7 ms·

Manufacturers need to get a clue that dealers are poison to their industry. Every time we've bought a new car in my family the experience has been a nightmare b

Manufacturers need to get a clue that dealers are poison to their industry. Every time we've bought a new car in my family the experience has been a nightmare because of all the games the dealers play. The only new car I have any interest in buying today is a Tesla because their sales model is low stress and can be done from my office. I will drink a toast to the day the last auto dealership goes out of business.

tacomonstrous 9y ago
Last time I bought a car, I had a fairly pleasant experience at the dealer. I looked up what I wanted online (CarGuru.com), called the dealer, made sure it was available, and then went over and bought it. Zero stress.
- ghaff 9y ago
  The sales guys are still often idiots. But if you know the cost of the car, don't need financing, and either plan to do a private sale of your current car or it's a donate for $2K vs. trade-in situation, it isn't really all that stressful. What's stressful is when they start playing games with all the levers. If you're fortunate enough to not be in the position to maybe have to play those games, you basically hold the cards.
  - geff82 9y ago
    Being a former certified car sales guy who changed to IT out of passion, I am currently in the process of buying two cars for business and family. I am horrified by the current state of car sales. Cars are presented dirty, salespeople show absolutely no interest in even talking to us while staying around their dealership for a long time looking at specific cars. Best was this Monday, when I called one dealer and told: I want to buy a (specific) new car. Now. No haggling, I just sign. Had to call them 3 more times, every time I got a new excuse why no salesman is available to me. "Please wait another hour, then he is out of the meeting"... so I just called another more expensive dealer after 8 hours, told them the same thing. The salesman sent me the contract in a second. But as I mailed the signed contract back after business hours, I did not hear anything from it the next day. Called the dealership after waiting half of the next day to hear "Salesman out of office today". I said: no problem, I just resend the contract to another person. "You can do this, but the salesguy needs to get permission from the boss to sell you the car". At the end of the day, they somehow managed to send me the invoice for the car.... but everything took many phonecalls.
    - cmdrfred 9y ago
      Seems that deregulation is sorely needed here. Car dealerships are working with the same enthusiasm as the DMV.
      - braindouche 9y ago
        My local DMV is far more enjoyable to go to than my local car lot.
  - Broken_Hippo 9y ago
    "... don't need financing" Only this can create problems of its own. Some dealers will refuse to work with you if you are paying with actual money instead of a loan. My parents went through this. They sold some farmland and decided to buy a new car with the profits. A few dealers simply said no. The car they wound up with mostly depended on where would actually sell them the car.
    - ghaff 9y ago
      I've never encountered this but I'm not shocked. They often don't make a lot of money ($500 is a figure I hear thrown around) on the car itself.
      - rplst8 9y ago
        Why wouldn't they take cash then? If they don't have to give the incentives, that's more money in their pocket.
        rdtsc 9y ago
        They bank on screwing people over with financing. I didn't tell them how I'd be paying until we were signing paperwork already. He wasn't happy to hear a I will be writing a check. Then I refused to sign the arbitration agreement and he really got mad, but oh well I got the car anyway. However it wasn't a pleasant experience overall.
        Broken_Hippo 9y ago
        Some simply aren't willing to do the paperwork one must do with transfers over 10k. More importantly, they make more money off of the loans than they do with cash. This is true even if they must repo the car later on - they can often sue you for at least part of the total cost, minus the amount they sell the car for (that last bit might vary by state, though).
    - decwakeboarder 9y ago
      You could also be missing out on incentives from the manufacturer for not using their financing. It's definitely a good idea to have money or financing already lined up, but some manufacturers will give thousands of dollars in incentives to use their financing.
  - freehunter 9y ago
