[cs702]

Anyone who's ever bought a car knows firsthand how unpleasant it is to deal with traditional car dealers. The price of every vehicle is fully negotiable but the negotiating room is opaque.[1] Key car features and options are bundled in arbitrary packages and priced in ways that make pricing even more opaque. Car salesmen (they're typically men) almost always have a fake smile on their face and come across as smooth-talking, commission-seeking sharks pretending to be one's best friend. Customers who bite the bullet and buy a vehicle nearly always come away feeling like the dealer took advantage of them.

Kudos to Tesla for taking on this cartel.

--

[1] Edmunds lists the following types of fees charged by traditional car dealers at the time of sale: "registration fees," "doc fees," "trade-in fees," "dealer fees," "holdback," "financial reserve," and "advertising fees." Good luck trying to figure out what these fees ought to be for the vehicle you want to buy. Source: http://www.edmunds.com/car-buying/what-fees-should-you-pay.h...

[talmand]

It can be a rather unpleasant experience, plus it makes me feel bad to immediately hate the person before I get to know his/her style of selling. I know it's unfair but when that salesperson walks up I'm immediately "just go away and leave me alone".

Plus the sad fact is that the salesperson is the middleman of the manager, who is the middleman of the financier, who is the middleman of the dealership. There are probably more steps I'm forgetting.

Why can't cars be sold just like any other product? What makes them so special that government has to be involved, other than protecting monopolistic practices? I may never purchase a Tesla but I would argue against anyone that would want to stop this type of car sales.

[jbigelow76]

> Why can't cars be sold just like any other product?

Because then they run the risk of getting Amazon'd or Wal-Mart'd.

[talmand]

Why is that a risk? What's wrong with ordering a car from Amazon?

Or do you mean it's a risk from the dealers' perspective? Because I get that and personally don't care.

[jrockway]

Because I get that and personally don't care.

But you donate less money to political candidates than the auto dealers do, and so here we are.

[talmand]

Thus, why I don't care if they fail and are wiped out.

[jbigelow76]

I'd love to order a car from Amazon too. My last car buying experience was a multi-day beat down, in the end the best I can summarize it: "I probably got screwed, but they didn't screw me as hard as they wanted to."

I don't care about the dealers either, but as another poster stated, dealers have their own lobbying groups to make sure that the people that make the laws do care.

[gallerytungsten]

The risk is that a whole bunch of middlemen who don't add much (if any) value would get cut out of the equation. The dealers are well aware that their business model is despised by buyers, hence the forest of protectionist law that they've purchased over the years.

[kamaal]

>>Because then they run the risk of getting Amazon'd or Wal-Mart'd.

Your post sounds like Amazon and Wall-Mart are doing some thing wrong in the way they are running things.

And what is the risk you are talking about. Do you mean to imply Amazon and Wall-Mart are evil and have some caused damage to their consumers/customers?

[jbigelow76]

The original Wired story is addressing concerns about storefront distribution channels instead of traditional dealerships and how this impacts existing dealers. So my statement about potential negative impact if Amazon or Wal-Mart could become a distribution channel is from from the perspective of existing dealerships, not from the perspective of the consumer, many of which would jump at the chance to buy a car from Amazon or Wal-Mart.

[untog]

I don't think it sounds like that at all. He's talking from the dealers perspective, who will absolutely lose out in the case of being "Walmart'd".

[dkokelley]

I'm not sure what being Amazon'd or Wal-Mart'd is. Are you talking about commoditization?

[jbigelow76]

Cars already are a commodity, albeit an expensive one. When it comes down to getting from point A to point B they are all interchangeable.

"Amazon'd" or "Wal-Mart'd" was my shorthand way of saying that increased efficiency in the distribution channel + leverage from volume purchases would drive margins down for auto makers and put dealerships in jeopardy since the don't add any value.

[bryanlarsen]

They'd still make lots of money from their service department, so I wouldn't feel sorry for them.

[Terretta]

Costco'd: http://www.costcoauto.com/

[btilly]

Why can't cars be sold just like any other product?

