Oh No! Car Dealers Might Have To Deal With Informed Customers! That Must Be Illegal!
from the felony-interference-of-a-business-model dept
A few folks sent over this recent NY Times article about how the traditional auto sales world was apparently up in arms about a company called TrueCar that seeks to make the process of buying cars easier by providing more info to buyers about what cars are actually selling for, what the dealers' true prices are, and also offering guaranteed "haggle free" prices from certain dealers. To be honest, this really doesn't sound all that different from a few other services online. The last two times I've bought cars, I've been able to get good deals using online services like this and just emailing directly to dealers (and for anyone buying a car, I can't recommend CarBuyingTips.com enough, even with its 90's era web design -- that site has saved me a ton).However, what's really incredible is how the industry has reacted to this site -- basically freaking out and whining about how consumers actually being informed might put them all out of business. The excuses are typical of what you'll find with an industry that works on a collusion or gatekeeper system when it's finally faced with real competition. They start talking about how real competition is evil and how it will lead to a worse situation with more scams. In fact, TrueCar got hit with claims that what it was doing, in providing consumers with more info, was illegal. They've even had to change their practices in some states -- which really only goes to show just how much car dealers have influenced various state laws in their favor to protect against true competition and an informed consumer.
Others, including Honda, have argued that TrueCar could open the door to unscrupulous dealers trying to sell a more expensive car or more options once they get the customers in the door — which Honda said reflected poorly on the brand. Honda also threatened to cut off marketing dollars to dealers who promoted its cars on the site below the invoice price, a price that is supposed to represent something close to the dealer’s cost (though dealers usually make more money on other manufacturer incentives and programs).Think of just how convoluted and insane this argument is. Honda doesn't want informed consumers because (wait for it...) informed consumers might lead dealers to try to trick buyers. Seriously. Okay, time to cross Honda off any future potential car list.
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Filed Under: car buying, cars, competition, gatekeepers, innovation
Companies: truecar
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Great NY Times
Great Job Guys.
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Re: Great NY Times
dealers: don't hate the player, hate the game; you brought this on yourselves
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Kind of like the car dealership atmosphere in and around the Motor City in the 80's and earlier. None of them were open weekends or evenings and if a small independent dealership tried opening on weekends they faced vandalism and thinly veiled threats of violence. The dealers claimed the misdeeds were from their employees who didn't want to work weekends, but I never bought that line, even back then.
Here's a LA Times article from 1985 about it:
http://articles.latimes.com/1985-01-20/business/fi-10631_1_car-dealers
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5 Reasons The Future Will Be Ruled By B.S.
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Re: 5 Reasons The Future Will Be Ruled By B.S.
Choice quotes from first page:
But the second page tries to suggest that all industries will go the way of content ones. Which they haven’t, and show no signs of doing.
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All these recent happenings are part of a much, much bigger problem
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But just like music, there will be a few dealers here and there who provide exceptional service, selection, and prices that will keep going despite this.
My guess, the biggest whiners are the dealers/auto makers that are ripping customers off the most.
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Sigh...the irony
Basically, Honda is saying to myself and other potential customers...you can only get our best rate by coming in person, playing this back and forth -- this is the best I can do game, and walking out of the dealer to only hear your phone ringing a couple days (if not sooner) later w/ them saying they can do a little bit better.
Honda showing some 'true' colors here.
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Re: Sigh...the irony
I keep cars for at least 10 years and pay cash on the barrelhead. My brother's a mechanic whose lot in life is to keep his family's cars running, heh.
Whining about informed customers is truly stupid in this day and age. I'd love to see them cite the law wherein such consumer education is illegal. Laugh riot that would be!
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Car Dealers Missing the Point
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It's called advertising
So, are newspaper adverts next?
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because that is the actual job description of the Finance Manager who writes up the loan. Often his/her entire income is commissions off the "back end" items they try to add on to the total (read: TruCoat from Fargo).
Like Honda doesn't know that ... (I imagine they have a fee for disingenuousness removal too.)
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Silly
Hmmm where have we heard that before?
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Others, including Honda, have argued that TrueCar could open the door to unscrupulous dealers trying to sell a more expensive car or more options once they get the customers in the door...
Isnt that the way it is already?
Buyer: Gee I want a (insert brand/model here) with cloth interior and manual windows.
Sales: Well we have THIS (insert brand/model here) with leather and all powers for a few thousand more.
Nothing new here Honda please move along.
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Example 1: Computer sales
Customer: I want a computer, I only really surf the web, do e-mails, and microsoft office
Sales Guy: Oh, you definitely need this super-powered quad core computer with a blu-ray burner, 20 gigs of ram and 5 terabytes of hard drive space :D
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Interesting
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New car sales have always been a barely break even situation for the most part. (Mass market cars, not Mercedes/Lexus/BMW etc.) Some of the lines salesman give you have a basis in reality. The "cost" of a car is not what the invoice says, it is that plus the cost of the people who peeled the anti-chip plastic off the fenders/hood, the plastic off the interior, the initial wash, the test drive to make sure there are no rattles/etc and of course the rent on the piece of dirt it occupies until sold. Additionally, most dealerships don't actually "own" the cars they sell, they only actually "rent" them, so they are paying interest on the 20k car sitting on the lot till it sells.
