Markup In The Automobile Business

[TedH]

I'm a writer working out of the Milwaukee area.  Forum members have helped me many times over the years, mainly with identifying automobiles and trucks in photographs, sometimes when only a quarter panel is visible.  About two years ago, I asked for input on a story focused on what I termed "markup in the automobile business."  There were many helpful responses; ultimately, I was greatly aided by an industry insider.  First draft of the story is here:  Markup In The Automobile Business.  Please have a look and let me know your thoughts.  (Some of you will see your earlier comments.)  Goal is to make corrections and received additional input. Many thanks, Ted 

[Frantz]

Thanks for the sited quotes. Not quite as one sided as I had imagined and glad we could enlighten you a little. If absolutely nothing else, I'd be delighted to find out you've realized CR is a biased source. I've hated them for years because they pretend to be something they are not. At best, it's mob responses in an organized manner. I still believe that the car industry is great for consumers because you can haggle. I still believe if it was such a profitable industry as many believe, then more people would look to become investors. Knowing what a dealer actually makes doesn't actually affect the negotiation much either because if we could stay in business selling them much cheaper than we do, then we would in order to gain volume from the guy down the street. That's how competition works. I think it's unfair to attack the industry for being all about money, as that is the entire point of all industries, at least successful ones. And you can still get within a few hundred bucks of a final deal with about 10 minutes of online research before sitting down once with the dealer of your choice using such industry controlled tools as TrueCar (at least for new cars). A few minutes longer on used, but the value of a used car to  you can vary based on your own priorities as not all used Honda Civics are the same... 

For myself as a sales person, I don't really care how much I make off you, but the easier you make it for me the more I am going to help you out in the future. Now there have been customers who pay a little more than avg and they get some extra care. I've spent money out of my own pocket to make things right for them. But even if I get a flat (aka we didn't make enough money for me to earn a higher commission than the min per car we make), if you make it easy on me I'm going to want you to come back. I still have a great customer from when I sold Fords who now buys me lunch when he needs a new truck because I still help him get the same deals I was offering him. No one is making much but it's a darn easy sale and he gives great surveys. If you come in with all this data on how much we're making and how it's all a scam and you spend my time and go to 10 dealers to try and "keep me honest", well frankly it's hard to argue that it's worth my time, plus you're more likely to give a less than perfect survey, and that's worse than losing money on a car. It's certainly your right to do so, but looking at both sides of the perspective would give you a better experience so long as you have a good sales person (who does want to get paid well for being good). You deserve to get a good deal and can do so easily. And a good deal does leave room for profit, just like with anything else you buy.

Edited November 23, 2018 by Frantz (see edit history)

[trimacar]

I come from a family of writers, and if you want some honest feedback, I'll give it.

 

Your topic is interesting, as is much of the content, but it rambles.  I'm reading along about car pricing and all of a sudden I'm in a grocery store.  With the length of what you've written, I believe it would serve you well to come up with some "chapters", so to speak.  Then, organize each "chapter" with the material that's relevant.  

 

Have a professional edit your work.  A lot of your sentences, aren't, they're just phrases.  Use of semi-colons and dashes should also be reviewed.

 

There's an age-old rule that, when you try to explain something to somebody, you 1)tell them what you're going to tell them, 2) tell them, then 3) tell them what you've told them.   I'd say you need to start out with explaining WHAT you're trying to explain, as the first couple of pages jumps back and forth from personal experience (which probably should be it's own "chapter") to describing the angst of other people regarding the car buying experience.  Even the title (an old used car saying) is vague and doesn't really let the reader know what's coming.  In fact, it's not the focus of the article at all.

 

I also agree that it's not correct to criticize a dealership trying to "make money", that's the purpose of a business.  One can criticize if unethical methods are used, but not the making money itself.

