I hate car dealers....
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Comparing buying cars and buying soap at Walmart is not a fair comparison.
Car dealers advertise "come in and make your best deal". Walmart says "we have the lowest price". Very different marketing.
The real problem as I see it is that "dealing" on cars and "cash back incentives" from the manufacturers is just crazy, and should never have started in the first place. The only dealing should be on the value of the trade in vehicle. But now that they have been done, how do they stop it?
OK, if you take out dealing on the price of a car, then how do you deal with an overstock of inventory. Retail stores run sales to move that stock and hope that you will buy something else while you are there, which will help to offset the sale price. That is not going to happen with a $20K-$40K item that is only purchased once every 3-5 years.
I am also insulted by the sales gimmicks. "Invoice price" is a made up number by an individual dealership. It incorporates the actual cost of the car from the manufacturer, the overhead of running the dealership, and some profit. To say that a car is sold under invoice is a joke. No one can sell their product at less than it costs and remain in business for very long. So why advertise your product that way?
Personally, I prefer to purchase large items locally, from a person I know, so I have some leverage when service is needed. I expect to be treated a bit better for service if I purchased my product there. Yes I may pay a bit more up front, but I think it makes sense to support the local economy, because that is who supports my business. Do I purchase over the internet? Yes, but only if it is an item that is not readily available locally.
And about the salesman - if you are unhappy with that person, ask for another, or complain to the sales manager. You have the final say so in any transaction, because you are the person that is spending the money. You can always vote with your feet.
I guess the question that is being asked is, how much profit is fair? The real question is, how much NET profit is reasonable. Gross profit of $5K per car sounds like a lot, but if the net is only $150.00 after salaries, utiities, insurance, taxes, benefits, interest, etc etc etc, then is it worth it to make the sale? The average person thinks that most businesses make about 30% net profit. Actually, the number is closer to 10% Grocery stores work on 1.5%.
I wish it had a simple answer. It just does not work out that way. Obviously, I own my own business, and have done so for the last 24 years, which may bias my opinion here.
Sorry this got so long...........
Car dealers advertise "come in and make your best deal". Walmart says "we have the lowest price". Very different marketing.
The real problem as I see it is that "dealing" on cars and "cash back incentives" from the manufacturers is just crazy, and should never have started in the first place. The only dealing should be on the value of the trade in vehicle. But now that they have been done, how do they stop it?
OK, if you take out dealing on the price of a car, then how do you deal with an overstock of inventory. Retail stores run sales to move that stock and hope that you will buy something else while you are there, which will help to offset the sale price. That is not going to happen with a $20K-$40K item that is only purchased once every 3-5 years.
I am also insulted by the sales gimmicks. "Invoice price" is a made up number by an individual dealership. It incorporates the actual cost of the car from the manufacturer, the overhead of running the dealership, and some profit. To say that a car is sold under invoice is a joke. No one can sell their product at less than it costs and remain in business for very long. So why advertise your product that way?
Personally, I prefer to purchase large items locally, from a person I know, so I have some leverage when service is needed. I expect to be treated a bit better for service if I purchased my product there. Yes I may pay a bit more up front, but I think it makes sense to support the local economy, because that is who supports my business. Do I purchase over the internet? Yes, but only if it is an item that is not readily available locally.
And about the salesman - if you are unhappy with that person, ask for another, or complain to the sales manager. You have the final say so in any transaction, because you are the person that is spending the money. You can always vote with your feet.
I guess the question that is being asked is, how much profit is fair? The real question is, how much NET profit is reasonable. Gross profit of $5K per car sounds like a lot, but if the net is only $150.00 after salaries, utiities, insurance, taxes, benefits, interest, etc etc etc, then is it worth it to make the sale? The average person thinks that most businesses make about 30% net profit. Actually, the number is closer to 10% Grocery stores work on 1.5%.
I wish it had a simple answer. It just does not work out that way. Obviously, I own my own business, and have done so for the last 24 years, which may bias my opinion here.
Sorry this got so long...........
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I believe it is the responsibility of the dealership to make a profit. As such, I'm not at all concerned by getting the best possible deal I can. Put another way, i worry about the dealer just about as much as he worries about me.
