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Kill the laws that keep car dealers in business

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Re: Kill the laws that keep car dealers in business

#191

Post by drzaiusapelord »

venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

> At least not Honda dealers. Used cars averaged around $1000 profit, but new cars were around $200.

I went to the Honda dealer a month ago and test drove a new CRV. The salesperson refused to even consider budging from the MSRP. He let me walk when I said I would only consider going lower (largely based on Truecar pricing). I looked at the details of the cost and there were endless dealer fees on there as well. The whole thing was Kafka-esque and insane to me. My wife and I walked away with nothing and the sales guy left me a VM on my phone every single day for a month afterwards hoping I had a change of heart. The car, while decent, is far from a luxury product and the idea that its so far in demand that they won't negotiate is laughable. The CRV comes at a slight premium of other cars in its class as well.

Meanwhile, at other dealers I can negotiate literally thousands off the MSRP. I find it very hard to believe the Honda dealer is making merely $200 per sale. Considering the real estate they have and cost of running that operation, they would have to sell hundreds of cars a day to avoid bankrupcy.

Oh and the trade-in cost for my car they offered was literally half its market value. Considering the value of my trade-in car and the terrible price offered, my estimate is that they were going to make about $5,000 off me if I agreed. Probably more, especially if I took their financing. Then we're looking at, 2 or 3x that?

There's a reason cars aren't sold at flat prices like other goods. This game they've developed can be very profitable.

Re: Kill the laws that keep car dealers in business

#192

Post by prostoalex »

jasonkester wrote: post #24

This seems like an opportunity for an Uber/AirBnB move. Find a jurisdiction anywhere in the USA where direct manufacturer sales are legal. Negotiate with the manufacturers to handle direct-to-consumer sales for them. Write your "app" so that customers can build their car online and have the order go straight to the factory. Charge the customer a "delivery fee" to get their heavily discounted car to them, from which y…

The trick is to get that delivery fee and associated costs anywhere reasonable.

Hiring a car transporter, negotiating time and date when one can be home to accept the vehicle, signing off the paperwork - all of this is overhead someone (most likely you, the consumer) has to pay for.

So at some point a new economic model emerges - you buy a large parking lot to stabilize the storage costs and minimize expense on car transporters, you hire someone to inspect and sign off on the delivered vehicles, and you start ordering cars by a dozen to spread out that vehicle delivery cost...

Re: Kill the laws that keep car dealers in business

#193

Post by hnal943 »

alkonaut wrote: post #56
venning wrote: post #37

I paused my software development career to sell cars for a year. I sold cars at two different Honda dealerships, both owned by Fortune 500 companies in, what I believe is, the densest single market for Hondas in the US (Metro DC). There's a couple things missing from the situation as described by the author. First, dealerships don't really make that much of a profit on new car sales. At least not Honda dealers. Used…

> In order to sell a car, you have to have a car on your lot. I don't understand the above: you mean people buy new (unused) cars from dealers, "off the shelf"? Aren't most new cars custom? Are US customers more impatient, so that in order to close a sale you need to have the various options pre-built, so that people don't have to wait four months for their new car to be built? I have rarely seen a new car sitting at…

Most dealers will not make a car custom for you; you have to choose from the available inventory. If they do not have it on the lot, they will ship and existing car from elsewhere (possibly another state), but they will charge you a delivery fee. It's crazy.

Re: Kill the laws that keep car dealers in business

#195

Post by bduerst »

grandalf wrote: post #187
rayiner wrote: post #174

Earlier quoted context omitted.

> - why can't I rent a car for a month and if I like it sign up for a year or two or three? Because of the massive depreciation on a new car the minute you drive it off the lot. > - trim levels are out of control and make inventory planning much worse. If the base model sells for $18K but is available in a $36K trim level, is it really the same car? Why not just keep it simple. There are a lot of trim levels in cars…

> Because of the massive depreciation on a new car the minute you drive it off the lot. Does the car depreciate? Or is it that it can no longer be sold as "new", making many of the incentives irrelevant. If the "new" car gets 0% financing, and the "used" car with one mile on it gets market rate, then of course there can be a higher sticker price on the new one.

