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Are Car Dealers a Business Worth Keeping? (vox.com)
schwit1 writes: An opinion piece at Vox argues that "car dealers are awful," and the efforts to protect them against direct sales from Tesla and other manufacturers are misguided. "Buying a car involves going from dealer to dealer, each of whom has his own inventory. One guy only has blue paint. The other guy doesn't have the blue paint, and also only has dark gray seats. And each has his own fake sticker prices and complicated cash-back offers. It's no wonder 83 percent consumers say they would rather skip the haggling, and a third of people say doing taxes is less annoying than working with a car dealer.
But it's not just the hassle. State bans on direct sales turn out to cost consumers an enormous amount of cash. It's an enormous problem, and it warrants a federal solution. Cars are the most expensive consumer product that the typical consumer buys. And while it may seem obvious that cars are expensive due to the material and labor required to build them, the logistics of distributing cars is actually a very expensive part of the process. Research by Eric Marti, Garth Saloner, and Michael Spence has concluded that as much as 30 percent of the cost of a car is the cost of distribution.
But it's not just the hassle. State bans on direct sales turn out to cost consumers an enormous amount of cash. It's an enormous problem, and it warrants a federal solution. Cars are the most expensive consumer product that the typical consumer buys. And while it may seem obvious that cars are expensive due to the material and labor required to build them, the logistics of distributing cars is actually a very expensive part of the process. Research by Eric Marti, Garth Saloner, and Michael Spence has concluded that as much as 30 percent of the cost of a car is the cost of distribution.
from the ./ headline:
Are Car Dealers a Business Worth Keeping?
Remove the prohibitions on direct sales from manufacturers to the public. If the dealers survive, they are worth keeping. If the dealers fail, they were not.
Ceci n'est pas une signature.
Look at the places where people still haggle over crap like a bag of rice or a pair of pants. Their economies are always underdeveloped with a low standard of living. Moreover, look at the most successful retailers: Walmart, Amazon, Target, that Swedish furniture chain, etc. They all have posted prices. They dominate global retail. If haggling was efficient and productive then some Egyptian or Bangladeshi retail chains would dominate global retail. This is not the case. The price tag was one of the most important innovations of capitalism. So why the fuck do we still by cars like some old lady in a 3rd world market haggling over some melons?
The dealers already pay Chevy it's price. The only wiggle room you get is on the dealers profit.
Chevy competes with Ford much better then Joe's Chevy competes with Fred's Chevy.
And then you get the 5 state regions where all Honda/Accura dealers are owned by the same corporation.
Stealerships might have been needed when there were 3 car companies worth considering.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Lol, I love beating the dealers to pieces. I game the hell out of them and they can't do a thing about it. Here's what I do.....
I start with the best advertised car price and call each dealer near me.
I say, "Here's our best price so far, can you meet it? No, we're not coming in. Just email me your best price and if it's good then we'll come in." I told them exactly what model so the quotes would all be for the exact same vehicle. I also emailed several of them competing quotes from other dealers.
So I did this several times, getting lower and lower quotes each time. :) They complained bitterly about my doing this, but they beat each other senseless trying to shave another hundred or so off the last set of quotes.
They would say, "Well if I give you a price then you'll just go to another dealer and they'll give you a lower quote, wah wah wah".
And I said, "Damn right I will, wouldn't you? I'm just doing my due diligence trying to get a fair price quote. If you don't want to get this sale, don't give me a quote, it's not a problem."
"Wah wah wah" went the dealers. "This is unfair", "You're just taking advantage of us!", "Wah wah wah", and so on. lol
But they kept giving us lower and lower quotes. So fug 'em. It's not like I was putting a gun to their heads. :)
Then I found out something interesting. The dealer physically closest to you is under A LOT of pressure from the car company to sell the car to you, it has to do with their service area and their local sales market. Apparently they get big brownie points for making sales close to their dealership, and they get frowned on if they lose a sale to another dealer farther away. But a dealer farther away will quite happily sell you a car no matter where you live. Hmmmm, let me think about that.... Muwahahahaha. :)
So once they'd beat each other down pretty close to what they claimed was the "lowest price" they could offer, I spoke to the closest dealer to me (Dealer "A") and told them that Dealer "X' (about 25 miles away) had made me a really good offer, so I was probably going to buy from Dealer "X' , and I was just letting Dealer "A" know to be polite. Cuz I'm a polite guy, you know? That's what makes me so fucking loveable.