I got a very good price on my Crossfire, but therein lies an instructive story. I stopped by the dealer on Sunday to check out the car. I liked what I saw and after surprisig little negotiation, got the salesman to agree on a pricec told him I'd return with the wife the next day. Which I did, and had him confirmonce again he price. I was looking at a red one, when he mentioned that the had a black in the back. After about 15 minutes of staring at both, I opted for the black. I again confirmed the price, after which he delivered me to the FI guy. A great guy, talkative as all hell; I found out about his wife, his kidsone budding athelete in particularand his interest in old muscle cars. We were bonding like you couldn't believe.
I was paying cash, so the paperwork was relatively light. Numerous boes had to be initialled, etc. I really only glanced at the contract since I knew the price. Wife wrote the check, and we left with handshakes all around.
(I'm sure you see where this is going)
A day later my wife is reviewing the contract; "uh, dearc weren't we supposed to get the car for $xx,xxx?" A more thorough review showed that the actual price I paid was about $1K more than I agreed upon. I was very angry, probably as much so with myself as with the dealer. I called and spoke with one of the owners, explaining the situation: he was EXTREMELY solicitious! The result was I went back in a reinitiated the contract to the agreed-upon price. I was promised a $921 check within 3 weeks. I got it 4 week later.
Just a simple mistake by the FI guy. Can happen to anyone. Right.
I got a very good price on my Crossfire, but therein lies an instructive story. I stopped by the dealer on Sunday to check out the car. I liked what I saw and after surprisig little negotiation, got the salesman to agree on a pricec told him I'd return with the wife the next day. Which I did, and had him confirmonce again he price. I was looking at a red one, when he mentioned that the had a black in the back. After about 15 minutes of staring at both, I opted for the black. I again confirmed the price, after which he delivered me to the FI guy. A great guy, talkative as all hell; I found out about his wife, his kidsone budding athelete in particularand his interest in old muscle cars. We were bonding like you couldn't believe.
I was paying cash, so the paperwork was relatively light. Numerous boes had to be initialled, etc. I really only glanced at the contract since I knew the price. Wife wrote the check, and we left with handshakes all around.
(I'm sure you see where this is going)
A day later my wife is reviewing the contract; "uh, dearc weren't we supposed to get the car for $xx,xxx?" A more thorough review showed that the actual price I paid was about $1K more than I agreed upon. I was very angry, probably as much so with myself as with the dealer. I called and spoke with one of the owners, explaining the situation: he was EXTREMELY solicitious! The result was I went back in a reinitiated the contract to the agreed-upon price. I was promised a $921 check within 3 weeks. I got it 4 week later.
Just a simple mistake by the FI guy. Can happen to anyone. Right.
Ok - so from what I'm hearing their are some differences between US and UK dealers. In the UK we have suggested manufacturers basic list price along with the governments tax & to top it off we pay to register the car in this country for the first time (big con) & road fund license for 6 months or one year.
It's unavoidable in any aspect of the sales arena, you have to have a profit margin & to retain a fair percentage it's only reasonable, as much as it greaves you jsisbella its very unlikely to ever change.
It's also fair to say that if you have a great dealer whose sales & aftersales is 2nd to none but is making no money will not be there long term, to the point that you've even said that you don't mind paying a little extra to ensure smooth ownership in the event of any problems - I agreein supporting the local agent.
Apart from Asda(walmart) - we also have other shops like Tesco, Sainsburys & not forgetting Marks & Spencers, all very good retailers in the UK, the first 2 slug it out on a daily basis but M & S don't profess to be the cheapest - but do advertise quality.
Perhaps thats the way forward.
What sort of business do you have ??
It's unavoidable in any aspect of the sales arena, you have to have a profit margin & to retain a fair percentage it's only reasonable, as much as it greaves you jsisbella its very unlikely to ever change.
It's also fair to say that if you have a great dealer whose sales & aftersales is 2nd to none but is making no money will not be there long term, to the point that you've even said that you don't mind paying a little extra to ensure smooth ownership in the event of any problems - I agreein supporting the local agent.
Apart from Asda(walmart) - we also have other shops like Tesco, Sainsburys & not forgetting Marks & Spencers, all very good retailers in the UK, the first 2 slug it out on a daily basis but M & S don't profess to be the cheapest - but do advertise quality.
Perhaps thats the way forward.
What sort of business do you have ??
