Based on all other comments I have an unpopular opinion: I think this is fine. If 10 people want to buy 1 car, how do you choose which person gets it? You raise the price until there's only 1 person. How else would you do it?
However, they play those games where they advertise one price but actually have tons of mandated fees when you show up to purchase. So it makes shopping around very hard, you can’t compare between 2 dealerships as even calling them won’t give you that info. It’s predatory and anti consumer.
Advertised price was 24,500. I walked out totaling 30,000 after all the bullshit and that was with a 4000 downpayment. I left an honest review on Google Reviews about how misleading and unhappy I was with that dealer in particulars process but I loved the car so I just sucked it up.
When we bought my wifes car I had a much better experience. Some dealerships are just sleazy, and if you need the car you need the car.
I reached out to maybe 7 or 8 dealers, had a couple that refused to provide a total itemized cost, and then got back 5 quotes that varied quite a bit (like $7500 on a $30k car).
Did one round of negotiation which ended up lowering the lowest price another thousand bucks or so and went with that dealership.
When I bought a truck in 2019, there was only one in my state that had the features that I wanted (I did not tell the dealer this). I tracked down the fleet/internet sales manager's email and emailed him asking what the Out-the-door price without incentives was on that VIN, then when it came time to do paperwork, I told them to apply incentive codes XXXXXX and YYYYYY. They tried to add on a dealer package for $1500 (I laughed when they explained it to me: nitrogen-filled tires, VIN etching on the windows, tint on the rear windows, and security lug nuts, I said we're breathing 70% nitrogen right now, and you can buy a VIN etching set online for $10), so I kept saying "no" until they asked if I could do $150 which was their cost, and I said yes to finish the deal.
I told the salesperson that I understand they have to make a profit, and I have no issue with that, that they probably made $1500 to $2000 after the manufacturer volume incentive, and he said they only made $800 off of me.
Absolutely brutal.
I think my favorite out of all of these was "grapes;" the term used by Ford salesmen to refer to fiercely brand loyal pickup truck buyers. juicy and easily squeezed.
That's the entire point of these crappy business practices. At the end of the day, you paid. Thus they continue doing the same thing.
If you really wanted this to change, don't reward the bad business practices.
(Side note: This is a common topic on reddit /askcarsales. Honest dealers are basically forced to do some of these things. The shady dealers advertise lower prices, but lots of fees. So uninformed consumers show up at good dealer and say "Look ShadyDealer has this exact car for $5,000 less! GoodDealer tries to explain, consumer gets mad, etc. etc.)
It also doesn't help that every manufacturer has basically stopped selling their low-end small cars. No more Honda Fit. No more Ford Fiesta or Focus.
The thing is, I don't think that most people buying cars right now even 'need' them. So people like you who do need one are also getting screwed by that.
Exactly. They're trying to find the maximum you'll pay. It's like when you click on "Enterprise" plan on a SAAS company - time for a sales rep to Google your company, see the nice share price and give you a "custom" quote.
Enterprise sales can be a long process because of the procurement process at the company. You can be looking at a 9 month to 3 year sales cycle, where a sales person is going to be involved the entire time answering questions, having security assessments completed, responding to quotes from other companies, etc.
You're going to have more conversations about special implementation requirements, integration with an obscure system, special support, training and compliance needs, etc.
For a long time I've believed that every company really needs 2 "enterprise" plans.
1. Standard Enterprise
- Yes we have SAML
- Yes you can have massive discounts on overages
- Yes you can get a copy of our SOC2 Type II if you sign an NDA.
Price: $X / [month,year]
2. Custom Enterprise
- We'll complete your custom security assessment document
- Discuss special options for training and support
Price: Contact Sales
You can apply the pressure by thanking them for their time but their number is too high compared to the competition and I guarantee the car salesman is going to be calling you back with a better deal.
Any sale is better than no sale, they make money selling cars by volume and will take less profit to close a sale, you don’t know their profit margin so let them eat into it to close the sale at a later time by walking away! If you don’t have time, they will play on these fears to make you think you must sign the paper that very second or you are missing that deal of a lifetime.