    >The sales guys are still often idiots. Ugh. I was test driving a car I knew almost nothing about recently. I'm in the market for a fun weekend driver as a second car, and this one caught my eye on the dealer lot. I was looking at the car when a salesman approached me (I did not approach him, and I did not look at any other cars). I asked him to let me take it for a drive, and while we were driving I was asking him questions about it. "I don't know" was his only response. I'm sitting here in the drivers seat of a two-seater sports car doing 110mph down the highway and this guy is completely silent. "Does it have a turbo?" I don't know. "How big is the engine?" I don't know. "How many gears does it have?" I don't know. "How fast can I be going while putting the roof down?" Actually on this one his response was "let's give it a shot" and started lowering the roof at highway speeds. Luckily it apparently can handle that. Turns out the guy just started working there about two months prior and had never even heard of the car we were driving, he'd only sold Jeeps and pickup trucks and sedans up to that point. He just wanted the commission from selling a car he knew nothing about. I liked the car, but I will not buy from them.
quadrangle 9y ago
Car dealerships are also among the ugliest, least appealing places in urban settings. But then, everything car-related is part of perhaps the majority of what's bad about modern society…
- Kluny 9y ago
  And usually massive wastes of valuable land.
  - HeyLaughingBoy 9y ago
    What else would you do with it?
    - r00fus 9y ago
      How about a park? Or more residential housing? Office buildings? Can't wait till we can replace our petroleum vehicle economy and it's superfund sites (i.e., any former gas station).
    - Kluny 9y ago
      In my town, you'd build houses on it. The vacancy rate is under 0% and small, dingy houses sell for about $600,000.
  - quadrangle 9y ago
    True, but, to be fair, a parking lot filled with cars for sale is only marginally worse than a giant parking lot filled with cars sitting there unused most hours of the day — and we have far more of the latter wasting our valuable land.
stevenwoo 9y ago
Did you always negotiate car prices yourself or did you consider using a purchasing service like Costco where there is no negotiation?
- mwexler 9y ago
  Almost every online car purchasing service at major brands is a white labeled truecar. Don't assume that, say, the "AAA" or "Costco" brand is giving you any special treatment. Your lead goes into a lead queue, a price that is better than floor/sticker but not as good as you may have gotten from negotiation is given, and you, saving time and stress instead of money, buy the car. I was a huge fan of truecar until I did the experience, and now I'm hugely disappointed. I felt like the experience hid information and shepherded me to a dealer to let it take advantage of me; I saved some time and hassle, but I spent more money in the process and at the end, wasn't all that happy. YMMV, so check out the tool (directly or via AAA or Costco etc.), but be realistic over what it can do: it makes money from the dealers, not you, so be aware of biases. I haven't tried non-online services (personal negotiators, etc.) so can't speak to those.
  - coredog64 9y ago
    It also doesn't save you from the bullshit that goes on in the finance office.
  - mcguire 9y ago
    Any dealer is 'no haggle' if you pay list price.
deleted 9y ago
[deleted]
ataggart 9y ago
>I will drink a toast to the day the last auto dealership goes out of business. Unfortunately, manufacturers are prohibited from selling directly to consumers in many states. As usual, scratch below the surface of a "market failure", and you're likely to find some regulation getting in the way.
- dforrestwilson1 9y ago
  ^ This. Here is a good Planet Money episode about it. http://www.npr.org/sections/money/2013/02/12/171814201/episode-435-why-buying-a-car-is-so-awful http://www.npr.org/sections/money/2013/02/12/171814201/episo...
- TeMPOraL 9y ago
  Look at that regulation a little closer, and you may find a reason it was created. Doesn't mean the particular piece of regulation is helpful nowadays, but also doesn't immediately mean it isn't.
- semanticist 9y ago
  It might be worth asking why the regulations exist. Scratch below the surface of "red tape" and you're likely to find some regulatory capture and incumbents buying laws to stop competition.
- r00fus 9y ago
  And what money funded the writing of those regulations? It's purely the end-game of capitalism - if not constrained, it will subvert political systems to install it's cronies, capture regulatory agencies and buy legislation. A government that doesn't regulate money's interaction with politics will end up representing only capital-owners.
dtnewman 9y ago