 

Also, I think some mention of types of buyers should be included.  Yes, there are a lot of buyers who look at pricing and invoices and factory price and so forth.  However, there are also a HUGE number of people who go into a dealership and say something like "I can spend $500 a month, what'll that get me".  Dealerships adore those kind of people, because games can be played with financing to make just about any payment work.

 

Lastly, I can tell you for a fact that at a lot of dealerships, the best day to buy a car is the last day of that dealership's fiscal month.  It's not always the last DAY of the month, though, as sometimes the month is extended if the last day falls on a Sunday or holiday.  That's the day that the sales manager has looked at the books, knows he has to sell X number of cars that month to get the per unit bonus, and if he's a few shy, will give great deals to make the quota.  Investigate it yourself, don't attach my name to it.

 

Fun stuff....

[Xander Wildeisen]

All I know, is that I paid way more for this car, than what it cost brand new. And it's condition is not factory fresh. Talk about a mark up.

[auburnseeker]

38 minutes ago, Xander Wildeisen said:

All I know, is that I paid way more for this car, than what it cost brand new. And it's condition is not factory fresh. Talk about a mark up.

Yes but I would take it over any new car priced 3 times whatever you paid for it. 

[Gunsmoke]

While I applaud your effort and perseverance, I think you are beating a dead horse (or trying to make Jello stick to a wall). The marketing of any consumer product is always based on supply and demand. Automobiles are no different. In North America, with millions of new cars sold annually, every manufacturer is trying their best to make a product(s) that in the long haul will be seen by the consuming public as a good product to buy (CR may inform some buyers thusly). Their reputation is paramount in the long picture. To use a somewhat pure model, in the 50's/60's the VW Beetle was introduced. It was a well made, high quality control, simple means of transport, generally a no frills A-B car which changed very little over decades. It's selling price (about $2000), aimed at affordability and a mass market (much like Henry Ford's T 50 years earlier). Their marketing campaign reflected their company's goal, volume sales at a minimum price and establish a good reputation for value. Compare that to the Big 3, whose business plans were often based on advertising hype as a means of selling mediocre products that had hundreds of models/options. Race on Sunday, sell on Monday was a good example, playing a shell game with consumers by suggesting the car they are about to buy just won the Indy 500! In the hyperbolic world of marketing, you are right in suggesting the game is all about smoke and mirrors. The latest gimmicks about $10,000 factory rebates is just part of the shell game. free accessories, no-cost options, and such drivel are more of the same. So you ask about a measure of mark-up?  As someone once said when asked where the Library is, "I'm afraid you can't get there from here"! The end price someone pays for a car is based only on "supply and demand". The seller can say whatever he/she wants to push the sale, MSRP, rebates, options, at cost, more power, free maintenance, 5 yr warranty, etc. The buyer can shop around, compare similar offers, study the quality/reputation of product, rely on knowledgeable friends, or go with something they already know gives good value. It's a shell game usually, buyers remorse is so common.

[R Walling]

 Too many personal stories. Stick to the facts and make it short and sweet.

 After a while, I was skipping whole paragraphs.

Edited November 23, 2018 by Roger Walling (see edit history)

[gungeey]

I sell cars:

My experience: 

A ) A "Great deal" is a matter of perception

B ) The people that pay the least are least satisfied with their experience and purchase

C)  People aren't satisfied with TruCar "Exceptional Pricing", they want to be the new benchmark

D ) If you don't want to dicker, well, sticker is quicker...

 

Finally, do you go to the dentist or a restaurant and negotiate a price? Why not?

 

Steve

Edited November 25, 2018 by gungeey
addition (see edit history)

[Bhigdog]

1 hour ago, gungeey said:

Finally, do you go to the dentist or a restaurant and negotiate a price? Why not?

 

Actually, if the procedure or seating in question is in the cost range of a new car the price is most definitely, and often is, negotiated.

My dentist routinely knocks 10 to 15%  off his standard rates since I mentioned I don't have insurance.

When you ask for a substitution on a menu are you not negotiating?

My local hardware store discounts 10% off of EVERYTHING I buy there simply because I asked for it.

