in over forty years of buying many new cars that the memory of purchasing one won't be unpleasant.
Wake up you manufacturers! Many of us have been ready for years to buy online in a streamlined process that allows us a level playing field in your game of "guess what the dealer really paid for this car and what he might actually accept to sell it to you".
Can you imagine having to buy everything else you do not knowing the price you are going to have to pay? It's long past time for a change.
Having just found out that I was COMPLETELY ripped off in a car purchase in December 2009... I am SICKENED that state and federal officials like to play "help the consumer" but fall far short with legislation that really does nothing more than say "better luck next time."
Short version of events:
I was a life long Connecticut resident living in the middle of the state. My car had died unexpectedly, so I went out and, after a few test drives, I bought a car in November 2009 and it wasn't the right car for me so I traded it back to the same dealer for purchase price minus "registration fees" Those fees came to $1011.00. But I bit the bullet and took it as a "rental fee".
The dealer showed me a 2006 Ford Fusion... When he went to get the keys for the test drive, I asked to see the carfax. The carfax report was clear. I test drove the car and thought it was a decent car.
During the execution of documents for purchase, the dealer said that the "lender is requiring a 2 year extended warranty" I pushed forward. The car also came with "free tires for life". I had received $10,900.00 for trade on the first car and financed $7,367.00 for a total purchase price of $18,267.00.
In January 2010, I called to get the car brought in for new tires... It was at this time that I was informed 1) I was informed I had to drive the car at least 25,000 miles before getting the new tires and 2) that the car had to have all oil changes done at the dealership and that since I had not done so, the tire warranty was void.
In April 2010, the power window on the passenger side of vehicle stopped working... The motor worked but nothing happened. Further, if I hit a bump, the window would slide down on its own.
In October 2010, BOTH power mirrors stopped working the same day... I suspected a fuse and check... as far as I could tell, it was not a fuse.
At the very end of December 2010, I had moved to Rhode Island and went through registration & required inspection process. The car failed inspection due to a check engine light that was on. The check engine light was reset and codes cleared to see if there was a problem or if it was a one time code... it came back on again.
On February 2, 2011, I took the car to a repair shop that could do further diagnosing of the issue and I was informed that BOTH catalytic converters were shot and needed to be replaced at a cost of $2,000.00 each (according to my research).
On February 4, 2011 I took the car to a dealer to just get rid of it. The dealership offered me $5,000.00 trade... a loss of $13,267.00 in 13 months!!! I was just about at boiling point... It was about to get worse...
The dealership stated that according to the carfax they pulled, this Ford Fusion had been in an accident in July 2007; LONG before I purchased the car. I was now livid. I asked to see the carfax which they provided and in black and white was an accident from July 10, 2007. Further, the car had been sold at auction in March 2009, September 2009 and November 2009. The dealer I purchased it from listed the car for sale on November 30th, 2009.
Additionally, the car was practically idle from March 9, 2009 to when I bought it having been driven on 179 miles in just over 9 months.
I am now left to pick up the pieces from a horrible deal and see what, if any, action I can take against the parties involved.
I know this was supposed to be a short comment... guess that couldn't be done...
I keep reading complaints about negotiating a fair deal from car dealerships. Here’s the beginning of one I just read:
“Someday the car manufacturers are going to realize that people are tired of the games that their dealerships play with buyers. Just look at this article (Edmunds.com 10 Steps to Buying a New Car), loaded with warnings about how you could get taken to the cleaners during virtually every step of the car buying process! What does that tell you about the integrity of the whole class of businesses that sell cars? While the internet appears to be helping buyers, I'm finding that many dealerships view it merely as a toll to gather sales leads which they then want to lure into the same sordid sales process. Price quotes are many times meaningless.”
I see this kind of frustration everywhere but let’s put this into prospective. Yes, decades ago there wasn't the internet and nobody knew what cars should sell for. You had no choice but to "believe" what the dealer told you. Then the US passed The Automobile Information Disclosure Act in 1958 that required every car to have a sticker on the window, clearly outlining, among other things, the manufacturers suggested retail price (MSRP) for every optional item, including destination charges.
Nowadays, where most of the dealerships are corporate owned or owned by individual businesspeople, governed by a myriad of laws, they are run in a normal business environment where customer retention is of paramount importance. The industry is in a crossroad of climbing out of the old ways into the new paradigm of customer satisfaction.