I agree! Dont't knock car sales people. There are good one and bad ones, like everything else. Most of the car sales people are great. Just remember, if you want a good deal, just do your homework and shop around..You will have to earn your discount and not expect someone to giver you a steal. Anyone can get a good deal...you got to work for it!.....or pay stick and shut up!
Re: Poor uneducated buyers
Originally Posted by jasontodt
Good Job pkms18, this guy really doesn't have a clue. There is even a guy on the Crossfire for sale forum saying he can buy 2 Crossfires for 45000. People just don't know what they are talking about for the most part. A brand new automatic Crossfire has around $2000 worth of markup built in it. Give or take a few for advertising differences. And yes there is the almight holdback from the manufacturer. A whole 3% WOw, on a $20000 dollar vehicle that's a wopping $600. That's nothinig considering the overhead and expense when it comes to running a dealership. Let's see this guy try to get the internet to service his vehicle when it's broke down. Maybe his mouse on his computer can change the oil for him. Or, maybe his hard drive can put a new serpentine belt on for him.
I know there are honest salesman out there. I've met several. Unfortunately, given my experience, they are a minority. If I went to a dealer and was not fed a line of crap or played like a pigeon with stereotypical tactics, I'd probably be impressed and pay a good deal more for sincerity, trust, and integrity of the dealer...
I don't know what I am talking about? There's no 3% manufacturer's holdback on the Crossfire like you mention. It's a goose egg, zero. Do your homework.
"That's nothing considering the overhead and expense when it comes to running a dealership"... You must have missed my comment about the 5 million dollar building... Overhead is what a dealer makes it. It can be as bloated or lean as they choose. I'll buy from a dealer that constantly tries to get his customers the best deal by reducing his own costs. I am the Lead Engineer for a $60 million dollar product line. I know something of overhead and what people will pay for it...
"Let's see this guy try to get the internet to service his vehicle when it's broke down"... You must have missed my comment about the poor service and constant battling I need to do to get my dealer(s) to do what was promised at the time of sale. I'd sure like -not- to have to make a scene to get some warranty honored on a near new car. I have paint peeling from around my rear spoiler right now. They said it was normal for this car. They are all like that. Translation: It's not bad now, but let's wait until your paint warranty runs out before you have it fixed. I will win on this one, but It'll take me and the general manager and a loud scene to get it fixed.
"Koltzy - One last thing to ask you. When you go into Walmart to do your food shopping, do you ask for a discount ?"... Gordon looks like you missed my comment about Saturn. If all dealers gave the same low price, it would -be- WalMart and I would be fine paying what everyone else pays.
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I think most car manufacturers are starting to move towards the same goals and at the same time, trying to figure out how they can cut out dealers totally.
It's all about margins and right now, dealers are a necessary evil for manufacturers but with growing acceptance of Internet car buying, we're already seeing small dealerships either suffering or going away.
I remember speaking to a Chrysler executive in Canada a few months back and he said that the plan is to be able to sell Chryslers like they do MB, MSRP most of the time with minimal to no incentives.
You don't see many small MB dealerships, if any, they are all huge with large overheads when it comes to their showrooms, facilities and staffing.
Not many 40k models yet, but you must admit, with the 2005 line-up, particularly the 300C, it is one heck of a car for the money if they deliver.
It's all about margins and right now, dealers are a necessary evil for manufacturers but with growing acceptance of Internet car buying, we're already seeing small dealerships either suffering or going away.
I remember speaking to a Chrysler executive in Canada a few months back and he said that the plan is to be able to sell Chryslers like they do MB, MSRP most of the time with minimal to no incentives.
You don't see many small MB dealerships, if any, they are all huge with large overheads when it comes to their showrooms, facilities and staffing.
Not many 40k models yet, but you must admit, with the 2005 line-up, particularly the 300C, it is one heck of a car for the money if they deliver.
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Re: Poor uneducated buyers
Originally Posted by Koltzy
If all dealers gave the same low price, it would -be- WalMart and I would be fine paying what everyone else pays.
So the question is would you be fine paying what everyone else pays if the price is the same. And when the price is the same, "low" doesn't really have much of a meaning anymore since there is no comparison and low is a comparative term.
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Originally Posted by mouserider
Not many 40k models yet, but you must admit, with the 2005 line-up, particularly the 300C, it is one heck of a car for the money if they deliver.