Whoah baby. I was getting a pretty good discount before, but now, as they say, "shit got real". And Dealer "A" dropped the price considerably and threw in a bunch of extra crap and offered to name their first-born child after me. I told them, "Well, I gotta tell Dealer "X" that I'll probably go with you guys then".
"Oh noes, don't call them!! They'll just offer you a better deal, err, I mean..."
So to make a long story short, I went through this "closest/farther" cycle a few times, and the prices kept getting lower and lower. And I hadn't even left the house yet, this was all by phone and email . :)
We did finally end up going with the dealer closest to us, and although I'm sure they made money on the car, they didn't make nearly as much as they would have liked to. We saved over $5000 from the original "best price". I've tried not to cry myself to sleep over this.
Just cruising through this digital world at 33 1/3 rpm...
Wrong headed thinking, the option to wheel and deal is more advanced, and can benefit everyone, and should be an option in our system
My only concern of not having a dealer is who to take the car to in the event of a recall or other service that can only be performed by a factory-authorized repair shop. Maybe it's possible to have Toyota or Ford certified garages, but dealers have to live up to much better standards than corner garages or else they could lose their dealership status. The difference between a dealer's service shop and a corner garage is significant.
http://github.com/gbook/nidb
If there were no dealers then I would have to just pay whatever chevy decides I should pay in my area. When I have 3 or 4 dealers to choose from then competition comes into play and I can get a better price. Its not a perfect system but it does serve a purpose.
Or you could go to Ford, Toyota, Honda, Tesla, etc, they will still have to compete. Beyond that there will always be used car dealerships creigslist and the classifieds section in the local paper.
Additionally if you absolutely must have the latest Chevy you already have to pay what Chevy says you have to pay plus what ever the local dealer can out of it for his cut.
---Saying gnome 3 is better than windows 8 not so much a compliment as it is damning with light praise.
most cars sold are sold by dealerships owned by large chains that span counties or states. you might call them regional businesses, but very few of them are small enough to be considered local.
unless customer can access perfect or near perfect information on the item being sold, direct sales wont triumph method of sale where customer can access the item directly before sale. in case of car that means dealer for most part.
given the dissatisfaction expressed by most of tesla customers in the few publicly available surveys done( and there has been too little of surveys due to actions of tesla). direct sales of cars do not seem to serve customers satisfactorily.
Remember when you saved $75 by buying a computer online ... and when it arrived it had 5 bad pixels on the screen? Yes, and then came the awkward haggling about getting a replacement and who would pay shipping, etc. If you had just gone to a reputable dealer it would have been simpler and maybe worth the $75.
When you 'kick the tires' at an auto dealer, you are inspecting the vehicle. You can't visually inspect much but the upholstery and paint, but that's important. A test ride probably won't tell you if you will like the car after many miles, but you'll listen for odd noises, sense improper shifting, feel the acceleration. You'll imagine the car stuffed with the spouse & kids, or the fishing gear or the surfboard. You will mentally compare this car with several others you have test driven. What is this preview worth to you?
...omphaloskepsis often...
Auto dealers are some of the largest contributors to state political campaigns. It won't be fixed at the state level.
Exactly this. This is a state problem which should be addressed at the state level.
If you don't want laws protecting car dealers in YOUR state, vote for state legislators who will fix it. The fact that New Jersey, or California, or Michigan has laws preventing Tesla (or any other car manufacturer) from selling directly to the consumer is a problem for the voters of that particular state. If you don't live in that state, it is none of your business.
The truth is that all men having power ought to be mistrusted. James Madison
Funny... Best buy is not a local business, but they still charge me Texas sales tax. And pay Texas property taxes...
Bullshit. Haggling for car purchases benefits three people:
1. People who are aggressive negotiators. Not everyone has the stomach *or time* to negotiate on a car.
2. People with money. Rich people have choice including the ability to wave a fat stack of cash at the dealership. Poor people have to take what they can get.
3. The dealers who can anchor prices at ridiculous heights. Because of the lack of free information and restrictions on how long people who need cars can go without them before it starts costing big car purchasing is not a free market and thus the invisible hand does not help.
Why does every "problem" warrant a federal solution?
Because the dealership lobby has locked in their preferred business model through state laws. And anyone who tries a different business model will have to fight it out 50 times in state legislatures. Better to have the feds lay down some nationwide requirements (mandatory warranty service, etc.) and let some people try different marketing schemes.
