Seattle Honda/Toyota Dealer Decides To Try To Sell Cars Like Tesla Does, Rather Than Trying To Shut Tesla Down

from the that's-one-step dept

Over the past few years, we've highlighted how frightened autodealers have absolutely freaked out about the way in which Tesla sells its cars. If you don't know, rather than having a bunch of independent dealers, Tesla sells direct, where you mainly buy via its website. Rather than dealerships, Tesla has showrooms where you can go check out the cars. The pricing is clear and obvious and it's much lower pressure. Dealers have tried a variety of tricks to actually outlaw Teslas from being sold in their states, even arguing that Tesla's website is illegal. Thankfully, most states aren't falling for this, and even the FTC has supported the Tesla way of selling cars.

Apparently, some dealers are finally realizing that if you can't beat 'em by trying to make them disappear, perhaps you ought to compete. Via Jalopnik, we learn of a dealer in Seattle (who owns both a Honda and a Toyota dealership) who has decided to adopt what he thinks is the "Tesla model" for selling cars -- single price, no haggling, no separate finance department whose there to screw you over on the deal terms, and transparency about the loan rates.
What's more, the dealerships have no F&I managers. Salespeople handle the loans. Learning to do that isn't easy, so Miller and Mohammadi have hired contractors to do some paperwork and walk the salespeople through the process.

Prices are fixed, and so are interest rates. Customers who need financing can refer to a chart on the wall, tracing their finger from their credit score to the amount of the loan.
Of course, the story also notes that this shift hasn't been easy. Most of the existing sales staff left as they couldn't deal with this setup, and sales at the dealership dropped significantly -- though they've since rebounded. And, of course, there have been other dealers in the past that have adopted "one price/no haggling" setups, but studies have shown that many customers don't trust such deals, assuming that the "one price" is likely to be higher than they could get by negotiating, even if they don't like haggling.

While I think it's a smart move to try to compete, rather than ban, innovative competitors like Tesla, it feels a little bit like a cargo cult copying situation, where the focus is on copying the obvious superficial aspects of what Tesla is doing, but not the deeper hidden reasons. In Tesla's case, it's a combination of factors that are selling those cars, including the cool factor, the environmental factor and the overall prestige of the car. Hondas and Toyotas, while recognized as reliable, don't have all of those factors. Plus, since the Tesla sales model is for all Teslas, there is no other option, so no one feels that the single price offering is a rip off. That's not the case when a single dealer does something.

So I think it's good that this dealer is looking for a better model, but it's going to involve a lot of experiments and innovating, beyond just copying some of the superficial aspects of what Tesla does.

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  • identicon
    Anonymous Anonymous Coward, 9 Apr 2015 @ 9:51pm

    Price

    Seems like it would be fairly easy to go to edmunds.com and go through their pricing evaluation and then compare that with the prices listed, and then make a reasonable decision.

    It also seems like knowing how much you need to borrow, and then visiting a couple of lending institutions, like your bank, would be a better way of financing.

    Until this shakes out, there will be a lot of skepticism.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 Apr 2015 @ 11:56pm

    *who's

    reply to this | link to this | view in chronology ]

  • identicon
    Stephen, 10 Apr 2015 @ 1:48am

    Rose Tinting the Tesla Way

    Tesla's way is certainly innovative, but there is also a downside as another site explains:

    "Someone walking into the new Tesla showroom on Route 17 can learn anything they want about the electric cars. They can test-drive the Model S, they can decide what color they want, whether they want dark wheels, tan leather, carbon fiber accents or an upgraded stereo."
    http://www.nj.com/bergen/index.ssf/2014/12/tesla_opens_paramus_showroomjust_dont_try_to_buy_ anything.html

    What they can't do at the showroom is actually BUY a car!

    "'Right now we say, "Great, why don’t you take that information and go home to your personal computer,"' Will Nicholas, a spokesman for Tesla, said."

    As nj.com goes on to explain: "That’s because in New Jersey, you can only buy a Tesla online. A bill making its way through the legislature would change that, but it still hasn’t reached Gov. Chris Christie’s desk."

    In other words, you can ONLY buy a Tesla over the Internet. The hack-prone, NSA-infested Internet which sites like Techdirt.com spend large amounts of column space publishing stories illustrating its dangers.