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As far as cutting out dealerships goes...that is not going to happen. Think of all the expense saved by the corporation by keeping the dealers independent. I'm sure a few of you heard about Ford's flop a couple of years ago, when they tried to have a few corporate owned dealerships. They just didn't work. The one thing I do believe corporate should do, is have a minimum advertised price. This is the same thing they do for golf clubs, bbq's, televisions, etc...if you look, you will never see it advertised for less than a certain amount. It is then up to the retailer to sell the product for whatever they want. ABC Warehouse is a perfect example of this... But we will see...as long as dealerships keep selling cars, corporate will be happy.
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Well, technically minimum advertised price is something that is on-the-border legal. There are several rules set by the FTC and one of them is anti-price fixing to ensure that free-market forces will be able to prevail.
The way most manufacturers get away with it is that resellers are "strongly" encouraged not to advertise lower, but with the Internet, vendors get away with it anyway. B&H Photo for example in NYC, they don't advertise the price, but put a button where if you click on it, they will email you the price.
You're right about manufacturer-owned dealerships, those aren't really going to work either, and they also might get into anti-trust laws if they try too hard to force indys out in favor of their own lots.
What might evolve is the concept of Internet car sales, where all you ultimately need is a place to pick up the car and this place is the same place that preps the car and does your after-sales maintenance.
The way most manufacturers get away with it is that resellers are "strongly" encouraged not to advertise lower, but with the Internet, vendors get away with it anyway. B&H Photo for example in NYC, they don't advertise the price, but put a button where if you click on it, they will email you the price.
You're right about manufacturer-owned dealerships, those aren't really going to work either, and they also might get into anti-trust laws if they try too hard to force indys out in favor of their own lots.
What might evolve is the concept of Internet car sales, where all you ultimately need is a place to pick up the car and this place is the same place that preps the car and does your after-sales maintenance.
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The problem with that idea (internet sales - local delivery) is that how do you do a test drive first?
That is the problem the car dealers are going to have to face, and the one I have already had to face in my computer business. Customers come in, test the equipment, get a list of part numbers they need, using my time which they feel is free, and then go buy it off the net directly from the manufacturer, or a net division of one of my distributors at my cost.
I watched gross profit on computers go from 40% back in 1980 to 2% today. Makes it not worth selling hardware, and that is exactly what we have done. We are now a software company.
In actuality, it is not better for the customer. The money they save up front is lost in after sale support costs. When I did complete systems, I was responsible for the complete system. Now the customer has the problem of dealing with hardware and software support. And if the hardware support is an 800 number and mail it in for swap out, all I can tell them is to call me when they have the hardware functional. I can not tell you how many times I am asked to do a complete system by second time buyers....
If I wrote badly and my thoughts were not clear about profit in my previous post, let me set the record straight. Any business has to make a profit, enough to be worth all the grief of being in business, to stay around. The point I was trying to make was that it just seems silly to advertise that you will sell "below invoice", and expect anyone to believe it. It just can't be done.
That is the problem the car dealers are going to have to face, and the one I have already had to face in my computer business. Customers come in, test the equipment, get a list of part numbers they need, using my time which they feel is free, and then go buy it off the net directly from the manufacturer, or a net division of one of my distributors at my cost.
I watched gross profit on computers go from 40% back in 1980 to 2% today. Makes it not worth selling hardware, and that is exactly what we have done. We are now a software company.
In actuality, it is not better for the customer. The money they save up front is lost in after sale support costs. When I did complete systems, I was responsible for the complete system. Now the customer has the problem of dealing with hardware and software support. And if the hardware support is an 800 number and mail it in for swap out, all I can tell them is to call me when they have the hardware functional. I can not tell you how many times I am asked to do a complete system by second time buyers....
If I wrote badly and my thoughts were not clear about profit in my previous post, let me set the record straight. Any business has to make a profit, enough to be worth all the grief of being in business, to stay around. The point I was trying to make was that it just seems silly to advertise that you will sell "below invoice", and expect anyone to believe it. It just can't be done.
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All very good and valid points jsisabella.
The test drive element will probably keep the need for dealerships around, at least until the habit of test drives go away like with many other products like you've pointed out for computer equipment.
I know that Chrysler has tried using car rental companies as outlets for their customers to try out cars a while back when they owned a stake in Dollar.