Have gnu, will travel.
if chevy sells a car to a dealer for $16000 and the dealer after haggling and whatnot sell the car to me for $17600 then the dealer made their 10% profit. Cut out the dealer and buy from the manufacturer and they will just sell me the car direct for $17600. It is foolish to think anything else would happen. The main difference is now my 10% has left my community and is being spent in detroit (or wherever). This whole idea "if I can just buy my coke directly from the man My drugs will be cheaper" is unrealistic. That is not how the world works or has ever worked.
In my experience, working with dealerships have been less than ideal. Between pushy salespeople, the F&I guy giving the hard sell on extended warranties and add-on services and the fact that the dealer is essentially the middle man, I'd say that I'd much rather buy from the manufacturer directly if I bought new again. I don't think the government should have a say in how something is sold.
The sweet spot is buying a mint condition vehicle that's 3-5 years old via private party, which is what I have done. I get a thorough inspection before the sale. The worst of the depreciation is over and the vehicle still retains its newness at 20-40k miles. Someone else endured and paid for the dealership experience for me. Did I mention that you pay up to 30-40% less?
That's not entirely true, because the dealer's pricing isn't that simple, either. They're typically buying the cars from the dealer on credit and get a discount if they pay back faster than the terms of the credit agreement. Manufacturers will also offer incentives to the dealer, like a substantial bonus if they meet a challenging sales target. The net result is that the dealers may sometimes make deals on individual cars that don't appear to make sense given the "dealer price" but that do make sense when you look at all the discounts and incentives they're getting.
There's no point in questioning authority if you aren't going to listen to the answers.
I just markup how much I need an employer to pay me by the amount of the taxes such that it's equivalent to me paying no taxes.
And the employer marks up the costs of the products we sell so that it's equivalent to him not paying me at all.
And the customers of those products simply insist that their employers pay them more to cover the cost of the products, so it's like they're getting those products for free.
Wow, this is awesome. Somehow nobody ever pays for anything in this system. Money doesn't exist! It's all magic! Yippee!
---
OR...maybe all money flows in a loop and we tax it when it changes hands. Oh, that makes a lot more sense. The world makes sense again. I guess I was just temporarily a huge idiot who didn't know how economics works.
This is why you ALWAYS buy a car at the end of the month... because some stealership somewhere is DYING to make their sales goal, and will practially GIVE you the car in order to make that goal. There's an excellent This American Life podcast about it.
Which has more power: the hammer, or the anvil?
nt
Test drove some cars, found the one I wanted. Emailed every Mazda dealer within 100 miles, send me their best quote including destination (OTD) and I'd pick up the car Sat morning. Included that I would not be calling back and only taking quotes. Got several that asked me to call, those got ignored. Best quote was a good deal in the truecar data, emailed them back that they won and when I'd be coming by. The car was out front ready for me to take around the block when I arrived. Signed paperwork shortly after, shook hands and away I went. I guess using a 3rd party to negotiate would be easier, but this is about as painless as I could get without doing so.
You are not limited by dealer's inventory.
You normally order a fully customized car, which is built specially for you.
It normally takes 2-6 weeks to manufacture and deliver it.
a third of people say doing taxes is less annoying than working with a car dealer.
The other two thirds are people who have never bought a car from a dealer.
Car dealers are useless middlemen that provide little to no value to car buyers. The only reason they still exist in the new car market is because they are protected by law. The sooner they go away the better. If they could provide actual value I wouldn't object to their existence but 99%+ of them are nothing more than a needless markup to the price of the car and add a lot of irritation to the process. Not to mention that many have a well earned reputation for being crooks.
Dealership laws are usually examples of IN STATE corruption, not federal, though I don't rule out some federal being involved.
The GOOD thing about state level corruption is it's easier to bring down the necks of state level reps - you may see them at the grocery store occasionally. That's why we have multiple levels of government - you can tar and feather the locals and doing that keeps the feds scared that it's going to happen to them. The way I see it is we're wasting plenty of feathers from poultry processing plants by putting them in pillows and coats.
When it's strictly federal level corruption the guilty are usually out of tar and feather range.
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Squeezing $120 billion of efficiency out of a $400 billion industry by largely eliminating the jobs of people who we find irritating might not be the best course of action and could put 1 million irritating people in jobs that bother us even more.
Lol, I love beating the dealers to pieces. I game the hell out of them and they can't do a thing about it.
Some people do enjoy the negotiation. Most Americans very much do not and I am one of them. And frankly for most people, car dealers are better negotiators. They do it all day every day and they are well practiced. Plus it frankly is a huge time sink and an annoying one at that. I've negotiated plenty of car buys but the experience is never painless or fun.