Many places will extend a 10% or so discount to veterans if asked. My annual beach house rental is $300 less because I asked.

My parts store has me in the top discount column even though I don't buy that much anymore.

Negotiating is a learned skill that many people are unaware of or ashamed to practice. My dad taught me at an early age that almost any thing is negotiable and how to go about it. It has saved me many many thousands of dollars over my lifetime with no negative results. 

That said, I do detest buying a new car and often leave some on the table just to get it over with. Buying a car is like negotiating with Ming the Merciless................Bob

Edited November 25, 2018 by Bhigdog
additional thoughts, grammer, spelling too much time on my hands. (see edit history)

[60FlatTop]

I like to use a multiplier of 5 until a buyer offers less. Second buyer offering the same price usually gets it.

 

Over 20 pages is a lot. I didn't read it. But I like Milwaukee.

[gungeey]

2 hours ago, Bhigdog said:

 

Actually, if the procedure or seating in question is in the cost range of a new car the price is most definitely, and often is, negotiated.

My dentist routinely knocks 10 to 15%  off his standard rates since I mentioned I don't have insurance.

When you ask for a substitution on a menu are you not negotiating?

My local hardware store discounts 10% off of EVERYTHING I buy there simply because I asked for it.

Many places will extend a 10% or so discount to veterans if asked. My annual beach house rental is $300 less because I asked.

My parts store has me in the top discount column even though I don't buy that much anymore.

Negotiating is a learned skill that many people are unaware of or ashamed to practice. My dad taught me at an early age that almost any thing is negotiable and how to go about it. It has saved me many many thousands of dollars over my lifetime with no negative results. 

That said, I do detest buying a new car and often leave some on the table just to get it over with. Buying a car is like negotiating with Ming the Merciless................Bob

 

Bob, was actually posing the question to the original poster, with all that said sounds like you would be a delightful customer.

 Your dentist is free to say "no" to your discount request, or maybe he's not the best dentist or maybe he cuts corners when it comes to instrument cleaning..

He may well be just a real nice guy...

Other dentists might not need the work, have a tuition bill to pay for etc

All these come into play in the world of retail and services rendered

 

I wonder if your Hardware store owner/bbeach house owner thinks of people wanting discounts as "Ming"? LOL

 

[John348]

New automobile sales today have changed a large part is due to leases, and the lease market. There is very little wiggle room on a new vehicles, the price is the price and they are all about the same for similar equipped vehicles. There really are no more negotiations anymore. 

I buy a new vehicle every 3-5 years, usually on a phone call and it is done deal. Used cars on the lot I cringe at the thought of buying one,  A friend of mine always compared it to going bar hoping to meet his next ex-wife, You never know the real history and when you do find out it is just too late, and you are in. 

There has to be a profit margin on everything sold, and dealers have to have one also. 

Edited November 25, 2018 by John348 (see edit history)

[Bhigdog]

1 hour ago, gungeey said:

 

Bob, was actually posing the question to the original poster, with all that said sounds like you would be a delightful customer.

 Your dentist is free to say "no" to your discount request, or maybe he's not the best dentist or maybe he cuts corners when it comes to instrument cleaning..

He may well be just a real nice guy...

Other dentists might not need the work, have a tuition bill to pay for etc

All these come into play in the world of retail and services rendered

 

I wonder if your Hardware store owner/bbeach house owner thinks of people wanting discounts as "Ming"? LOL

 

 

Of course you are correct. It's a totally fluid interaction that's why it's called negotiation. ( verb. discussion towards reaching agreement). The seller is free to agree to a request or not. Sometimes his response may be  keyed to his current situation. Often it comes down to how the request is presented. The buyer is also free to accept the denial or not. As in many things how you present your request is as important as the request itself. When I'm denied I always offer a polite thanks anyway.

My hardware store owner always seems glad to see me and I try to find a reason to compliment him or the help. He also knows if I'm in his store I'm not in Lowes.

