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.

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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Comments on “Oh No! Car Dealers Might Have To Deal With Informed Customers! That Must Be Illegal!”

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Gwiz (profile) says:

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.

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:


Anonymous Coward says:

so how long before every industry is doing the same thing? threatening websites for telling the truth, wanting new laws introduced or old ones enhanced ‘because the industry is dying’! anyone really expect the rest of the business world not to jump on this? one or two get away with something, the rest want it as well! what a can of worms that’s been opened!

MAJikMARCer (profile) says:

It’s all a margins game. And in a way it’s not so different than the death of the music stores. Why buy CDs from a dedicated music store when you can order online? Why buy from a dealer and haggle, when you can find your car online and get a better deal?

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.

Cassius (profile) says:

Sigh...the irony

Having bought new Honda’s in late 2007 and late 2010…and having used TrueCar.com as a research tool (recommended by Edmund’s forum members…another great resource for auto buying research), it really miffs me that Honda has the audacity to make statements about below invoice pricing (which I secured w/ 0 hassle on both cars after pitting a Chicago and Indy dealer against each other, negotiation, and was ready to test & sign on the line when I walked in the dealer).

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.

nbcart (profile) says:

Car Dealers Missing the Point

For Honda to complain about an informed consumer is absolutely short sited. Honda gets their fixed base price on every sale and that is not negotiable for the dealer or the customer. The greatest profit a car dealer will make beyond the initial sale is on service. Corporations need to change their business models to be more customer centric or they will fail.

GMacGuffin says:

…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 …

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.)

weneedhelp (profile) says:

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...

Um… isn’t that the point of a salesmen?
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.

SIlverBlade says:

Car dealerships and computer sales people are my two top people that try to trick people.

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 😀

Anonymous Coward says:

Sigh...the irony

Just bought a 2012 Honda. Love it. Did the back and forth, went with the dealer who gave me more for my delicious trade-in. Probably still overpaid a bit but after researching (Edmunds amongst others), I feel good about it.

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!

Anonymous Coward says:


I reckon this fuckng disgusting behavior from corporations and governments has been going on for decades, im not even gonna bother hoping that we’ve magically, somehow, caught red handed, the very first instance of corporate or government abuse…… nah-ah, nope

All these recent happenings are part of a much, much bigger problem

Anonymous Coward says:

Having been in and around the car business while growing up, car “sales” have never been notably profitable other than used cars. Car dealerships have always been about the long tail, i.e. service, parts and finance. But, the system built up over the last 50 years is actually rather intelligent in it’s design unlike say RIAA/MPAA because it is completely legal and works to the consumers benefit most of the time while making a viable business model. (Please continue reading before bursting into flame. :))

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.

Anonymous Coward says:

The car dealership of the future will sell all its cars at or slightly below cost. It will stay in business (barely) by offering free taxi rides in the used cars, but collecting “donations” for them. When every dealership starts doing this, the most innovative car dealerships will also set up a bar and a movie theater, showing free movies every night and making money on the drinks, popcorn and valet parking.

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!

ahow628 (profile) says:

Custom order

So I can go to dell.com right now and custom order a computer with the amount of ram, color, accessories, whatever, exactly as I want it. And I don’t have to go to a store.

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?

btc909 says:

I leased a 2012 Honda, what an F’in nightmare. Lied about the sales price, padded the LoJack, Security, Paint/Fabric into the $325 monthly payment. In a CA lease agreement these prices are not broken down. Totally in the stealerships favor. I b!itch and was able to toss the security & get the LoJack & Paint/Fabric reduced & the sales price were originally agreed upon for $250 per month. Plus the bastards held onto my license plate for a month. Thanks alot Jayson at the Moreno Valley, CA Honda stealership. Manufactures need corporate stores, yes they have parts & service, & several variations of the same vehicle to check out. Bare bones & mid range, and fully loaded. Offer these vehicles to be loaned out for two days, possible buyers can check them out, decide if they like them, then you order the vehicle online as to what you want. Price is set by the manufacture. Vehicle is delivered to the corporate store for final inspection. The Pilot is great, but the non-responsive F U attitude from Honda America, I should have went with the Highlander.

shawn (user link) says:

It's not so bad.

