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Oh No! Car Dealers Might Have To Deal With Informed Customers! That Must Be Illegal!
from the felony-interference-of-a-business-model dept
A few folks sent over this recent NY Times article about how the traditional auto sales world was apparently up in arms about a company called TrueCar that seeks to make the process of buying cars easier by providing more info to buyers about what cars are actually selling for, what the dealers' true prices are, and also offering guaranteed "haggle free" prices from certain dealers. To be honest, this really doesn't sound all that different from a few other services online. The last two times I've bought cars, I've been able to get good deals using online services like this and just emailing directly to dealers (and for anyone buying a car, I can't recommend CarBuyingTips.com enough, even with its 90's era web design -- that site has saved me a ton).
However, what's really incredible is how the industry has reacted to this site -- basically freaking out and whining about how consumers actually being informed might put them all out of business. The excuses are typical of what you'll find with an industry that works on a collusion or gatekeeper system when it's finally faced with real competition. They start talking about how real competition is evil and how it will lead to a worse situation with more scams. In fact, TrueCar got hit with claims that what it was doing, in providing consumers with more info, was illegal. They've even had to change their practices in some states -- which really only goes to show just how much car dealers have influenced various state laws in their favor to protect against true competition and an informed consumer.
However, what's really incredible is how the industry has reacted to this site -- basically freaking out and whining about how consumers actually being informed might put them all out of business. The excuses are typical of what you'll find with an industry that works on a collusion or gatekeeper system when it's finally faced with real competition. They start talking about how real competition is evil and how it will lead to a worse situation with more scams. In fact, TrueCar got hit with claims that what it was doing, in providing consumers with more info, was illegal. They've even had to change their practices in some states -- which really only goes to show just how much car dealers have influenced various state laws in their favor to protect against true competition and an informed consumer.
Others, including Honda, have argued that TrueCar could open the door to unscrupulous dealers trying to sell a more expensive car or more options once they get the customers in the door — which Honda said reflected poorly on the brand. Honda also threatened to cut off marketing dollars to dealers who promoted its cars on the site below the invoice price, a price that is supposed to represent something close to the dealer’s cost (though dealers usually make more money on other manufacturer incentives and programs).Think of just how convoluted and insane this argument is. Honda doesn't want informed consumers because (wait for it...) informed consumers might lead dealers to try to trick buyers. Seriously. Okay, time to cross Honda off any future potential car list.
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Great NY Times
Great Job Guys.
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Kind of like the car dealership atmosphere in and around the Motor City in the 80's and earlier. None of them were open weekends or evenings and if a small independent dealership tried opening on weekends they faced vandalism and thinly veiled threats of violence. The dealers claimed the misdeeds were from their employees who didn't want to work weekends, but I never bought that line, even back then.
Here's a LA Times article from 1985 about it:
http://articles.latimes.com/1985-01-20/business/fi-10631_1_car-dealers
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But just like music, there will be a few dealers here and there who provide exceptional service, selection, and prices that will keep going despite this.
My guess, the biggest whiners are the dealers/auto makers that are ripping customers off the most.
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Sigh...the irony
Basically, Honda is saying to myself and other potential customers...you can only get our best rate by coming in person, playing this back and forth -- this is the best I can do game, and walking out of the dealer to only hear your phone ringing a couple days (if not sooner) later w/ them saying they can do a little bit better.
Honda showing some 'true' colors here.
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Re: Great NY Times
dealers: don't hate the player, hate the game; you brought this on yourselves
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Car Dealers Missing the Point
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It's called advertising
So, are newspaper adverts next?
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because that is the actual job description of the Finance Manager who writes up the loan. Often his/her entire income is commissions off the "back end" items they try to add on to the total (read: TruCoat from Fargo).
Like Honda doesn't know that ... (I imagine they have a fee for disingenuousness removal too.)
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Silly
Hmmm where have we heard that before?
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Re:
5 Reasons The Future Will Be Ruled By B.S.
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Others, including Honda, have argued that TrueCar could open the door to unscrupulous dealers trying to sell a more expensive car or more options once they get the customers in the door...
Isnt that the way it is already?
Buyer: Gee I want a (insert brand/model here) with cloth interior and manual windows.
Sales: Well we have THIS (insert brand/model here) with leather and all powers for a few thousand more.
Nothing new here Honda please move along.
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Example 1: Computer sales
Customer: I want a computer, I only really surf the web, do e-mails, and microsoft office
Sales Guy: Oh, you definitely need this super-powered quad core computer with a blu-ray burner, 20 gigs of ram and 5 terabytes of hard drive space :D
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Interesting
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Re: Sigh...the irony
I keep cars for at least 10 years and pay cash on the barrelhead. My brother's a mechanic whose lot in life is to keep his family's cars running, heh.
Whining about informed customers is truly stupid in this day and age. I'd love to see them cite the law wherein such consumer education is illegal. Laugh riot that would be!
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Re: 5 Reasons The Future Will Be Ruled By B.S.
Choice quotes from first page:
But the second page tries to suggest that all industries will go the way of content ones. Which they haven’t, and show no signs of doing.
