Ok... let me chime in a little bit here. First... I am a salesman who works both interent leads, and floor traffic. I have researched many methods on how to increase my closing percentages in both areas.
In the area of interent leads, many consumers think that since they sent an e-mail asking for a certain dealers "best price"... that they are "entitled" to a response. I ask you to do one thing... step out of the consumers shoes... and step inside a salesman.
Everyday, 10 - 20 leads are generated and most of them are consumers asking for best price. I large majority of these consumers have 1) never driven the vehicle 2)Have no idea what options or packages they want 3)Have no idea if they want to lease, purchase, money down, term, miles, etc.
Now.. every salesman is paid on comission. Just like you earn your money, he has to earn his. Now... he could easily send out 20 responses a day... chase a wild goose... maybe close 20% of those leads... but they are all $100 mini commissions. Or... he could simply ignore the e-mails that scream "shopper"... or "Mini Commission"... or the guy who is simply asking for a price for sh!ts and giggles.
I agree.... your money is hard earned.... but so is the salesman. We hear it everyday that such and such a customer feels ripped off because he found someone there neighborhoods over who is paying $4 less a month.
To put it simply... you as the consumer have the right to shop. You have the right to try and get your best deal for the product in which you are buying. But... don't take offense when a dealer decides not to chase the wild goose... or simply refuses to play your game of cat and mouse. There is NO law saying a dealer has to sell you a car... and at any point... he can ask you to leave. Remember... True... your paying 30,000 for a car.... but the salesman might be making a measly 100 bucks... so in reality... your hard earned money has no merit with him individually. Now... if there is some gross on the table... and its a 700 or 800 dollar commission... then you might get more flexibility with the dealer and the salesman.
Lastly... in amazes me how many of you complain about dealer practices.... but yet... your quick to pit dealer against dealer... committ to numbers than backaway....be decieftful about financing, trades, etc. If you want a honest salesman, an honest dealership.... be honest yourself. after you get numbers... check him with one dealer. If the payments are the same... or reletively close... you have a deal.
Its not rocket science... everyone deserves to make profit... and at the same time... get a deal.
If you don't want to follow up internet leads then just stop taking them!....
You see you do get business from them that's why you take them. If you pick and choose which emails to answer why does it AMAZE you that the consumer (the guy spending $$$) picks and chooses his deal?
In my opinion dealers need to differenciate themselves from other dealers. Customer service is not order taking it's about service. Give a customer a reason to pay a few hundred $$ more to you...come on think! Don't say because our service dept is open 7 days with nice clean loaners...stretch the boundaries a bit.
I disappear for a few years and you are in the first thread that I read upon my return. It's a small world.
Are you still setting the public right on the salesman customer issues?
I am back because my wifes 01 civic needs replacing, 125K miles and not one repair, just brakes and tires. I am so glad that you talked me out of buying the Focus for her!
I made the stupid aggreement with my 4th grade daughter that I would give her a car when she turned sixteen if she held straight A's for the 6 years. She turned 16 last week and I own her a car. So I am buying the wife a new car and kid get's the 01 civic.
The wife is a director for a local chain of hospitals so the civic doesn't fit the image. She wants an upscale wagon, But honda doesn't offer one.....What to do. She doesn't want an SUV so the CRV and Pilot are out. Any suggestions on another brand that stands the test of time for 30-45K, or better yet is Honda or Acura producing any wagons in 07?
It's not rocket science and I don't want to sound like a smart guy but your own admission shows how easy internet selling can be. Let's look at the numbers.
10-20 internet leads per day. Let's call it 15. You said close 20% of those leads. That's 3 closes per day. 3 closes per day makes 15 per week based on a five day work week. If they're all mini's that's $1500.00 per week or $75,000.00 per year!(based on a 50 week year)
Not bad scratch if we consider this doesn't include any walk in business or incentives you'd receive for selling 60+ cars per month!
Now all of this will be dispelled as being overly simplistic but I'm just working the numbers you provided. The point being, why make it so hard, shoot every email request a $200 over invoice price less incentives and be done with it. This kind of work could be done before lunch.
Oh if it was just that easy. Obviously you have never sold cars. If you recieve 15 leads a day.... 20% of those leads are legite. But to follow you... to provide one quote, you first have to see if you have the car available, check to see if its sold, pull hte invoice... figure a "best price" to shoot back... then repeat the process for the other 14 leads. Roughly, its about 30 minutes per lead. With 15 leads, thats roughly your entire day just responding to these types of consumers. Now... we all know one e-mail just doesn't do it. Its 4 to 5 emails before they actually come in. But... 15 leads still come in the next day, and your still following up with 3 to 4 from the previous day. of those 3 to 4... you might sell 1 or 2.
My point is.... it is simply not worht it at all. And... by me being honest and telling you guys that, you take offense to it. You fell like these dealers are providing bad customer service, and what not. But truly... there are hundreds of buyers every month, in every market. The bottom line is, what buyers can you attract to your dealership... have a vehicle they are interested in purchasing IN STOCK... and maximizing the profit.
Those types of interent leads are dead ends. Like I said... if you ever get them to your store, you typically do not have the vehcile they want because they packaged some whako options in it online, and there is NO profit.
My point is..... if you get ignored... just think of it as the salesman or the dealer is passing on "your deal"... just as you have the right to pass on "his deal".
My point is..... if you get ignored... just think of it as the salesman or the dealer is passing on "your deal"... just as you have the right to pass on "his deal".
I have no problem with this. Although you might want to send out a canned "sorry we couldn't help" type message.
A typical Internet Salesperson can handle 80-110 leads per month, if worked properly.
One thing you are forgetting is that not everyone who submits an Inquiry is buying in 72 hours. Most of the inquiries are in the 90 day range. These leads have to be followed up on...test drives...trades appraised etc.
I expect my salespeople to make no less that 80K per year...and most of them do.
Remember... True... your paying 30,000 for a car.... but the salesman might be making a measly 100 bucks... so in reality... your hard earned money has no merit with him individually.
Aw...Next time you get that "measly 100 bucks", take it and purchase a clue with it.
OUR 30K is still 30K, no matter what YOUR cut of it is. So, in reality, YOU have no merit with the guy dropping 30K on a car.
Internet sales is really just a lead-in to the traditional car buying approach. Sure, it does save the buyer from driving around to 3-4 different dealerships.
But I have bought 3 cars through the internet sales man now..and each time I still had to sit in the little cramped cube and do the back and forth over why are there wheel locks on the car *scowl* lets play the lease payment game *shudder*
I guess I could just be doing it wrong...of course i am sure if I call up and take the car for sticker and write a check..the process would be much quicker.
One thing you are forgetting is that not everyone who submits an Inquiry is buying in 72 hours.
Don't forget that a bunch of leads are just people looking at cars for fun online and think it would be interesting to find out how much they could actually buy it for... They aren't even in the market for a car, but they just like messing around online looking at cars...
In your original post you stated that you went with the most upfront dealer WHO just happened to also be the lowest cost. So are you saying that you would buy somewhere else to save a $100.00? I can understand saving $500 maybe but then you have to think what happens when something with my vehicle goes wrong are they really going to be there for me? I guess my point is for $100 or $200 I would go with someone who I can trust and know will be there for me because of the way I was treated up front and honest.
a good buying experience shouldn't be a bonus, it should be the bare minimum
I absolutely agree and I think most customers will pay a little more to be treated that way.
