I will drink a toast to the day the last auto dealership goes out of business.
It's outrageous to me that the initial price they give bears no resemblance to reality. But I'm sure they do it because there are some people who just don't like negotiating and will pay it. Or they might even tell them "I'm gonna do you a big favor and knock $25/month off so that you remain a loyal customer" and then the customer comes away actually feeling like they got a deal even though they were actually ripped off.
In the old days (WAY before my time), you might have negotiated for everything (say eggs in a grocery store) so I wouldn't have had an issue with negotiating for cars. But seeing as cars are one of the only remaining things that you can negotiate on price, the dealerships take advantage of the fact that people today just aren't used to negotiating and therefore aren't very good at it.
If there were a car brand with affordable cars that didn't play these games, I'd buy from them happily.
We're paying $170 month for hers ($0 down except for registration which was 280 since we transferred from another car).
I'm only putting this here as a baseline for others to use. I didn't sign an NDA on what I'm paying ;) It's easy to get ripped off in this game, so it's good to know what others are paying. I hope this helps someone. And I'd be curious to know if you got a lower price!
Now, car companies could lower the sticker price of the vehicle as time goes on. A model that has been around for 5 years and will likely be refreshed in 1-2 years could just have money taken off the sticker. But then when they introduce the new model, there's sticker shock at how much more it is. There's also the perception issue that Volkswagen wouldn't want the Golf to be seen as below a competing vehicle just because it's slightly older - and then when the new model comes out people think it's overpriced because it's now "the same price as the competitor that has always been more expensive".
For most car companies, they're making cars on spec - the idea that if they make it, someone will buy it. If a company has excess inventory at the end of a year, they need to move it. It's a depreciating asset and if no one will buy it for $20k, they need to offer a discount. But that discount often isn't permanent. It's an issue of inventory that might be temporary. They'll even advertise "for $x thousand off!", but they don't want to change the sticker because they want to sell for that price when they don't have an inventory glut.
Likewise, sometimes consumers go off a brand or model. Car companies have scandals and need to discount things to win consumers back. Sometimes they miscalculate what consumers want and the vehicles still have utility, but they aren't what a lot of people want and have to discount them.
Sometimes you make a car that's in the same class as other vehicles, but it's an inferior version. You want your next model to be as good as the competitor so you don't want to lower the sticker and permanently put it in people's consciousness that you make an inferior vehicle to your competitor, but you need to sell these crappier cars. You'll even put it in ads that your discount exists many times.
Tesla doesn't have any of these problems. Their supply is more limited than their demand so they never have excess inventory. Given that they don't have competitors in their space, you're never left thinking, "the Tesla Model S was created in 2012, but this NewElectricCo Model Y was just created in 2017 and I'm getting the new awesome model that no one has and looks new and has the best stuff!"
If Tesla becomes a mass-market company with competitors, they'll face many of these same issues. If Tesla has 5 competitors providing much the same vehicles (in the way that an Audi A4, BMW 3 Series, and Mercedes C-Class are much the same vehicle) and they're building enough units to meet demand, they'll likely have to discount too.
If Tesla builds 100k units and consumers have only bought 70k by December, well, they're going to have to push the 30k units left over with discounts. If Tesla has a Model S from 2012 competing in 2020 against a brand-new NewElectricCo vehicle, they're going to have to discount to push their vehicle. At some point, Tesla is likely to produce a model that is considered not as good as a competitor and they'll have to discount it a bit until the next version comes out.
Tesla is in a great position right now because it has way more demand than supply, but if Tesla is actually looking to change the world, that's going to change.