I'm guessing my dentist isn't hurting for $. Yet he still has smile for me when I sit down for a $4500 bridge (less $500 that is listed as professional courtesy).

So yes, I do consider myself a delightful customer.

The fact that I am offered an asked for courtesy discount does not make me any less so.  Many merchants would rather a 10% less margin than see the margin go to someone else especially if you happen to be a steady customer.

I find negotiating with many car dealers distasteful because it's often a shell game with not so obvious slight of hand figuring.

I used to buy my new cars/trucks from my local Chrysler/Dodge dealer. I could sit down with the store owner ( not a sales guy going off to talk to the sales manager every few minutes ) and we would have a rational discussion as to what I wanted, what I needed, what I could get and what it would cost.

Of course Chrysler gave his dealership to someone else

I think the new store's name is Ming's Chrysler/Ram.

 I buy far fewer new cars now. ................Think about that.........................Bob

Edited November 25, 2018 by Bhigdog (see edit history)

[Xander Wildeisen]

 

[billorn]

1 hour ago, Bhigdog said:

 

Of course you are correct. It's a totally fluid interaction that's why it's called negotiation. ( verb. discussion towards reaching agreement). The seller is free to agree to a request or not. Sometimes his response may be  keyed to his current situation. Often it comes down to how the request is presented. The buyer is also free to accept the denial or not. As in many things how you present your request is as important as the request itself. When I'm denied I always offer a polite thanks anyway.

My hardware store owner always seems glad to see me and I try to find a reason to compliment him or the help. He also knows if I'm in his store I'm not in Lowes.

I'm guessing my dentist isn't hurting for $. Yet he still has smile for me when I sit down for a $4500 bridge (less $500 that is listed as professional courtesy).

So yes, I do consider myself a delightful customer.

The fact that I am offered an asked for courtesy discount does not make me any less so.  Many merchants would rather a 10% less margin than see the margin go to someone else especially if you happen to be a steady customer.

I find negotiating with many car dealers distasteful because it's often a shell game with not so obvious slight of hand figuring.

I used to buy my new cars/trucks from my local Chrysler/Dodge dealer. I could sit down with the store owner ( not a sales guy going off to talk to the sales manager every few minutes ) and we would have a rational discussion as to what I wanted, what I needed, what I could get and what it would cost.

Of course Chrysler gave his dealership to someone else

I think the new store's name is Ming's Chrysler/Ram.

 I buy far fewer new cars now. ................Think about that.........................Bob

 

Just a question and I mean no offence.... would you continue to go to those places if they didnt give you discounts or would you find another place that did?

[Bhigdog]

44 minutes ago, billorn said:

 

Just a question and I mean no offence.... would you continue to go to those places if they didnt give you discounts or would you find another place that did?

No offense taken and it's a good question. If a discount is refused I take it at face value. No harm no foul. It's seldom a deal breaker. However, To use my hardware store as an example When I need an item they are my go to store, both because of the discount and I feel a certain loyalty since I was afforded a courtesy. I have no idea if others are offered the same  nor does it matter. I'll pass up an item I see in Lowes, for example, because I know I'll be near my hardware store soon.

Scrounging for discounts is not a way of life and in many situations it would not be appropriate. But if the opportunity seems right I see no harm in asking and  the seller often agrees.

Again a somewhat silly example. When I buy a box of cigars I ask, with a smile,  if the store owner will throw in a BIC lighter. He always does with a return smile. So for a 50 cent ($1 retail) item He's made a happy customer and I'm $1 (tax free) richer. Scale that up in amounts saved (earned tax free), hundreds of times over many years.

Again, to use the case of the hardware store, the merchant gains a loyal repeat customer for a very modest decrease in margin and I get to feel appreciated...... What's not to like?..............Bob

Edited November 25, 2018 by Bhigdog (see edit history)

[Bhigdog]

1 hour ago, Xander Wildeisen said:

 

Now that there is funny. I don,t care who you are.....bob

[Xander Wildeisen]

The guy did get his 20, and 10 for the gourd. Haggling got the buyer nothing in the end. 