Also, you can flex carvana prices and be like, I can buy a car through carvana on my phone cheaper than you guys, then simply tell them you are walking away cause of that and see them magically go talk to their manager and get a better price for you right then or later on the phone, I pulled this off a couple times before. You can figure out their profit margin and markup and see if you can get them to lower the price and still make money. Win-win
I had a similar experience booking a hotel room recently. Despite advertising a rate of $x, when I'd click through to complete the booking, towards the end of the process every single one would tack on a mandatory "service fee" of somewhere between $40-80. It seems to me to be a way to keep their room rates artificially lower to stay competitive on the price comparison websites.
(Maybe this has been a thing for a while - I haven't booked a hotel in years)
I believe there are laws in some locations that make Airbnb show the price upfront on the map and they do for those places. But it doesn't seem to be the norm in the US.
Isn't that illegal? They are advertising for non-existent product.
The current "markup" phenomenon is the same as the prior experience (pre-pandemic) where OEMs intentionally subsidized the purchase of their vehicles well below MSRP, and savvy customers could negotiate thousands off a car deal. It's mind boggling to me that we allow for such an inefficient market to perpetuate! 100 years of franchise dealerships is enough! Time for business and consumers to wake up and enact change.
Ford seems to be testing the waters about how to simplify the car purchase process: https://fordauthority.com/2022/05/ford-dealers-will-likely-s...
There's plenty of dealerships who have historically had simple purchase processes with standard no haggle pricing but often buyers have to do extensive research in order to find such dealerships.
An almost similar thing happened to the F150 Lightning, Ford had to threaten dealers that they would withhold any future deliveries if they caught wind of markups.
They'll make tons of gross profit because their cost infrastructure will go down, and OEMs will be happy because they still won't have to deal with customers and can focus on wholesaling cars to their "dealer" network.
The rub is in the finance and insurance products. OEMs all have captive lending arms, and currently dealers make a ton of money ($1,500+ per vehicle retailed) in finance and insurance profit. Navigating that relationship will be interesting as OEMs take on more control of the sales process.
Even with all of the might of GM behind it, and with the cars themselves having a distinct position in the market with a few unusual features no other brand had, such as polymer body panels that were lightweight, rust proof and easy to repair (by simply replacing entirely), Saturn only lasted a few years before folding.
I was selling cars myself for a few months during their peak, and recall that they mainly got used as a rhetorical backstop by customers who would bring in an invoice for our vehicle (printed out from edmunds.com, which had just barely become a thing at the time), and argued that they should pay some absurdly small fixed number ($100, $300, possibly $1000 if they were buying an NSX, our "halo" vehicle) over invoice to get a fixed price like saturn.
This was a couple years before dealerships had organically responded to the internet by adding all sorts of hidden costs that do not show up on an invoice to the base price (in addition to the usual ones) so unlike today the invoice was literally our invoice price. But they were not there to buy a Saturn they were there to buy a different brand of car.
The pattern seems to be: if you create value, you get optimized away. If you buy, screw things up to create scarcity, and flip, you make bank.
It's like Amdahl's Law for capitalism: some things are easy to optimize, other things aren't, and eventually the things that aren't easy to optimize dominate the system.
I usually do the same when I sell stuff second-hand because my priority is getting rid of it as fast as possible, not to make the most money. Since dealers have very limited inventories these days, they should take more time to get a better price.
I'd argue that using this phrase to write off wider ethical concerns is one of the key issues here.
Many people actually ”need” things, but always end up getting beaten by the person who has more $. It’s just constant battering of people that aren’t as well off as others. It’s often a disgusting system. The poor always suffer due to this “I’ll just hand wave to the ethics and talk about capitalism“.
Firstly, that it is illegitimate to criticise capitalism because it has created some benefits. As if we're not even allowed to dream of system reform because we're currently doing better than other countries. Very little social or economic progress would be made if we all thought like this.
Secondly, that those benefits are purely due to unadulterated capitalism. In reality, Western countries follow a mixture of capitalist, statist, and socialist policies. The poor in the US have seen improvements because of the minimum wage, anti-trust regulations, and various social safety nets combined with economic growth.
Thirdly, that the only thing holding other countries back is "their own cultures". This ignores widespread, long-term destabilising interference by Western countries in Africa, the Middle East, South Asia and South America.
I am fairly open to the argument that price gouging for necessities in times of sudden life threatening crunch is not ok, but car market is operating like a normal market.
You could just as easily claim that industry consolidation is "rational" because it the people making the deals make a lot of money, but the overall effect is often bad for society.
