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Dealer's Tricks - bait & switch, etc.
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You could argue that the money comes from service on the cars. If that were the case then how to the large dealers 45 minutes outside the suburbs of major cities (the ones people drive 200 miles to save $50 at) sell cars for cheap and still stay in business? I could be wrong but I don't imagine they get a lot of service calls.
Also in another board (Should you service your car at the place you bought it) I hear service managers bemoaning how they only get paid 40 cents on the dollar and aduited for warranty work. Clearly that cannot be their source of income.
So the only way new car dealerships make money is from used car sales and out of warranty work?
(Yet used car dealerships and independant mechanics go out of biz all the time doing the same thing).
I just finished a good old fashioned negotiating session with a seasoned car buyer. I wish all customers were like them. They were "be-backs" and ready to talk turkey. I sat down and worked the deal from MSRP and discounted a bit at a time until we reached an agreement. None of this "give me your best price" or "what will you take for this car right now" or you guys know the rest. And we ended negotiations in good terms, with both parties treating each other with respect and dignity. They will pick up their car on Saturday.
: )
Mackabee
Car dealerships run on very small net margins, roughly 3% or so for a well run store, which is among the lowest in retail.
New cars generally, overall, when finance income is included, break even, or, average about a $275 or so net loss per car.
However, used cars are generally profitable. When I owned a share in a new car store, we lost (net) like $200-250 per new copy, but netted over $1,000 per used copy. And we sold a lot of used cars, so we more than covered the liability that the new car dept was. And parts and service are also profitable. I never had a big problem with warranty work as a general rule. There are some parts of it that are a royal PITA (Diagnostic work can put you in the hole as an example).
If this helps to clarify...
Bill
The best way is to do exactly what you did - try to sell it yourself. If you got no takers at $8500 you definitely know that's too much. And if nobody will pay you that much why would they pay a dealer that much - plus tax!.
Of course, the reason they put a price of $9600 on it is the same reason you asked $8500 when you would've taken $7800.
When Infiniti first came out many moons ago, not only did they have a very poor advertising campaign (very zen, no images of the actual car), but to further increase the aura of the vehicle, Nissan was pretty insistent that Infiniti dealers be stand alone operations. Since there were no "old" Infinitis out there, they quickly found out that dealers couldn't make a living on new car sales alone with nothing but warranty work for the first few years. They backed off fairly quickly once they had a dealer revolt on their hands.
As for for "rich individuals" buying up all the dealerships, they can't buy what the current owners aren't willing to sell. If it were all that easy to make money in the business, why are these other dealers calling it quits? Seems to me that there are therefore fewer individuals out there who really know how to be successful in the business than there are dealerships to be run. If thereby these individuals become "rich," then that's the American way, no?
CWJ
If that is the case then how come so many service dept's are so eager to deny something is covered by warranty? Is it because they think that the pissed off customer is going to get it fixed by them anyway and they'll get full price as opposed to a percentage (great way to make customers want to come back to you for service)?
I have also heard on other boards that one dealership had a quota of how much warranty work he could do for cars not purchased at his dealership. Why would the car manf care where the work is done or which of their affiliates sold the car. The cost/profit of the manf is still the same. Or is this a ploy to limit losses from bad manufacturing by causing the customer inconvience so that they will not get warranty work done, thus sparing them the cost? Again a great way to piss of your customer base.
Not trying to pick nits, but one could easily say that the "dealers" are publishing the NADA numbers, shouldn't they be the MOST accurate.
Not picking on anyone, but is sure is easy to see why car buyers don't trust dealers. You guys don't even trust the numbers that your association puts out.
FWIW
TB
Maybe you can lend me some insight. From what I understand when a car dealer
does warranty work he gets compensated from the manufacturer. Not as much as if
it had been an out of pocket customer repair but enough to make some profit (right?).
Technically you're correct. TheMfr pays for the work, atthe amount of time they think it ought to take (Not always the case, labor is where you can get screwed... but they are not always outrageous).