Yes, but when something goes wrong with your vehicle- you will be in a service department which may as well be 100 miles from the sales floor.
I mean how often do you see the sales guy after the deal goes down?
I have always thought and it has been confirmed here, buy your car where you get the best deal, take your car to where you get the best service. *shrugs*
I remember you! You were always one of the "good guys".
Yeah, I still hang around. A glutton for punishment I suppose. I've given up trying to educate people. They know more than I do and they get nasty when I try to gently show them the reality of the business.
I have no idea what direction to send you for a station wagon that's "upscale" Volvo and Audi's come to mind but the reliability problems and cost of repairs would make me stay FAR away from one of those. Some of the Subarus are pretty nice.
I have heard throughout these forums about the reliability issues that Audi is known for. I have worked with VW through the ugly years (01-03) and the Touareg launch in 04. Those were tough times for reliability. As for Audi, the cars have become consistently more reliable in recent years. In 02 there was some serious issues with the CVT and those have been resolved. For the 2004 MY we had less service incidents than BMW and BENZ.The A4 avant is a great value, great warranty plus an IIHS double best pick on offset front crash and side crashes. Plus with the Quattro AWD it gives peace of mind in snowy and wet conditions, and Lets talk about fuel economy with the FSI 2.0 engine....alright I will stop now.... :P
<<I have always thought and it has been confirmed here, buy your car where you get the best deal, take your car to where you get the best service. *shrugs*>>
Toyota told me(through an e-mail)that their dealers can REFUSE to perform warranty work on vehicles purchased from other Toyota dealers. In other words, I can get a great buy on a Toyota from a dealer 50 miles away and my local Toyota dealer can REFUSE to service the vehicle!
I have always thought and it has been confirmed here, buy your car where you get the best deal, take your car to where you get the best service. *shrugs*
Toyota told me (through an e-mail)that their dealers can REFUSE to perform warranty work on vehicles purchased from other Toyota dealers. In other words, I can get a great buy on a Toyota from a dealer 50 miles away and my local Toyota dealer can REFUSE to service the vehicle!
Flat 6 not a V-6. Subaru doesn't do V style motors.
The Imprezas are ok but if you wanted more upscale I think you would have to go to the Legacy wagon unless you did not mind the higher seating position of the Outback.
True... your paying 30,000 for a car.... but the salesman might be making a measly 100 bucks... so in reality... your hard earned money has no merit with him individually. Now... if there is some gross on the table... and its a 700 or 800 dollar commission... then you might get more flexibility with the dealer and the salesman.
This statement makes it clear that a good negotiator will not get the best price by purchasing over the internet.
Your typical floor salesman wants a shot at the gold ring, i.e. a sale closed at well above invoice (and probably with some other padding, a trade-in and a financing fee to boot).
A dealer would like you to define "service" as "not twisting your arm quite as much as would another salesman." And then, he will expect you to pay for the privilege. That may not be your idea of service, but given the long-standing tradition of the shell-game method of car sales, this attitude from dealers should not be surprising.
Advice to buyers: Your offer at around invoice will be much better received if you make the salesman work for it, in person. It is quite easy to ignore an email with a low-price offer, because the salesman has no sense of commitment to, or investment in, your offer. But if your salesman has invested some face time with you before he has received it, then that same offer will be a lot more appealing because of his desire to turn his time investment into a payoff.
Edmunds includes an article called Negotiating 101 that provides some very good advice. The author's recommendation of Herb Cohen's book You Can Negotiate Anything is also outstanding. Read these sources, and consider the lessons to be learned before investing your hopes into buying a car online -- read between the lines, and it will be obvious why an online purchase would yield only a mediocre price at best.
... **OUR 30K is still 30K, no matter what YOUR cut of it is. So, in reality, YOU have no merit with the guy dropping 30K on a car.** ============================
We keep saying $30k here and using that as the example ..... true, it's your $30k .. but it's how much actual profit the dealer has to make on each and every deal to make it even worth his while ...
Dealers can't sell 150 vehicles a month for $200 over invoice and still keep the doors open .. they use an average, and most dealers are watching the average on a daily and per unit basis ... depending on the dealer and the product, most dealers need to net at least $1,500 across the board .. that's why some buyers get insulted when their offer get's refused ... some get sold for $600 over, some get sold $1,900 and the beat goes on.
We keep using the salesman in the example .. but dealers/GM's, sales managers, etc have the final say .. most times, the sales person has very little to say on the final price ...
... **Toyota told me (through an e-mail)that their dealers can REFUSE to perform warranty work on vehicles purchased from other Toyota dealers. In other words, I can get a great buy on a Toyota from a dealer 50 miles away and my local Toyota dealer can REFUSE to service the vehicle! ..**
Dealers (not just Toyota) can refuse service at anytime ....
Think about it ... you have 20 vehicles that have been dropped off for service .. 18 are loyal customers and 2 of them are out of state or they were bought from the dealer 15 miles away --- if it isn't emergency service, who's vehicle would you work on first.?
I agree with Isell, Subaru is probably the way to go. Their largest demographic is the medical profession. Have her look at the Outback line first, maybe a Forester LL Bean edition too.
... figure a "best price" to shoot back... then repeat the process for the other 14 leads. Roughly, its about 30 minutes per lead.
You need to get more organized...I take ten minutes per lead, tops. Follow ups average less than a minute per lead per day. I give my best price on the first volley, and stick to it. Hit or miss, then move on...these people are doing me a favor by not coming in to price shop.
I like it as a customer, too. No "I show you when you show me", "Come here and we talk it over", etc. You give your price and move one. You also learn quickly if your best is competitive or not (by reactions of the leads), which allows a fairly quick adjustments, as well.
As for "showroom" leads, only certain percentage will be finalized, just smaller (even significantly). However, if you take this approach, amount of effort is also proportionally smaller, as there are no hours of fruitless grinding.
It just requires a different mindset, that's all. You need to let go and move one much quicker than in the showroom.
Think about it ... you have 20 vehicles that have been dropped off for service .. 18 are loyal customers and 2 of them are out of state or they were bought from the dealer 15 miles away --- if it isn't emergency service, who's vehicle would you work on first.?
Assuming scheduled maintenance, the one which is getting the most service done (more profit) regardless of where it was purchased. No?
Yes, but when something goes wrong with your vehicle- you will be in a service department which may as well be 100 miles from the sales floor.
I mean how often do you see the sales guy after the deal goes down?
I guess we are a little different in that our Service waiting area is in the New Car Showroom on the other end of service so they see us everytime they come in for service. We sell just over 200 cars (New) a month on average and have a retention rate in the 80% range. One reason are customers are treated different is because we are 100% employee owned and the customer never has to meet the sales manager in ANY part of the negotiation. We also tell them when they do have a problem we won't be the ones running in the opposite direction when they need help.
have always thought and it has been confirmed here, buy your car where you get the best deal, take your car to where you get the best service
what about all the horror stories you hear about service departments who treat you like crap when you haven't bought the car from their dealership. Or in some cases where you are helped but the people who bought their car from the dealership get first priority over you. Just wondering?