Very few people need new car now. Or need to change their car now. It is a flexible market. In the current market supply shortage means that you will have to squeeze 50000 more miles out of your current car in the next two years. It's not insulin or baby formula.
Maybe you're right and this is a fraction of a percentage of the population. I'd be surprised but am open to seeing stats on it.
Will they? It seems like scarcity pricing is becoming a more and more common strategy.
Similarly, I also love that this website exists as a consumer, to provide balance to the market and better distribute demand (keeping prices overall lower).
American society is structured such that a car is considered more or less a requirement. Is it okay to charge the max people will possibly pay for other requirements of living like medicine? Martin Shkreli Was universally loathed for that.
Dealers aren’t supposed to charge extreme markups any more Than they are supposed to give cars away for free. They do it because right now they can, but that doesn’t make it moral or American. It is just greed, which is often waived off as “how capitalism is supposed to work”. It’s just greedy usury because they can get away with it.
So much is "wrong" with the dealership model relative to a competitive market I don't even know where to start. But, I do believe over time the franchise laws and dealer cartels will change dramatically. We're seeing that start to happen now with Tesla's model and Ford is creating a new model that looks a lot like Tesla's. Some states, looking at you TX, will continue to protect the local dealers cause the dealer associations donate a lot of money to state politicians but the tide will eventually turn...at least I think it will.
The other issue is the classic bait and switch they do. They’ll market one price online but once you’re in person suddenly that price is marked up 15k.
The solution? Remove dealers from the equation and let the manufacturers sell directly.
If you think that the process of buying a car at retail is the market working efficiently, your expectations are incredibly low.
I don't think the process of buying a new car is efficient at all. And I'm not defending the dealership system either. I'm just saying they're acting rationally, and that the markups don't shock me.
Just like the market can react to markups, it can also do so for markdowns.
Maybe those who were too late will come back and be quicker to decide next time, because they think you are fair.
If you make it all about who has more money, they'll go to another dealer.
There's no shortage of them.
Imagine if any store did that: you go to an Apple store to buy a new iPhone, there are 20 people in front of you. Are you ready to outspend some of them?
and they also need to hope there are enough stupid people on the internet to buy at a markup something sold in the hundred of millions of pieces,one indistinguishable from the other.
more proof that an honest business can serve society better than scammers.
As someone who used to attend more than a 100 concerts/year, I sincerely hate them.
> This is only possible because the the tickets are being sold originally for under market value
No, this is only possible because tickets can be made artificially scarce.
And because there is a portion of the population who owns more money than is able to spend.
Surely you agree there's a supply and demand curve for concert tickets, where if the price is sufficiently low, all tickets will be bought, and if the price is sufficiently high, few or no tickets will be bought?
Market value is what people are willing to spend for something. If people are willing to spend more on the tickets (the scalper's price), there's an incentive for the scalper to create bots to scoop up the tickets and resell them. That means the artist performing at the concert is leaving money on the table and letting the scalper profit off their underpricing.
The artist should increase ticket prices and cut out the middle man. Of course there are other systems the artist could use to improve the perceived fairness to fans, like linking ID to tickets, or using a lottery system, or selling tickets to anyone willing to wait in line for days. But all of these have their own pros and cons.
Which are all non-money methods of charging more. Whether it's with time or luck.
You would be basically financing my business, at zero interest rate, while I also make a profit on the money you give me.
You do realize that profit is "the excess of returns over expenditure"? it's not given that you are making more money than me (I could easily have an higher markup), but for sure I'm having less problems than you finding customers!
Thank you for doing it.
I got more cars coming, see you on Monday!
This is sort of the problem, though, isn't it? There aren't more cars coming on Monday.
your assumption is that by buying everything I got from me and selling at an higher price than me (doesn't mean higher markup) you are pushing me out of business.
Or that you are monopolizing the market buying all the cars, assuming that you can buy the tens of millions of used cars around.
You're also assuming that I am stupid and I'll let you do that, in the name of principles.
The second time I see you coming in to buy a car I'll check who you are, the third time you come you'll be greeted by a "we are not a B2B company, find another supplier".
That said, I was expecting to be countered on the inherent riskiness of my position, as I'd forgotten that it is indeed mutually beneficial but for that.
Sell to first buyer, easy.
Then it’s bullshit that will lead to violence.