If that is the case then how come so many service dept's are so eager to deny something is covered by warranty? Is it because they think that the pissed off customer is going to get it fixed by them anyway and they'll get full price as opposed to a percentage (great way to make customers want to come back to you for service)?
Its' not a matter of pricing differences as much as its' becoming a matter of.. well, AudiA8Q said it best when he likened warranty work to HMOs. It's becoming a matter of getting the Manufacturer to OK the repairs. And a lot of the time they dont want to do it "because they all do that" or because "The customer did XYZ"...etc....
Leave your gas cap loose? Get a check engine Light? They might pay the claim once.... after that.... I hear reports (Which I am somewhat inclined to disbelieve) about Toyotas with Sludged engines and denied warranty claims. A great example would be Chevrolet Astro/GMC Safari Idler Arms. They used to fail within 10K miles. GM's response was not to repair it with an improved part, but to basically tighten them down more (Which removed the slop.. for a while. The real cure was to pop Moog Idler arms in there). Then at 40-50K miles, they were totally shot.
Problem is, the Mfrs put US in the hot seat and that's not only unfair to the customers, but we get the unhappy customers. Then we get a bad service survey and we get to hear BS about it from the manufacturer! So, in some ways, we're just as stuck as you are.
I have also heard on other boards that one dealership had a quota of how much warranty work he could do for cars not purchased at his dealership. Why would the car manf care where the work is done or which of their affiliates sold the car. The cost/profit of the manf is still the same. Or is this a ploy to limit losses from bad manufacturing by causing the customer inconvience so that they will not get warranty work done, thus sparing them the cost? Again a great way to piss of your customer base.
Few reasons here... and that's not totally true either. Basically, a Manufacturer, say, BMW is going to look at warranty claims in relation to sales volume nationwide. Then all of a sudden one dealer is real low or real high. Red Flgs pop up.
A) Why is this guy so high? Is he doing unneccesary/imaginary work?
Point is, if a dealer is doing an excessive amount of warranty repairs,and you were the manufacturer, you'd be suspicious, wouldnt you?
One thing that we are limited to are goodwill adjustments. I.E. Say you're a VW dealer and 2 2000 Jettas come in with blown sunroof motors. Car A was sold in August 1999 and has, say, 23K miles. Car B was sold in March of 00 and has 27K miles. Both are past their factory warranty. Car B was bought by someone who lives up the street, does not ever use you for service and they bought the car from your biggest competitor across town. It was at your store once before for a check engine light and you got a 0 on the survey for some ridiculous reason. Car B was sold by you to a loyal repeat customer who services their car at your store.
Who are you gonna do the goodwill for?
So that's the one limit that we have. Again, I'm not a service dept expert... sales is my Forte, but warranty work has become a SERIOUS p.i.t.a. for us to deal with lately...
Hope this helps!
Bill
kcram
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I'm saying NADA is the dealers association, so it is reasonable to expect they get it right.
Now, I'm with you and understand that it's only a guide. But since it's the National Automobile Dealers Association, you would expect to see accurate information. After all, doesn't that info come from member dealers?
If you guys don't trust your own numbers...
Get it?
TB
Yes, it costs money, but for the price, you get a lot more than just the invoice price - you also learn how to use the information effectively, and they say they are a Chek-Chart licensee, and Chek-Chart apparently has the best track record for invoice prices since 1965 or so.
As for offers....I've been thinking lately if it would be good to "pre-figure" an offer to the dealer like this:
Say the price I want to pay for a car is $20,000, which is $500 above invoice. Adding a 9% sales tax of $1,800, and various doc fees, ad fees, etc, of $200 (Just to give us nice round numbers here) for a total "out the door" price of $22,000.
Is it good to pre-figure a price offer that way? Let's say my initial price offer is at invoice, so that's: $19,500 + $1755 (tax) + $200 (fees) = $21,455. So I do something like this (say 3 offers before they accept:
1. I'll give you $21,455 out the door for this car as my opening offer. It must include all taxes and fees, and I've added the real 9% tax plus appropriate fees into my offer.