Recent car lessee here. Like most people, I'm not in a position to buy a Tesla, but I agree that I can't stand the games the others play. I recently leased a 2017 Hyundai Sonata. I go in telling them exactly what I want (base model, no money down, 12k miles/year). They come back with an offer for something like $290 month + $1300 down (so effectively $326/month over 36 months). After some very tough negotiating, I got it down to $200/month with nothing down except registration (~$400 for registration, so effectively ~$211/month all-in). It's outrageous to me that the initial price they give bears no resemblance to reality. But I'm sure they do it because there are some people who just don't like negotiating and will pay it. Or they might even tell them "I'm gonna do you a big favor and knock $25/month off so that you remain a loyal customer" and then the customer comes away actually feeling like they got a deal even though they were actually ripped off. In the old days (WAY before my time), you might have negotiated for everything (say eggs in a grocery store) so I wouldn't have had an issue with negotiating for cars. But seeing as cars are one of the only remaining things that you can negotiate on price, the dealerships take advantage of the fact that people today just aren't used to negotiating and therefore aren't very good at it. If there were a car brand with affordable cars that didn't play these games, I'd buy from them happily.
- dtnewman 9y ago
  I should say that I'm otherwise pretty happy with the car. So much so that a few weeks later we leased an Elantra for my wife. If I could go back, I would have gotten that instead. She has a few more gadgets than me (heated seats, sunroof, leather steering wheel) and the car gets better mileage though it is smaller and it's nice for at least one of us to have a roomy back seat. Both cars have Android auto and apple car which are amazing. We're paying $170 month for hers ($0 down except for registration which was 280 since we transferred from another car). I'm only putting this here as a baseline for others to use. I didn't sign an NDA on what I'm paying ;) It's easy to get ripped off in this game, so it's good to know what others are paying. I hope this helps someone. And I'd be curious to know if you got a lower price!
- mdasen 9y ago
  I think the issue goes beyond sleazy sales tactics. There are issues of inventory, sales preferences, model cycles, etc. If you're Volkswagen and just came out with a brand-new Golf, there's excess demand that's been waiting for it to come out and limited supply. So, the vehicle sells close to the sticker price. People want the new thing, it's the most up-to-date vehicle in its class for at least a little while while the Fords and whatnot might have been updated 3-4 years ago. Now, car companies could lower the sticker price of the vehicle as time goes on. A model that has been around for 5 years and will likely be refreshed in 1-2 years could just have money taken off the sticker. But then when they introduce the new model, there's sticker shock at how much more it is. There's also the perception issue that Volkswagen wouldn't want the Golf to be seen as below a competing vehicle just because it's slightly older - and then when the new model comes out people think it's overpriced because it's now "the same price as the competitor that has always been more expensive". For most car companies, they're making cars on spec - the idea that if they make it, someone will buy it. If a company has excess inventory at the end of a year, they need to move it. It's a depreciating asset and if no one will buy it for $20k, they need to offer a discount. But that discount often isn't permanent. It's an issue of inventory that might be temporary. They'll even advertise "for $x thousand off!", but they don't want to change the sticker because they want to sell for that price when they don't have an inventory glut. Likewise, sometimes consumers go off a brand or model. Car companies have scandals and need to discount things to win consumers back. Sometimes they miscalculate what consumers want and the vehicles still have utility, but they aren't what a lot of people want and have to discount them. Sometimes you make a car that's in the same class as other vehicles, but it's an inferior version. You want your next model to be as good as the competitor so you don't want to lower the sticker and permanently put it in people's consciousness that you make an inferior vehicle to your competitor, but you need to sell these crappier cars. You'll even put it in ads that your discount exists many times. Tesla doesn't have any of these problems. Their supply is more limited than their demand so they never have excess inventory. Given that they don't have competitors in their space, you're never left thinking, "the Tesla Model S was created in 2012, but this NewElectricCo Model Y was just created in 2017 and I'm getting the new awesome model that no one has and looks new