We are very similar to you guys. Our service desk is on the other side of the showroom and our lounge is directly across from my office.
If there is no one using the lounge I will use it as a closing room. My office is nice but not nearly as nice as sitting in our lounge with big leather chairs, a cappichino in your hand with a a nice coffee table surrounded by Land Rover and British memorobilia.
We normaly bypass the managers too except for the final up or down vote of the numbers I have worked out with them. Unless someone is being difficult and I just can't make any progress no one meets a manager until the deal is done and they just shake their hand to congragulate them on their new purchase.
To be honest, I have never had an issue, perhaps others has. When I had my Olds, I went to a service center near my office. With Honda, we moved about 25 miles. And now use the service center close to our house.
There is two schools of thougth here, perhaps some service centers use this as a way to generate new car sales, if you are happy with the service here - then maybe you will buy your next car here.
My guess is not all service centers operate the same - I am sure the "horror" stories are true. My guess is that the service centers who focus on providing "service" rather than were you bought the car from ar the ones you want to associate yourselves with anyway *shrugs*
Personally, I have never had any trouble getting my Nissan serviced at a local dealer. I bought it out of state. We go to the dealer for everything (even oil changes), and I think after five years, we are regarded as loyal service customers. Never a problem and they do a good job at a fair price.
Around here, there are at least 3 Nissan dealerships within reasonable driving distance, and several more if I want to drive a bit further. If I weren't treated well where we get service, I'd move on to someone else.
Only place I won't go to is the place where I bought my very first Nissans; they overcharged me then, many years ago when I was young and naive, and last I looked, they were still putting "ADM" stickers on their new cars. I refuse to have anything to do with them. Shows how long a negative experience can have repercussions for the customer.
Maybe there are "horror stories" about dealers that treat you like crap when you come in for service if you haven't bought a car there. If they do, then they've lost you for future sales, too. Doesn't make sense to me; a smart dealer wants to retain you for service (and isn't that where a lot of profit is made?), and try to retain for your next car purchase, too.
Even though I prefer to do my initial exploratory questions by e-mail, if I were treated well at the service dept. of a particular dealer I would certainly give them a chance to make a sale in person come the time to buy a new car (assuming I wanted the same brand again).
(Golic slipped - yup, I agree completely with your last paragraph.)
I think one thing that plays into whether or not a dealer will service a car that wasn't purchased from them has to do with the customer's attitude. I service my car at a different dealer than the one I purchased from.
My first service visit to them was for an oil change and a tire rotation. They were very pleasant to deal with, and did the job quickly. A few days later, I get a survey in the mail about the experience. I gave them straight 10s (1-10 scale) as I felt they deserved those marks. My next visit to them was for another oil change and a state inspection. They recognized me immediately when I walked in (mind you I had only been there once before), thanked me for the great survey response, and did the oil change and state inspection free of charge (saved me $50).
I continue to use these guys for all of my service as they are priced very competitively with even the independant shops, and do a good job. I have also had them do a few warranty things, and they always get me in next day, and complete the work quickly - and give me a loaner. I have now been using them for 2 years, and things have gone really well. I continue to reward them on surveys (because they do a good job, not because I am looking for a freebie), and they do periodically throw in maintenance items for free (tire rotations / oil changes). At Christmas, I do remember my service advisor, and typically give him a gift certificate to a local eating establishment.
My point is that they realize that I will be a loyal customer to their service department as long as they continue to treat me well. Honestly, I don't blame dealers from turning away customers that come in demanding warranty work (that didn't purchase from them), that have an axe to grind, or that have killed them on customer surveys in the past (for no good reason).
OUR 30K is still 30K, no matter what YOUR cut of it is. So, in reality, YOU have no merit with the guy dropping 30K on a car.
You're right - it will still be your $30K because they'll skip your email and sell to the next guy offering $30.5K. I'm sure you would be able to get that $30K price, but don't get huffy because you'll have to work for it (like emailing 15 dealers or going in person to 5 or whatever).
Personally, I'm willing to leave $200-300 on the table just to avoid the hassle, but that's me.
This whole thing reminds me of the travel agent business. Look what the internet did to that - especially after the airlines went to direct sales. If you talked to many travel agents back then, they sounded just as confident as some of the sales people posting here. Now, if you can find a travel agent still in business, ask them whether the "Mountain came to Mohammed or Mohammed came to the mountain."
With the internet, I suspect that new car salespeople are in for a drastic change in "business model" in the next 5 years. Some dealer is going to figure out that it's better to sell more cars at a lower margin over the internet, alter the salesperson compensation scheme accordingly and - viola - the discipline that is the free market will eventually drive other dealers to the same business model.
We are merely in the transition time between what was and what will be.
With regard to the "service" issue, let's be real. Few dealers would invoke such a "right" (not to service a car they didn't sell). For several reasons. Such as, the hourly rate paid by the manufacturer to the dealer for warranty repairs is frequently higher than the "posted hourly rate." When I worked at a Ford Dealership the "posted hourly rate" (charged to paying customers) was something like $60 per hour, but the "warranty rate" - put on the books and charged to the manufacturer - was something like $65 to $70 per hour.
There's also the "consumer confidence" problem. One reason that manufacturers *use* the dealer network model is that it gives consumers - in a very mobile society - confidence that if their car breaks down in East Egypt, they can still get it repaired even if they bought the car from West Hades dealer. Heck, smaller manufacturers like Kia have to cut the prices on their cars (vis a vis competitors) *because* most towns don't have Kia a dealership in the event of a breakdown. So, while dealers may *tolerate* the occassional dealer refusal to service a customer here or there - they won't tolerate it as "standard operating policy."
But, more to the point, has anyone ever actually negotiated a *lower* price on a new car with salesman/sales manager because the salesman/sales manager planned on recouping the "lost sales money" in service work (be it warranty related or customer paid)???
Of course not. Because the salesman doesn't make money on the service end . . . but the *dealer* does.
If a salesman doesn't factor the "service end" in when making the deal, why should the consumer??
With the internet, I suspect that new car salespeople are in for a drastic change in "business model" in the next 5 years. Some dealer is going to figure out that it's better to sell more cars at a lower margin over the internet, alter the salesperson compensation scheme accordingly and - viola - the discipline that is the free market will eventually drive other dealers to the same business model.
That's a well constructed analysis, I just don't know if I agree with it.
I'm wondering whether the opposite situation may occur, i.e. the dealerships come to believe that the traditional sales model may actually be more profitable. Or in the alternative, they may accept that some people will insist on buying online, but try to limit its appeal so that more consumers either give up on online buying entirely, or else accept that the internet will be used just for establishing initial contact, rather than close the deal. The would-be online buyers won't like this at all, but their options might be limited if dealers conclude that it won't generate high enough volumes to offset the lower margins.
If a salesman doesn't factor the "service end" in when making the deal, why should the consumer??
The dealers don't want to hear it, but I've been consistently saying that their definition of "service" clashes with the use of a true internet sales model (not just the internet as a lead generator, but as a way to close transactions.) If I was running the dealership and wanted to steer people toward internet deals, I'd tout it as a service-oriented, no-haggle model that offers some unique benefits not available to the traditional customer, whether that's home delivery or whatever other stuff that customers might like.