And honestly no matter what price you get from a dealer, there is a markup involved. They aren't selling it to you at a loss. I would rather deal directly with the manufacturer and I'd even be ok with splitting the dealer markup between us. Both the manufacturer and I would be better off. Dealers cannot go away soon enough in my opinion.
I find January a great time to buy. Dealers have to unload inventory by EOM to keep it from being included in yearly totals. Deals abound, as long as you don't mind a brand new "last year's" model.
There is a dealer in Minneapolis that sells nothing but used cars, and most of them are like 1-2 years old with very low miles. My wife bought an Acura MDX that was 1 year old with like 14,000 miles on it and it looked brand new inside and out. We drove the same model and trim new and couldn't see any differences (there was no model year changes).
And the savings were great, much more than any discount we could have gotten off a new car.
The car still has an extensive manufacturer warranty, serviceable by any dealer.
I bought my Volvo S80 V8 used from a dealer, a one owner lease return. I paid HALF the sticker price (sticker found inside the car) with 20K miles on it and it was totally mint.
The other nice thing is avoiding troublesome new cars.
tesla's model has already had a real world test. Go buy an apple computer. You can buy direct from apple or a dealer. Its the same basic price. When the manufacturer competes with its dealers you pay the maximum price all the time at all the locations. It amazes me how so many people can not understand the reality of the world they are actually living in.
That's redundant. Vox is just the old left wing Daily Kos blog, rebranded to try and find a new audience. Everything there should be considered an opinion piece.
For too many used are dealers live up to the sterotypes.
Vehicle dealerships' business model needs to change with the times, but it wouldn't be a good thing for them to just go the way of the dinosaurs. If you're purchasing something that expensive, don't you want to see it before you commit to the purchase? Test drive it? If you have a problem, wouldn't having a manufacturers' authorized representative physically available to you to handle any problems make much more sense than having to do it over the phone? Think in terms of having to call somewhere like Comcast or AT&T if you have a technical problem; how does that typically work for you? If nothing else it's tougher for people to treat you like you don't matter at all if you're right there in front of them, and they can't just hang up the phone and forget about you. Also, again, service: there has to be a physical location where you can take the vehicle you've spent $35000 or more on, if it needs certain things done to it; I'm my own mechanic, have worked with many mechanics, and I don't trust 99% of them; factory mechanics at a dealership are at least slightly more trustworthy, and by the way if you have a recall item that needs to be corrected, isn't the manufacturer the only one who is supposed to provide that service? You can't just box up your car and have FedEx come pick it up and ship it back to the manufacturer like you can a laptop or a smartphone if it needs to be repaired. Dealerships need to not be contractually limited in what brands of vehicles they deal in, for starters, and companies like Tesla need to not be blocked from doing business like they are right now, it's standing in the way of progress.
Are YOU using the TOOL, or is the TOOL using YOU? Think about it!
Dealers really don't mark up cars, any money made from a car sale is from incentives. Where they make their money is from all the added crap they try to sell you, hoping you are stupid and sign a lease and #1 the service center.
You are missing a lot. Dealers really don't mark up cars, any money made from a car sale is from incentives. Where they make their money is from all the added crap they try to sell you, hoping you are stupid and sign a lease and #1 the service center.
Indeed. Bought a jeep wrangler from a "group", they have dealerships all over the San Francisco Bay Area. Most independent dealers (with one lot) look to get bought out by these consortiums. Leaving dealer's like "Fast Bubba's quality cars" trying to sell you a pacer with mis-match panels and primer all over the body. Well, who can blame them? A big pay out for your business is a very attractive offer.
Python: 'And then suddenly you have a language which says "we're all stuck with whatever the whiniest coder wants".'
They get a point or two. Far less than the price difference at retail.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Apple knows their customers are chumps. Their computers aren't normal goods, more like Jewelry.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
So you, an individual who buys a car once every few years, think you can negotiate a as good a deal from the manufacturer than a bunch of dealers who buy hundreds if not thousands of cars from the manufacturer each month?
If you think your negotiating skill is that great, then you should have no problem negotiating a good price from dealers. If your negotiating skills suck, then you're far more likely to be taken to the cleaners by the manufacturer than by multiple middlemen in competition with each other.