    In that context, I notice that "www.teslamotors.com" still uses HTTP rather than HTTPS throughout. That is NOT a good start!

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 10 Apr 2015 @ 3:58am

      Re: Rose Tinting the Tesla Way

      All the NSA can add to your profile by visiting teslamotors.com is your a 40 something environmentally responsible male who feels the need to compensate for certain physical um short comings. No danger of being taken out by drones.

      If they see that I mostly read articles at techdirt about government spying and make negative comments about the government I end up on a domestic terrorist watch list with my face programmed into facial recognition drones and get blasted the moment I cross the border.

      Https is not needed everywhere, everyone will know those rumors about small things are wrong once I am driving around in a Tesla I can't afford!

      reply to this | link to this | view in chronology ]

    • icon
      BentFranklin (profile), 10 Apr 2015 @ 10:40am

      Re: Rose Tinting the Tesla Way

      NSA knows you bought a car no matter how you paid.

      reply to this | link to this | view in chronology ]

  • identicon
    Andrew D. Todd, 10 Apr 2015 @ 4:30am

    Trade-Ins

    Presumably Tesla doesn't do trade-ins. Trade-ins are a significant element of the normal car-dealer's operations, and a major source of profit, simply because it is comparatively hard to assess what a trade-in might be worth. I don't know whether one could sell Toyotas and Hondas, sans trade-in. I understand that car salesmen often perceive success as getting a nice trade-in, which will sell quickly at a good price, rather than slightly higher profit on the new car. The difference between the buying and selling prices of a used car is often much larger than the markup on a new car.

    I noticed another story on Jalopnik, about a car which had been debatably classified by the CarFax title/history reporting service. When the dust settled, seven years (and several owners) after a disputed accident, and insurance company write-off, it was not considered worth the $3500 which the dealer had, provisionally, been willing to offer, on a blue-book basis.

    http://carbuying.jalopnik.com/couple-denied-trade-because-carfax-revealed-total-loss-169609009 1
    http://oppositelock.jalopnik.com/how-carfax-works-and-why-you-should-take-it-with-a-gra-1639660981

    T his case is rather mysterious. Possibly, the insurance company was more pre-occupied with medical bills, which start where automobile values end, and simply paid the blue-book value by way of clearing the air. A car can look a mess, with the fiberglass fenders hacked about, and still be fairly repairable, provided that the damage does not extend to the load-bearing steel unit-body. It is also possible that the automobile was bought by the mechanics program of a Voc-Ed school or something like that, and received $50,000 of unpaid student labor, according to the rule of "No car leaves this shop until it gleams!"

    In the last analysis, there are regional dealer-only used car auctions, and a car is worth what a professional used-car dealer, having performed his own inspection, is willing to bid.

    Lately, the local public radio station has been advertising that listeners should donate their old cars, instead of trying to trade them in or sell them. The premise is that an old car in the driveway is enough of a nuisance that someone whose time is of value might prefer to give it away. In my own family, years ago, a mint condition Volkswagen Beetle eventually got given away to a neighbor as a sort of additional thank-you gift for a couple of years of paid nursing of an aged relative.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 10 Apr 2015 @ 5:10am

    15 years ago when I bought first started buying my cars from Carmax, all the other car dealers assured me that I shouldn't buy from them, because their business model wouldn't work, and they would be out of business soon.
    When I purchased my most recent car from them, I realized that it was very similar to the Tesla model.
    Small variations, especially in the financing department. But, when I went to get different financing a few days later from my bank, I was able to pay off the carmax financing with no penalty.

    reply to this | link to this | view in chronology ]

    • identicon
      Andrew D. Todd, 10 Apr 2015 @ 6:26am

      CarMax, toAnonymous Coward, #7

      CarMax has local dealerships and repair shops. Its applicability to Tesla is dubious. Furthermore, a very perfunctory search turns up the following:
      ----------------------------
      http://www.consumeraffairs.com/automotive/carmax.html?page=2
      -- ------------------------------
      "CarMax under fire for selling recalled cars" WSB-TV (Ch. 2, Atlanta) Tuesday, Nov. 4, 2014

      http://www.wsbtv.com/news/news/local/carmax-recall-policy-changes/nhySR/
      ------------------------ --------
      Jerry Hirsch, Petition seeks to block CarMax sales of unrepaired recalled cars, Los Angeles Times, Jun 24, 2014

      http://www.latimes.com/business/autos/la-fi-hy-carmax-deceptive-advertising-20140624-story.html
      - -----------------------------