The dealers don't want to hear it, but I've been consistently saying that their definition of "service" clashes with the use of a true internet sales model (not just the internet as a lead generator, but as a way to close transactions.) If I was running the dealership and wanted to steer people toward internet deals, I'd tout it as a service-oriented, no-haggle model that offers some unique benefits not available to the traditional customer, whether that's home delivery or whatever other stuff that customers might like.
Yeah, but given (and it is a given) that you can't sustain a dealership by blowing all your cars out at near-invoice, how would you keep the lights on with your model? Would your no-haggle price be higher than your competitors, but you would offer additional services (like all-email trans, home delivery)? You would still lose the price-only people.
Yeah, but given (and it is a given) that you can't sustain a dealership by blowing all your cars out at near-invoice, how would you keep the lights on with your model? Would your no-haggle price be higher than your competitors, but you would offer additional services (like all-email trans, home delivery)? You would still lose the price-only people.
If I was the dealer, I don't think that losing the price-oriented buyer from the internet model would be so bad. That's a customer who is better dealt with in the showroom.
I look at it this way -- from the dealer's standpoint, dealers have intentionally made the buying process complex and difficult for the average consumer. The basic premise is that you make the process painful for the consumer, let the consumer know that it is difficult (word of mouth helps), then "reward" the buyer with reduced pain or the promise of reduced pain in exchange for a higher price.
The shrewd negotiator understands this system, works it to his/her advantage, and pays a very low price...but most customers aren't shrewd negotiators, and will pay more (plus give more profit in the form of trade-in, financing fees, pack, etc.). So at this point, there isn't much incentive for the dealer to give away the money via an anonymous email, when that low price has generally been granted only after the dealer exhausts his bag of tricks with the shrewd customer.
If I was a dealer, I'd take advantage of that fear of hassle that many consumers have -- after all, the dealers created it, they may as well use it to their advantage. The majority of buyers aren't shrewd negotiators, and will appreciate anything that makes the purchase and ownership experience better...but that definition of "better" probably needs to be extended beyond what salesmen typically think today if it is to resonate with the prospective online customer.
If that's the case, then the low-price buyers will simply have to manage the traditional system and work with it. And if they are really that shrewd and savvy, then they have probably already figured out that the internet is not the low price option, and won't expect much from it.
The ones who are price shopping in the belief that buying a car is like shopping at Amazon may be disappointed to find that the traditional car dealer has absolutely no desire to do business like that, and will charge a signficant premium for the privilege of doing so. For those who are truly price conscious, it won't be worth the effort of dealing with the internet with false expectations, only to find that it's the same old, same old.
I'm wondering whether the opposite situation may occur, i.e. the dealerships come to believe that the traditional sales model may actually be more profitable. Or in the alternative, they may accept that some people will insist on buying online, but try to limit its appeal so that more consumers either give up on online buying entirely, or else accept that the internet will be used just for establishing initial contact, rather than close the deal. The would-be online buyers won't like this at all, but their options might be limited if dealers conclude that it won't generate high enough volumes to offset the lower margins.
I'm sure there will be some "high end" vehicle dealers who will do this . . . much like there are "high end" luxury good sellers who won't mark down to Wal-Mart prices.
But, for the "average car dealer" selling the low to mid-level vehicle, I don't see how they can resist the trend that's at work everywhere else - from toothpaste to hot tubs.
The internet now gives the "average consumer" access to actual paid prices for new automobiles - something that has never before existed.
Right now, that price information comes through consumer self-reporting or "aggregated experience/estimates" like Edmunds or car brokers, or similar methods. In the future, the information on prices paid might come from even MORE reliable sources - such as the ability to data mine individual consumer sales from new car lender records or, even, the State Motor Vehicle Records for states that impose a sales tax on motor vehicles.
What was once the sole province of the car dealer (how much did customer A, B, and C pay for car X) is now information in the hands of the consumer. Which means the consumer now has the ability to (relatively quickly and cheaply) compare price differences.
Why would a consumer - be it via internet or in face-to-face negotiations - pay $A for car X when "everyone else" -as disclosed by internet research - is paying only $B??
The dealer's ability to exploit consumers continues to exist now because there are still people who aren't familiar with or comfortable with the internet,etc. That situation is changing and will continue to change.
Consumers soon will have the ability - with their cellphones - to scan the barcodes of items at BigBox Store X and see what that very same item is selling for at Wal-Tarjay down the street. Once consumers get acclimated to the ability to "comparison shop" from the comfort of their living room (or, even, the the floor of a competitor's shop), they are likely to demand the same at the new car dealership.
The only real question, then is *whether* the consumer will or will not use that price information to exploit the price differences that exists on cars. To date, in every other arena, it appears consumers are so willing. From a dealer's perspective, IMO, it's only a question of when, not if the margins on car sales will become smaller.
I think that what "smaller margin" implies, then, is a different - more efficient - sales method at the dealer level.
...there are trade-in values and financing issues, I don't think you're going to see a more efficient sales method. The internet buyer with perfect credit and no trade is a rare bird. Many times the big issue is not the sales price, but trying to convince the customer that their 10 year old miled up trade-in isn't worth $5K just because KBB said so, or trying to get them financed when they're $6000 upside-down on their current ride. Or if their credit is in the toilet.
That's where it all falls apart. When buying a computer online (for example), Dell doesn't have to worry what condition your current computer is in, or if you still owe $500 on it, or whatever.
As long as there are trade-in values and financing issues, I don't think you're going to see a more efficient sales method.
I would agree with that, albeit I will analyze it more harshly in terms of how the dealer profits from the the "ideal" transaction.
If a dealers profit came solely from selling you a new car that you wanted at some reasonable margin, then the process would already be a lot simpler than it is today. There are several reasons that the process isn't all that simple:
-Inventory: Dealers don't want just to sell you a car, but they generally prefer to sell their cars, cars in their current inventory. (Of course, they'll sell you whatever they can, but on the whole, they are most motivated to sell what's on hand.) That means that a dealer wants an opportunity to steer you toward a car that he wants to sell, rather than get you focused on buying the "ideal" car that may not be parked on his lot. This may also mean selling you a used car, which will probably produce a higher margin than would a new car, even after the holdback, etc.
-Upsell: Dealers would love to load your car with more stuff than you may have originally wanted, particularly if that stuff is either in car parked on the lot or can be installed prior to the dealership. The upsell benefit also applies to extended warranties, fabric protector, etc., etc.
-Financing: Dealers make fees from dealer-originated loans or leases, and would like the commission from that component of the transaction.
-Trade-in: A dealer would love to get a good quality trade-in at a low price, and then resell that trade-in at a significant markup. Chances are good that the margin earned from selling this trade-in will actually be higher than would be earned from the sale of a new car.
The internet transaction will probably not create all that much opportunity in these other areas most of the time, so it isn't all that appealing in the scheme of things. When you consider that these areas can provide most of the profit in a typical sale, then the online model becomes even less appealing.
To use the example, Dell is trying to sell one item (the PC), and would be pleased to layer on some money from warranty and accessories, but doesn't earn enough from their sale to do the hard sell with the customer. The car dealer earns a fair bit of margin on all of these things, which incentivizes him to push for them all. That pushing is much more easily done in person than online.