So, why all the negative discourse. Well it’s simply because this is about the only retail environment that negotiates price. Negotiation breeds adversity from the very onset. Where people genuinely need advice on a complicated piece of machinery they are afraid to go into a dealership to seek that advice because they fear the process of negotiation and bad press.
There seems to be confusion about what a dealer pays for a car. Not that it really matters (you can't find what a dealer paid for a refrigerator, or a couch, or a big screen TV, or what Macy’s or Marshalls paid for that designer dress or what it costs to build a 2000 sq. ft. house?). I can tell you simply it’s the dealer invoice (yes the real invoice between the manufacturer and the dealership) less what was held back by the manufacturer and later given to the dealer. This "holdback" is often 2 or 3% of the base MSRP. This is what the dealer pays to have inventory on their lot so you don’t have to special order every car you buy and wait months like many countries around the world.
So, let’s be perfectly honest and I defy anyone to dispute these facts. Using Toyota as an example, we can test some real numbers. If you take the MSRP and subtract the Invoice, then subtract the holdback, here’s what you get in terms of gross profit.
Vehicle Gross Profit Margin
For those non-business types, gross profit margin is the profit in dollars divided by the selling price (ie $2,332 / $30,190 = 7.72%), expressed as a percentage. From the gross profit, a business must pay for all their expenses, including salaries, rent, supplies, utilities etc. to arrive at a Net Profit or Loss.
As I said, let’s put this into prospective. From actual Annual Reports found on the internet, here are the facts compared to a Toyota Dealership at 9.04% gross profit.
Best Buy = 24.5% gross profit margins
Big Lots = 40.6% gross profit margins
Macy’s = 40.7% gross profit margins
Costco = 13% gross profit margins
Walmart = 24.8% gross profit margins
Marshalls/TJ Maxx = 26.2% gross profit margins
Safeway = 28.28% gross profit margins
Most of these companies represent a bargain in your minds; but every single one of them pulls a greater profit from you than a Toyota Dealer would IF you purchased the car at full MSRP.
So, what games are dealers playing with buyers? How are you getting taken to the cleaners during virtually every step of the car buying process? What does that tell you about the integrity of Car Dealers? How are you being lured into the same sordid sales process?
If you don’t like the games (its never the dealership that starts the negotiations), go in and buy the car at the carefully researched, competitive and fairly priced MSRP. You’ll love the experience and the expert guidance you’ll get from the product consultants (salespeople). Plus you will be getting a real bargain compared to ALL the other products you buy every day.
This kind of insightful advice is always helpful, especially when shopping for a car can be such a dreadful experience, which I believe should be blamed on the whole American "vulture culture" business practices that always thrive in the hands of unscrupulous car salesmen. Of course, what else can you expect when the whole car business model is built around preying upon customer's good faith relying on underpaid and overworked sales people to do the dirty job.
This was the actual response I got when I went to the local VW dealer with my Edmund's True Market Value sheet in hand:
"Does Edmunds sell cars?... "If they can sell for that price, then buy from them..."
End of the story...
"If you follow our suggestions the car buying process can be fast and enjoyable. But more importantly, you will have the satisfaction of knowing you got the right car for you at an excellent price."
Some of the worst advice possible for most consumers. Price is the most important aspect of a car purchase for a whopping 6% of car buyers but the average consumer is made to FEEL like they still HAVE to negotiate because it's the way it always was before the internet and they build up very unrealistic expectations, it's not the dealers that make it still feel like the 1960s. A least once a week I get a prospective buyer that immediately wants a $5000 discount on a vehicle like our Sorento, and then gets completely irate when they are told it is not even remotely possible. The profit we make as a dealer from a vehicle like that is $1719. Even adding a current factory rebate of $1250 to this would only give a consumer a discount of $2969 by selling the vehicle at our cost and making $0 to do it, yet somehow they expect yet another $2000 less than this again. Of course people dread buying a car and have a horrible experience, how can a customer even begin to enjoy the process or be excited about taking home a brand new vehicle when everyone tells them how to prepare for how bad it will be.
The internet has made manufacturers far more competative than ever before. The average markup in a 2011/2012 vehicle is between 4-12%. The rough markup of a side of fries and a drink at McDonalds is somewhere around 96% but I can guarantee you never hear "I'll buy the burger if you throw in the fries and drink otherwise I"m going to Burger King".