and has the best stuff!" If Tesla becomes a mass-market company with competitors, they'll face many of these same issues. If Tesla has 5 competitors providing much the same vehicles (in the way that an Audi A4, BMW 3 Series, and Mercedes C-Class are much the same vehicle) and they're building enough units to meet demand, they'll likely have to discount too. If Tesla builds 100k units and consumers have only bought 70k by December, well, they're going to have to push the 30k units left over with discounts. If Tesla has a Model S from 2012 competing in 2020 against a brand-new NewElectricCo vehicle, they're going to have to discount to push their vehicle. At some point, Tesla is likely to produce a model that is considered not as good as a competitor and they'll have to discount it a bit until the next version comes out. Tesla is in a great position right now because it has way more demand than supply, but if Tesla is actually looking to change the world, that's going to change. -- A few closing thoughts: First, GM did experiment with no-haggle pricing. Their Saturn brand had that as a staple of their business. There's something cool about the idea, but when you're trading in a vehicle, you still need to haggle over the trade-in cost. So, any benefit to the non-sleaze of the new car's price can be lost on the trade-in (though you could sell it yourself if you wanted that hassle). Second, this also happens with a lot of products, not through negotiation, but through discounts. When the Galaxy S8 came out, it was new and shiny and there was excess demand and not going to be great discounts. Come January 2018, you'll likely to be able to pick up a discounted phone. The Galaxy S9 won't be out yet, but they'll be looking to clear out inventory and the S8 might look more dated against phones that have come out since making it less attractive at list price. Now, it's still often a set, non-haggle price. So maybe you would have no problem if Tesla said, "we're offering $8k off all 2017 Model S vehicles" and everyone was getting the same thing. But companies are going to have to manage their inventory, model cycle, consumer preferences, and competitive alternatives. Tesla will have to do that as well. And some of that will be local. Maybe Tesla has some excess units in Florida nearing the end of the year while having sold out in California. It might make more sense for them to try and move the inventory in Florida with a discount. It costs money to move vehicles. Sometimes it makes sense to try and hit a certain critical mass in a market to get word-of-mouth. Maybe you're at risk of losing employees if you're constantly taking inventory away from them. There's definitely a lot of sleaze in the industry, but Tesla likely won't be able to be a single, stable price forever as they ramp up to meet demand and gain competitors. They'll have to provide discounts - though they might provide up-front, non-sleazy, no-haggle discounts.
Shivetya 9y ago
I never have had an issue at a new car dealer nor can I recall anyone else doing so. Might be a local thing, I do have many of the same brand to choose from being in the metro Atlanta area. Now to the article, full loaded vehicles have a lot of cushion when it comes to discounts and so the manufacturer isn't going to suffer a loss of the vehicle but instead losing out on extended profit. Another area they are giving up profit on is financing. When I bought a new Volt back in March; at discount but nothing stellar; I ended up taking a loan because it was zero percent. Real hard to justify paying cash when they will just give you money. I did notice that it was mostly sedans they listed as holding the discounts with some SUV but not many if any CUV/ CUV sales are taking off world wide so there isn't much pressure there. I would wonder how much pressure this puts on used car franchises, those who only sell used. See the low prices benefit manufacturer branded dealers because they can get the trade as well.
larrydag 9y ago
I work in the auto finance industry. I totally understand your point of view. There are a lot of games the dealers play to make a profit on each vehicle they sell. It can be really trying on the customer. I would love to disrupt this auto dealership industry. Tesla business model is compelling but I don't think it needs to be manufacturer driven. I think there is still a place for dealerships but their business model can be upended. Some guys working on this is AutoFi and Carvana. I think there are ideas out there. I would love to be a part of that.
abandonliberty 9y ago
My friend's recent experience Before the sale: Gets told her gender affects her ability to drive manual After the sale (different location): Service is non-existent, they argue valid issues aren't real and get downright insulting.

