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Selling New Cars Proves Unprofitable For Most Auto Dealers


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49 minutes ago, HotRunrGuy said:

Short story, during our last vehicle purchase a couple of months ago, my wife & I were so impressed with a young man at a local dealership, that even though we did not ultimately purchase from him, we gave him a $100 gift card to a great Italian restaurant we enjoy, as a thank you for the time he spent, and the level of respect he showed us.

 

No doubt, he has earned the chance to try again in the future.

 

Great story, thanks for sharing HotRunrGuy sir!

 

My most recent car purchase was just as impressive. About a month ago, I bought a used Tesla Model S from a traditional car dealership in Maryland, near Washington, D.C. and arranged to have the car shipped to my home in Fort Worth. The entire transaction, other than Texas inspection, registration, and titling, was handled online and via FedEx (for certain paperwork). The salesman was extremely competent and respectful, and went the extra mile to ensure that when I got the car, everything met my expectations. 

 

The day after the car arrived, I sent the salesman a $200 e-gift card to Old Ebbitt Grill in Washington, D.C., his favorite restaurant. :)

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3 minutes ago, Deanh said:

question, what made you buy elsewhere...

 

Sight un-seen, they offered more for my trade-in, plus they found more incentive/rebate money that the local dealer didn't offer. It was a Z-plan purchase, so the vehicle price was fixed, but the other items tilted the purchase in their favor.

 

HRG

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12 minutes ago, HotRunrGuy said:

 

Sight un-seen, they offered more for my trade-in, plus they found more incentive/rebate money that the local dealer didn't offer. It was a Z-plan purchase, so the vehicle price was fixed, but the other items tilted the purchase in their favor.

 

HRG

understand completely...it happens...did you call the kid back and tell him the details to give his "managers" the chance to equal the deal?.....I seriously have loyal customers that will tell me if someone has stated something different from me, to see if theres the chance...and sometimes Ill discover some serious BS ( ie, they are a couple of hundred cheaper , yet payments are $50 higher???? )....then again I also type my own paper so they don't have to go through the dog and pony show. Ironically, they never tell me if Im cheaper?...LMAO....

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2 minutes ago, Deanh said:

did you call the kid back and tell him the details to give his "managers" the chance to equal the deal?.....

 

I rarely do that except in special cases because I don’t think it’s fair.  If I ask 2 dealers to give me their best price that’s what I expect.  Not their “best unless you get a lower one from somewhere else price”. It rewards the business who gave you the higher price and screws over the one who was cheaper.

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33 minutes ago, Deanh said:

understand completely...it happens...did you call the kid back and tell him the details to give his "managers" the chance to equal the deal?.....I seriously have loyal customers that will tell me if someone has stated something different from me, to see if theres the chance...and sometimes Ill discover some serious BS ( ie, they are a couple of hundred cheaper , yet payments are $50 higher???? )....then again I also type my own paper so they don't have to go through the dog and pony show. Ironically, they never tell me if Im cheaper?...LMAO....

 

Yes sir, I did tell him how he got "beat", but no sir, he didn't get a 2nd chance. Personally, I don't enjoy the negotiating game, he had his chance, and came in 2nd. And no, I did not share numbers between dealers.

 

HRG

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3 hours ago, akirby said:

There are ways to change the buying experience and make it easier for both customers and dealers but most dealers either have no clue how to do it or have no desire to do it.   The mfrs also have to make the user interfaces more intuitive and provide in vehicle help (some are doing that) and change allocation rules.  

 

Lincoln is doing some of that with Black Label.  Home shopping and ordering, home pickup and delivery for service, etc.


This concept is absolutely foreign to me. You buy toys and music on the internet, not vehicles.  (talking about new, not used or collectable, hard to find vehicles)

How does one buy a car without ever test driving it?  You're just gonna drop 70k on a Linc and not even do a walk around before they drive it out to your house? 

Yeah, it's nice to use the website for pricing out specs and different models, but eventually you gotta go to the dealer. Home ordering just seems like problems waiting to happen.