Given that, you are highly unlikely to ever buy a car at dealer cost. I don't care what numbers you had when you went in, they either break even, make a minimal profit or don't sell the car for the most part. A dealership simply can not stay in business operating at a loss.
So, the long tail. How dealerships generally pay the rent is via the finance and service departments. (Mostly the service department.) Finance is a trivial item but for a dealership it is instant profit they couldn't get from the price of the car directly, 0.25% higher interest rate and they make their $500 cost to have kept the car on the lot plus about $500 profit. Dealerships "sell" the contract to the banks and are immediately paid out for the entire contract so subtract car cost, maintenance cost and the rest is profit as if you paid over invoice. This is still not even close to enough to keep the lights at the dealership going.
So, how the long tail works. The car is a razor handle, service is the razor blade. Almost half the cost of a new car is pure profit for the manufacturers but that profit goes away very quickly due to warranty work and such. This is where the symbiosis of dealership and manufacturer work in the consumers benefit though. The manufactures want to keep all that profit if at all possible but they have to put 5/100 warranties on the cars to compete, and still keep the price of the car competitive. So, they shave it down based on relative failure rates and build in a "comfortable" profit on average cost of the warranties.
The dealership on the other hand is hoping the car breaks because warranty work is their profit center. The dealership charges all work and parts back to the manufacturer at a significant markup. (Well the work portion, the parts are at manufacturer defined costs.) In order to make this work, the salesman can't be TOO huge of a flaming asshole such that you won't come back even for the warranty work.
An average car over a year needs about $1000 worth of time/effort to correct little defects. So, a dealership breaking even on sales at 200 cars a month is looking to make 200x12x1000=2.4 million a year on "warranty" work alone. Consider 3/4ths of that easily goes to paychecks and regulation compliance costs and dealerships are not making all that much money individually, usually they are less profitable than your local grocery store.
So, I seriously doubt that the individual dealerships have any real problem with any higher education of the buyers and I imagine any problems are coming from the manufactures. Old timer general managers in single dealership towns might be getting pissy but I kinda doubt a dealership in say San Diego, Houston or Orlando cares much because in high competition areas they pretty much always have to give you the base cost and just hope you come back for service anyway. It generally works out, all cars need work and even if you buy at the competitor you might service with your closer dealer since it doesn't cost you anything for the warranty work.
Just my $0.02 (plus a couple bucks) description of the car industry. :) Not defending them on this, just explaining that they are not the evil empire many folks may believe, given they grew up actually by working "WITH" consumers and not against them.
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Rear end 'em
I remember buying a car using Edmunds, before the car companies got their hooks into it. I was able to haggle, knowledgably, which is the way it should be. Good to hear there are more sites like the old Edmunds. Sell outs...
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Thanks dealers!
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The most profitable businesses of the year 2020 will be those whose actual profits come from an activity at least six times removed from the actual thing that the businesses ostensibly do.
Yay for progress!
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Scratch Honda?
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Custom order
How the hell does that not exist for cars? I can design a car exactly as I want it on their site, but then it says, something like, "Here are cars similar to that in your area." The cars they list are different colors, models, and packages from what I designed. WTF?
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Re: Custom order
I think state laws prohibit manufacturers from selling directly to customers. Regulatory capture, presumably. Some sites will send your specifications to a dealer, but that's about as close as you can get.
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Quit your crying!
Woe is me. The car dealer is making a profit...barely 10% in some cases.
I don't hear any of you complaining about the 400% mark-up on sodas at McDonalds!!
Get real people.
What's the internet going to do for you when your car needs a repair??
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Re: Quit your crying!
Because McDonald's isn't trying to make it illegal to publish information about soda.
What's the internet going to do for you when your car needs a repair??
Recommend a good mechanic.
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Truecar
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It's not so bad.
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Tough choices for the consumer...
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Car Leasing Educates You
http://monthlycarlease.com/2012/05/car-lease-deals-may-2012/
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If a dealer wants to make a certain amount of profit, what is my problem as a buyer. Do you folk ever before buying at "Lazy boy" or Walmart, go to websites and try to find out that "what is the real price"?
I literally kick out customer who try to come up with BS.
We as car sales people are very aware of the fact that "Buyers are Liars".
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Oh No! Car Dealers Might Have To Deal With Informed Customers! That Must Be Illegal!
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blog comment
waxing ny and waxing nyc,body waxing nyc
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Rubbish!
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It's hard to know which cars are good anymore...
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thanks
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Car Shopping tips
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How the hell does that not exist for cars?
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The truth
Again we come back to "there's about an 8% maybe 10% markup on this car."
Customers are the real scam artists and rip off con men. I don't mind you being educated but you run around playing us against each other determined for us to make no money. Oh and all that "back end" stuff we're supposedly so bad for selling?