I started selling cars about 10 years ago. When one of the first companies started providing "leads" (Microsoft/Car Point) I saw the writing on the wall immediately.
Since that time I moved to the East coast and hooked up with a Honda dealership. I started their Internet Dept 5 1/2 yrs ago. When I first started, the fellow who did this the previous year before I took it over did 38 cars.
We started from the ground and built up with a "process" which minimizes the hassle and customers time in the dealership...and obvoiusly the pricing structure.
How has it worked? Well, I now have 4 guys that work for me here (I am still selling, but minimally now) We did 400 cars last year...purely through the Internet. Thats what we can prove, how many others that "slip through?" Probably a lot.
I figure that within 5 years 75% of our dealership will be Internet Sales. That's the way it's heading now.
two points to add, my guess is Dell's margins are far greater than that of any car dealer and than sell a heck of alot more computers than cars would be my uneducated guess.
Not sure all dealers "love" the trade-in. An example I am thinking, say some one comes in to buy a Land Rover, wants to splurge and is trading in- 1990 OLDBrand SUV with 95K miles on it. My guess is dealer only takes trade in as a convenience to buyer and as he is driving off the front lot the car is going out the back to auction.
I saw the shift too. MUCH different that eight years ago when the vast majority of "leads" that came through the internet were worthless.
Still, a lot of customers don't use the internet or perfer the "old fashioned" way of buying cars. I don't see that ever changing.
But, using the internet doesn't have to equate to "buying cheap". Cars will always sell for what the market dictates. One guy/gal here constantly preaches that making a profit is a bad thing. He/she thinks every deal should be a 200.00 over invoice deal. He/she thinks it's terrible that dealers actually make a profit on the used cars that they sell and on the products the finance department sells.
400 cars with five people??? It sounds like my department jut might be bit too mean and lean!
"my guess is Dell's margins are far greater than that of any car dealer"
Dell's margins are about 6.5% on PC's which would be close to $2000 on a $30000 car.
"Not sure all dealers "love" the trade-in."
I would say that 10% was on the high side for the trades we actually kept and turned around. The rest was whole-saled out for pretty much what it cost us to take them in trade.
Very good point. Many of our trades just go away to auction. We generaly only keep two makes of vehicles on our used car lot and then we only keep them if they are in warranty.
Any other make will probably go to auction unless it is still under warranty then it might go to another dealership in our autogroup.
Sure sometimes we make money at auction but many times we lose money too. Just as an example we took a late 90's BMW sedan in trade for a land rover. The car was a TMU but we told the guy if he could bring in records to prove its mileage we would give him another 500 bucks. He brought in the records and we did the deal.
He drives his BMW in picks up his land rover and the next day one of our wholesalers comes to pick up the car. I give him the key and he comes back to ask me what the trick to start it is. I go huh started fine yesterday. I call up the customer and ask if there were any tricks to starting it. He goes no never had a problem with it. The ignition lock just gave up the coast right that second. If it had held out another day we would have been ok. Instead we had to have the car flatbedded out and get 700 dollars less for it then we had planned. All in and all I think we lost almost a 1,000 dollars on the car.
One guy/gal here constantly preaches that making a profit is a bad thing. He/she thinks every deal should be a 200.00 over invoice deal. He/she thinks it's terrible that dealers actually make a profit on the used cars that they sell and on the products the finance department sells.
When did I ever say this? I'm curious to know whether that's a deliberate misstatement on your part, because I made my points fairly clear.
What I said was is that I won't pay very much, and anyone who knows how to negotiate won't have to, either.
In fact, I have something in common with the sales managers at your dealership -- I actually depend on the overpayers to provide you with the margins that I won't provide, which in turn help to make my deals work.
I'm actually dreading the internet model, because I will probably have to pay more if it becomes the dominant model. Again, I'm sure that most savvy buyers will realize fairly quickly that the internet is at best a mediocre price option, not a bargain hunter's paradise.
Comments
In the area of interent leads, many consumers think that since they sent an e-mail asking for a certain dealers "best price"... that they are "entitled" to a response. I ask you to do one thing... step out of the consumers shoes... and step inside a salesman.
Everyday, 10 - 20 leads are generated and most of them are consumers asking for best price. I large majority of these consumers have 1) never driven the vehicle 2)Have no idea what options or packages they want 3)Have no idea if they want to lease, purchase, money down, term, miles, etc.
Now.. every salesman is paid on comission. Just like you earn your money, he has to earn his. Now... he could easily send out 20 responses a day... chase a wild goose... maybe close 20% of those leads... but they are all $100 mini commissions. Or... he could simply ignore the e-mails that scream "shopper"... or "Mini Commission"... or the guy who is simply asking for a price for sh!ts and giggles.
I agree.... your money is hard earned.... but so is the salesman. We hear it everyday that such and such a customer feels ripped off because he found someone there neighborhoods over who is paying $4 less a month.
To put it simply... you as the consumer have the right to shop. You have the right to try and get your best deal for the product in which you are buying. But... don't take offense when a dealer decides not to chase the wild goose... or simply refuses to play your game of cat and mouse. There is NO law saying a dealer has to sell you a car... and at any point... he can ask you to leave. Remember... True... your paying 30,000 for a car.... but the salesman might be making a measly 100 bucks... so in reality... your hard earned money has no merit with him individually. Now... if there is some gross on the table... and its a 700 or 800 dollar commission... then you might get more flexibility with the dealer and the salesman.
Lastly... in amazes me how many of you complain about dealer practices.... but yet... your quick to pit dealer against dealer... committ to numbers than backaway....be decieftful about financing, trades, etc. If you want a honest salesman, an honest dealership.... be honest yourself. after you get numbers... check him with one dealer. If the payments are the same... or reletively close... you have a deal.
Its not rocket science... everyone deserves to make profit... and at the same time... get a deal.
docyazz@yahoo.com is what you gave me.
You see you do get business from them that's why you take them. If you pick and choose which emails to answer why does it AMAZE you that the consumer (the guy spending $$$) picks and chooses his deal?
In my opinion dealers need to differenciate themselves from other dealers. Customer service is not order taking it's about service. Give a customer a reason to pay a few hundred $$ more to you...come on think! Don't say because our service dept is open 7 days with nice clean loaners...stretch the boundaries a bit.
I disappear for a few years and you are in the first thread that I read upon my return. It's a small world.
Are you still setting the public right on the salesman customer issues?
I am back because my wifes 01 civic needs replacing, 125K miles and not one repair, just brakes and tires. I am so glad that you talked me out of buying the Focus for her!
I made the stupid aggreement with my 4th grade daughter that I would give her a car when she turned sixteen if she held straight A's for the 6 years. She turned 16 last week and I own her a car. So I am buying the wife a new car and kid get's the 01 civic.
The wife is a director for a local chain of hospitals so the civic doesn't fit the image. She wants an upscale wagon, But honda doesn't offer one.....What to do. She doesn't want an SUV so the CRV and Pilot are out. Any suggestions on another brand that stands the test of time for 30-45K, or better yet is Honda or Acura producing any wagons in 07?