If you want to walk in, look at a sticker, and walk out with your new car, you should visit a Saturn dealership.

Unless they changed it recently, they never haggle.

[minitrollster]

>Unless they changed it recently...

Saturn doesn't exist anymore.

From Wikipedia: "Following the withdrawal of a bid by Penske Automotive to acquire Saturn in September 2009, General Motors discontinued the Saturn brand and ended its outstanding franchises on October 31, 2010. All new production was halted on October 1, 2009."[1]

1. http://en.wikipedia.org/wiki/Saturn_Corporation

[unboring]

Or a Scion dealership. I bought a Scion TC a few years back and it was the smoothest experience ever. No haggling, just pay the advertised price and walk out. Every Scion dealer was obligated to advertise the same price, so you knew you were getting the same price as everyone else.

[woobar]

What's stoppping you from walking into ANY dealership, paying sticker price and driving off in a new car?

[bdbrash]

I thought the Saturn brand was discontinued.

[EliAndrewC]

Completely agree - even when the salesmen behave exactly as you'd want them to, it's still a stressful experience because of the price opacity.

When my wife and I bought our current car, we researched the average price for that year/model and resolved not to pay more than that, even though the price we were quoted was much higher. So we went to the dealer and noticed that the price on the sticker was LOWER than the price we'd planned to demand.

We quickly conferred, "Well, it says that $200 of that price is for the mudflaps, we should at least demand that we not have to pay for those since we don't care about them." So the salesman ends up quoting us a price even LOWER than we'd planned to ask for. We looked at each other, shrugged uncertainly, and said "sure, that's fine."

Objectively we ended up paying less than we'd planned when we walked into the dealership, but we felt significantly less happy about it! Later on we kicked ourselves for being caught too off guard to do any haggling; we probably could have knocked at least a few hundred dollars off, and even if not there would have been no harm in asking. There's something to be said for not having to hassle with haggling if you find it unpleasant (as we do), but it's a perverse system that gives you a better deal than you were expecting and makes you feel worse for it.

[astral303]

Future tip: there's a fair amount of price transparency out there, if you search for invoice pricing. Sites like Edmunds provide invoice pricing for the entire car, as well as the MSRP.

Most high volume dealers will sell you cars at or 1% above invoice. This way you can walk in to the dealer informed and know the approximate range.

Dealers don't like this. Some only negotiate as "$ or % off MSRP" and absolutely refuse to compare to invoice. It doesn't matter, since you know what the invoice is.

Finally, demanding not to pay for an accessory that's on the car that you don't care about is a losing proposition. Most of these accessories are factory- or port-installed and are factored in the sticker printout that's with the car. The dealer was charged by the manufacturer for that accessory and has to pay its cost. You are better off finding another car with less stuff on it, or ordering a car (which usually is a painful process, unless you're buying a Mini).

[luser001]

I've read that the "invoice price" is artificially inflated, because manufacturers give dealers hidden "incentives" and things like that to lower the real cost to the dealer. Any thoughts?

[astral303]

I wouldn't call it artificially inflated, in that often times there are just no incentives (especially if ordering a car and not buying from existing stock).

There are two kinds of incentives: publicly advertised incentives (often called "cash back") and manufacturer-to-dealer incentives. The first kind is fairly common. For example, towards the end of a model year (or especially last year of a generation of a car), it's common for manufacturers to offer $1 or $1.5K cash back. The second, "advertised to dealer" kind is much more difficult to find out about. It might hinge on the # of cars the dealer sells that month. It might target a very specific model. Sometimes Edmunds has such incentives listed on a regional basis.

Many people don't bother checking even the manufacturer's own site for incentives. Right now, for example, Toyota has a $500 cash back on Corollas in my area. If I walk into a dealership and demand invoice, I am going to be actually paying $500 over invoice. Most salesmen will withhold available incentives and will happily nod and say "sure, here you go, invoice, you are robbing us blind here buddy."