Edited by probowler
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1 hour ago, akirby said:

 

I rarely do that except in special cases because I don’t think it’s fair.  If I ask 2 dealers to give me their best price that’s what I expect.  Not their “best unless you get a lower one from somewhere else price”. It rewards the business who gave you the higher price and screws over the one who was cheaper.

and again no dis-respect...but if someone  does that, the easy comeback is weve never lost a deal to a legitimate price...you're quite entitled to spend, hours weeks , days shopping a car...depends on how much you value your own time....obviously no one cares about the sales persons time right?...Ive literally seen people spend months researching, e-mailing, calling etc etc etc ...negotiating the shit out of a deal, to save a few bucks a month....makes one wonder, definitely not how I operate...its like crawling over broken glass to pick up a nickel when the dollar bill flies past in the wind.....

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50 minutes ago, HotRunrGuy said:

 

Yes sir, I did tell him how he got "beat", but no sir, he didn't get a 2nd chance. Personally, I don't enjoy the negotiating game, he had his chance, and came in 2nd. And no, I did not share numbers between dealers.

 

HRG

we get some crazy $hit come our way...total games....customers will come in with crazy numbers...and then when asked why they didn't buy..."They didn't have the color or equipment...…"....I do an awful lot of tongue biting and head shaking...I would NOT be in this business but for repeat clientele and referrals....and I quite often go the extra yard because of that loyalty. I doubt you or Akirby have ever dealt with the same salesperson twice let alone had any sort of relationship...and that's nothing against you guys, its the way Ive seen things going for a while...and also the reason sales personnel staying at a place for a long period of time is becoming non existent.....and I have to say, I would have to point my finger, good AND bad....directly at the internet....

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1 hour ago, probowler said:

How does one buy a car without ever test driving it? 

 

  1. Research cars that fit your criteria. Look at reviews on sites like this, YouTube, Car and Driver, Motor Trend, Consumer Reports, etc.
  2. Using the information you gathered in your research, narrow down your shopping list until you are down to the model that works best for you.
  3. For new cars, visit websites for car retailers that offer 100% online car buying experience and high customer ratings. Examples.
    1. New Tesla cars, direct online ordering from manufacturer. https://www.tesla.com/
    2. New car dealers using Roadster. https://roadster.com/shop
    3. New and used car dealers using Dealer.com. https://www.dealer.com/
    4. Used cars at Carvana. https://www.carvana.com/
    5. Used cars at Vroom. https://www.vroom.com
  4. Review photos and videos of the cars you found on these sites. If you need additional photos or videos, use the 'contact' link to request them from the seller.
  5. Submit the required deposit to commence purchase.
  6. Complete any necessary purchase documentation. Coordinate this with the seller using e-mail, instant messaging, telephone, FedEx (if printed documents need to be transferred).
  7. Arrange delivery of vehicle (provide dates, specify whether to ship vehicle to home or work or pick up vehicle at retailer location, etc.)
  8. Enjoy driving the vehicle you purchased.

 

I did this for the used Tesla Model S I purchased recently, as mentioned in a previous post. Great experience from start to finish.

Edited by rperez817
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I beg your pardon - I used the same salesman for 3 focii, one edge, 2 fusions and one escape.  I stopped going there because they lowballed my trade way below wholesale) and the service dept completely sucked.  I now have a new salesperson (pair actually) at another dealer where I was treated fairly and not lowballed.  I bought my f150 and a friend just bought a mustang.  I don’t want the absolute lowest price - I want a fair price and honesty.

 

i also sold furniture for 6 years in high school and college and I was often confronted with lower prices from other stores or “free delivery”.  We explained how their free delivery wasn’t really free and how their price may not be apples to apples and what they needed to check. Then we told them that we’d like their business but if they thought the other store was a better deal they should buy it.  Because we knew our prices were better in most cases.  I never told someone To go get their best price and we’d beat it because I didn’t want someone doing that to me.

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1 hour ago, probowler said:


This concept is absolutely foreign to me. You buy toys and music on the internet, not vehicles.  (talking about new, not used or collectable, hard to find vehicles)

How does one buy a car without ever test driving it?  You're just gonna drop 70k on a Linc and not even do a walk around before they drive it out to your house? 

Yeah, it's nice to use the website for pricing out specs and different models, but eventually you gotta go to the dealer. Home ordering just seems like problems waiting to happen.

 

Nobody said you wouldn’t have test drives available.  Tesla does.  But you only need to keep a few of each model for test drives, then the customer orders the colors and options they want. 