I frankly think that if manufacturers started striking deals with car rental places, I'd much rather "test drive" a car for a weekend or a week rather than a 15 min cruise around the area of the dealership. GM's weekend test drive last year was probably the closest recent attempt.
The relationship I have with my dealer is more one of service and support rather than sales anyway, I know what I want when I buy a car and I don't need any selling to convince me.
The test drive element will probably keep the need for dealerships around, at least until the habit of test drives go away like with many other products like you've pointed out for computer equipment.
I know that Chrysler has tried using car rental companies as outlets for their customers to try out cars a while back when they owned a stake in Dollar.
I frankly think that if manufacturers started striking deals with car rental places, I'd much rather "test drive" a car for a weekend or a week rather than a 15 min cruise around the area of the dealership. GM's weekend test drive last year was probably the closest recent attempt.
The relationship I have with my dealer is more one of service and support rather than sales anyway, I know what I want when I buy a car and I don't need any selling to convince me.
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I've a vice that's cost me a tidy bundle over the course of my life: Buying vehicles with motors in them. The bulk of these50+have been motorcycles, but car and truck dealers have also seen me on a regular basis. I write this to give background to this flame-worthy statement:
If you approach the buying of a vehicle in anything but an adversarial mannerc it's going to cost you money.
This is not to say that you go in with attitude. However, if you think for one moment that the dealer has your best interests at heartcit's going to cost you money.
Dealership ploys and scams are legendary, andcontrary to what has been saidI believe the majority of the dealers employ a slight-of-hand practice. Better Business Bureaus and numerous other watchdog outfits have documented this egregious behaviour for years.
My X-Fire buying experience was as distasteful as they come. However, in September I bought my wife a Honda Element at Stevens Creek Honda in Santa Clara. This was a pleasant experience. They are professional, straightforward and very rare.
If you approach the buying of a vehicle in anything but an adversarial mannerc it's going to cost you money.
This is not to say that you go in with attitude. However, if you think for one moment that the dealer has your best interests at heartcit's going to cost you money.
Dealership ploys and scams are legendary, andcontrary to what has been saidI believe the majority of the dealers employ a slight-of-hand practice. Better Business Bureaus and numerous other watchdog outfits have documented this egregious behaviour for years.
My X-Fire buying experience was as distasteful as they come. However, in September I bought my wife a Honda Element at Stevens Creek Honda in Santa Clara. This was a pleasant experience. They are professional, straightforward and very rare.
Where exactly is the line drawn between getting a fair price and getting ripped off? Also, what exactly is a "good price" to pay for something with no incentives? I'm just curious to see what people believe would be an adequate profit margin for dealerships, in percentages. Just trying to keep the conversation going. As I'm sure everyone in this forum will agree...we are all in business to do one thing...and I'm sure you can guess what that is. As far as internet sales...unless something has changed it was illegal in Michigan (not sure about the rest of the US), and DC really pulled back on the amount they were spending on it. Although, you still can get interent quotes.
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Despite the "suggested" in MSRP, I view that price as the amount I will pay for a vehicle. If there is insufficient margin for the dealer in the MSRP then the issue is between them and the manufacturerc I am not going to subsidize a dealer's inefficiencies. If I can get a vehicle for less than MSRP, that's great, but not expected. I want everyone to make a fair profit.
My position re dealers may sound harsh, but it result from seeing continual efforts on their parts to scam buyers.
The local DC outlet tacked a $10,000 spiff on the X-Fire when it first came out. This is idiocy and nothing more than profiteeringc racketeering is more like it. It demonstrates a huge disrespect for the buyer which, in turn, has caused me to suspect every move they make. They are in no way unique,unfortunately.
Despite the "suggested" in MSRP, I view that price as the amount I will pay for a vehicle. If there is insufficient margin for the dealer in the MSRP then the issue is between them and the manufacturerc I am not going to subsidize a dealer's inefficiencies. If I can get a vehicle for less than MSRP, that's great, but not expected. I want everyone to make a fair profit.
My position re dealers may sound harsh, but it result from seeing continual efforts on their parts to scam buyers.
The local DC outlet tacked a $10,000 spiff on the X-Fire when it first came out. This is idiocy and nothing more than profiteeringc racketeering is more like it. It demonstrates a huge disrespect for the buyer which, in turn, has caused me to suspect every move they make. They are in no way unique,unfortunately.