It's not just the car the customer is purchasing, they are buying the dealership. When a client takes the time to build a relationship with the dealer and their salesperson, the shop generally goes a step further when it is time to help them down the road. Washing their car during service, use of a loaner vehicle, discounts on needed parts, extra services performed at no charge, items that may be just outside of warranty might be written off as goodwill, etc... A buyer who fought for the lowest price or bought 1 town over to save $500 will get no such treatment from their local dealership; $500 might sound like a lot but how much is it actually WORTH over a 3-10 year life of your vehicle.
As a sales professional, when a prospect's first demand on the lot is "absolute lowest price, i'm comparing with 5 other dealers in the region, or X dealer has priced it for this can you do better?" my usual response is to thank them for stopping by and wishing them the best of luck in their search and sending them on their way. Most don't understand why and only a few will ask why: - In the same time it takes to argue pure price for 1 vehicle and make virtually no profit I can sell 3 other vehicles at regular prices to 3 other clients who who will get exceptional service and that I will have built a lasting relationship with, (which is worth more to both of us in the end). Now I don't mind working out a deal for my clients, including some extra accessories or maintenance visits but it's no longer about price at that time, it's about value and relationship. Even if we only have a couple of hundred dollars to work with they are generally very happy when we can come up with something that works for everyone. I enjoy it when we can find accessories to include that work for a client because it means their "deal" became much more personallized and had more to do with actually satisfying their needs and they are much happier with their purchase than if they just fought over a number on a page.
I might not sell a vehicle to every person I meet, but my own clients are always extremely happy to buy from me again and again and they send many of their family and friends to buy from me as well.
- Highest Quality
- Best Service
- Lowest Price
Guess which of the above most clients I meet are willing to sacrifice first?
I have managed a dealership for the last five years of my life. I used to get angy when I read comments like those posted about being taken advantage of or porr customer srevice. I don't anymore. Those types of situation are very much in the minority. As our margins across the board decrease, and the knowledge of our margins increases, the only differentiation that one dealership can make over the next is in customer service!! We are all well aware of this fact. 80% of the training that I do, personally, in my dealership is based around teaching my sales professionals how to interact efficiently and professionally with our customers. We train on ways to save the customers time, on how to alliviate stress in our buying process, and how to make sure that each customers has a fufilling experience no matter what thier goals are for that specific vist. The truth of the matter is that No matter how curtious or professional my staff is, they do not recieve the same in return. Last month alone, 62% of the appointments set by my associates never showed up, or called in to cancel. (Please bear in mind that the majority of these were people who had initially contacted us, either by phone or online.) We had 3 people who agrred to purchase a car and then break that agreement because they beat our price by under $100. (I do not begrudge anyone for trying to save money, but surely a professional's time is worth a little.) There are still dealers who will take advantage of a consumer whenever they can, and I despise them. Asking a fair profit for a good product and service is not taking advantage. There are very few new car dealers who would not openly invite a customer to walk into their showroom and offer to purchase any car for $300-$500 over invoice. We would welcome the oppurtunity to increase our customer base. As professional and a consumer I welcome sites like edmonds. They allow my to gather a large amount of information in a short period of time. They dont always tell the whole story though. If you are in the market for a new or pre-owned vehicle i would recommend a slightly alternative path for investigation. Use your high powered websites to determine the car that you would like to purchase. But then learn about your local dealerships. Go and talk to service customers in that dealership, see how they are treated and how they like the dealership. Call a Sales Manager, or a General Manager. (We all pick up the phone) Have a conversation, not about the exact lowest price, but about the dealership and how it runs, what it offers for its customers. When you've found a dealership and a person that you'd like to do business with the price is easy. Don't let a few hundred dollars stand in the way of doing business with a place or a person that you like! It is never worth it.
