4 ms·

Cars are commodities, and should not be sold by salesman on commission. I'm not buying another car until mine falls apart.

adamio 13y ago
The salesmen could be needed - because cars are commodities. If a customer walks in your door, you really need to sell them on your brand of car, at your dealership. If the dealerships were manufacturer owned, perhaps the commission would be lower and service level higher.
adventured 13y ago
This. All dealerships should be converted to car delivery and ordering centers (with one of each model for test driving). The middle man cost should be wiped out, and the business should move to an order > build > x days to deliver approach. Save buyers $3,500 on a $30,000 car, let them further and easier customize, and they will wait for delivery. Simply put, replace build car > sell car, with sell car > build car. As it is, car salesmen are nothing more than order takers that generate a large commission and overhead; the customers come to you. They only still exist because of massive regulatory controls that have created a dealership cartel. Auto makers would become significantly more profitable in this model as well, no more massive piles of inventory or huge mistakes in guessing which models will sell. This ancient, backwards model currently costs GM and Ford billions each year in lost profit, and costs consumers billions in unnecessary middle-man mark-up.
- sokoloff 13y ago
  I predict that in that world, the buy it today, drive it home tonight makes would capture market share. Honda already does a great job of building just one or two configs (very limited option space, other than color) and sells a lot of cars that way. In an "Amazon Prime" world, few people want to wait 21 days for their new car is my hunch.
  - nradov 13y ago
    I expect we'll see a mix of both. Dealers will continue to stock the most common configurations, and offer them at a discount. Slightly less common configurations will be stocked at manufacturer regional distribution centers available for delivery in 1 - 2 days. And really rare configurations will have to be custom ordered, with the customer paying full sticker price and waiting much longer. As long as the manufacturer has excess plant capacity in the continental USA and a lean production process it ought to be possible to do custom final assembly and shipping in <2 weeks. My father sold new cars ~30 years ago and custom orders were actually more common back then. Many dealers and volume manufacturers actively discourage custom orders now, even when customers would be willing to pay more to get exactly what they want. I think this is because of badly aligned incentives and will probably change.
  - toomuchtodo 13y ago
    If I can't wait 21 days for a new car, I have some serious life planning issues.
    - deleted 13y ago
      [deleted]
    - pjc50 13y ago
      Quite often people need a new car because their previous one suddenly broke down or was involved in an accident, neither of which are plannable.
      - toomuchtodo 13y ago
        Did rental cars suddenly disappear? After every car accident I was involved in where my car was a total loss, I had to wait 5-10 days for a check from my insurance company to cover the loss. During that time, a rental was provided to me.
- brc 13y ago
  You may not know it, but every single BMW built is ordered to specification. There is not a 'standard' model, and every single car has to be ordered individually. The new BMWs you see sitting in dealer lots are those ordered by the dealership, where the local salespeople pre-emptively order cars in color/trim combinations that they think they can sell. Typically these are optioned up a bit, and thus they can convince a wavering buyer to take one today instead of waiting. The end result of this system is that inventory is borne by the dealerships, customers can personalize their cars (taken to the extreme with Mini) and the factory is a fascinating place to visit because every single car coming down the line is different to the one in front and the one behind. It is entirely integrated to their JIT systems soma truck full of steering wheels unloads them in the correct build order to match the vehicles progressing down the line already.