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Re:
All these recent happenings are part of a much, much bigger problem
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Re: Re: Great NY Times
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New car sales have always been a barely break even situation for the most part. (Mass market cars, not Mercedes/Lexus/BMW etc.) Some of the lines salesman give you have a basis in reality. The "cost" of a car is not what the invoice says, it is that plus the cost of the people who peeled the anti-chip plastic off the fenders/hood, the plastic off the interior, the initial wash, the test drive to make sure there are no rattles/etc and of course the rent on the piece of dirt it occupies until sold. Additionally, most dealerships don't actually "own" the cars they sell, they only actually "rent" them, so they are paying interest on the 20k car sitting on the lot till it sells.
Given that, you are highly unlikely to ever buy a car at dealer cost. I don't care what numbers you had when you went in, they either break even, make a minimal profit or don't sell the car for the most part. A dealership simply can not stay in business operating at a loss.
So, the long tail. How dealerships generally pay the rent is via the finance and service departments. (Mostly the service department.) Finance is a trivial item but for a dealership it is instant profit they couldn't get from the price of the car directly, 0.25% higher interest rate and they make their $500 cost to have kept the car on the lot plus about $500 profit. Dealerships "sell" the contract to the banks and are immediately paid out for the entire contract so subtract car cost, maintenance cost and the rest is profit as if you paid over invoice. This is still not even close to enough to keep the lights at the dealership going.
So, how the long tail works. The car is a razor handle, service is the razor blade. Almost half the cost of a new car is pure profit for the manufacturers but that profit goes away very quickly due to warranty work and such. This is where the symbiosis of dealership and manufacturer work in the consumers benefit though. The manufactures want to keep all that profit if at all possible but they have to put 5/100 warranties on the cars to compete, and still keep the price of the car competitive. So, they shave it down based on relative failure rates and build in a "comfortable" profit on average cost of the warranties.
The dealership on the other hand is hoping the car breaks because warranty work is their profit center. The dealership charges all work and parts back to the manufacturer at a significant markup. (Well the work portion, the parts are at manufacturer defined costs.) In order to make this work, the salesman can't be TOO huge of a flaming asshole such that you won't come back even for the warranty work.
An average car over a year needs about $1000 worth of time/effort to correct little defects. So, a dealership breaking even on sales at 200 cars a month is looking to make 200x12x1000=2.4 million a year on "warranty" work alone. Consider 3/4ths of that easily goes to paychecks and regulation compliance costs and dealerships are not making all that much money individually, usually they are less profitable than your local grocery store.
So, I seriously doubt that the individual dealerships have any real problem with any higher education of the buyers and I imagine any problems are coming from the manufactures. Old timer general managers in single dealership towns might be getting pissy but I kinda doubt a dealership in say San Diego, Houston or Orlando cares much because in high competition areas they pretty much always have to give you the base cost and just hope you come back for service anyway. It generally works out, all cars need work and even if you buy at the competitor you might service with your closer dealer since it doesn't cost you anything for the warranty work.
Just my $0.02 (plus a couple bucks) description of the car industry. :) Not defending them on this, just explaining that they are not the evil empire many folks may believe, given they grew up actually by working "WITH" consumers and not against them.
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Re: Re: Re: Great NY Times
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Rear end 'em
I remember buying a car using Edmunds, before the car companies got their hooks into it. I was able to haggle, knowledgably, which is the way it should be. Good to hear there are more sites like the old Edmunds. Sell outs...
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Thanks dealers!
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The most profitable businesses of the year 2020 will be those whose actual profits come from an activity at least six times removed from the actual thing that the businesses ostensibly do.
Yay for progress!
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Scratch Honda?
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Custom order
How the hell does that not exist for cars? I can design a car exactly as I want it on their site, but then it says, something like, "Here are cars similar to that in your area." The cars they list are different colors, models, and packages from what I designed. WTF?
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Re: Custom order
I think state laws prohibit manufacturers from selling directly to customers. Regulatory capture, presumably. Some sites will send your specifications to a dealer, but that's about as close as you can get.
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Quit your crying!
Woe is me. The car dealer is making a profit...barely 10% in some cases.
I don't hear any of you complaining about the 400% mark-up on sodas at McDonalds!!
Get real people.
What's the internet going to do for you when your car needs a repair??
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Re: Quit your crying!
Because McDonald's isn't trying to make it illegal to publish information about soda.
What's the internet going to do for you when your car needs a repair??
Recommend a good mechanic.
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Truecar
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It's not so bad.
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Tough choices for the consumer...
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Car Leasing Educates You
http://monthlycarlease.com/2012/05/car-lease-deals-may-2012/
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If a dealer wants to make a certain amount of profit, what is my problem as a buyer. Do you folk ever before buying at "Lazy boy" or Walmart, go to websites and try to find out that "what is the real price"?
I literally kick out customer who try to come up with BS.
We as car sales people are very aware of the fact that "Buyers are Liars".
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Oh No! Car Dealers Might Have To Deal With Informed Customers! That Must Be Illegal!
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blog comment
waxing ny and waxing nyc,body waxing nyc
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Rubbish!
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It's hard to know which cars are good anymore...
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