Dealers Too Busy For OnLine Shoppers

imidazol97 · December 2006

>Call NY politicians for help? HA HA HA HO HO!!!

I hoped others would catch the extreme irony in that. They really do care about the little buy in between election campaigns. Our governor was caught on part of his (not reporting "free" golf outings and coin investment scandals) and his party's shenanigans. Now they're angering many by passing laws to impact the incoming opposition party in governorship and both houses--eliminating many of the political payoffs they themselves practices through 10 years of politics.

Everytime I see the carpetbagger on a campaign interview for 2008, I think of all the tricks they got by with from AK to DC to NY. The problem is they ain't much worse than the rest up there. I

daveyd088 · December 2006

I work for a pretty large auto group (11 dealerships in the state) and all I do is handle the new internet leads. I do not sell on the floor, I just respond to the new leads that come in, and follow up with the old ones, kind of admin I guess. The bottom line is most of these are not very solid car buyers. We see about 100 of these inquires per day, and 6 of 10 never even take the time to get back to us. I can understand that customers want to shop for the best price, but it is the most frustrating thing in the world to have a 20 minute conversation with someone, find the exact car they want, give them a price of invoice or less, and then never hear back from them. And that's just the people who give us phone numbers! If you want to be taken seriously when you send in a internet inquiry, please give a real name and phone number, unless you just want to be contacted via email. A 10 miunte conversation can save 30 emails back and forth discussing colors and options. Also, putting in a little note about what you are looking for is very helpful. You can pick out the exact vehicle you are looking for online, but we may never see that info! We do okay with the way we work, 20-25% closing ratio, and between 15-20% of the stores total deals are internet customers. Just had to add my 2 cents, everyone have a good holiday

jipster · December 2006

60% never get back to you and you have a 20-25% closing ratio. That means out of the 40% that do get back with you, half end up buying?

Do you give that "invoice or less" price by e-mail... or only via phone call?

cccompson · December 2006

Thank you for a most informative post.

I wonder how those ratios compare with the industry as a whole. They strike me as pretty damned good.

When I send out for internet quotes, I am ready to buy (and I'm not interested in talking by phone until the deal is set). If I email 10 stores seeking a vehicle (precisely specified), I may get 5 or 6 replies on a hot seller, 7 to 9 on a slow mover. I seek price from the get go and those that don't supply one in their initial reply are immediately crossed off my list. As a result, at least two-thirds of those I contacted are history after the first round of email.

daveyd088 · December 2006

The price we give is different for every customer, depending on what kind of vehicle they are looking at, how they will be paying, if they have a trade in, etc. We generally used the generic emails as a first contact, just to try and weed out the serious buyers and the the people playing around. If you ask for a price, you will pretty much get an email like this:

MSRP: X
Invoice: Y
Rebates (if any) : Z

Make us an offer you feel is fair for both of us, and let us know when you would like to test drive.

I don't actually sell on the floor, so I'm not a real salesperson, and my bonus is based on volume not gross. It doesn't matter to me if we make $3,000 or lose $300. That's my manager's job, any exact number is given by him. We have the highest internet closing ratio in our district, our response time is under 10 mins, and we do okay. We can work totally by email, as long as the person will respond to email. Thanks to all the internet car buyers out there, you guys keep us in business and should be appreciated.

shasta67 · December 2006

Thanks for clearing that up. How you got paid was a big question for me. I was in the internet department of a Toyota dealership a couple of months ago. I have to say it was much more laid back than I am used to. I did not get the feeling you were paid on commission. I think it will become a much more common way to buy a car, especially with the newer generations. They are so much more used to dealing with computers for shopping. It also has to be cheaper for the dealerships too.

abraindrainer · December 2006

This is an interesting strategy because it assumes that the consumer is price informed which typically is not the case. Do you get a lot of lowball offers that are thousands outside the ball park? Of course, there is a belief that the person that gives the number first loses but I think this addage assumes that the person giving the number is the one that is less informed.