Rlee47--I agree but that was saturn's modus operandi and look what happened to them. There are too many buyers who like the thrill of the deal as well. In 70% of the world, everything is negotiated-food, clothing, etc. Dealers won't change until we become better, objective consumers, and are willing to walk away from a deal knowing the salesperson is not going to chase after us. Americans are just too picky and inpatient. :-)
Unfortunately, the way this article recommends buying a car is a fantasy. Using this website, I asked 3 dealers for a price on a specific model and options. One sent a lot of nice emails, but finally never offered a price and just stopped communicating. The other two first tried to steer me to cars on their lot that were not what I wanted. I finally got a price from one dealer, but then they just stopped answering emails when I accepted their price! Unfortunately, most dealers are still using the 1970's sales methods - bring people to the lot to sell them cars they don't really want with a lot of high-profit dealer add-ons. They could be using the internet to make deals and sell cars, but instead they use it for advertising and luring you to the lot. From my experience, these dealers fit the stereotype of smooth talkers who don't care if you come back - they only want to loot your wallet for as much as possible.
No business works off gross profit margins, if they did they would be out of business in a month. Most dealers have internet sales, some are legit others are scams to get you into their showroom.
The last vehicle I purchased was all done through the internet. The fact that I was 500 miles away from the dealer probably helped. First thing you need to do is test drive the vehicle(s) you are interested in but tell them you are only test driving today. You can ask for the internet salesman, get his business card, it should have his e-mail address on it. If it doesn't ask him what it is. Tell him you will contact him. If he wants your information just give him your e-mail address but not your phone number.
Once you narrow down your choice then start checking different dealers inventory. If you have the internet salesmans e-mail address send him an e-mail and tell him what car you are interested in and that you want him to send you their internet price. If he says you need to come down to their store, tell him no you don't and if he won't send you the price then tell him "we are done here".
On my purchace I knew my out the door price, I knew my interest rate. I knew what my monthly payments were. We had pre approval from Ford so we didn't have to fill out a credit app. iWe showed up at the dealer and were out in an hour.
I don't understand what your website means by "complicated pricing system".
The new car has a window sticker, minus rebates you qualify for.
The trade-in has a value.
The difference figure has a break-down of out the door, or payment.
Four square. Period. Not hard for customer to understand. A small amount of negotiation may be required for all parties to be happy.
Thank you very much.
Do you-all make money from car sales or not?
I think so.
You are welcome
I'd like to clear up a few things I saw in the reader's comments to this article I wrote for Edmunds.com.
First of all, one reader wondered what "so-called dealer dic fees" are. This was an unfortunate typo -- it is "doc fees," which stands for documentation fees. This is the amount the dealer charges to draw up the contract. Some states will cap this fee, usually at $100. Other states leave the fee unregulated and sometimes it can be up to $600.
Also, one of the readers said that the dealer leads system didn't work well for him. It's true that some dealers don't respond with an actual price. Instead, they say to "come on down and we'll take care of you." You need to either email or call them back and say, "I've already test driven the car so I'm just looking for a price quote." In most cases, though, if you contact 5-7 dealers, you will get 3-4 firm quotes.
Finally, many readers used this space to discuss how horrible the car buying process is. If you find a good dealership, and do some research, and know how to navigate the system, the process can be enjoyable. It is changing, but slowly. And some dealerships are still using sales practices from the dark ages. Look for the good dealerships and give them your business.
Philip Reed, Senior Consumer Advice Editor, Edmunds.com
Look it is easy to post all the neagitve stuff on buying a car. But lots of times we as consumers do it to ourselves. It is a simple process. Pick the car, and negotiate the best deal you can. If you do your research on how much mark up is in a new car today you know that ity is only around 3-5%!! That's it. No one is taking anyone to the cleaners, it is about getting as much product out as a dealer can, and keeping a relationship with the us the customers.
When it comes to trade values KBB is the worst and most unreliable site on the web. KBB never takes into account what it cost to run it through service, advertise it, certify it, and detail it.
If you can sell it yourself for more than you should. But be ready for people that can't really come up with the money, and ball busting offers.
Bottom line I use the K.I.S.S. rule: Keep it simple stupid. Find a Sales Rep who is informative and you feel you can trust, and a dealer who is going to take care of you for the long haul. All of that is part of a good deal. Again, with the small margin that dealers really have to work with everyone is set up to get the vehicle that they are going to enjoy for many years at a very fair price.
Inside of the finance office holds the greatest salesman of them all. This person will try to sell you various types of warranties and service contracts for a price taken off the top of his or her head. I wish that these contracts had set prices in order to make it more comfortable for the consumers. It will make the dealership look more trustworthy.