It's accessories or things you WANT to add. Seriously, I don't hear you crying about them asking if you want to add fries and a drink to your burger...
I respect customers that pay a profit. The rest of you aren't customers. You're mooches.
This "i need the best price, you need to price match this" attitude has caused the decline in our economy single handedly over the years.
That's right. It's not the banks. it's not Obama. It's not taxes.
It's the "educated" consumer.
Here's how it works, and why:
You come to my dealership, you buy a car, pay a profit, I make my commission. Or you come to my business, buy my product, pay a profit, and they can afford to pay me, or give me enough work hours to make my bills.
I take my paycheck, and pay profit at other businesses. That profit pays their employees, who are in turn SOMEONE ELSE'S customers. They pay their bills, buy someone's products, pay a profit, and those employees get paid. And so forth. Until eventually it comes around.
Now, this is the CURRENT consumer mentality:
OMG YOU ARE CHARGING $2 MORE FOR THIS SHIRT THAN THE GUY DOWN THE STREET YOU ARE A RIP OFF ARTIST! *insert other manipulative, rude bullshit here*.
Company price matches. This is no biggie on it's own, but guess what? Due to website publications and bragging about your deal, everyone then wants it. Pretty soon, profits hit such a low amount, the company has to cut hours to keep their bottom line up. No, they aren't going to cut it from the top, and you cannot change that by refusing to shop there. Or worse, you start trying to be an ehero and "exposing" what people make a profit on and turn everyone into those annoying "super shoppers."
So the company now cuts hours, labor, etc to makeup for the loss. These employees then do not have money to pay bills or buy things as much, and the businesses they buy from then suffer in turn. And guess what happens next? the same thing happens to their employees, and the businesses they are customers of too.
Pretty soon everyone is trying to "cut costs" by chewing everyone's profit out, and business slows down. Economies collapse. People cannot pay rent or mortgages, and banks lose their money too. Banks then collapse, and lay off employees.
All because you wanted a deal.
But what's the FIRST thing the average customer does? "Oh it's because banks are greedy." or "Oh I need to make sure no one makes a profit off me" instead of buying the brand, car, or trim level, or food you can afford.
This one is the most laughable: Oh the president needs to bail us out, the economy is his fault!
Customers and buyers can actually fix the economy by paying a profit, and shutting up and letting businesses charge their fair profits. I know you don't like the idea that "winning" in a deal causes economical problems, and if it's just you? Sure. But due to things like truecar.com and all these other "consumer education" sites? Notice how with the addition of the Internet and information our economy is going to shit.
My advice? Sit down, if you like the guy and the product, pay what they're asking, pay for the customer service, and don't be a dick to "get a deal".
Fix the economy by cutting all this "i need to shop 6 places and play every business against each other for a deal" crap.
Economical problems are cause by consumers thinking they are educated, thinking they have a right to dicate what profits a company can make, and being manipulative, lying little assholes.
Don't believe me? Look at any 3rd world country in economic turmoil that is broken to hell and look at their practices. They do the very things listed above that people say are good ways to shop.
But hey don't believe me! Do some simple math. No profit or bare profit = less money for employees, therefore less money for other businesses, and less money for YOUR own paycheck in the end when YOUR business gets hit.
I also believe businesses need to do what consumers are doing, and say "no we're not going to cut each other's throats anymore" and if anyone sues? Tell the judge. "No, fuck you. I'm not paying that fine, I have a right to protect myself from cheating consumers."
Long story short: If you see something you like, being sold by a nice guy? Quit your whining, pay up and shut up, or leave, go get treated like shit somewhere cheaper, and don't whine when you get your discount but get treated bad for ripping businesses off.
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All car dealers are scum. I tried the shopping tactics listed and they kicked me out.
Never buy from them again...
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Legal
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Why do customers submit bogus contact info?
When submitting a lead through TrueCar, why do a large percentage (90% or better) submit a fake name, bogus phone number and an email address that they never check? (Our lead mgmt software tells us if you've even opened the email)
In many dealerships, such as the high-line luxury brand I work for, we have stringent rules in place for the sales staff to rigorously follow up with every lead that comes in. Every follow up task is schedule to the "T". So you spend time getting TrueCar pricing, submit info to the dealer to allow them to contact you, and then we spend HOURS AND HOURS following up with you. Dozens of phone calls to voicemail, dozens of unopened emails, etc... Look, we don't bite. We just simply want to honor your wishes and help you purchase a car in the easiest, most time-efficient way possible. So why would you go through the trouble of researching a car, submitting contact info, and then never responding to our contacts? Makes no sense. To give you a perspective, in the last 12 months, I have personally received HUNDREDS of TrueCar leads and to this day, have not sold one car to a TrueCar prospect.
Buying a car is very simple. Sometimes people over-complicate it to the point of sheer frustration for both parties. Very simple: visit a dealership that sells the product you want, find a salesperson that you get along with, get a fair price, buy the car and go home happy. Thanks for your feedback!
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