FYI: If they are informed, they had a guy like Isellhondas agree to their bid, first. That may explain why you observe better closing ratios...

phairphair · December 2006

I don't understand this policy. Your initial reply to the customer is like "showing your cards". Some will know the invoice amount, some won't. Why tell them and give away your margin?

As customers realize they can get a much better deal internet shopping, that's all they'll do. How do the salespeople at your dealership feel about this?

Does the manufacturer have large holdbacks for the make you sell? What is the incentive for your dealership to be focused on volume and not profit?

I'd guess you sell non-luxury cars that are in relative high supply to demand.

pch101 · December 2006

there is a belief that the person that gives the number first loses but I think this addage assumes that the person giving the number is the one that is less informed.

That's not the reason. The reason to avoid being the first one to name a number is because it sets a floor for the buyer, and a ceiling for the seller.

As a buyer, you have locked in a price that will never go down once you've named the first number. (Of course, there are exceptions to this, but is difficult to do this without appearing unethical or creating bad will.) The same thing is true for the seller (although in practice, they often try with the last minute "we made a mistake, we need to raise the price" ploy.)

Part of the negotiation process is the element of price discovery -- the buyer can guess what the seller will accept, but doesn't really know. While a buyer can go in knowing the invoice, holdback, and most of the incentives, s/he won't know about the other factors that might motivate the dealer to offer even deeper discounts than those might suggest. If you, as the buyer, name the first number, you have shut off the flow of information and will never have a chance to find out.

daveyd088 · December 2006

We get some offers that are not even close, but most times this is on used vehicles and not new. Most of the internet customers we deal with have a pretty good idea of what they are looking for, or at least think they do, which is okay too.Sending customer an email with sticker and invoice sometimes works, because most customers today are looking for dealers that are upfront, and since this isn't a solid number it also can give us a last look at pricing from other dealers. It gives enough so that a customer has an idea of what they are looking at, without giving a price that could be shopped around, make us an offer and we'll tell you if we can take it. Every customer is different, but we have had some success with customers just beginning to shop around.

abraindrainer · December 2006

Phairphair: Giving invoice and public incentives is not "showing your cards" to online buyers! I think that any serious online shop can safely assume that most of the online buyers already know these numbers. Furthermore, successful online shops segragate online and walkup customers and treat them very differently and even have much different processes and prices (as confirmed by some recent comments here). Those that simply use online contact to drive traffic to their floor must have pretty poor closing ratios. FYI: Some dealerships will not let you switch from walkup to internet if they know your name; this practice may seem silly but there are dealerships doing that in attempt to "protect" their salespeople.

Personally, I have tried contacting the same dealers as a walkup and as an online customer. The difference is pretty dramatic.

Daveyd088: I have found that many Internet "managers" typically give a reasonable price but then say: "I do not know how low the price may go once you are here". Buyers armed with that less than optimal quote give you a number that is maybe $500-1000 lower. You smartly jump on it because it is within acceptable range and you "earn their business".

jb_turner · December 2006

You will get the same "deal" because you will have to "deal" with a salesman at the dealership.

recentbuyer1 · December 2006

When I did my internet shopping for the vehicle I just bought, I didn't wait to see what information the dealers would give me. I disclosed up front that I knew the invoice price already and used that to show them exactly how I had calculated my "starting offer." Then it was up to them to say they would match it or to tell me know much lower they would go. I wanted to be ask up front as possible, so I also told them I wanted the out-the-door price, with the only additional items being tax and actual title charge...NO doc fee. I found that approach to work very well. I saw it as showing all my cards because I had no desire for a bump and grind, and the internet dealers who responded all seemed very straightforward. The best offer we got was $350 below invoice, but we tookl $250 below invoice because they responded first and I liked the way they dealt with us, plus they were much closer than the low-bid dealer. As far as I could tell, there were no rebates or factory to dealer incentives, but there must have been something "hidden" to get multiple below-invoice quotes.