      It seems CarMax does sloppy repair work, and does not comply with recalls. I doubt they're worse than other used car dealers, but their national organization puts them in the position of being measured against the manufacturers. There was an incident a few years ago, in which a RoRo ship carrying a bunch of, I think, Subarus, from Japan turned turtle off the Alaska coast. The ship was eventually salvaged, but the car company opted to scrap the cars, because no one could say how the experience of being turned sideways might affect the cars' airbags, and the company chose not to take the risk of selling them.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 10 Apr 2015 @ 6:00am

    I don't like one-price, no-haggle dealers

    I don't like one-price, no-haggle dealers precisely because their prices are higher than I can get anywhere else with just a little haggling. Now if they set the prices to a reasonable level, I wouldn't mind at all. But usually you can beat their deals.

    But I wish them luck.

    reply to this | link to this | view in chronology ]

  • icon
    John Fenderson (profile), 10 Apr 2015 @ 8:44am

    If this became common practice

    single price, no haggling, no separate finance department whose there to screw you over on the deal terms, and transparency about the loan rates.


    You know, if this became common practice across dealerships, I might reconsider my "never buy a car from a dealership" rule.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 10 Apr 2015 @ 9:06am

    So "innovation" to Masnick is trying what's proven to not work...

    >>> other dealers in the past that have adopted "one price/no haggling" setups

    If no one does it, there's a reason.

    Besides that, luxury car seller (Tesla) has a niche that can't be compared to any conventional type.

    reply to this | link to this | view in chronology ]

    • icon
      John Fenderson (profile), 10 Apr 2015 @ 10:17am

      Re: So "innovation" to Masnick is trying what's proven to not work...

      "If no one does it, there's a reason"

      And that reason is inertia. Everything about how how dealerships sell cars in the US is geared towards an expectation that people will haggle. Customers have been trained to expect this, and the entire pricing infrastructure is geared to support it.

      Changing it is a huge task that would be very disruptive to the industry. It would require sticker prices that actually reflect the price dealers need to sell the car at, rather than what we have now: an inflated price to allow room for haggling down. Customer expectations also have to be changed so that the ones who expect to haggle don't feel that they're somehow being ripped off.

      But if the industry were to actually make the change, it would benefit pretty much everybody. Dealerships would see more customers as many of those (like myself) who avoid them like the plague because of all those shenanigans would suddenly become customers. Customers would benefit because they would be less likely to be ripped off by dealers. It's a classic win/win. But one that is unlikely to happen.

      Personally, as I said, I have a blanket policy of not buying cars from dealerships. Dealerships are just too manipulative, risky, and (unless you are the sort that enjoys haggling or overpaying) very unpleasant. Although Tesla sells cars that much higher-end than I would ever be in the market for, if that weren't the case then Tesla would be one of the few cars I would be fine buying from a "dealership".

      reply to this | link to this | view in chronology ]

  • icon
    amberb (profile), 10 Apr 2015 @ 10:36am

    Grammar Police

    "no separate finance department whose there to screw you over on the deal terms"

    Should be "no separate finance department that is there.." or "no separate finance department who is there..."

    "Whose" is possessive. It's not a verb. I already know that I am a grammar Nazi and a huge pedant. *sigh*

    I can't wait to buy a Tesla though. I intend to do that as soon as their ~$35,00 model becomes available. If I wanted a Honda, it might be better to buy it through a web site. Then I don't have to deal with car salespeople and their tactics.

    reply to this | link to this | view in chronology ]

  • icon
    toyotabedzrock (profile), 12 Apr 2015 @ 8:54pm

    It might also be technical knowledge that Tesla needs for cars to be fixed. Later down the road they will need to allow for a third party supply chain so people can fix their own cars or have a local shop do it.

    reply to this | link to this | view in chronology ]


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