About the only "inflation" is that the invoice price does include dealer holdback, which helps offset financing charges of holding a car on the lot in stock. A car that was held for a while will accumulate more financing charges (and thus less of the holdback will go into the dealer's pocket), whereas a car that is sold right away will let the dealer pocket the entire holdback. Typically we are talking anywhere from $200 to $800, depending on the car price and car manufacturer. This is an extra sensitive area and dealers are particularly unwilling to negotiate "into the holdback."

[mbreese]

When I bought my last car, I actually had it both ways: slimy car salesman and nice guy who made it all go smoothly.

After looking around, I was ultimately interested in 2 different cars from different dealers. For car one, the salesman kept hedging of a price. The price that I knew I could get according to my research wasn't even close to the price he quoted. He was actually quite pleasant to deal with, but I just had a feeling that the dealership wanted to keep prices high.

At a different dealer for the same car, the salesman wouldn't even give me a price for the car until they saw my trade-in. I walked out of that place immediately.

For the car that I ultimately bought, I walked into the sales office with my wife and two kids. He immediately setup a test drive (including our car seats). When we got back, we quickly went through the options we'd need and the price of the car. It was all very transparent, and with the manufacturer incentives (end of the model year) it was a pretty reasonable price (well below invoice), and I was very happy with it. I actually liked the first car better, but was very happy with the one I ended up with.

Because of how that guy treated us, I'd go back to him to by multiple cars in the future. So really, it goes back to the balance between maximizing short-term profits over long term profits. The sleazier the dealerships will try to maximize short term sales at the expense of long term sales. The better ones try to build customer relationships so that they aren't just selling you one car. They are trying to also sell you your next car.

[randomdata]

I kind of enjoyed buying my last vehicle. For some reason, the salesman had it in his mind that I could not afford the one I was looking at. I was the one trying to talk him into adding options, while he was trying to take them away to keep the costs lower. Once I finally talked him into the one I wanted, he, without asking, starts filling out the loan application. I'm like "umm, I'm going to be paying for it in cash."

Before I even left home I had already determined what I considered a fair market exchange for the trade with my existing vehicle. I think in the end, they actually ended up doing a little bit better than I had expected.

[calbear81]

I try to not pay cash ever when there are financing deals available at today's ridiculously low interest rates. Many car makers will have 0% or 1.9% financing and you should take that since there's a reasonable chance you will make more than that back by taking the cash you saved and investing it instead. At 0% financing, it's a no brainer, why give them all your cash up front instead of throwing it into an interest bearing account instead and making some money instead.

[chucknelson]

I've always heard that you get a better price if you tell them you're paying in cash...is this just bad info?

[TylerE]

Bad info.

They make money on the financing, so are likely to be more willing to negotiate on price if they think they will make it back on the financing.

Doesn't mean you can't can't _pay_ cash, but 95% of dealers you don't want to be too upfront about that.

[bunderbunder]

For that matter, even if you can't pay cash you shouldn't get lulled into assuming you have to take the dealer's financing. Shop around a bit, see if you can find a loan where only the bank gets a piece of the pie, instead of both the bank and the dealer. For my last purchase, my credit union gave me about half the rate the dealer offered.

But don't let them know that until they're getting ready to fill out a loan application.

[yebyen]

Agreed. Which is why you should never tell them you are paying cash upfront, unless you are dealing with an individual seller who obviously might prefer not to work with financing company. They will give you a better deal if they think they can make it up on the financing.

Individual sellers will more likely give favor to cash in hand, at least I know I would rather have cash in hand for my car.

[gallerytungsten]

It's better to lead them on, thinking that you are going to finance. Then, when you have a final price, drop the cash bomb. Be ready for some furious attempts to raise the price in a bunch of ways, after that revelation!

[SoftwareMaven]

It's a trade-off. For many people who don't understand how to figure out interest rates and payments, it gives the dealerships one more number to play with to hide the real price of the car. As others have mentioned, if you do understand it and can decipher it, it gives another place for them to make money.