I got the impression that because my email showed that I did my homework, the dealers were willing to show their cards too, so to speak, because they could see I was someone who didn't want to play around and who was ready to write a check. I was detailed in my figures and provided a contact number. I am going to buy our next car in the same way; this time around, we also visited a local dealer for the test drive and later gave them a chance to match the $250 below invoice offer...they initially said they would, then backed out when we showed up, so I doubt I'll bother with them next time around.
"

kurtamaxxxguy · December 2006

Rest assured this lowly customer rarely makes a dealer inquiry, especially by internet, unless he has researched a car canidate as much as possible, which (this time around) will include __renting__ a canidate vehicle to get as much drive time experience in beforehand.

However, one very nasty experience at an "internet dealer", where the finance department proceeded to ruin the internet pricing with a series of unexpected fees and other garbage, has suggested this way of buying a car may not be that much different from the persian baazar method so many dealers still use. I will never buy from that dealer again.

One way Internet car buying could be improved is for the discussion to include __EVERY FEE__ that the customer will be expected to pay. That way, there will be no deal-breaker surprises or last minute hassle.

imidazol97 · December 2006

>where the finance department proceeded to ruin the internet pricing with a series of unexpected fees and other garbage, has suggested this way of buying a car may not be that much different from the persian baazar method

I hope you didn't reward the dealer for their bad methods by purchasing the car from them...!

phairphair · December 2006

In general most dealers assume people approaching them via email know the invoice. In any case, I mentioned it in my communications.

If you received a below invoice cost on your 07 G35 it must be because you live in a low demand area. Chicago dealers didn't care what I knew about the cost of the car, they would not come down more than $1000 off sticker on a G35x with prem/tech/navi. It had nothing to do with negotiation skill. Simple supply and demand.

recentbuyer1 · December 2006

You have to be proactive. Instead of leaving it to them to disclose (or not) every fee, state very clearly in your email that you will NOT pay any additional fees. In the one I sent out, I stated that I would not pay a doc fee, prep fee, or anything additional beyond tax and actual license fee. I made sure their quotes were out-the-door, and I would have walked in a heartbeat if the dealer we purchased from had tried to slip in any last-minute BS fees. Make it clear up front and get the out-the-door in writing before you hit that finance office.

recentbuyer1 · December 2006

It looks like you were replying to me, so I just want to clarify. The vehicle I bought below invoice was a 2007 Element, not a G35. I would never have gotten such a good deal on a high demand vehicle!

kurtamaxxxguy · December 2006

Unfortunately the dealer (Power Chevrolet, part of the Power network) was especially sneaky, waiting to pounce the fees after I had signed an "agreement acceptance" document (in effect, I had bought the car at that point). :surprise:

Lesson learned.

3 years later, their new salespeople bragged to me that they "live for the haggle". Their idea of "fun" won't be at my expense. :lemon:

ctbuyer3 · December 2006

I was proactive with a Toyota dealer when trying to buy a RAV4. I disclosed the invoice price and what I was willing to pay. The response back was that there invoice price included: Advertising Expense - $442, Gas - $10, Dealer Holdback Expense - $490 and Wholesale Finance Reserve - $245. The dealer said these additional expenses a standard for all Toyota Dealers and are part of the invoice. He said that Edmund's did not take them into account but should. I am trying to determine if what the dealer said is accurate and should I be including an additional $1,187 to the invoice price.

Kirstie_H · December 2006

Gas - $10?? How petty.

british_rover · December 2006

All real toyota invoices include the gas that is put in the cars before the leave the facoty. It varies per car but is normaly between 10 and 20 bucks.

I have never seen any other make do this.

Kirstie_H · December 2006

I still contend that it's petty & annoying. It's as bad as a customer who would refuse to sign a deal over one free car wash.

kyfdx · December 2006

I agree... but, it isn't a customer cost.. It is on the dealer's invoice....

If you want to make deals contingent on the dealer's invoice, then you get what you ask for..

regards,
kyfdx
(not the host here)

british_rover · December 2006

Yup just another reason why starting negotations from X amount above or below dealer invoice is a mistake.

jipster · December 2006

There's a difference between accurate and legitimate. The MSRP price is accurate, but I doubt you want to pay that. I've always been leery of dealerships invoice printouts. They can put whatever they want on the thing... gas, dealer prep, etc. Everything on that list is negotiable, though I question the legitimatsie of several items.