tacomonstrous 9y ago

Last time I bought a car, I had a fairly pleasant experience at the dealer. I looked up what I wanted online (CarGuru.com), called the dealer, made sure it was available, and then went over and bought it. Zero stress.

ghaff 9y ago
The sales guys are still often idiots. But if you know the cost of the car, don't need financing, and either plan to do a private sale of your current car or it's a donate for $2K vs. trade-in situation, it isn't really all that stressful. What's stressful is when they start playing games with all the levers. If you're fortunate enough to not be in the position to maybe have to play those games, you basically hold the cards.
- geff82 9y ago
  Being a former certified car sales guy who changed to IT out of passion, I am currently in the process of buying two cars for business and family. I am horrified by the current state of car sales. Cars are presented dirty, salespeople show absolutely no interest in even talking to us while staying around their dealership for a long time looking at specific cars. Best was this Monday, when I called one dealer and told: I want to buy a (specific) new car. Now. No haggling, I just sign. Had to call them 3 more times, every time I got a new excuse why no salesman is available to me. "Please wait another hour, then he is out of the meeting"... so I just called another more expensive dealer after 8 hours, told them the same thing. The salesman sent me the contract in a second. But as I mailed the signed contract back after business hours, I did not hear anything from it the next day. Called the dealership after waiting half of the next day to hear "Salesman out of office today". I said: no problem, I just resend the contract to another person. "You can do this, but the salesguy needs to get permission from the boss to sell you the car". At the end of the day, they somehow managed to send me the invoice for the car.... but everything took many phonecalls.
  - cmdrfred 9y ago
    Seems that deregulation is sorely needed here. Car dealerships are working with the same enthusiasm as the DMV.
    - braindouche 9y ago
      My local DMV is far more enjoyable to go to than my local car lot.
- Broken_Hippo 9y ago
  "... don't need financing" Only this can create problems of its own. Some dealers will refuse to work with you if you are paying with actual money instead of a loan. My parents went through this. They sold some farmland and decided to buy a new car with the profits. A few dealers simply said no. The car they wound up with mostly depended on where would actually sell them the car.
  - ghaff 9y ago
    I've never encountered this but I'm not shocked. They often don't make a lot of money ($500 is a figure I hear thrown around) on the car itself.
    - rplst8 9y ago
      Why wouldn't they take cash then? If they don't have to give the incentives, that's more money in their pocket.
      - rdtsc 9y ago
        They bank on screwing people over with financing. I didn't tell them how I'd be paying until we were signing paperwork already. He wasn't happy to hear a I will be writing a check. Then I refused to sign the arbitration agreement and he really got mad, but oh well I got the car anyway. However it wasn't a pleasant experience overall.
      - Broken_Hippo 9y ago
        Some simply aren't willing to do the paperwork one must do with transfers over 10k. More importantly, they make more money off of the loans than they do with cash. This is true even if they must repo the car later on - they can often sue you for at least part of the total cost, minus the amount they sell the car for (that last bit might vary by state, though).
  - decwakeboarder 9y ago
    You could also be missing out on incentives from the manufacturer for not using their financing. It's definitely a good idea to have money or financing already lined up, but some manufacturers will give thousands of dollars in incentives to use their financing.
- freehunter 9y ago
  >The sales guys are still often idiots. Ugh. I was test driving a car I knew almost nothing about recently. I'm in the market for a fun weekend driver as a second car, and this one caught my eye on the dealer lot. I was looking at the car when a salesman approached me (I did not approach him, and I did not look at any other cars). I asked him to let me take it for a drive, and while we were driving I was asking him questions about it. "I don't know" was his only response. I'm sitting here in the drivers seat of a two-seater sports car doing 110mph down the highway and this guy is completely silent. "Does it have a turbo?" I don't know. "How big is the engine?" I don't know. "How many gears does it have?" I don't know. "How fast can I be going while putting the roof down?" Actually on this one his response was "let's give it a shot" and started lowering the roof at highway speeds. Luckily it apparently can handle that. Turns out the guy just started working there about two months prior and had never even heard of the car we were driving, he'd only sold Jeeps and pickup trucks and sedans up to that point. He just wanted the commission from selling a car he knew nothing about. I liked the car, but I will not buy from them.

quadrangle 9y ago

Car dealerships are also among the ugliest, least appealing places in urban settings. But then, everything car-related is part of perhaps the majority of what's bad about modern society…

Kluny 9y ago
And usually massive wastes of valuable land.
- HeyLaughingBoy 9y ago
  What else would you do with it?
  - r00fus 9y ago
    How about a park? Or more residential housing? Office buildings? Can't wait till we can replace our petroleum vehicle economy and it's superfund sites (i.e., any former gas station).
  - Kluny 9y ago
    In my town, you'd build houses on it. The vacancy rate is under 0% and small, dingy houses sell for about $600,000.
- quadrangle 9y ago
  True, but, to be fair, a parking lot filled with cars for sale is only marginally worse than a giant parking lot filled with cars sitting there unused most hours of the day — and we have far more of the latter wasting our valuable land.

stevenwoo 9y ago

Did you always negotiate car prices yourself or did you consider using a purchasing service like Costco where there is no negotiation?

mwexler 9y ago
Almost every online car purchasing service at major brands is a white labeled truecar. Don't assume that, say, the "AAA" or "Costco" brand is giving you any special treatment. Your lead goes into a lead queue, a price that is better than floor/sticker but not as good as you may have gotten from negotiation is given, and you, saving time and stress instead of money, buy the car. I was a huge fan of truecar until I did the experience, and now I'm hugely disappointed. I felt like the experience hid information and shepherded me to a dealer to let it take advantage of me; I saved some time and hassle, but I spent more money in the process and at the end, wasn't all that happy. YMMV, so check out the tool (directly or via AAA or Costco etc.), but be realistic over what it can do: it makes money from the dealers, not you, so be aware of biases. I haven't tried non-online services (personal negotiators, etc.) so can't speak to those.
- coredog64 9y ago
  It also doesn't save you from the bullshit that goes on in the finance office.
- mcguire 9y ago
  Any dealer is 'no haggle' if you pay list price.

deleted 9y ago

[deleted]

ataggart 9y ago

>I will drink a toast to the day the last auto dealership goes out of business. Unfortunately, manufacturers are prohibited from selling directly to consumers in many states. As usual, scratch below the surface of a "market failure", and you're likely to find some regulation getting in the way.

