The left seat up front.
I just re-read this thread and don’t quite understand the ‘put upon’ mentality of the car dealers, while ignoring the matter of fact statement from ‘david b’ – “Car dealers have earned their reputations over the years. The public didn’t wake up one day and say, hey we are going to hate car dealers..”
Gentlemen,
Nobody said or even implied that auto dealers felt "put upon". Becoming a franchised new car dealer for a major manufacturer is a very desirable goal but it's a difficult and expensive endeavor. A friend of mine just paid 35 million dollars for a new car dealership that was under-performing in it's market. Men don't spend that kind of money to be "put upon". They do it because if you're good at it it's both gratifying and profitable.
In graduate school I studied managerial economics. In a statistical analysis class my professor said something that struck me as something everybody needs to grasp. "The truth is indifferent to your beliefs, hopes, or wishes." The truth just is. And truth #1 is that virtually everybody reading this thread (GT owners) is not a typical auto buyer. You are all part of the 5% I talked about (Queen Bees) earlier. You may think, wish, or hope that you are like most people and that you are representative of the general population but you are not.
Truth #2 is that auto dealers would go broke quickly if they geared their operations to 5% of the buying public. They must gear it to the 95% and try to get the 5% to an upper level employee (often unsuccessfully).
#3 Auto Dealership management is one of the most studied professions with dealers constantly attending "20 group" meetings with fellow dealers to compare and study the most successful practices. There are over 16,000 new car dealers in the U.S. and it's the most ferociously competitive retail business that exists. Dealers must do "what works" not "what gives people a warm fuzzy feeling".
#4 In a recent national study it was determined that nearly 50% of adult Americans could not come up with $400 to deal with an emergency. Grasp that!! In the richest country in the world about half of adults don't have the ability to draw $400 dollars on a credit card or from savings. They live hand to mouth every month and spend every dime of every paycheck as soon as they get it. A huge # of Americans can't even open a checking account. They use check cashing stores and Pay Day loans for emergencies. Only about 1/3 of Americans have good credit. This is the pool that all businesses must fish in, not just auto dealers.
My take on the “high-pressure dealership outsold the nice-guy dealership”…………….(because we were nice?????????????), is probably better explained by looking at the quality for the sales training. The high-pressure guys most likely ‘followed up’ until they got the deal. It’s ‘Sales 101’. It’s how ‘sales’ works.
In retail automobile sales that's not at all how "sales" works. Selling an automobile to "ma and pa lunch-bucket" that requires negotiating a trade value and securing financing is a completely different animal than the "business to business" or "business to professional" sales that you may be familiar with. Follow up is good but "be backs" are a standing joke in the car business. One sale and delivery NOW, is worth 50 "be backs" no matter how well you follow up. John Q. Public will often continue to shop even after he's made a deal IF he's not delivered on the spot. If he's got shaky credit and you don't deliver him and another dealer does you just lost the deal. He may put 500 miles on that new car and you can't get him financed so you have to get the car back and sell it as used. Tough gig. Successful dealers don't "see what they can sell", they "sell what they can see". Sell what's in stock and deliver it if at all possible RIGHT NOW. That's how successful dealers operate. In retail auto sales that is "Sales 101".
I ‘assume’ the ~6pt margin alluded to covers the cars that are simply ‘commodities’. I am not going to go into detail about the time I purchased my GT (not a commodity, but a called a ‘HALO CAR’ for a reason), but suffice to say, the dealership where I first had a ‘deposit’ of $10K over list deal, tried to jack up the price another $15K a month before scheduled delivery (allowing me the ‘pure enjoyment’ of walking away from the deal we had because they ‘unilaterally’ changed the deal…….in writing). I then spoke with several dealerships that tacked on an additional $70K+ to the list price before finding mine at list.
The exorbitant ‘Dealer Consideration’ practice engaged in whenever a ‘popular’ vehicle comes out (Chevy SSR, Thunderbird, Shelby, Focus RS, etc….) frankly leads to the lousy perception, as well as potentially ‘killing’ the product because people are so disgusted with the practice they simply stay/walk away.
No, the 6% I alluded to covers everything. Losses on some new cars and 18% profits on the most desirable cars that sell for more than MSRP averaged out to about 6% at my dealerships. Here's another indisputable truth. There are only 2 ways to allocate a scarce product. 1-With a price or 2-With a line. Most Ford dealers back in '05 & '06 received only one Ford GT to sell. They all had dozens of buyers but they only had one GT to sell and no way to get more. If a buyer is willing to pay 50K over list and you are not then why do you think you "deserve" the car for 50K less than another buyer is willing to pay? If that same dealer has an abundance of Focus 4-door sedans he may have to sell them at a $1500 dollar loss each to move them. Buyers don't care that the dealer is losing money on the car they bought nor should they. That's just how the market works.
If you built your home for 1 million dollars 15 years ago and the market today allows you to sell it for 2.5 million, are you going to sell it for 1 million or "rip somebody off" for 2.5 million? In a free marketplace with voluntary exchange nobody is ripping anybody off. If you don' like the price of something then don't buy it.
Net Net - My singular experiences were quite the contrary with regards to the various customer’s trying to rip-off the dealer conjectures, and I doubt I’m the only one.
Nobody said you're the only one, nobody said "every" buyer is trying to "rip off dealers" though many do by lying about trade mileage & condition or their credit. Your singular experience is not representative because you are a high net worth individual who is comfortable making decisions. The average Joe is extremely uncomfortable making decisions and there isn't a damn thing that any auto dealer can do about that. If you were an auto dealer you couldn't fix that problem either.
If you go back and read all of my posts in this thread you will understand what happens at the dealer level and why it happens. What I have laid out is not my speculation or conjecture. It's the reality of operating an automobile dealership coming from a guy with a quarter century operating both import and domestic dealerships. I've also laid out how the 5% can have an easy and pleasant experience every time. You can choose not to believe it and you can wish it wasn't true. But that would be like a frequent flyer critiquing an airline pilot's flying ability. I don't care how many times you've sat in the back and observed, or how many good & bad flights you've been on, you don't know what it takes to fly that airliner until you have trained for years and earned the right to sit up front in that left hand seat. I don't care how many cars somebody has purchased, until they have tens of millions of dollars on the line operating a new car dealership they don't have a clue how difficult it is to control all aspects of employee behavior involved in operating such a complex retail business.
The Galpin's, Longo's, and Penski's of the auto world are master operators as skilled at their craft as Joey Hand is at his. But they can't take away the uncomfortable aspects of negotiating, financing, and negative equity in trades. Even the most skillful dentist or doctor can't make everything comfortable.
Today's the day, this is the place, and I'm the man. Buy now and save. Make that deal, and it's all bullshit until the tail lights go over the curb. Cheers.
Chip Beck
Dealer Principal/Owner Operator
Pontiac - GMC Trucks - KIA - Lotus