 

Its not for everybody but I’ve ordered several vehicles without a test drive because I never had a problem.  Until the Escape.  Wife drove it but neither of us sat in the passenger seat.  It sucked to us so now we have to test drive and check all the seats.

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19 hours ago, rperez817 said:

 

Probably a combination of both. The whole culture of car buying in the U.S. market is crazy. It's not dealerships' fault though. Dealerships adjust their business model to what customers want. Sadly, customers in the U.S. expect they should be able to buy a new car meeting their exact preferences from dealership stock and take the car home the same day. Impulse buying to the extreme. This business model is not good for car dealerships or for automakers. 

 

Like with Tesla worldwide and with most car brands in the European market, new car sales should be mostly customer orders. If someone wants a car right away from retailer stock, it should be a used car, demonstrator, or new car that another customer returned or did not take delivery on.

 

Automotive News 3 years ago said this. https://www.autonews.com/article/20160606/RETAIL/306069951/why-americans-reject-build-to-order-cars

 

 

 

I wonder if selling from stock came about because manufacturers don’t want to build customer orders as much anymore but instead prefer to bundle popular options and encourage most buyers (walk ins or cross shoppers)!to go that way. 

 

It it might be the fickle nature of buyers but it the reality of a competitive market. It’s the new era of the internet where sales staff are treated like people in the way of the impatient I want it now customers good deal

Edited by jpd80
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16 hours ago, rperez817 said:

 

  1. Research cars that fit your criteria. Look at reviews on sites like this, YouTube, Car and Driver, Motor Trend, Consumer Reports, etc.
  2. Using the information you gathered in your research, narrow down your shopping list until you are down to the model that works best for you.
  3. For new cars, visit websites for car retailers that offer 100% online car buying experience and high customer ratings. Examples.
    1. New Tesla cars, direct online ordering from manufacturer. https://www.tesla.com/
    2. New car dealers using Roadster. https://roadster.com/shop
    3. New and used car dealers using Dealer.com. https://www.dealer.com/
    4. Used cars at Carvana. https://www.carvana.com/
    5. Used cars at Vroom. https://www.vroom.com
  4. Review photos and videos of the cars you found on these sites. If you need additional photos or videos, use the 'contact' link to request them from the seller.
  5. Submit the required deposit to commence purchase.
  6. Complete any necessary purchase documentation. Coordinate this with the seller using e-mail, instant messaging, telephone, FedEx (if printed documents need to be transferred).
  7. Arrange delivery of vehicle (provide dates, specify whether to ship vehicle to home or work or pick up vehicle at retailer location, etc.)
  8. Enjoy driving the vehicle you purchased.

 

I did this for the used Tesla Model S I purchased recently, as mentioned in a previous post. Great experience from start to finish.

 

I would never purchase a car this way, though I understand some do. There are critical things that, to me, require a test drive (and usually more than one, with at least one being an extended drive). For instance, are the seats comfortable (especially with extended length driving)? Will my road-trip cooler fit on the rear seats floor? Is visibility good? Does the transmission shift smoothly? Is there good power for initial acceleration and passing? Do I like the interior? Is the infotainment system responsive? Don't need to know all that, I guess, if going from a 2016 Edge to a 2019 Edge, but for a new design definitely. I think some in this thread are treating it as either/or. Either everyone buys through a factory order without a test drive or everyone buys from dealer stock. But in Germany, for instance, about half buy from factory orders but a dealership will always have some vehicles on hand for a test drive.

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On 8/30/2019 at 10:55 AM, Kev-Mo said:

With all due respect to the ones who work hard in this business - the whole thing needs to be re-invented.

 

I think that re-invention of automotive retailing will come in the next 10-15 years when the big 3 revolutionary changes underway right now in the automotive industry combine and become well established. 1.) Electrification. 2.) Autonomous vehicles. 3.) Mobility services.

 

It will be interesting to see what happens with car dealerships at that point. One school of thought is that dealerships will face a bleak future. The famous automotive industry executive Bob Lutz said this. https://www.autonews.com/article/20171105/INDUSTRY_REDESIGNED/171109944/bob-lutz-kiss-the-good-times-goodbye

 

"Car dealers will continue to exist as a fringe business for people who want personalized modules or who buy reproduction vintage Ferraris or reproduction Formula 3 cars. Automotive sport — using the cars for fun — will survive, just not on public highways. It will survive in country clubs such as Monticello in New York and Autobahn in Joliet, Ill. It will be the well-to-do, to the amazement of all their friends, who still know how to drive and who will teach their kids how to drive. It is going to be an elitist thing, though there might be public tracks, like public golf courses, where you sign up for a certain car and you go over and have fun for a few hours.