dforrestwilson1 9y ago
^ This. Here is a good Planet Money episode about it. http://www.npr.org/sections/money/2013/02/12/171814201/episode-435-why-buying-a-car-is-so-awful http://www.npr.org/sections/money/2013/02/12/171814201/episo...
TeMPOraL 9y ago
Look at that regulation a little closer, and you may find a reason it was created. Doesn't mean the particular piece of regulation is helpful nowadays, but also doesn't immediately mean it isn't.
semanticist 9y ago
It might be worth asking why the regulations exist. Scratch below the surface of "red tape" and you're likely to find some regulatory capture and incumbents buying laws to stop competition.
r00fus 9y ago
And what money funded the writing of those regulations? It's purely the end-game of capitalism - if not constrained, it will subvert political systems to install it's cronies, capture regulatory agencies and buy legislation. A government that doesn't regulate money's interaction with politics will end up representing only capital-owners.

dtnewman 9y ago

Recent car lessee here. Like most people, I'm not in a position to buy a Tesla, but I agree that I can't stand the games the others play. I recently leased a 2017 Hyundai Sonata. I go in telling them exactly what I want (base model, no money down, 12k miles/year). They come back with an offer for something like $290 month + $1300 down (so effectively $326/month over 36 months). After some very tough negotiating, I got it down to $200/month with nothing down except registration (~$400 for registration, so effectively ~$211/month all-in). It's outrageous to me that the initial price they give bears no resemblance to reality. But I'm sure they do it because there are some people who just don't like negotiating and will pay it. Or they might even tell them "I'm gonna do you a big favor and knock $25/month off so that you remain a loyal customer" and then the customer comes away actually feeling like they got a deal even though they were actually ripped off. In the old days (WAY before my time), you might have negotiated for everything (say eggs in a grocery store) so I wouldn't have had an issue with negotiating for cars. But seeing as cars are one of the only remaining things that you can negotiate on price, the dealerships take advantage of the fact that people today just aren't used to negotiating and therefore aren't very good at it. If there were a car brand with affordable cars that didn't play these games, I'd buy from them happily.