I don't understand how "Dealer Holdback Expense" can be categorized as an expense when it generates income. The dealership is suppose to collect holdback from the manufacturer... not the customer. I'd find another dealership if I were you.

kubus_gt · December 2006

I just bought Mazda6 and the price included full tank of gas. As a matter of fact the sales guy specifically said that Mazda pays for that full tank.

shasta67 · December 2006

I am trying to determine if what the dealer said is accurate and should I be including an additional $1,187 to the invoice price.

Well I would run away very fast from this dealer. The only thing that is not included, in the invoice Edmunds gives you, is the Advertising fee. This is either a very new car salesman or he is simply lying threw his teeth. Either way they would never get my business.

imidazol97 · December 2006

>Power Chevrolet, part of the Power network) was especially sneaky, waiting to pounce the fees after I had signed an "agreement acceptance" document (in effect, I had bought the car

I'm afraid they'd have been told I signed at the price before they wanted to add on more fees and they have my address if they want to try to force me to purchase without a final agreement on the price. I'd tell them it would sound great on the local TV station's consumer problems segment about their adding on fees and trying to use a final agreement to further up the price. I'd tell them the name of my attorney in case they further wish to contact anyone.

It's just never too low for some dealers/salespeople, is it?

audia8q · December 2006

They can put whatever they want on the thing... gas, dealer prep, etc. Everything on that list is negotiable, though I question the legitimatsie of several items

Each of our mfg's invoice differently.. Ford for example puts a charge for gas, ad fees and holdback on the dealers side of the invoice. Mazda only puts the ad fee, holdback.. Toyota(in some regions) puts a laundry list of things. Saab used to put the cost of the owners manuals on the invoice. Oddly enough mazda pays to fill up the car but it never covers the cost so the dealer has to eat most of it...

If the customer wants to start haggling at "dead cost" instead of invoice or MSRP then things like holdback, ad fees and other legit invoice items are fair game.

jipster · December 2006

Each of our mfg's invoice differently

O.k, but it seems to me that after a dealerships gets the invoice price from a mfg. they will sometimes add their own costs to the invoice statement. Which is the summary cost printout, or whatever it's called, that I have been shown before.

Also, not to open a can of worms, but your definition of holdback makes is sound like a true expense. You pay this when you purchase a vehicle from mfg, then they give it back to you when the vehicle is sold. Why would a dealership ever want to give up their holdback to a buyer? Which seems to happen a lot.This practice of going after holdback is encouraged by many buyers/negotiators.

audia8q · December 2006

I agree that some dealers might add things to their internal costs but there are some legit things and some are not. Of course, the dealers who make stuff up are the ones to avoid!! Unless you know the specifics of each mfg then most buyers are in the dark concerning certain invoice items.

Like you, I don't want to open up a holdback debate but again each mfg handles holdback differently. One of our mfg pays holdback to the dealership on the parts statement quarterly which is used to pay off parts expenses. So it never makes it back to the sales department. So the folks working in sales don't want to know anything about holdback...also if the car is a dealer swap the dealer who had the car originally keeps the holdback...so everything isnt exactly black and white...Not off limits its just a touchy subject unless the consumer is aware of all the internal workings of the mfg - dealers relationships.

Why would a dealership ever want to give up their holdback to a buyer? Which seems to happen a lot.This practice of going after holdback is encouraged by many buyers/negotiators.

sometimes mfg have dealers in stairstep or volume bonus programs. This forces dealers to push units to hit target numbers. If I'm close to hitting a big bonus I will take almost any deal, even losers to make the incentive. A few months ago I loss about $15000 selling cars on the last day of the month to hit a substantially larger bonus. These are the types of mfg programs that forces dealers to be extremely aggressive and almost vicious towards the competition.... without these incentives many dealers are not profitable.

pch101 · December 2006

This is going to be a hard concept to explain if you don't follow the concept of financial leverage (a business' use of borrowed money) and how that improves returns and cash flow, but bear with me and I'll give it a shot.