 

And like racehorse breeders, there will be manufacturers of race cars and sports cars and off-road vehicles. But it will be a cottage industry.

 

Yes, there will be dealers for this, but they will be few and far between. People will be unable to drive the car to the dealership, so dealers will probably all be on these motorsports and off-road dude ranches. It is there where people will be able to buy the car, drive it, get it serviced and get it repainted. In the early days, those tracks may be relatively numerous, but they will decline over time.

So auto retailing will be OK for the next 10, maybe 15 years as the auto companies make autonomous vehicles that still carry the manufacturer's brand and are still on the highway.

 

But dealerships are ultimately doomed."

 

On the other hand, many owners and executives of car dealerships are much more optimistic and say that dealerships have always adapted to change and will continue to do so. Jeff Carlson, owner & president of 2 Ford dealership and 1 Subaru dealership in Colorado and the 2016 NADA chairman, said this. https://www.autonews.com/article/20170122/NADA100/301239911/what-is-the-future-of-the-franchise-system-dealers-cautious-but-optimistic

 

"The reason dealers are able to survive is because we compete furiously, and we have to reinvent ourselves every single day. If the manufacturer announces an incentive, we have to adapt, and if he takes it away, we have to readapt, and if there's a new regulation, we have to adapt," Carlson said. "And if we have a new model of mobility that comes out, it may take us a few days -- but we'll adapt. We are very rapid changers. We mutate or die."

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4 hours ago, rperez817 said:

 

I think that re-invention of automotive retailing will come in the next 10-15 years when the big 3 revolutionary changes underway right now in the automotive industry combine and become well established. 1.) Electrification. 2.) Autonomous vehicles. 3.) Mobility services.

 

two of those three things are still far down the road-nearly everyone has backed off Autonomous cars due to several issues. 

 

I'm not sold on ride sharing-if anything your going to need even more vehicles on the road to meet the requirements of everyone traveling and who the hell is going to want to get into a vehicle that has been puked in on a Friday night  by the prior user on the way home from the bar? 

 

There is still a significant pride in ownership/identity tied into owning a car-I can see it shrinking, but that will take a couple generations to happen. 

 

Electrification is coming the soonest, but its still 15 years out before it gets anywhere to the 50% market. 

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On 8/29/2019 at 6:24 AM, 630land said:

Been like this forever. Why you have to practically yell "No!" when the F&I Manager tries to push "extra profit items" at closing.

 

601xx ZIP is Chicago area. We used to have even more Ford dealers. Some only 3-4 miles apart.

I've a 2020 Ranger SuperCab 4x2 on order from 1 of the 3 Ford agencies here on Oahu, this transaction will be consummated via Ford's X-Plan pricing.

A condition of using this program is that the dealer MUST list any and all additional taxes, fees, added options on page 2 of the X-Plan contract, however it does NOT prevent the dealer from adding ridiculous markups and options.

Prior to placing the order the dealer required a non-refundable deposit of which I had no problem with provided the only additional fees/taxes I will pay for are 1) Hawaii State sales tax (4.75%), 2) county registration fees and 3) the X-plan capped fee for documentation, which is $100, all this was disclosed in the sales agreement. No worthless glass etching, paint sealants, performance enhancing additives, zero-zilch-nada.

The reason I am being so hard nosed with this agency is that they quoted me a ridiculous price for a 2019 this past June, this out the door price included an eight thousand dollar markup because of their claimed high demand for the truck

You read that correctly an $8000 dealer markup above the MSRP.

There will be no financing nor trade, the balance will be paid via cashier's check.

I'm sure the F&I person at this dealership is a nice, if not crafty person, but I don't plan to meet the soul at all in closing of this purchase, there is simply no need to.

Apparently the X-Plan pricing is designed to provide a no haggling price just above invoice, the dealer is required to show this amount in the signed contract.

