Whatever the reason, purchasing a car is probably the most combative transaction out there. We could delve into the psychology and history of what makes it that way, but for now let's look at it from an isolated angle. Both parties, the consumer and the dealership/salesperson/sales manager, don't want to leave any money on the table. The consumer is looking after his/her own best interest, trying to ensure that they don't get raked over the coals or mistreated. The salesperson makes a living on the profit of vehicle sales, and so he/she is doing their best to put food on the table.
Admittedly, this is a simplified version of what takes place. But it raises an important question that dovetails with the previous post: How much does the dealership make on a new car sale?
As Mr. or Mrs. Car Buyer, when you are out there negotiating the price of a new car, do you see inflated prices that must be whittled down to reality? After all, we buy things every day that have built-in profit margins. Bath soap, enchiladas for dinner, duct tape. The company you work for sells its product/service for a profit, or the company would go under. (Non-profit organizations not included)
"Hold on just a minute" you might say. "I think about the profit in those items, just not as much as when I purchase a $25,000 car. Besides, we don't generally negotiate on every day items." Quite right. Buying a car is truly different from any other transaction. But no neighborhood restaurant has ever been criticized for selling its mashed potatoes for profit, even though some restaurant owners are crooks.
Websites like Edmunds, Kelly Blue Book, and others provide all sorts of information on dealer invoices, average sales prices for your area, and buying tips. But getting down to the brass tacks, must car dealerships and their salespeople be battled with for hours to ensure a fair price, or do they make less than is generally accepted?
11.20.2009
Reasonable Profit or Reckless Greed?
Ah yes, that universal turning point we all remember: purchasing your first new car. Driving onto the lot in anticipation, test driving several models of cutting-edge vehicles, all equipped with the newest features and offering your senses the coveted "new car smell." (Where do they get that, anyway?) Arranged in neat rows with paint and wheels glistening in the sun, they beckon to us, invite us to enter an alluring world that exists behind the wheel of our soon-to-be new car. Even the names of the colors sound like something on the horizon: Sandy Beach Metallic, Phantom Gray, Barcelona Red. These are not just basic shades and hues, folks; it's much more than that.
Sometimes buying a new car has been something on your mind for a long time, perhaps a long awaited rite of passage. Maybe it's a spur of the moment decision, or something out of necessity. In any case, there are elements common in each scenario - trying to decide on a particular model, weighing all the options, and then one final little detail...negotiating the price.
In the information age, this process has undergone significant change. For many car buyers these days, the negotiations start before they ever arrive at the lot. A small percentage even finalize the purchase without going to the dealer in person. Many people research on various consumer information websites, such as Edmunds and Kelly Blue Book, and then arrive in person to test drive and possibly purchase a vehicle. Simply driving to the dealership and starting the process from scratch still happens, too. No matter which route you take, at some point the consumer has to ask themselves this question:
How much is a fair profit for the dealership?
Or, put another way, how do I make sure I'm not hosed? What can I do to ensure that no money is left on the table, that I wasn't taken advantage of, that my rights and best interests were served in this transaction?
These are all reasonable questions, and they should be asked. In theory, we all recognize that without profit, the dealership cannot stay in business, the salespeople and other staff can't buy groceries, etc. But we cannot escape the fear and trepidation common to the car buying experience. We've all heard stories about unscrupulous car salesmen preying on unsuspecting customers. Is this really a common scenario, or has it become a part of pop culture and urban legend?
Sometimes buying a new car has been something on your mind for a long time, perhaps a long awaited rite of passage. Maybe it's a spur of the moment decision, or something out of necessity. In any case, there are elements common in each scenario - trying to decide on a particular model, weighing all the options, and then one final little detail...negotiating the price.
In the information age, this process has undergone significant change. For many car buyers these days, the negotiations start before they ever arrive at the lot. A small percentage even finalize the purchase without going to the dealer in person. Many people research on various consumer information websites, such as Edmunds and Kelly Blue Book, and then arrive in person to test drive and possibly purchase a vehicle. Simply driving to the dealership and starting the process from scratch still happens, too. No matter which route you take, at some point the consumer has to ask themselves this question:
How much is a fair profit for the dealership?
Or, put another way, how do I make sure I'm not hosed? What can I do to ensure that no money is left on the table, that I wasn't taken advantage of, that my rights and best interests were served in this transaction?
These are all reasonable questions, and they should be asked. In theory, we all recognize that without profit, the dealership cannot stay in business, the salespeople and other staff can't buy groceries, etc. But we cannot escape the fear and trepidation common to the car buying experience. We've all heard stories about unscrupulous car salesmen preying on unsuspecting customers. Is this really a common scenario, or has it become a part of pop culture and urban legend?
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