mediaman 13y ago
One of the world's most complex engineering challenges, filled with tens of thousands of highly engineered parts and tens of millions of lines of code, with per unit pricing ranging from $10k to $100k+, is a "commodity"? The term "commodity" typically refers to products that feature little to no differentiation between each other. It means you could largely "throw a dart" to pick one, and you'd be no better or worse off than someone who does meticulous research. That you say you won't buy another car until yours falls apart already suggests that perhaps you don't actually consider cars to be a commodity. Sure, you won't upgrade in order to get a faster or more luxurious car. But I'd imaging from your statement that reliability is probably important for you. Although you don't state it, if you frequently have family with you in the car, or even if you don't, there's a good chance safety is important as well. Cars from various manufacturers vary greatly in both these respects. Not to mention that for other people, sportiness, luxuriousness, ruggedness, storage space, and other factors are important as well, and cars vary on those dimensions as well. If the vehicle market qualifies as a commodity, so are the majority of markets of any sort, to the degree that the concept of a commodity adopts a useless definition.
- billclerico 13y ago
  the same model car across different dealerships is a commodity. that's why carwoo was great, it helps you run a commodity auction to get the best price.
  - IgorPartola 13y ago
    Right. The problem is that most people have no idea which car to get. "Honey, this one has a nicer GPS system, but that one has a moonroof! Oh, but this one has symmetric all wheel drive. I don't know what that is but it sounds impressive. Or wait, this other one has a SH-AWD... and this one has X-Drive. You know what, I'll take the moonroof!" The sales staff are not competing against other dealerships of the same maker. They are competing against other makes. They are really selling you the brand. Having said that, I think it's stupid that once you know the exact make and model you still need to deal with the sales staff. At that point, just give me the best price you have. You know what it is, you know what your competitors are doing. Why are we still talking? Also, I don't know if you've noticed, but the landscape is changing. One of the big changes is that much more of the salesperson's income comes from salary and not commission. This is good. This means less sneaky tactics. Also, lots of dealerships now have an Internet department which will give you a quote online that is likely pretty close to your final offer. It's still worth trying to haggle, but lots of them don't have time for this: they simply give you an offer that's low enough to where you might actually just take it.
__pThrow 13y ago
Depending on your preference for engaging in negotiation and buying and selling, there is a pretty reasonable model to show you should buy a typical 3 year old used car and then sell it around year 5 or so thus buying a car when it is still reliable has past the fastest part of its depreciation curve and selling it when it's about to fall down the reliability curve and still worth close to what you paid for it.
- sokoloff 13y ago
  You save even more by buying at 3-4 years and keeping until 10 years or 150K miles. Cars today are remarkably reliable well past a 5 year mark. You'll have an occassional several hundred dollar repair. That's less than what most people pay every single month for their crazy car habit. Plus, you only go through the aggravation of buying and dealing with your DMV 1/3 as often this way...
- judk 13y ago
  Try that with a Honda and you learn that 3 yr-old Hondas cost the same as new Hondas, because the depreciation is less than the overhead of reselling the car (through a dealership)