--
A few closing thoughts: First, GM did experiment with no-haggle pricing. Their Saturn brand had that as a staple of their business. There's something cool about the idea, but when you're trading in a vehicle, you still need to haggle over the trade-in cost. So, any benefit to the non-sleaze of the new car's price can be lost on the trade-in (though you could sell it yourself if you wanted that hassle). Second, this also happens with a lot of products, not through negotiation, but through discounts. When the Galaxy S8 came out, it was new and shiny and there was excess demand and not going to be great discounts. Come January 2018, you'll likely to be able to pick up a discounted phone. The Galaxy S9 won't be out yet, but they'll be looking to clear out inventory and the S8 might look more dated against phones that have come out since making it less attractive at list price.
Now, it's still often a set, non-haggle price. So maybe you would have no problem if Tesla said, "we're offering $8k off all 2017 Model S vehicles" and everyone was getting the same thing. But companies are going to have to manage their inventory, model cycle, consumer preferences, and competitive alternatives. Tesla will have to do that as well. And some of that will be local. Maybe Tesla has some excess units in Florida nearing the end of the year while having sold out in California. It might make more sense for them to try and move the inventory in Florida with a discount. It costs money to move vehicles. Sometimes it makes sense to try and hit a certain critical mass in a market to get word-of-mouth. Maybe you're at risk of losing employees if you're constantly taking inventory away from them.
There's definitely a lot of sleaze in the industry, but Tesla likely won't be able to be a single, stable price forever as they ramp up to meet demand and gain competitors. They'll have to provide discounts - though they might provide up-front, non-sleazy, no-haggle discounts.
Made negotiations easy. You basically know the lowest the dealers will go.
Dealer loyalty is not something you have so they have no incentive to make you want to come back: you probably won't anyway. If you a a buyer for a large company (ie a fleet of plumbers) you will find your dealer is more responsive. Not only does it get the large sale today, but he knows you will be back next year for more if he treats you well because there are advantages to having all one make of vehicle in a fleet.
No you wouldn't. You've already lost the affordable game by insisting on new cars. New car dealerships get away with this crap because their customer base is already not very price-rational. It doesn't matter whether they're discounting you $1000 or $3000 when you've already foregone $10,000 or more in exchange for the abstract feeling of newness. If you don't want to play price games, just get on craigslist, look for a car at a price you like, go check it out and have your mechanic inspect it, then don't negotiate, just pay the price. Or whatever, you can even be sloppy and get screwed by a private party and still probably end up way ahead compared to the stealership's prices.
New cars are a luxury product and it's very strange to see people discussing them as if they're anything else. Luxury products always have wacky economics, since their value is so untied to fundamentals.
Yes, I think I would. Or at least that a lot of others would. I understand that used cars are a better deal, but I've already decided that I want the "luxury" of a new car. But within that framework, I still want the best price, just as many others do. It's not illogical to say "I want a new car and I want to pay as little as possible for it without negotiating". In my case, I bought a used car before my current one and it turned out to be a dud. Let's say that you place a premium on having a car that doesn't break down frequently. With a leased car, I'm paying for that luxury. I understand that I can come out ahead with used cars, but I don't want to deal with the hassle of taking it to a mechanic, the possibility of things breaking when the car is out of warranty, and yes, not having the latest features. And as much as people hate negotiating for new cars, negotiating for used cars is even worse.
However, that is a scam idea with no basis in the physical world, invented and maintained by those with a vested interest. Therefore, all a brand new car (as opposed to a good 1 year old car) gets you is a vague feeling of newness and false ideas in your head that the probability of failure is lower. As smart as you think you are, by buying into it you've already bought into their system. They're already selling you a bag of air, and already got you to agree that this has some value, so they have a lot of leverage on the price, since there's no objective way to value something that is useless except because people can be tricked into wanting it.
Unfortunately, manufacturers are prohibited from selling directly to consumers in many states. As usual, scratch below the surface of a "market failure", and you're likely to find some regulation getting in the way.
http://www.npr.org/sections/money/2013/02/12/171814201/episo...
Doesn't mean the particular piece of regulation is helpful nowadays, but also doesn't immediately mean it isn't.
It's purely the end-game of capitalism - if not constrained, it will subvert political systems to install it's cronies, capture regulatory agencies and buy legislation.