Good to see you are still around
......Glenn
10-20 internet leads per day. Let's call it 15. You said close 20% of those leads. That's 3 closes per day. 3 closes per day makes 15 per week based on a five day work week. If they're all mini's that's $1500.00 per week or $75,000.00 per year!(based on a 50 week year)
Not bad scratch if we consider this doesn't include any walk in business or incentives you'd receive for selling 60+ cars per month!
Now all of this will be dispelled as being overly simplistic but I'm just working the numbers you provided. The point being, why make it so hard, shoot every email request a $200 over invoice price less incentives and be done with it. This kind of work could be done before lunch.
My point is.... it is simply not worht it at all. And... by me being honest and telling you guys that, you take offense to it. You fell like these dealers are providing bad customer service, and what not. But truly... there are hundreds of buyers every month, in every market. The bottom line is, what buyers can you attract to your dealership... have a vehicle they are interested in purchasing IN STOCK... and maximizing the profit.
Those types of interent leads are dead ends. Like I said... if you ever get them to your store, you typically do not have the vehcile they want because they packaged some whako options in it online, and there is NO profit.
My point is..... if you get ignored... just think of it as the salesman or the dealer is passing on "your deal"... just as you have the right to pass on "his deal".
I have no problem with this. Although you might want to send out a canned "sorry we couldn't help" type message.
One thing you are forgetting is that not everyone who submits an Inquiry is buying in 72 hours. Most of the inquiries are in the 90 day range. These leads have to be followed up on...test drives...trades appraised etc.
I expect my salespeople to make no less that 80K per year...and most of them do.
OUR 30K is still 30K, no matter what YOUR cut of it is. So, in reality, YOU have no merit with the guy dropping 30K on a car.
But I have bought 3 cars through the internet sales man now..and each time I still had to sit in the little cramped cube and do the back and forth over why are there wheel locks on the car *scowl* lets play the lease payment game *shudder*
I guess I could just be doing it wrong...of course i am sure if I call up and take the car for sticker and write a check..the process would be much quicker.
Don't forget that a bunch of leads are just people looking at cars for fun online and think it would be interesting to find out how much they could actually buy it for... They aren't even in the market for a car, but they just like messing around online looking at cars...
a good buying experience shouldn't be a bonus, it should be the bare minimum
I absolutely agree and I think most customers will pay a little more to be treated that way.
I mean how often do you see the sales guy after the deal goes down?
I have always thought and it has been confirmed here, buy your car where you get the best deal, take your car to where you get the best service. *shrugs*
I remember you! You were always one of the "good guys".
Yeah, I still hang around. A glutton for punishment I suppose. I've given up trying to educate people. They know more than I do and they get nasty when I try to gently show them the reality of the business.
I have no idea what direction to send you for a station wagon that's "upscale" Volvo and Audi's come to mind but the reliability problems and cost of repairs would make me stay FAR away from one of those. Some of the Subarus are pretty nice.
Yor daughter sounds like a winner!
I was thinking of maybe an Outback. You can get a V-6 in these now and they are pretty nice inside.
Too bad they ruined the looks when they redesigned them though.
Toyota told me(through an e-mail)that their dealers can REFUSE to perform warranty work on vehicles purchased from other Toyota dealers. In other words, I can get a great buy on a Toyota from a dealer 50 miles away and my local Toyota dealer can REFUSE to service the vehicle!
Toyota told me (through an e-mail)that their dealers can REFUSE to perform warranty work on vehicles purchased from other Toyota dealers. In other words, I can get a great buy on a Toyota from a dealer 50 miles away and my local Toyota dealer can REFUSE to service the vehicle!
The Imprezas are ok but if you wanted more upscale I think you would have to go to the Legacy wagon unless you did not mind the higher seating position of the Outback.
This statement makes it clear that a good negotiator will not get the best price by purchasing over the internet.
Your typical floor salesman wants a shot at the gold ring, i.e. a sale closed at well above invoice (and probably with some other padding, a trade-in and a financing fee to boot).
A dealer would like you to define "service" as "not twisting your arm quite as much as would another salesman." And then, he will expect you to pay for the privilege. That may not be your idea of service, but given the long-standing tradition of the shell-game method of car sales, this attitude from dealers should not be surprising.
Advice to buyers: Your offer at around invoice will be much better received if you make the salesman work for it, in person. It is quite easy to ignore an email with a low-price offer, because the salesman has no sense of commitment to, or investment in, your offer. But if your salesman has invested some face time with you before he has received it, then that same offer will be a lot more appealing because of his desire to turn his time investment into a payoff.
Edmunds includes an article called Negotiating 101 that provides some very good advice. The author's recommendation of Herb Cohen's book You Can Negotiate Anything is also outstanding. Read these sources, and consider the lessons to be learned before investing your hopes into buying a car online -- read between the lines, and it will be obvious why an online purchase would yield only a mediocre price at best.
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We keep saying $30k here and using that as the example ..... true, it's your $30k .. but it's how much actual profit the dealer has to make on each and every deal to make it even worth his while ...
Dealers can't sell 150 vehicles a month for $200 over invoice and still keep the doors open .. they use an average, and most dealers are watching the average on a daily and per unit basis ... depending on the dealer and the product, most dealers need to net at least $1,500 across the board .. that's why some buyers get insulted when their offer get's refused ... some get sold for $600 over, some get sold $1,900 and the beat goes on.
We keep using the salesman in the example .. but dealers/GM's, sales managers, etc have the final say .. most times, the sales person has very little to say on the final price ...
Terry.
Dealers (not just Toyota) can refuse service at anytime ....
Think about it ... you have 20 vehicles that have been dropped off for service .. 18 are loyal customers and 2 of them are out of state or they were bought from the dealer 15 miles away --- if it isn't emergency service, who's vehicle would you work on first.?
Terry.
You need to get more organized...I take ten minutes per lead, tops. Follow ups average less than a minute per lead per day. I give my best price on the first volley, and stick to it. Hit or miss, then move on...these people are doing me a favor by not coming in to price shop.
As for "showroom" leads, only certain percentage will be finalized, just smaller (even significantly). However, if you take this approach, amount of effort is also proportionally smaller, as there are no hours of fruitless grinding.
It just requires a different mindset, that's all. You need to let go and move one much quicker than in the showroom.
2018 430i Gran Coupe
Assuming scheduled maintenance, the one which is getting the most service done (more profit) regardless of where it was purchased. No?
I mean how often do you see the sales guy after the deal goes down?
I guess we are a little different in that our Service waiting area is in the New Car Showroom on the other end of service so they see us everytime they come in for service. We sell just over 200 cars (New) a month on average and have a retention rate in the 80% range. One reason are customers are treated different is because we are 100% employee owned and the customer never has to meet the sales manager in ANY part of the negotiation. We also tell them when they do have a problem we won't be the ones running in the opposite direction when they need help.
have always thought and it has been confirmed here, buy your car where you get the best deal, take your car to where you get the best service
what about all the horror stories you hear about service departments who treat you like crap when you haven't bought the car from their dealership. Or in some cases where you are helped but the people who bought their car from the dealership get first priority over you. Just wondering?
If there is no one using the lounge I will use it as a closing room. My office is nice but not nearly as nice as sitting in our lounge with big leather chairs, a cappichino in your hand with a a nice coffee table surrounded by Land Rover and British memorobilia.