I don’t think this is such a bad thing, if it’s used correctly. I’m ok with people knowing how much they should pay and whatnot, as long as they’re willing to pay a fair profit. How much should I be paying for a gallon of milk, for a candy bar, for a computer? These are all subjective based on profits. If you’re willing to pay a profit for buying a car, I think it’s fair.

Raman Kohli says:

The problem with websites like True car and black book and all that is, they give you a certain price but do not sell you a car at that price.
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”.

Websites for Car dealers (user link) says:

It's hard to know which cars are good anymore...

With all the technology changes and improvements, cars are getting cheaper. As for Honda – I still drive my 2005 Element and it’s really reliable car. The new Civic’s feel kind of cheaply made, especially plastics. So if something was good years ago, it may not be anymore. The point is: Do your homework before heading to dealer.

Michal Zand (user link) says:


For Honda to complain about an informed consumer is absolutely short sited. Honda gets their fixed base price on every sale and that is not negotiable for the dealer or the customer. The greatest profit a car dealer will make beyond the initial sale is on service. Corporations need to change their business models to be more customer centric or they will fail.

you got hustled says:

I love the car business. No college degree, don’t even know how to use a computer… although I make about $850,000 a year. I want to thank all my customers out there for making it possible for a loser like me to flourish. I am the guy that car salesmen call “the hammer” or “the closer” or also referred to by many as “the shark”. I am the well dressed, clean cut, nice shoe and expensive wearing guy behind the sales desk. I am the guy you fear when you walk in to the dealership. You want to hate me as soon as you see me but you don”t. Instead you keep glancing at me and my smile keeps breaking you down. You start telling yourself maybe he”s not such a bad guy after all. Maybe he”s diferent. After wearing down my sales guy for an hour and getting all the information you need, it”s time for you to go home anf make a safe, informed decision of which car you will buy and how much you will pay for it. You think to your self of how you easy it was to tell the salesmen that you cant do anything that day and you will “think about it” or how ” you need to talk to your wife or husband” or how “you need to pick up your kids” or ” honey let”s go get lunch and talk it over”. How clever! As your just about to stand up you see me walking over to you…and thats when your plan goes to the *****. The next 5 minutes belong to me and my craft. This is when you become my bitch. This is when I teach you a lesson. This is when I put you to sleep. This is when all my sales guy are behind you admiring my skill. This is when they are laughing at how silly I am you look. This is when I fill their paychecks. No website, invoice, car add, internet, or YOU will ever beat me. I am they guy you fear, love to hate, hate to love. I am they guy that you in negative equity for the restvof your life, i am the one that made you say “what have i done??? I am “The Closer”

Truth speaker says:

The truth

I think it’s funny how people want no hassle prices but they aren’t willing to pay the price listed because they think it’s a rip off.

Again we come back to “there’s about an 8% maybe 10% markup on this car.”

Customers are the real scam artists and rip off con men. I don’t mind you being educated but you run around playing us against each other determined for us to make no money. Oh and all that “back end” stuff we’re supposedly so bad for selling?

It’s accessories or things you WANT to add. Seriously, I don’t hear you crying about them asking if you want to add fries and a drink to your burger…

I respect customers that pay a profit. The rest of you aren’t customers. You’re mooches.

This “i need the best price, you need to price match this” attitude has caused the decline in our economy single handedly over the years.

That’s right. It’s not the banks. it’s not Obama. It’s not taxes.

It’s the “educated” consumer.

Here’s how it works, and why:

You come to my dealership, you buy a car, pay a profit, I make my commission. Or you come to my business, buy my product, pay a profit, and they can afford to pay me, or give me enough work hours to make my bills.

I take my paycheck, and pay profit at other businesses. That profit pays their employees, who are in turn SOMEONE ELSE’S customers. They pay their bills, buy someone’s products, pay a profit, and those employees get paid. And so forth. Until eventually it comes around.