[1937hd45]

TedH, Did it ever dawn on you that this Forum is provided by the Antique Automobile Club of America, sadly they accept 25 year old cars now, but I come here to read about PRE World  War Two vehicles. Bob 

[A. Ballard 35R]

20 minutes ago, 1937hd45 said:

TedH, Did it ever dawn on you that this Forum is provided by the Antique Automobile Club of America, sadly they accept 25 year old cars now, but I come here to read about PRE World  War Two vehicles. Bob 

 

Interesting point, Bob, but my question is why the subject of dealer mark-ups on basically new cars has anything to do with AACA or its stated mission?

 

I'm sure that many will think otherwise.  😀

[Xander Wildeisen]

The Tesla Topic got a lot of posts/views.

[Bhigdog]

I come here to read about post ww2 cars!

Argle bargle, grump grump!

And where the Hell is my prune juice? ........bob

Edited November 25, 2018 by Bhigdog (see edit history)

[TerryB]

There are few reasons to debate the cost of new cars here on this forum and thanks to the internet more than enough information exists on pricing of new cars and what are good or bad days to buy a car.  Anyone in business is entitled to make money for their efforts to provide a product or service.  Hopefully they do it in an honest way.  Those who do prosper and those who don’t fade away.

 

[plymouthcranbrook]

6 hours ago, John348 said:

New automobile sales today have changed a large part is due to leases, and the lease market. There is very little wiggle room on a new vehicles, the price is the price and they are all about the same for similar equipped vehicles. There really are no more negotiations anymore. 

I buy a new vehicle every 3-5 years, usually on a phone call and it is done deal. Used cars on the lot I cringe at the thought of buying one,  A friend of mine always compared it to going bar hoping to meet his next ex-wife, You never know the real history and when you do find out it is just too late, and you are in. 

There has to be a profit margin on everything sold, and dealers have to have one also. 

I don't know about 2018 but in 2012 when we bought our Kia soul I went to 3 area dealers and talked with them until I got the best price(which happened to be from the closest).

[John348]

2 hours ago, plymouthcranbrook said:

I don't know about 2018 but in 2012 when we bought our Kia soul I went to 3 area dealers and talked with them until I got the best price(which happened to be from the closest).

 

What was the price difference? Was the car off the lot in that dealers inventory? Were they identical in every aspect including color? All of these are contributing factors, as I wrote in the statement that you quoted me 

"they [prices]are about the same for similar equipped vehicles"

[61polara]

I read your article and have to say that I don't know what I just read.  Very jumbled, no direction and no clear conclusion.  I'm not a car dealer, but have bought and sold a lot of new and used cars and don't understand what a grocery store has to do with your article because you didn't explain why it was relevant.  You have included to many irrelevant personal experiences which tend to indicate bias, not saying you are bias, only it indicates that.  Tear this article up and start fresh.

Sorry to be harsh, but you asked for a review.

Edited November 26, 2018 by 61polara (see edit history)

[JACK M]

21 hours ago, 1937hd45 said:

TedH, Did it ever dawn on you that this Forum is provided by the Antique Automobile Club of America, sadly they accept 25 year old cars now, but I come here to read about PRE World  War Two vehicles. Bob 

 

There is unlikely any other internet forum where there is a cross section of car guys like this forum has.

I also read the article and found it interesting, however I do agree with some observations here.

The OP wanted to find a place where he could get some input from car guys and he found it.

I don't think he is out of line with this endeavor in the General Discussion forum.

And it gives some of you guys that don't have much of a life besides cars to feel involved.

 

Tongue in cheek.

Edited November 26, 2018 by JACK M (see edit history)

[Frantz]

9 minutes ago, JACK M said:

And it gives some of you guys that don't have much of a life besides cars to feel involved.

Hey now, I resemble that remark!