dtnewman 9y ago
I should say that I'm otherwise pretty happy with the car. So much so that a few weeks later we leased an Elantra for my wife. If I could go back, I would have gotten that instead. She has a few more gadgets than me (heated seats, sunroof, leather steering wheel) and the car gets better mileage though it is smaller and it's nice for at least one of us to have a roomy back seat. Both cars have Android auto and apple car which are amazing. We're paying $170 month for hers ($0 down except for registration which was 280 since we transferred from another car). I'm only putting this here as a baseline for others to use. I didn't sign an NDA on what I'm paying ;) It's easy to get ripped off in this game, so it's good to know what others are paying. I hope this helps someone. And I'd be curious to know if you got a lower price!
mdasen 9y ago
I think the issue goes beyond sleazy sales tactics. There are issues of inventory, sales preferences, model cycles, etc. If you're Volkswagen and just came out with a brand-new Golf, there's excess demand that's been waiting for it to come out and limited supply. So, the vehicle sells close to the sticker price. People want the new thing, it's the most up-to-date vehicle in its class for at least a little while while the Fords and whatnot might have been updated 3-4 years ago. Now, car companies could lower the sticker price of the vehicle as time goes on. A model that has been around for 5 years and will likely be refreshed in 1-2 years could just have money taken off the sticker. But then when they introduce the new model, there's sticker shock at how much more it is. There's also the perception issue that Volkswagen wouldn't want the Golf to be seen as below a competing vehicle just because it's slightly older - and then when the new model comes out people think it's overpriced because it's now "the same price as the competitor that has always been more expensive". For most car companies, they're making cars on spec - the idea that if they make it, someone will buy it. If a company has excess inventory at the end of a year, they need to move it. It's a depreciating asset and if no one will buy it for $20k, they need to offer a discount. But that discount often isn't permanent. It's an issue of inventory that might be temporary. They'll even advertise "for $x thousand off!", but they don't want to change the sticker because they want to sell for that price when they don't have an inventory glut. Likewise, sometimes consumers go off a brand or model. Car companies have scandals and need to discount things to win consumers back. Sometimes they miscalculate what consumers want and the vehicles still have utility, but they aren't what a lot of people want and have to discount them. Sometimes you make a car that's in the same class as other vehicles, but it's an inferior version. You want your next model to be as good as the competitor so you don't want to lower the sticker and permanently put it in people's consciousness that you make an inferior vehicle to your competitor, but you need to sell these crappier cars. You'll even put it in ads that your discount exists many times. Tesla doesn't have any of these problems. Their supply is more limited than their demand so they never have excess inventory. Given that they don't have competitors in their space, you're never left thinking, "the Tesla Model S was created in 2012, but this NewElectricCo Model Y was just created in 2017 and I'm getting the new awesome model that no one has and looks new and has the best stuff!" If Tesla becomes a mass-market company with competitors, they'll face many of these same issues. If Tesla has 5 competitors providing much the same vehicles (in the way that an Audi A4, BMW 3 Series, and Mercedes C-Class are much the same vehicle) and they're building enough units to meet demand, they'll likely have to discount too. If Tesla builds 100k units and consumers have only bought 70k by December, well, they're going to have to push the 30k units left over with discounts. If Tesla has a Model S from 2012 competing in 2020 against a brand-new NewElectricCo vehicle, they're going to have to discount to push their vehicle. At some point, Tesla is likely to produce a model that is considered not as good as a competitor and they'll have to discount it a bit until the next version comes out. Tesla is in a great position right now because it has way more demand than supply, but if Tesla is actually looking to change the world, that's going to change. -- A few closing thoughts: First, GM did experiment with no-haggle pricing. Their Saturn brand had that as a staple of their business. There's something cool about the idea, but when you're trading in a vehicle, you still need to haggle over the trade-in cost. So, any benefit to the non-sleaze of the new car's price can be lost on the trade-in (though you could sell it yourself if you wanted that hassle). Second, this also happens with a lot of products, not through negotiation, but through discounts. When the Galaxy S8 came out, it was new and shiny and there was excess demand and not going to be great discounts. Come January 2018, you'll likely to be able to pick up a discounted phone. The Galaxy S9 won't be out yet, but they'll be looking to clear out inventory and the S8 might look more dated against phones that have come out since making it less attractive at list price. Now, it's still often a set, non-haggle price. So maybe you would have no problem if Tesla said, "we're offering $8k off all 2017 Model S vehicles" and everyone was getting the same thing. But companies are going to have to manage their inventory, model cycle, consumer preferences, and competitive alternatives. Tesla will have to do that as well. And some of that will be local. Maybe Tesla has some excess units in Florida nearing the end of the year while having sold out in California. It might make more sense for them to try and move the inventory in Florida with a discount. It costs money to move vehicles. Sometimes it makes sense to try and hit a certain critical mass in a market to get word-of-mouth. Maybe you're at risk of losing employees if you're constantly taking inventory away from them. There's definitely a lot of sleaze in the industry, but Tesla likely won't be able to be a single, stable price forever as they ramp up to meet demand and gain competitors. They'll have to provide discounts - though they might provide up-front, non-sleazy, no-haggle discounts.

Shivetya 9y ago

I never have had an issue at a new car dealer nor can I recall anyone else doing so. Might be a local thing, I do have many of the same brand to choose from being in the metro Atlanta area. Now to the article, full loaded vehicles have a lot of cushion when it comes to discounts and so the manufacturer isn't going to suffer a loss of the vehicle but instead losing out on extended profit. Another area they are giving up profit on is financing. When I bought a new Volt back in March; at discount but nothing stellar; I ended up taking a loan because it was zero percent. Real hard to justify paying cash when they will just give you money. I did notice that it was mostly sedans they listed as holding the discounts with some SUV but not many if any CUV/ CUV sales are taking off world wide so there isn't much pressure there. I would wonder how much pressure this puts on used car franchises, those who only sell used. See the low prices benefit manufacturer branded dealers because they can get the trade as well.

larrydag 9y ago

I work in the auto finance industry. I totally understand your point of view. There are a lot of games the dealers play to make a profit on each vehicle they sell. It can be really trying on the customer. I would love to disrupt this auto dealership industry. Tesla business model is compelling but I don't think it needs to be manufacturer driven. I think there is still a place for dealerships but their business model can be upended. Some guys working on this is AutoFi and Carvana. I think there are ideas out there. I would love to be a part of that.

abandonliberty 9y ago

My friend's recent experience Before the sale: Gets told her gender affects her ability to drive manual After the sale (different location): Service is non-existent, they argue valid issues aren't real and get downright insulting.