adamio 13y ago

The salesmen could be needed - because cars are commodities. If a customer walks in your door, you really need to sell them on your brand of car, at your dealership. If the dealerships were manufacturer owned, perhaps the commission would be lower and service level higher.

adventured 13y ago

This. All dealerships should be converted to car delivery and ordering centers (with one of each model for test driving). The middle man cost should be wiped out, and the business should move to an order > build > x days to deliver approach. Save buyers $3,500 on a $30,000 car, let them further and easier customize, and they will wait for delivery. Simply put, replace build car > sell car, with sell car > build car. As it is, car salesmen are nothing more than order takers that generate a large commission and overhead; the customers come to you. They only still exist because of massive regulatory controls that have created a dealership cartel. Auto makers would become significantly more profitable in this model as well, no more massive piles of inventory or huge mistakes in guessing which models will sell. This ancient, backwards model currently costs GM and Ford billions each year in lost profit, and costs consumers billions in unnecessary middle-man mark-up.

sokoloff 13y ago
I predict that in that world, the buy it today, drive it home tonight makes would capture market share. Honda already does a great job of building just one or two configs (very limited option space, other than color) and sells a lot of cars that way. In an "Amazon Prime" world, few people want to wait 21 days for their new car is my hunch.
- nradov 13y ago
  I expect we'll see a mix of both. Dealers will continue to stock the most common configurations, and offer them at a discount. Slightly less common configurations will be stocked at manufacturer regional distribution centers available for delivery in 1 - 2 days. And really rare configurations will have to be custom ordered, with the customer paying full sticker price and waiting much longer. As long as the manufacturer has excess plant capacity in the continental USA and a lean production process it ought to be possible to do custom final assembly and shipping in <2 weeks. My father sold new cars ~30 years ago and custom orders were actually more common back then. Many dealers and volume manufacturers actively discourage custom orders now, even when customers would be willing to pay more to get exactly what they want. I think this is because of badly aligned incentives and will probably change.
- toomuchtodo 13y ago
  If I can't wait 21 days for a new car, I have some serious life planning issues.
  - deleted 13y ago
    [deleted]
  - pjc50 13y ago
    Quite often people need a new car because their previous one suddenly broke down or was involved in an accident, neither of which are plannable.
    - toomuchtodo 13y ago
      Did rental cars suddenly disappear? After every car accident I was involved in where my car was a total loss, I had to wait 5-10 days for a check from my insurance company to cover the loss. During that time, a rental was provided to me.
brc 13y ago
You may not know it, but every single BMW built is ordered to specification. There is not a 'standard' model, and every single car has to be ordered individually. The new BMWs you see sitting in dealer lots are those ordered by the dealership, where the local salespeople pre-emptively order cars in color/trim combinations that they think they can sell. Typically these are optioned up a bit, and thus they can convince a wavering buyer to take one today instead of waiting. The end result of this system is that inventory is borne by the dealerships, customers can personalize their cars (taken to the extreme with Mini) and the factory is a fascinating place to visit because every single car coming down the line is different to the one in front and the one behind. It is entirely integrated to their JIT systems soma truck full of steering wheels unloads them in the correct build order to match the vehicles progressing down the line already.

mediaman 13y ago

One of the world's most complex engineering challenges, filled with tens of thousands of highly engineered parts and tens of millions of lines of code, with per unit pricing ranging from $10k to $100k+, is a "commodity"? The term "commodity" typically refers to products that feature little to no differentiation between each other. It means you could largely "throw a dart" to pick one, and you'd be no better or worse off than someone who does meticulous research. That you say you won't buy another car until yours falls apart already suggests that perhaps you don't actually consider cars to be a commodity. Sure, you won't upgrade in order to get a faster or more luxurious car. But I'd imaging from your statement that reliability is probably important for you. Although you don't state it, if you frequently have family with you in the car, or even if you don't, there's a good chance safety is important as well. Cars from various manufacturers vary greatly in both these respects. Not to mention that for other people, sportiness, luxuriousness, ruggedness, storage space, and other factors are important as well, and cars vary on those dimensions as well. If the vehicle market qualifies as a commodity, so are the majority of markets of any sort, to the degree that the concept of a commodity adopts a useless definition.

billclerico 13y ago
the same model car across different dealerships is a commodity. that's why carwoo was great, it helps you run a commodity auction to get the best price.
- IgorPartola 13y ago
  Right. The problem is that most people have no idea which car to get. "Honey, this one has a nicer GPS system, but that one has a moonroof! Oh, but this one has symmetric all wheel drive. I don't know what that is but it sounds impressive. Or wait, this other one has a SH-AWD... and this one has X-Drive. You know what, I'll take the moonroof!" The sales staff are not competing against other dealerships of the same maker. They are competing against other makes. They are really selling you the brand. Having said that, I think it's stupid that once you know the exact make and model you still need to deal with the sales staff. At that point, just give me the best price you have. You know what it is, you know what your competitors are doing. Why are we still talking? Also, I don't know if you've noticed, but the landscape is changing. One of the big changes is that much more of the salesperson's income comes from salary and not commission. This is good. This means less sneaky tactics. Also, lots of dealerships now have an Internet department which will give you a quote online that is likely pretty close to your final offer. It's still worth trying to haggle, but lots of them don't have time for this: they simply give you an offer that's low enough to where you might actually just take it.

__pThrow 13y ago

Depending on your preference for engaging in negotiation and buying and selling, there is a pretty reasonable model to show you should buy a typical 3 year old used car and then sell it around year 5 or so thus buying a car when it is still reliable has past the fastest part of its depreciation curve and selling it when it's about to fall down the reliability curve and still worth close to what you paid for it.

sokoloff 13y ago
You save even more by buying at 3-4 years and keeping until 10 years or 150K miles. Cars today are remarkably reliable well past a 5 year mark. You'll have an occassional several hundred dollar repair. That's less than what most people pay every single month for their crazy car habit. Plus, you only go through the aggravation of buying and dealing with your DMV 1/3 as often this way...
judk 13y ago
Try that with a Honda and you learn that 3 yr-old Hondas cost the same as new Hondas, because the depreciation is less than the overhead of reselling the car (through a dealership)