2. $21,727.50 = $19,750 + $1,775.50 tax + $200 fees
3. $22,000 ($500 over invoice)
For the dealer, is this a reasonable price structure? It makes things a lot easier for the consumer, and it hopefully lessens or eliminates squabbling over $50 here or $50 there for miscellaneous fees, such as dealer prep (which on the Monroney sticker it even says that the manufacturer has added that charge into the final selling price.) Instead of having the dealer try to double-collect for it.
Has anyone done this, and is it a good way of making offers?
-Bryan
This is an old game I've seen and heard since the 1980s .... and probably way older than that. The reason/excuse I've heard is that the distributor/manufacturer provided a special allowance of $4000 and instead of spreading it over their inventory of eight units at $500 each, they put it all on ONE car, below cost. Naturally, even if you're a "door-buster" the first day the ad breaks, it's "already sold." Probably to a relative of the dealer or one of his top executives.
And that ad will continue in the papers for a few more weeks to reel-in more prospective buyers.
We have local computer shops (not a big chain like CompUsa) that do these "screamer ads" where they tout a system at a great price. Sure enough, you go there and they are all sold out, etc., etc. Then you get the "That system wasn't really that good, for $xxx I can get you into this model, even though I'm losing my shirt on the deal." Yea, right.
Well, a customer decided that he needed a new computer and was tired of the weekly screamer ads and games. So one Monday morning he decides to camp out in front of this store waiting for it to open. Sure enough, he was unable to buy the model/price as specified in the ad. Gets into a big argument and leaves. Goes straight to the BBB, and the county district attorney/consumer affairs division. They send an undercover person to try to buy a system and get the same runaround. Slaps them with a big fine, it all gets published in the paper, and makes them look really bad.
This also happen with a major Nissan dealer in the area (I actually tried shopping there once). The place was a classic bait-and-switch shop with weekly screamer ads, they had high-turnover because even the sales folks with any morals couldn't stand to work there. The state consumer affairs agency eventually nailed them with a huge fine they had to pay.
So in the end, don't get mad... get even. Report these dealers to everyone and anyone that will listen, i.e., BBB, consumer affairs/DA, and the local press, TV, radio, etc. You'll end up saving someone else from these games which will hopefully make the industry better for everyone.
Generally they're accurate..(Retail #s generally arent absurd like KBB) but they get their trade-in numbers based on some numbers they pull outta the air I think.
As a rule, I dont see peopleusing NADA books for appraisals. They're more used for banking advances.
Bill
I haven't had to do this with a car dealer, but I've been wronged by a credit union, wife's former employer, & a couple of "big box" type stores, and others, and believe me, if you put together a well-written, detailed, factual, pointed, and scathing letter--avoiding personal attacks, anger or opinion--and send separate copies to owners/managers/ceo's/consumer advocate groups/board of directors/BBB/state & local regulatory agencies etc. (you get the picture), you really can quickly have people falling all over themselves to rectify the problem. Make sure you "c.c." so every recipient, esp. the guilty party, knows who else is also reading that letter!
2001 Prelude Type SH, 2022 Highlander XLE AWD, 2025 Camry SE AWD
So inflated published trade values are probably partially due to overallowances.
"Yes Mr Smith, we'll give you 15K trade allowance on your 99 Taurus with 60K miles... The new Taurus is at sticker. This should meet your payoff and get you a 10% down."
Mr Smith probably thinks he got 15K for his trade. I've seen too many people who don't understand numbers very well, regardless of where they originate.
TB
Question: Does the salesman get some kind of a commission off a low ball trade?
I remember with my last purchase, I told the salesman that I wanted to pay $500 less to close the deal, and I didn't care if he did that by lowering my new car price, or giving me more on the trade. He came back with $500 more on the trade, and the deal was done.
Or, the Used Car Manager may have said, "No, that's the most I'm willing to put into that trade." in which case the $500 reduction would have come directly out of the new car end, reducing their gross profit by $500.