Yes the dealer is certainly entitled to profit on all car sales, this is why they are in business, however a reasonable profit. Certainly not anything in excess of 8K.

 

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On 8/31/2019 at 8:21 AM, probowler said:


How does one buy a car without ever test driving it?  You're just gonna drop 70k on a Linc and not even do a walk around before they drive it out to your house? 

Because not long ago, it was probably similar to the Lincoln you’d trade in?

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7 hours ago, probowler said:


You know, if you're buying a new car that is so similar to your old one that you don't need to test drive it, you have way too much money |:-|

What a bizarre , highly atypical case.

 

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Edited by jpd80
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11 hours ago, Mokume said:

I've a 2020 Ranger SuperCab 4x2 on order from 1 of the 3 Ford agencies here on Oahu, this transaction will be consummated via Ford's X-Plan pricing.

A condition of using this program is that the dealer MUST list any and all additional taxes, fees, added options on page 2 of the X-Plan contract, however it does NOT prevent the dealer from adding ridiculous markups and options.

Prior to placing the order the dealer required a non-refundable deposit of which I had no problem with provided the only additional fees/taxes I will pay for are 1) Hawaii State sales tax (4.75%), 2) county registration fees and 3) the X-plan capped fee for documentation, which is $100, all this was disclosed in the sales agreement. No worthless glass etching, paint sealants, performance enhancing additives, zero-zilch-nada.

The reason I am being so hard nosed with this agency is that they quoted me a ridiculous price for a 2019 this past June, this out the door price included an eight thousand dollar markup because of their claimed high demand for the truck

You read that correctly an $8000 dealer markup above the MSRP.

There will be no financing nor trade, the balance will be paid via cashier's check.

I'm sure the F&I person at this dealership is a nice, if not crafty person, but I don't plan to meet the soul at all in closing of this purchase, there is simply no need to.

Apparently the X-Plan pricing is designed to provide a no haggling price just above invoice, the dealer is required to show this amount in the signed contract.

Yes the dealer is certainly entitled to profit on all car sales, this is why they are in business, however a reasonable profit. Certainly not anything in excess of 8K.

 

 

 

This is interesting.  The x plan rules used to prohibit the dealer from forcing you to pay for additional options like undercoating or etched glass.  But the current rules just say they have to be listed on the agreement.  Most probably won’t but buyers should beware when shopping with x plan.

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On ‎8‎/‎30‎/‎2019 at 4:37 PM, akirby said:

I beg your pardon - I used the same salesman for 3 focii, one edge, 2 fusions and one escape.  I stopped going there because they lowballed my trade way below wholesale) and the service dept completely sucked.  I now have a new salesperson (pair actually) at another dealer where I was treated fairly and not lowballed.  I bought my f150 and a friend just bought a mustang.  I don’t want the absolute lowest price - I want a fair price and honesty.

 

i also sold furniture for 6 years in high school and college and I was often confronted with lower prices from other stores or “free delivery”.  We explained how their free delivery wasn’t really free and how their price may not be apples to apples and what they needed to check. Then we told them that we’d like their business but if they thought the other store was a better deal they should buy it.  Because we knew our prices were better in most cases.  I never told someone To go get their best price and we’d beat it because I didn’t want someone doing that to me.

THAT I can respect...but you are a rarity...……….

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13 hours ago, akirby said:

 

 

This is interesting.  The x plan rules used to prohibit the dealer from forcing you to pay for additional options like undercoating or etched glass.  But the current rules just say they have to be listed on the agreement.  Most probably won’t but buyers should beware when shopping with x plan.

Indeed sir, would you believe this is my very first car purchase with regards to frivolous markups and add-ons?

The first 3 new cars I've owned ('79 Mercury Capri, '81 F-150 4x4 Flareside and an '86 F-150 4x4 Styleside) were all special orders and purchased when I was a Lincoln-Mercury dealership mechanic. All 3 vehicles cost me $100 above invoice, yes I was provided with this cost at the time of signing. The third, a 2000 RangerSupercab 4x2, also special ordered was bought though a broker in Oregon after I had left the dealership.

I worked at this dealership for almost 14 years (they also sold Honda's) and saw all the shenanigans sales would pull just to make a sale, they would work the prospective buyer for HOURS just for them to sign.

I've vowed to never become one of those hapless souls.

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