A government that doesn't regulate money's interaction with politics will end up representing only capital-owners.
Can't wait till we can replace our petroleum vehicle economy and it's superfund sites (i.e., any former gas station).
What's stressful is when they start playing games with all the levers. If you're fortunate enough to not be in the position to maybe have to play those games, you basically hold the cards.
Best was this Monday, when I called one dealer and told: I want to buy a (specific) new car. Now. No haggling, I just sign. Had to call them 3 more times, every time I got a new excuse why no salesman is available to me. "Please wait another hour, then he is out of the meeting"... so I just called another more expensive dealer after 8 hours, told them the same thing. The salesman sent me the contract in a second. But as I mailed the signed contract back after business hours, I did not hear anything from it the next day. Called the dealership after waiting half of the next day to hear "Salesman out of office today". I said: no problem, I just resend the contract to another person. "You can do this, but the salesguy needs to get permission from the boss to sell you the car". At the end of the day, they somehow managed to send me the invoice for the car.... but everything took many phonecalls.
Only this can create problems of its own. Some dealers will refuse to work with you if you are paying with actual money instead of a loan. My parents went through this. They sold some farmland and decided to buy a new car with the profits. A few dealers simply said no. The car they wound up with mostly depended on where would actually sell them the car.
They're not giving you deals on the financing because they like you.
If I were buying a car my very strong default is to just pay cash and be done with it.
Ugh. I was test driving a car I knew almost nothing about recently. I'm in the market for a fun weekend driver as a second car, and this one caught my eye on the dealer lot. I was looking at the car when a salesman approached me (I did not approach him, and I did not look at any other cars). I asked him to let me take it for a drive, and while we were driving I was asking him questions about it. "I don't know" was his only response.
I'm sitting here in the drivers seat of a two-seater sports car doing 110mph down the highway and this guy is completely silent. "Does it have a turbo?" I don't know. "How big is the engine?" I don't know. "How many gears does it have?" I don't know. "How fast can I be going while putting the roof down?" Actually on this one his response was "let's give it a shot" and started lowering the roof at highway speeds. Luckily it apparently can handle that.
Turns out the guy just started working there about two months prior and had never even heard of the car we were driving, he'd only sold Jeeps and pickup trucks and sedans up to that point. He just wanted the commission from selling a car he knew nothing about.
I liked the car, but I will not buy from them.
I would love to disrupt this auto dealership industry. Tesla business model is compelling but I don't think it needs to be manufacturer driven. I think there is still a place for dealerships but their business model can be upended. Some guys working on this is AutoFi and Carvana. I think there are ideas out there. I would love to be a part of that.
I was a huge fan of truecar until I did the experience, and now I'm hugely disappointed. I felt like the experience hid information and shepherded me to a dealer to let it take advantage of me; I saved some time and hassle, but I spent more money in the process and at the end, wasn't all that happy. YMMV, so check out the tool (directly or via AAA or Costco etc.), but be realistic over what it can do: it makes money from the dealers, not you, so be aware of biases.
I haven't tried non-online services (personal negotiators, etc.) so can't speak to those.
Before the sale: Gets told her gender affects her ability to drive manual After the sale (different location): Service is non-existent, they argue valid issues aren't real and get downright insulting.
Now to the article, full loaded vehicles have a lot of cushion when it comes to discounts and so the manufacturer isn't going to suffer a loss of the vehicle but instead losing out on extended profit.
Another area they are giving up profit on is financing. When I bought a new Volt back in March; at discount but nothing stellar; I ended up taking a loan because it was zero percent. Real hard to justify paying cash when they will just give you money.
I did notice that it was mostly sedans they listed as holding the discounts with some SUV but not many if any CUV/ CUV sales are taking off world wide so there isn't much pressure there.
I would wonder how much pressure this puts on used car franchises, those who only sell used. See the low prices benefit manufacturer branded dealers because they can get the trade as well.