Now, this is the CURRENT consumer mentality:


Company price matches. This is no biggie on it’s own, but guess what? Due to website publications and bragging about your deal, everyone then wants it. Pretty soon, profits hit such a low amount, the company has to cut hours to keep their bottom line up. No, they aren’t going to cut it from the top, and you cannot change that by refusing to shop there. Or worse, you start trying to be an ehero and “exposing” what people make a profit on and turn everyone into those annoying “super shoppers.”

So the company now cuts hours, labor, etc to makeup for the loss. These employees then do not have money to pay bills or buy things as much, and the businesses they buy from then suffer in turn. And guess what happens next? the same thing happens to their employees, and the businesses they are customers of too.

Pretty soon everyone is trying to “cut costs” by chewing everyone’s profit out, and business slows down. Economies collapse. People cannot pay rent or mortgages, and banks lose their money too. Banks then collapse, and lay off employees.

All because you wanted a deal.

But what’s the FIRST thing the average customer does? “Oh it’s because banks are greedy.” or “Oh I need to make sure no one makes a profit off me” instead of buying the brand, car, or trim level, or food you can afford.

This one is the most laughable: Oh the president needs to bail us out, the economy is his fault!

Customers and buyers can actually fix the economy by paying a profit, and shutting up and letting businesses charge their fair profits. I know you don’t like the idea that “winning” in a deal causes economical problems, and if it’s just you? Sure. But due to things like truecar.com and all these other “consumer education” sites? Notice how with the addition of the Internet and information our economy is going to shit.

My advice? Sit down, if you like the guy and the product, pay what they’re asking, pay for the customer service, and don’t be a dick to “get a deal”.

Fix the economy by cutting all this “i need to shop 6 places and play every business against each other for a deal” crap.

Economical problems are cause by consumers thinking they are educated, thinking they have a right to dicate what profits a company can make, and being manipulative, lying little assholes.

Don’t believe me? Look at any 3rd world country in economic turmoil that is broken to hell and look at their practices. They do the very things listed above that people say are good ways to shop.

But hey don’t believe me! Do some simple math. No profit or bare profit = less money for employees, therefore less money for other businesses, and less money for YOUR own paycheck in the end when YOUR business gets hit.

I also believe businesses need to do what consumers are doing, and say “no we’re not going to cut each other’s throats anymore” and if anyone sues? Tell the judge. “No, fuck you. I’m not paying that fine, I have a right to protect myself from cheating consumers.”

Long story short: If you see something you like, being sold by a nice guy? Quit your whining, pay up and shut up, or leave, go get treated like shit somewhere cheaper, and don’t whine when you get your discount but get treated bad for ripping businesses off.

MagicMike says:

Why do customers submit bogus contact info?

Question for all of the car shoppers out there:

When submitting a lead through TrueCar, why do a large percentage (90% or better) submit a fake name, bogus phone number and an email address that they never check? (Our lead mgmt software tells us if you’ve even opened the email)

In many dealerships, such as the high-line luxury brand I work for, we have stringent rules in place for the sales staff to rigorously follow up with every lead that comes in. Every follow up task is schedule to the “T”. So you spend time getting TrueCar pricing, submit info to the dealer to allow them to contact you, and then we spend HOURS AND HOURS following up with you. Dozens of phone calls to voicemail, dozens of unopened emails, etc… Look, we don’t bite. We just simply want to honor your wishes and help you purchase a car in the easiest, most time-efficient way possible. So why would you go through the trouble of researching a car, submitting contact info, and then never responding to our contacts? Makes no sense. To give you a perspective, in the last 12 months, I have personally received HUNDREDS of TrueCar leads and to this day, have not sold one car to a TrueCar prospect.

Buying a car is very simple. Sometimes people over-complicate it to the point of sheer frustration for both parties. Very simple: visit a dealership that sells the product you want, find a salesperson that you get along with, get a fair price, buy the car and go home happy. Thanks for your feedback!

VictorG (user link) says:

It’s just the way of the future that buyers will be informed, with the internet there’s almost no limit to the amount of research that one can do prior to purchasing something, especially a bit-ticket item like a car. I’m sure that manufactures and dealerships were upset in the 1920s when the Kelley Blue Book began because they couldn’t fib about prices as well. It’s the same thing, just a more advanced technology.

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