[mcguire]

OTOH, if you're buying a used vehicle from a private owner, cash in hand is a pretty strong argument.

[bmelton]

Seconding Tyler's point, but with a slight amendment.

Paying cash is generally[] not better than financing through the dealership, but is much better than bringing your own financing.

[] There are a couple more factors that I haven't seen mentioned, specifically that paying cash is generally a lot faster. For the dealership, there isn't necessarily a benefit, but for the salesperson, a quick sale means they might get to slot an 'extra' sale in for that day, so it's worth it to them to play around with their commission on what they might consider a 'gimme'. If paying cash, it is best to do so on busy days so that there are other 'fish' for the salesperson to go to next. If you're the only person there, there's no real sense in urgency.

[praptak]

> The price of every vehicle is fully negotiable but the negotiating room is opaque. Key car features and options are bundled in arbitrary packages and priced in ways that make pricing even more opaque.

This is my ongoing remark on this topic: walking into a particular dealership is a mistake. You're making it hard for yourself to use your only negotiation asset - the option to go elsewhere. Figure out the features you need and contact multiple dealerships for a quote. This sets up a much more better game for you. But yeah, dealerships still suck.

[Terretta]

> Figure out the features you need and contact multiple dealerships for a quote.

Sites like http://www.autobytel.com/ can help simplify this process.

See also: AutoNation’s AutoUSA, Microsoft Corporation’s MSN Autos, CarsDirect.com, Cars.com, eBayMotors.com, Dealix.com, and AutoTrader.com.

[tomrod]

Indeed. A persistent cartel is a sign that such industry has unethical legal protection, to the detriment of the consumer.

[cynicalkane]

For new cars, there's always YC-backed CarWoo, a no-hassle car buying website: http://carwoo.com/

I haven't tried it, but heard good things. For a lot of brands (especially non-luxury Japanese) new cars are cost-effective right now.

[astral303]

Dealers generally hate sites like CarWoo and TrueCar:

http://forum.dealerrefresh.com/f46/carwoo-anyone-2746.html

Search that forum for lots of lovely language from the dealers about those two. TrueCar is particularly despised.

There is some positive feedback from dealers about CarWoo though, more so than TrueCar, so perhaps they figured out a thing or two better.

[dwj]

I think it's only the small-time dealers that hate carwoo. Have a look at the comment by Scott Salzman on that forum, which fits with my own experience. I bought my car through carcostcanada.com, and my local dealer couldn't even match the no-haggle quote I got through the site (their best offer was 1k more).

The dealer I went with was a high-volume dealership in the city. Not only was their price low, but they also were very friendly and helpful. It makes sense to use sites such as this - it's a huge time saving for both the customer and the dealer.

[nradov]

I used CarWoo a couple months ago to buy a new Subaru. It worked fine. Since I wanted an unusual combination of color, trim, and options it was helpful that I could leave my request open for a while and let the offers roll in from multiple dealers until I found one that matched my requirements. Personally I cared more about getting exactly what I wanted than paying the lowest possible price.

They could do better in filtering our junk offers. I clearly stated that I wanted a silver car without a sunroof but still had dealers spamming me with offers for a red one with a sunroof or whatever.

[Osiris]

I've never bought a car from a dealer and one the primary reasons is that I don't want to deal with a salesman. I'd rather get a used car where there's a significant price discount and there are well-established guides (KBB, Edmunds) that wil tell you basically what you should expect to pay. Buying a used car is much more price transparent than buying new. (The other reason is that I refuse to go into debt for something I use for an hour a day and hate every minute of it).

[Shivetya]

buying a car through a plan negotiated either by your employer, union, or other relationship to the automaker, usually sets limits on what a dealer can charge.

Example, a purchase I made this year specified the sale price of the car (lower than invoice you normally see) plus I think $100 documentation fee. No other fees were permitted.

I have seen X, S, and other other plan, for Fords, I am quite sure GM is the same if not Chrysler as well. When I bought a Mazda in 08 I only paid sales tax on the price Mazda set, not the dealer.