Why is that?
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. All of the "value add and hand holding" that goes on at dealers must not be worth it to customers. Perception is reality and the reality is that in general the public doesn't trust the car buying process at dealers and over the years more dealers than not have earned that reputation through practice.
As far as markup, maybe not at the dealer level, but absolutely at the corporate level. There is a ton of markup at capacity for the auto companies, can you say UNION!!!
Go into a apple store. People know there is markup and they walk out of the store excited, happy and cant wait to pay the high prices again. Why is that? There is more transparency in history of the car world around pricing but yet the public still thinks the dealers rip them off.... Why is that?...
David,
Ford is a public company and it's financial statements and unit sales are easy to find. 2010 was Ford's best year in a long time and their profit per car (including Ford Motor Credit) was $1242.23. That works out to a little over 3% on an average unit selling price of $33,500.
Most people hate any business that requires them to negotiate because it makes them uncomfortable. Imagine if most Apple I-Pod sales involved a trade in, financing, and negotiations on both interest rate and the balance due after trade allowance. The average Joe would find that akin to singing the National Anthem naked in front of a stadium full of people. Apple stores would not be quite so much fun.
Most auto buyers not only find the value added and hand holding provided by car dealerships to be worth it, most of them could not successfully buy a 4 or 5 figure car with out it. Like it or not, that's the reality of John Q. Public today. Drive around your city and look at all of the "Pay Day Loan" and "Check Cashing" shops. They are everywhere. Who the hell uses them?? The huge swath of the American public that can't even open a checking account or get a credit card.
You are a Ford GT owner and you are completely different than the average car buyer. Let me give you a few more insights. People buy things when they are...1. Comfortable and...2. Feel like they are getting the best deal possible. To be successful in auto sales, one must be able to immediately identify and split potential buyers into 2 groups as they require completely different sales methods.
The big group I call the worker bees and it consists of 95% of all Americans. These men and women go through life working for someone else, they are comfortable when someone else is in charge, they can't stand the pressure of having to make decisions (but they LOVE to bitch about the decisions of others), and negotiating terrifies them because they don't like confrontation and are scared they will make a bad decision. To sell cars to this group you can't ask them questions because that puts them on the spot and makes them uncomfortable. For example, if you say, "Would you like to go for a test drive?", many of them freak out as they think a test drive might obligate them. So you "direct them" by saying, "Hop in the drivers seat" and most of them will comply as they are more comfortable taking orders than making decisions. Then you get in the passenger seat and say, "Start it up and turn right on the street over there". When you get back from the test drive you can't ask them if "they would like to come inside to discuss numbers" because again many of them will freak out. So you direct them by saying, "Come with me and I'll give you some more information" and then walk into the office. They will follow. The whole presentation needs to go like that or they get uncomfortable and that's bad.
The small group are the queen bees who make up only 5% of the population. They are business owners, managers, and professionals who make decisions, negotiate, and direct human effort every day. Almost every Ford GT owner fits into this group. If you treat these men & women like the other group they will be immediately offended and will take their business elsewhere. Queen bees must be identified and handled properly right from the start. They will direct the entire sales process and the function of a salesman here is to listen and respond.
I am not criticizing or putting either group down, just describing what makes them tick.
Auto makers are aware of how much customers hate negotiating and many have tried "one price" selling (Saturn is an example). But it never works because a value for a trade-in still has to be agreed upon, and loan terms must be worked out. One price selling on used cars is obviously impossible because every used car is different. Finally, the tradition of "getting a deal" on a car is so ingrained in the public's mind that even those customers who hate to haggle will make a low ball offer on a car because they feel like they must to get a good price. Until and unless new cars are all paid for with cash and there are never trade-ins, negotiating at car dealerships and the discomfort and dislike that stems from it is unavoidable.
As such, the inescapable nature of a process that is required in some businesses, especially if that process makes some people uncomfortable, makes many people dislike it no matter how professional or well trained they may be. A dentist is much more professional than the kid who takes your order at McDonalds, but people hate to go to the dentist and like to go to McDonalds. Why is that? Why do people continue to go to the dentist? We don't like negotiating and we don't like getting our teeth drilled into but sometimes it's unavoidable.
I find the Apple "Genius Bar" to be a mad house of frustration, long waits, and big crowds. John Q. Public likes it because he can be certain that although he is not getting a good deal, he is getting the same deal as everybody else.
Finally, the Fleet Manager at most auto dealerships works almost exclusively with queen bees all day, every day. If you know what you want and are capable of walking in, writing the check, and driving out, you will find dealing with him to be quicker, easier, and much more pleasant than waiting for your name to be called so some high school kid can wait on you at the Apple Store.
That's my take on it.
Chip