The "invoice" to which you are referring is really a borrowing statement of sorts. When the dealership purchases the car, it doesn't actually come out of pocket to buy the car -- it borrows the entire purchase price and finances it until the car is sold. This allows the dealer to control a lot of inventory while minimizing its cash outlays, and effectively increases its returns.

This practice of borrowing has been expanding to include these extra "fees." Some of these "costs", such as the holdback, aren't really costs at all, but are just used to increase the amount of money that the dealer can borrow, which helps those margins and cash management. I'm not sure how they structure it, but here's a possibility: by including the holdback on the invoice, this could be used in effect to pay the holdback to the dealer before the car has even been sold. (It could be disbursed when the car is taken into inventory as part of the "loan", with that holdback loan repaid out of the "real" holdback payment once the car has been sold.) If that structure was used, it improves the dealer's cash flows and creates an inducement to acquire more inventory, which is good for the manufacturer (unless the dealership can't eventually sell it...)

From what I can tell, some manufacturers such as GM reimburse the advertising fee post-sale. In part, the manufacturer puts it onto the invoice as part of a forced contribution plan, and it should motivate the dealer to move product because it effectively adds an additional incentive to the dealer -- not only does the dealer collect the holdback, but also gets the ad fee reimbursement upon sale.

Now that more consumers know about the "invoice", I would expect this practice should expand. Since the average consumer confuses "invoice" with "cost", it makes the invoice an easy target. This is one reason why that while it is important to know the invoice, it is also important to understand the other money that flies around in a transaction. It's not always very straightforward, obviously...

abraindrainer · December 2006

A few months ago I loss about $15000 selling cars on the last day of the month to hit a substantially larger bonus.

Ok, this is not really true because by making your target your dealership certainly made more than $15k, did not it? Dealers are not really upfront about their real costs and incentives and many claim they are giving the holdback when in fact they are justing "hiding" their other profit sources. What is particularly annoying is the crying we hear: I cannot sell this below invoice because..

when in fact, there is a lot of volume and manufacturer-to-dealer money.

And yes, the dealerships screw their own sales force on more than just holdback arrangements because many sales people typically get very little of the back end profit (trade-in and financing). Those issues are certainly not part of the consumer side....

audia8q · December 2006

Ok, this is not really true because by making your target your dealership certainly made more than $15k, did not it?

yeah we hit the number...but what if we didn't? It was a hail mary pass with thousands of dollars at stake.
There are times we do everything to hit numbers and miss...meanwhile we took lower than avg. profits earlier in the month chasing the number....when you don't hit it the front end losses can be staggering.
The mfg's make the target numbers difficult to hit and they bank on big percentage of dealers failing to hit the bonus. You imply its a sure thing and nothing could be farther from the truth.
Lets say you invest $10 million for a single point new car franchise, you employ 150 people and your monthly expenses are around $500,000 just to keep the doors open. Is it too much to expect to earn a profit?...

I just realized this isnt the right venue for this discussion..sorry hosts.

abraindrainer · December 2006

yeah we hit the number...but what if we didn't?

Point well taken! There is risk envolved to everything we all do. I am not questioning anyone's right to make a fair buck for their services.

I just hope that dealerships would say "this is my best price, because that is what it takes for me to stay in business". Personally, I think that is very honorable. However, crying, lying about profits, margins & incentives, as well as other games are really nasty. In the information age, this is just laughable!

british_rover · December 2006

just hope that dealerships would say "this is my best price, because that is what it takes for me to stay in business".

Why should their goal just be to stay in business?
Don't they want to make a fair profit for their shareholders/owners/employees and hopefuly grow the business at the same time.

If I ran a business with the only goal being to stay in business I might as well run a not for profit business like Paul Newman.

Nothing against Paul Newman by the way I think he is a great guy.

audia8q · December 2006

However, crying, lying about profits, margins & incentives, as well as other games are really nasty. In the information age, this is just laughable!