This site provides knowledge for car buyers, for me I discovered this site 4 years after the fact, and realized I wasn't taken to the cleaners I walked in all by myself. I paid over $16,000 for a new car valued today at only $7900. That's two cars for the price of one!
That is a tough pill to swallow. This site provides quite a bit of knowledge, I wish I would have discovered this site 4 years ago. We are vulnerable without the Knowledge that the Edmunds site provides.
Got news for ya Edmunds. Your online service doesn't work with my local dealer. Tried the "quote" thing and dealer refused to give any info via e-mail. After "building" the car they still asked what options I was interested in, etc. Totally useless.
I read the comment above about financing departments and felt compelled to share my recent car buying experience.
I am driving the exact car I wanted and have the exact financing that I wanted for the small portion of my car that is financed, but I had to work to get the financing I wanted. It was worth the work.
The dealership I bought from has a fantastic service department, is close to where I live, and I worked with a sales professional who earns by units sold. The deal we put together was perfect.
Now to the point of my comment...
I told the finance department how important it is to me to keep my money local and wanted my small loan to be with our local Credit Union. I was told 3 percentage rates from lenders, all huge corporate and not the Credit Union.
I went into the finance managers office to speak to him about this. After 10 minutes of him telling me how the Credit Union was offering a very high interest rate and the 3 lenders offer lower finance rates.
I went down the street to the Credit Union and was not at all surprised to hear this is very common at this dealership and 2 other dealerships close by as well. These are all high volume dealerships.
I refinanced with the Credit Union when I received my loan docs.
I am now an educated car buying consumer, after learning some lessons that I am hoping someone finds beneficial.
Pre approval from the CU does not seem to matter. Customers have come in to these dealerships pre approved by the CU and walked out with loans like mine!
For all of those belly aching about the price and not knowing ... There is a price the MSRP. Manufactures Suggested Retail Price.. BUT people don't want to pay that want a *deal* ... It's your fault for thinking that the suggested price is too much. What if the government mandated that that was the price that had to be paid since it's one created by the manufacturer?
Stop whining and be happy that you get the chance TO get a better deal. Also the crap about extended warranties not being worth it is BS. I've always recouped my money and then some from them. Cars will do something stupid before the extended period is over. I went through 3 computers and 2 cam sensors under warranty as well as some cv boots.
Grow some or pay the sticker and shut up.
Few more tips:
1. Be aware of incentive or rebate expiration date. A dealer may not have the specific model you want, and you may have to order one and wait.
2. Try calling private small dealers as well. They may able to get you a car from official dealer at better price.
3. Service package price is far more negotiable than car price.
I'm a car salesman. I always find it funny when a customer says they don't want to play "the game". There is no game. Most customers don't belive the manufacturers invoice price. Customers want to list off what they found on a third party sight. Really? Go to 5 third parties sites and fine me the same invoice. If you really want a good deal. Don't come in as a jerk. We are people if we like you we help you. If we don't like you. Then why do you any favors. Do your research. I advise all my customers to. I want to make an educated offer. Not a baseless one. Also understand that I am under no obligation to not make profit off you. PROFIT is not a dirty word. It's what keeps people in business.
1. DO NOT give your mobile phone number! I did this and they keep calling at odd hours even after you tell them you are not interested.
2. Don't use your main email to ask for quotes. I have been unable to get off the dealer's spam email lists even after 3 years of asking to be taken off.
The statement that the lowest internet offer is within a few hundred dollars of the best sales prices is absolutely FALSE!
My last car was purchased about $1500 less than the lowest of 4 bids. The one before that (although at the beginning of the great recession) was about $3000 off of the lowest of 5 internet bids)
I e-mailed the dealers for a bidding war. I do this sequentially - somewhat random order but starting with bringing the highest to the lowest first. They gradually some opted out until I had my best deal. Interestingly some would opt out and rejoin in a couple days at a lower price.
Never share with the dealer where the other bids are from otherwise they will collude to stop your progress. I also used dealers in several city centers. This process takes a couple weeks rather than days, but highly effective.
† Edmunds.com received the highest numerical score in the proprietary J.D. Power 2014 Third-Party Automotive Website Evaluation Study℠. Results based on responses from 3,381 responses, measuring 14 companies and measures third-party automotive website usefulness among new and used vehicle shoppers. Proprietary study results are based on experiences and perceptions of owners surveyed from January 2014. Your experiences may vary. Visit jdpower.com.