In the first case you got your price reduction and the salesman's commission stayed the same whereas in the second case, the salesman's commission dropped by $125-$150.
So you can see that when it comes to your trade, it is definitely in the salesman's best interest to try and get the Used Car Manager to put as much in it as possible.
I have a '93 lumina and am still trying to get the brakes working properly (only 44K). I know of another LUMINA owner who also filed a claim. The standing joke is...we filed..we were told there was a settlement but we haven't seen a dime.....
I think their trade-in numbers are based on allowances or something.
1988 BMW 325i 4-door. Trade-In $3,600.
Yeah. Right.
I use their "Trade-In" numbers as some finance sources I use base their advances onthat.
Bill
Well...if that's really the case, then I suggest prospective buyers with trade-ins consult it. It's difficult to find, as it appears to be a subscription service provided to dealers. However, these Black Book values are available through cars.com at:
http://www.cars.com/advice/advice_carprices.jhtml?aff=national
Its no fun from anyone's perspective, but that's the way it is.
Ed
Example: edmunds used to do QUARTERLY! updates! =O
Prices on cars can flucutate wildly, and there's a lot that goes into appraising them. Overall, from where I sit, if I had to use one guide only, itd' probably be Black Book as they tend to report on auction averages.
Take Kelly Blue Book. No real differentiation on Color! They'll tell you that a Silver/Lt Grey GS400 is worth just as much in FL as a Black one with Black Interior!
Not even close.
And even auction reports are not failsafe. Take a 1998 Lexus LS400. Say it has 39K miles. Say the listing on an auction recap says the following:
1998 LEXUS LS400 TAN 39085 8GA SRWLSTAC 25,500
Hmm... LOADS of possible Variables there!
Tan? Is it Cashmere Beige (Champagne) which is a good color or is it Antique Bronze which is a terrible Color? From that description, I also dont know what kind of shape the car was in. Paintwork? Dings? Damage? What equipment did it have? Only option I can decipher there is a Sunroof (Which an LS400 had darn well better have or its' gonna get CLOBBERED!). Does it have Navi? Nakamichi? Heated Seats? Zenons? CD? etc...
For a Base Antique Bronze car, that's a roughly market-correct price. For a clean Cashmere beige one, its' cheap. So why was it cheap? Does it have paintwork all down the side? No Sunroof (well we know it had that)? Maybe it was just rough?
Etc...
That's why you need to look at overall averages to get a gauge of the market, but there's even more to it than that.
Edmunds though is finally getting it right with their TMV Appraisals. I ran a bunch of cars through there and they seem to be doing a much better job of it.
As far as what Books I use... I dont use KBB or NADA to price cars. I buy em, and mark em up about X$ and go from there.
Usually I end up selling them for a huge wack below retail, with rare exceptions (Like that 51K mile 1986 XJS I was telling you about, that's a car that you can throw the book out the window on)
Bill
Garypen: Thanks for the Black Book link. Looks like "the one".
I've only heard of these in these forums.
"Gloria's the name of a car in Japan, honey! I swear!"
Its' a matter of knowing how to read the little auction sales result pamphlets that get sent out...
Bill
Is this philosophy of tipping everyone so that they can perform the job they are paid to do in the first place born and bred in NYC where the price of everything is significanty higher then 99% of the country? Everyone seems to have their hand out in NYC from the doormen, to cabbies, to waiters and now auto service reps!
Bill from Manhattan
That's the most clever comeback I've seen in TH.
You win.
I think of that comment every time I see prices for goods and services in New York.
I'll have to check if that was predicted in Nostrodamus.
DOH!
You can do the same with a mortgage. You should have someone do the math for sending in just $50/month extra on a 30 year mortgage. It saves thousands!
But note - you could also do the same thing on the 3 year note, saving even more overall because of the shorter term, and the lower interest rate.
Unless your cash flow really demands the lower monthly figures, go for the shorter loan at the lower rate.
;^)
;^)