I'm not a fan of dealers who whine things like "oh I'm losing money to sell the car, blah blah.." I suspect some folks will feel good thinking they beat the dealer or whatever...but it's not a good sales tactic in my opinion.

jipster · December 2006

Thanks for the replies to "holdback".
Seems the more variables the manufacturer and dealership can throw into the pot, the more difficult for the consumer to accurately gauge true "cost".

abraindrainer · January 2007

"Staying in business" means making market level of profit adjusted for the risk level. British_rover, you are seeing things that are not there... I never said work for nothing! Paul Newman has nothing to do with it!

volvomax · January 2007

Who decides what that level of profit is?
You?
What level of profit would you like to make if you have $10 million of your money on the line?
Personally, the whole discussion about profit or loss is ridiculous.
Its nobodies business but the dealer.
The only thing that should matter is the price you can pay.

phairphair · January 2007

The market has decided that cars are a negotiable commodity. If your dealer wants to have "no haggle" pricing, let's see them try. The manufacturer will probably pull their product and customers will vanish.

If you want to work in a highly paid sales position where there is no negotiation then...oh, wait...there's no such thing.

It's nobody's fault but the dealers that consumers are so suspicious of their actions. They have earned a reputation for being shady and doing their best to take advantage of uneducated or naive buyers.

It's certainly the dealer's right to maximize their profit. It's also the buyer's right to minimize their cost.

This is a free market and car salesmen should stop crying about it.

Kirstie_H · January 2007

Step right this way to the profit discussion because it's off-topic in this one.

abraindrainer · January 2007

Thank you, phairphair! You took the words right out of my mouth...

Volvomax: I think I was pretty clear when I said making market level of profit and I certainly do not control the market!

Everyone is technically entitled to a fair profit and process. My original objection was to lying about profit. I have had dealers cry to me about not making any profit at invoice numbers whereas there were sizable manufacturer to dealer incentives and/or other dealers were selling for $2-4k lower.

I object to lying and blatant misinformation as I am sure you do when buyers lie to you?

sidv · January 2007

Actually, my "local" dealer was considerably more expensive, despite my already being a customer there. Between that, their lousy service and their lack of professionalism dealing with my internet requests, it was a pleasure leaving them behind.

sidv · January 2007

People who don't give you a phone number are just as likely serious buyers as those that do. Answer their questions as you would anyone else's IN AN EMAIL and you will be doing the world a favor.

sidv · January 2007

Why? Because it is a waste of time. Sure, you should go to a dealer or dealers to test drive the car or cars you are interested in. At that point, the only dealer who can serve any further purpose is the one who can give you the best price. Just about any dealer, apart from rare or year end closeouts, can get you the same car-but the best price is usually only offered by one dealer. The best way to determine who this is, at least in theory if dealerships behaved with some professionalism, is to use the internet and obtain competitive bids and availability information. It's all about efficiency and avoiding the cheeseball sales pitch.

shasta67 · January 2007

Answer their questions as you would anyone else's IN AN EMAIL and you will be doing the world a favor

I don't know why I find that so funny. Don't you think it is the dealers job to determine how they will do their job? If they determine that they only want to answer questions with phone numbers then that is their right. I would imagine it would be waste of time to answer every email that says something like "my name is john and I want you absolutely best price". Do you really believe that a dealer would give you a good price if they have no idea of who you are or if you are at all serious? The rules are pretty simple my friend, if you don't like a way a dealer does business then go find another. I really doubt too many of the dealers, who post on here, would worry too much about losing your business.

boomchek · January 2007

We actually get quite many email requests. Many times it helps to get a phone number just to verify what model, options and features they want. Many times people come in and ask for a basic model but also want a/c, and p/l and other items on there or think the base comes with that. Then it turns out that they need a higher or different model. So it's good to verify the make model etc.

Now the people that never give phone numbers, are the ones we'll probably never hear from again anyways, so why would I pull my pants down and give up confidential pricing info to someone who I haven't even spoken to or for all I know could be a competitive dealer? Besides if I do give my best number on email, they can print it out because it's in writing and use my number to go and lowball another dealer. That's not good business practice to say the least, and I don't think it's worth doing for the handful of extra skinny deals a month that the dealer might get.

cccompson · January 2007

It never ceases to amaze me how some dealers are so very afraid of acutal competition.

Dealers Too Busy For OnLine Shoppers

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