You just answered your own question. The car depreciates because it is no longer new, a status which adds value for a segment of the market. Variables like manufacturer incentives may come into play for some makes, but that doesn't change the fact that it depreciates.

Re: Kill the laws that keep car dealers in business

#197

Post by PretzelFisch »

Rumford wrote: post #125
300bps wrote: post #121

Earlier quoted context omitted.

I agree that the ban should be lifted. And I think car dealerships would survive without it. I recently spent some time on many car companies' websites and navigating the options is extremely difficult. They use all their marketing jargon like sDrive vs. xDrive or 4MATIC or whatever else other nonsense. They don't explain well what any of them mean, and I was left googling the definitions of everything. Then you get…

You're probably right. For example: Even though you can buy a Thinkpad directly from Lenovo, Best Buy still exists.

Probably the better example would be even though you can buy an Iphone directly from Apple.com the Apple Store still exists.

Re: Kill the laws that keep car dealers in business

#198

Post by ghaff »

gshubert17 wrote: post #141
jonlucc wrote: post #110

Earlier quoted context omitted.

I see an even bigger problem. Most people hate car salespeople. I hate car shopping and mattresses are even worse because the salespeople's incentives are very unclear and they clearly dick around with people. That perception isn't going to change overnight (and the salespeople's tactics would be tough to change quickly), so I won't pay for it any time soon.

The last new car I bought was a Saturn in 1992, mainly because their business model involved no haggling on prices and salespeople were there to help customers find the best match for them. I don't understand why this model didn't spread further.

The are no haggle dealerships generally and Scion, I believe, is a no haggle brand. There may be others. (Of course that doesn't necessarily mean that trade-ins and financing deals are no haggle.)

As for why it hasn't spread further, I imagine it's partly because a lot of people go into a car dealership expecting to apply their (they think) leet negotiating skills and will walk if told that the price is the price. From the dealer perspective, bargaining is also an opportunity to price discriminate. Given that dealers don't in general make a lot on new car sales, the best answer is probably that it's the system everyone is used to.

Re: Kill the laws that keep car dealers in business

#199

Post by ethbro »

300bps wrote: post #121
Rumford wrote: post #115

There are some interesting comments in here about how tough the struggle is for car dealerships, but I don't think that necessarily justifies their existence or mitigates the point of this article. If what the dealerships do is valuable enough to the customer, they would exist even without the ban on direct sales. But I think we can all intuit that if the ban were lifted, buying a car would be a very different (and b…

I agree that the ban should be lifted. And I think car dealerships would survive without it. I recently spent some time on many car companies' websites and navigating the options is extremely difficult. They use all their marketing jargon like sDrive vs. xDrive or 4MATIC or whatever else other nonsense. They don't explain well what any of them mean, and I was left googling the definitions of everything. Then you get…

To compare and contrast the two methods of research/purchase: both online and in person feature the same marketing jargon.

Online: You can perform further self-guided research to discern what these terms actually mean and whether you need those features or not. Furthermore, you can see what other people thought about those features.

In Person: You can have the salesperson explain those terms to you. Except... do you really trust someone with a direct financial interest in your purchasing a new car to help you figure out whether you need features and whether this car is the right car for you?

Re: Kill the laws that keep car dealers in business

#200

Post by JoeAltmaier »

ethbro wrote: post #199
300bps wrote: post #121

Earlier quoted context omitted.

I agree that the ban should be lifted. And I think car dealerships would survive without it. I recently spent some time on many car companies' websites and navigating the options is extremely difficult. They use all their marketing jargon like sDrive vs. xDrive or 4MATIC or whatever else other nonsense. They don't explain well what any of them mean, and I was left googling the definitions of everything. Then you get…

To compare and contrast the two methods of research/purchase: both online and in person feature the same marketing jargon. Online: You can perform further self-guided research to discern what these terms actually mean and whether you need those features or not. Furthermore, you can see what other people thought about those features. In Person: You can have the salesperson explain those terms to you. Except... do you…

In person is there for one reason: so the salesperson can direct the dialog, completely control the conversation. They are heavily trained in the dance of sales, and its all in their interest and not yours.

The primary reason to get the dealership out of the picture is, to get the salesperson out of the picture. You don't buy a toaster that way, or even a house. Why a car?

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