We normaly bypass the managers too except for the final up or down vote of the numbers I have worked out with them. Unless someone is being difficult and I just can't make any progress no one meets a manager until the deal is done and they just shake their hand to congragulate them on their new purchase.
There is two schools of thougth here, perhaps some service centers use this as a way to generate new car sales, if you are happy with the service here - then maybe you will buy your next car here.
My guess is not all service centers operate the same - I am sure the "horror" stories are true. My guess is that the service centers who focus on providing "service" rather than were you bought the car from ar the ones you want to associate yourselves with anyway *shrugs*
Around here, there are at least 3 Nissan dealerships within reasonable driving distance, and several more if I want to drive a bit further. If I weren't treated well where we get service, I'd move on to someone else.
Only place I won't go to is the place where I bought my very first Nissans; they overcharged me then, many years ago when I was young and naive, and last I looked, they were still putting "ADM" stickers on their new cars. I refuse to have anything to do with them. Shows how long a negative experience can have repercussions for the customer.
Maybe there are "horror stories" about dealers that treat you like crap when you come in for service if you haven't bought a car there. If they do, then they've lost you for future sales, too. Doesn't make sense to me; a smart dealer wants to retain you for service (and isn't that where a lot of profit is made?), and try to retain for your next car purchase, too.
Even though I prefer to do my initial exploratory questions by e-mail, if I were treated well at the service dept. of a particular dealer I would certainly give them a chance to make a sale in person come the time to buy a new car (assuming I wanted the same brand again).
(Golic slipped - yup, I agree completely with your last paragraph.)
My first service visit to them was for an oil change and a tire rotation. They were very pleasant to deal with, and did the job quickly. A few days later, I get a survey in the mail about the experience. I gave them straight 10s (1-10 scale) as I felt they deserved those marks. My next visit to them was for another oil change and a state inspection. They recognized me immediately when I walked in (mind you I had only been there once before), thanked me for the great survey response, and did the oil change and state inspection free of charge (saved me $50).
I continue to use these guys for all of my service as they are priced very competitively with even the independant shops, and do a good job. I have also had them do a few warranty things, and they always get me in next day, and complete the work quickly - and give me a loaner. I have now been using them for 2 years, and things have gone really well. I continue to reward them on surveys (because they do a good job, not because I am looking for a freebie), and they do periodically throw in maintenance items for free (tire rotations / oil changes). At Christmas, I do remember my service advisor, and typically give him a gift certificate to a local eating establishment.
My point is that they realize that I will be a loyal customer to their service department as long as they continue to treat me well. Honestly, I don't blame dealers from turning away customers that come in demanding warranty work (that didn't purchase from them), that have an axe to grind, or that have killed them on customer surveys in the past (for no good reason).
You're right - it will still be your $30K because they'll skip your email and sell to the next guy offering $30.5K. I'm sure you would be able to get that $30K price, but don't get huffy because you'll have to work for it (like emailing 15 dealers or going in person to 5 or whatever).
Personally, I'm willing to leave $200-300 on the table just to avoid the hassle, but that's me.
With the internet, I suspect that new car salespeople are in for a drastic change in "business model" in the next 5 years. Some dealer is going to figure out that it's better to sell more cars at a lower margin over the internet, alter the salesperson compensation scheme accordingly and - viola - the discipline that is the free market will eventually drive other dealers to the same business model.
We are merely in the transition time between what was and what will be.
With regard to the "service" issue, let's be real. Few dealers would invoke such a "right" (not to service a car they didn't sell). For several reasons. Such as, the hourly rate paid by the manufacturer to the dealer for warranty repairs is frequently higher than the "posted hourly rate." When I worked at a Ford Dealership the "posted hourly rate" (charged to paying customers) was something like $60 per hour, but the "warranty rate" - put on the books and charged to the manufacturer - was something like $65 to $70 per hour.
There's also the "consumer confidence" problem. One reason that manufacturers *use* the dealer network model is that it gives consumers - in a very mobile society - confidence that if their car breaks down in East Egypt, they can still get it repaired even if they bought the car from West Hades dealer. Heck, smaller manufacturers like Kia have to cut the prices on their cars (vis a vis competitors) *because* most towns don't have Kia a dealership in the event of a breakdown. So, while dealers may *tolerate* the occassional dealer refusal to service a customer here or there - they won't tolerate it as "standard operating policy."
But, more to the point, has anyone ever actually negotiated a *lower* price on a new car with salesman/sales manager because the salesman/sales manager planned on recouping the "lost sales money" in service work (be it warranty related or customer paid)???
Of course not. Because the salesman doesn't make money on the service end . . . but the *dealer* does.
If a salesman doesn't factor the "service end" in when making the deal, why should the consumer??
That's a well constructed analysis, I just don't know if I agree with it.
I'm wondering whether the opposite situation may occur, i.e. the dealerships come to believe that the traditional sales model may actually be more profitable. Or in the alternative, they may accept that some people will insist on buying online, but try to limit its appeal so that more consumers either give up on online buying entirely, or else accept that the internet will be used just for establishing initial contact, rather than close the deal. The would-be online buyers won't like this at all, but their options might be limited if dealers conclude that it won't generate high enough volumes to offset the lower margins.
If a salesman doesn't factor the "service end" in when making the deal, why should the consumer??
The dealers don't want to hear it, but I've been consistently saying that their definition of "service" clashes with the use of a true internet sales model (not just the internet as a lead generator, but as a way to close transactions.) If I was running the dealership and wanted to steer people toward internet deals, I'd tout it as a service-oriented, no-haggle model that offers some unique benefits not available to the traditional customer, whether that's home delivery or whatever other stuff that customers might like.
Yeah, but given (and it is a given) that you can't sustain a dealership by blowing all your cars out at near-invoice, how would you keep the lights on with your model? Would your no-haggle price be higher than your competitors, but you would offer additional services (like all-email trans, home delivery)? You would still lose the price-only people.
If I was the dealer, I don't think that losing the price-oriented buyer from the internet model would be so bad. That's a customer who is better dealt with in the showroom.
I look at it this way -- from the dealer's standpoint, dealers have intentionally made the buying process complex and difficult for the average consumer. The basic premise is that you make the process painful for the consumer, let the consumer know that it is difficult (word of mouth helps), then "reward" the buyer with reduced pain or the promise of reduced pain in exchange for a higher price.
The shrewd negotiator understands this system, works it to his/her advantage, and pays a very low price...but most customers aren't shrewd negotiators, and will pay more (plus give more profit in the form of trade-in, financing fees, pack, etc.). So at this point, there isn't much incentive for the dealer to give away the money via an anonymous email, when that low price has generally been granted only after the dealer exhausts his bag of tricks with the shrewd customer.
If I was a dealer, I'd take advantage of that fear of hassle that many consumers have -- after all, the dealers created it, they may as well use it to their advantage. The majority of buyers aren't shrewd negotiators, and will appreciate anything that makes the purchase and ownership experience better...but that definition of "better" probably needs to be extended beyond what salesmen typically think today if it is to resonate with the prospective online customer.
If that's the case, then the low-price buyers will simply have to manage the traditional system and work with it. And if they are really that shrewd and savvy, then they have probably already figured out that the internet is not the low price option, and won't expect much from it.
