Do uneducated auto buyers help smarter buyers and sellers? should they?

katie_n

Just read an article about "drip" pricing. The egg-heads were drawing some sort of corollary between new car prices and the sometimes aggressive (...poker?...) that goes on between sophisticated sellers, and now, their more educated buyers (through transparency, and the Internet). They mentioned the role that uneducated, unsophisticated buyers play: By being more susceptible to dealer adds to both the front-end and back-end, they help sellers make an overall profit, and other buyers make a better deal.

Do you think this is true? If so, do you think it's right? Any insight appreciated.

P.S.: Please try and see this, not from the POV of an experienced auto buyer or seller, but from the vantage point of a lonely elderly person with no computer, or a young adult with no car-buying experience (i.e., poor "poker" skills), or an ESL working poor person, etc.).

Mr_Shiftright

I would question that premise. There may indeed be pressures on a dealer to sell cars for a "good deal" (excess inventory at end of year, too many pink cars on the lot, etc) but the idea of a dealer voluntarily letting cars go more cheaply because they feel "satisfied" with past profits that month, or year, sounds way too fanciful to be possible.

I think a dealer, or his sales staff, handles each sale individually, and any mitigating circumstances have nothing to do with the deal some other buyer got last week.

clachnit

People with less information are always more vulnerable to getting a bad deal than are people with more information. But I agree with MrShift@Edmunds--each deal happens on its own, without reference to how other deals are conducted.

A simple way to get a good deal is to get multiple price quotes. This article, The Nonconfrontational Path to Car Buying explains why understanding or using "game theory" isn't necessary to get a good price.

--Carroll Lachnit, Features Editor, Edmunds.com

katie_n

Thanks to you both. I guess what I'm trying to wrap my head around is entire way new autos are bought and sold in this country.

If a supermarket advertises tomato soup @ 3/$2.00, they don't charge customers who didn't get the ad the normal "MSRP" of $0.98 a can. I can think of very few other sectors that advertise goods at one price, then charge pretty much whatever they think each buyer will go for.

You're both right: Auto dealers will try and get max profit from each deal. It's up to the buyer to exercise due diligence.

And if it weren't my elderly widowed mother, I probably wouldn't care so much.

vividi

New car dealers make money selling cars in two ways. First the obvious, they try to maximize profit per transaction (buying low selling high cars, loans, warranties, coating, etc). Second the owners, sales manager and salesman potentially can make lots of money by reaching sales goals or quotas (like $85,000 in the following case). National Public Radio's 'This American Life' spent an hour on this topic, and you can hear their program by using your favorite search engine and typing: npr 129 Cars. If you don't want to spend an hour, just listen to the last 8 or 15 min. So dealers will lose money on a transaction or even buy cars themselves or for the dealer to reach the sales goal and make the big bucks. This is why is it best to buy at then end of the year, or quarter or month when the dealers are close to, but not exceeding their sales goals.

kyfdx

I don't think the car business is any different than any other business where you negotiate price. Sophisticated shoppers with more information will generally do better than those who are unsophisticated or who lack that information.

Now, taking advantage of someone with diminished mental faculties is a different question. But, being elderly doesn't automatically put you in that category. But, there are people who have gone their entire life without making major financial decisions, who later in life are forced to make them. I'm not sure why they don't see the need to get help, or why they are so trusting, but it happens over and over. I have the same experience with my own elderly relatives.

Sorry to hear about your mother's bad experience.