The ones who are price shopping in the belief that buying a car is like shopping at Amazon may be disappointed to find that the traditional car dealer has absolutely no desire to do business like that, and will charge a signficant premium for the privilege of doing so. For those who are truly price conscious, it won't be worth the effort of dealing with the internet with false expectations, only to find that it's the same old, same old.
I'm sure there will be some "high end" vehicle dealers who will do this . . . much like there are "high end" luxury good sellers who won't mark down to Wal-Mart prices.
But, for the "average car dealer" selling the low to mid-level vehicle, I don't see how they can resist the trend that's at work everywhere else - from toothpaste to hot tubs.
The internet now gives the "average consumer" access to actual paid prices for new automobiles - something that has never before existed.
Right now, that price information comes through consumer self-reporting or "aggregated experience/estimates" like Edmunds or car brokers, or similar methods. In the future, the information on prices paid might come from even MORE reliable sources - such as the ability to data mine individual consumer sales from new car lender records or, even, the State Motor Vehicle Records for states that impose a sales tax on motor vehicles.
What was once the sole province of the car dealer (how much did customer A, B, and C pay for car X) is now information in the hands of the consumer. Which means the consumer now has the ability to (relatively quickly and cheaply) compare price differences.
Why would a consumer - be it via internet or in face-to-face negotiations - pay $A for car X when "everyone else" -as disclosed by internet research - is paying only $B??
The dealer's ability to exploit consumers continues to exist now because there are still people who aren't familiar with or comfortable with the internet,etc. That situation is changing and will continue to change.
Consumers soon will have the ability - with their cellphones - to scan the barcodes of items at BigBox Store X and see what that very same item is selling for at Wal-Tarjay down the street. Once consumers get acclimated to the ability to "comparison shop" from the comfort of their living room (or, even, the the floor of a competitor's shop), they are likely to demand the same at the new car dealership.
The only real question, then is *whether* the consumer will or will not use that price information to exploit the price differences that exists on cars. To date, in every other arena, it appears consumers are so willing. From a dealer's perspective, IMO, it's only a question of when, not if the margins on car sales will become smaller.
I think that what "smaller margin" implies, then, is a different - more efficient - sales method at the dealer level.
That's where it all falls apart. When buying a computer online (for example), Dell doesn't have to worry what condition your current computer is in, or if you still owe $500 on it, or whatever.
I would agree with that, albeit I will analyze it more harshly in terms of how the dealer profits from the the "ideal" transaction.
If a dealers profit came solely from selling you a new car that you wanted at some reasonable margin, then the process would already be a lot simpler than it is today. There are several reasons that the process isn't all that simple:
-Inventory: Dealers don't want just to sell you a car, but they generally prefer to sell their cars, cars in their current inventory. (Of course, they'll sell you whatever they can, but on the whole, they are most motivated to sell what's on hand.) That means that a dealer wants an opportunity to steer you toward a car that he wants to sell, rather than get you focused on buying the "ideal" car that may not be parked on his lot. This may also mean selling you a used car, which will probably produce a higher margin than would a new car, even after the holdback, etc.
-Upsell: Dealers would love to load your car with more stuff than you may have originally wanted, particularly if that stuff is either in car parked on the lot or can be installed prior to the dealership. The upsell benefit also applies to extended warranties, fabric protector, etc., etc.
-Financing: Dealers make fees from dealer-originated loans or leases, and would like the commission from that component of the transaction.
-Trade-in: A dealer would love to get a good quality trade-in at a low price, and then resell that trade-in at a significant markup. Chances are good that the margin earned from selling this trade-in will actually be higher than would be earned from the sale of a new car.
The internet transaction will probably not create all that much opportunity in these other areas most of the time, so it isn't all that appealing in the scheme of things. When you consider that these areas can provide most of the profit in a typical sale, then the online model becomes even less appealing.
To use the example, Dell is trying to sell one item (the PC), and would be pleased to layer on some money from warranty and accessories, but doesn't earn enough from their sale to do the hard sell with the customer. The car dealer earns a fair bit of margin on all of these things, which incentivizes him to push for them all. That pushing is much more easily done in person than online.
I started selling cars about 10 years ago. When one of the first companies started providing "leads" (Microsoft/Car Point) I saw the writing on the wall immediately.
Since that time I moved to the East coast and hooked up with a Honda dealership. I started their Internet Dept 5 1/2 yrs ago. When I first started, the fellow who did this the previous year before I took it over did 38 cars.
We started from the ground and built up with a "process" which minimizes the hassle and customers time in the dealership...and obvoiusly the pricing structure.
How has it worked? Well, I now have 4 guys that work for me here (I am still selling, but minimally now) We did 400 cars last year...purely through the Internet. Thats what we can prove, how many others that "slip through?" Probably a lot.
I figure that within 5 years 75% of our dealership will be Internet Sales. That's the way it's heading now.
Not sure all dealers "love" the trade-in. An example I am thinking, say some one comes in to buy a Land Rover, wants to splurge and is trading in- 1990 OLDBrand SUV with 95K miles on it. My guess is dealer only takes trade in as a convenience to buyer and as he is driving off the front lot the car is going out the back to auction.
Still, a lot of customers don't use the internet or perfer the "old fashioned" way of buying cars. I don't see that ever changing.
But, using the internet doesn't have to equate to "buying cheap". Cars will always sell for what the market dictates. One guy/gal here constantly preaches that making a profit is a bad thing. He/she thinks every deal should be a 200.00 over invoice deal. He/she thinks it's terrible that dealers actually make a profit on the used cars that they sell and on the products the finance department sells.
400 cars with five people??? It sounds like my department jut might be bit too mean and lean!
Dell's margins are about 6.5% on PC's which would be close to $2000 on a $30000 car.
"Not sure all dealers "love" the trade-in."
I would say that 10% was on the high side for the trades we actually kept and turned around. The rest was whole-saled out for pretty much what it cost us to take them in trade.
Any other make will probably go to auction unless it is still under warranty then it might go to another dealership in our autogroup.
Sure sometimes we make money at auction but many times we lose money too. Just as an example we took a late 90's BMW sedan in trade for a land rover. The car was a TMU but we told the guy if he could bring in records to prove its mileage we would give him another 500 bucks. He brought in the records and we did the deal.
He drives his BMW in picks up his land rover and the next day one of our wholesalers comes to pick up the car. I give him the key and he comes back to ask me what the trick to start it is. I go huh started fine yesterday. I call up the customer and ask if there were any tricks to starting it. He goes no never had a problem with it. The ignition lock just gave up the coast right that second. If it had held out another day we would have been ok. Instead we had to have the car flatbedded out and get 700 dollars less for it then we had planned. All in and all I think we lost almost a 1,000 dollars on the car.
When did I ever say this? I'm curious to know whether that's a deliberate misstatement on your part, because I made my points fairly clear.
What I said was is that I won't pay very much, and anyone who knows how to negotiate won't have to, either.
In fact, I have something in common with the sales managers at your dealership -- I actually depend on the overpayers to provide you with the margins that I won't provide, which in turn help to make my deals work.
I'm actually dreading the internet model, because I will probably have to pay more if it becomes the dominant model. Again, I'm sure that most savvy buyers will realize fairly quickly that the internet is at best a mediocre price option, not a bargain hunter's paradise.