I know Tesla is everyone's darling, but they're in a unique position because of their low sales volume. In pretty much all other industries, manufacturers don't want to deal with direct sales because it introduces variables like market projections, overhead like leasing warehouse space, and the logistics of dealing with product returns. They'd rather just concentrate on making the product, and ink a deal for 10,000 units with a middleman (supermarket, department store, electronics retailer, etc) and be done with it. The middleman handles all the marketing projections (to figure out how many items their geographical area needs), advertising, inventory, and returns.
if chevy sells a car to a dealer for $16000 and the dealer after haggling and whatnot sell the car to me for $17600 then the dealer made their 10% profit. Cut out the dealer and buy from the manufacturer and they will just sell me the car direct for $17600. It is foolish to think anything else would happen.
The dealership sold you a car for $17,600, but they sold the same car (in red) to your neighbor for $16,900 and to my brother-in-law for $18,200. The dealership can spend three hours haggling to figure out just exactly how much each customer is willing to pay. In fact, they have to, because haggling is their entire profit margin.
Direct manufacturer sales will make plenty of profit without haggling. They're likely to be more interested that each customer feels fairly treated during the purchase, and a couple hundred dollars one way or the other just doesn't matter. If a customer thinks Joe's Chevy cheated them, they'll go to John's Chevy for the next purchase. If they think Chevy cheated, they'll be going to Ford.
Point is: if you take out a middleman tax, the seller gets more money, the buyer pays less money, and everyone's happy except the middleman. Sales taxes are still paid locally, property taxes are still paid locally, staff are still hired locally, so most of the 'local' money is going to stay local.
I DESPISE haggling. I won't do it under any circumstances. I find it to be a major waste of time and energy.
When I give someone a price that is the price and it is not open to negotiation. If I see a price and I think it is fair I will pay it, if not I will go somewhere else and that is the end of it.
If there is somewhere that only does haggling I would just not go there ever. If there is an item that can only be bought with haggling I will just not buy it or pay someone else to do it.
Computer modeling for biotech drug manufacturing is HARD!
Your ad here. Ask me how!
#3-7 are pretty much lumped together, but here you go:
#1. The service center
#2. Car leases (dealers LOVE leases, very profitable for them. May even beat out the service center soon.)
#3. Added junk (underspray, fabric protection, accessories, etc)
#4. An extended warranty that you can never use
#5. Financing (How much per month were you looking at...)
#6. Handling/Processing
#7. Kickback from manufacturer
Then about last on the list:
#8. Price of the car / markup
Having lived in the US previously, I much prefer the Norwegian (and most of the EU) model where you go online or to a dealer and figure out exactly which car you want:
Engine, paint, transmission, seats etc, then you haggle a bit about the price and order it, with delivery a number of weeks later.
In the US it seemed dealers really needed to be able to deliver a car TODAY, not tomorrow or next week.
Personally I ordered a Tesla 4WD model a few days ago, for delivery in the beginning of March.
The main difference from my last car was in the fixed sticker price: No haggling about rebates, just a simple take it or leave it offer.
The main reason for getting a Tesla here in Norway is of course our incredibly high import duties and taxes on regular cars (a car with a V8 engine would probably cost 2.5 to 3 times as much as in the US), while a Tesla has no import duties, no sales tax, no road fees and lots of free parking & charging. In a couple of years they have stated that the relative subsidies for zero emission vehicles will get a cap, so only smaller cars will be able to take full advantage.
Terje
"almost all programming can be viewed as an exercise in caching"
Also, if one have to drive all around town to buy a car, one must live in a pretty desolate area. I generally go to one place and see Honda, Toyota, Kia, etc. Then I go to another place and see Mercedes, Volvo, Lotus.
Honestly, if we were all willing to payer the suggested retail price for cars, as Tesla wants us to, then dealers would not be necessary. But as the art of the deal for the automobile is ingrained in the current US culture, we have dealers.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
""Buying a car involves going from dealer to dealer, each of whom has his own inventory"
Or you could use the web. You may have heard of it. It's awsome, dude.
You were mistaken. Which is odd, since memory shouldn't be a problem for you
Wouldn't that be n/t/b then?
Chuuch. Preach. Tabernacle.
4. People who aren't dependent-buyers.
The ability to walk away is important. If you are shopping for a car because your car died and you don't have super credit or savings, haggling works about as well as bluffing in poker. You may not have the stomach for that, but it isn't the fault of the haggling system.
Help fight poverty: Punch a poor person.
Most of the comments have been made by people who have never worked within the automobile industry and who hate the current process of buying a car. That's fine, but they're missing some important parts of the picture. The first unmentioned part is that the majority of deals involve a trade. As much as you think people hate buying cars, you will quickly discover that they hate selling their cars even more. Most people are entirely too lazy to prep their cars for sale, and are usually unwilling to invest in the repairs that will facilitate the sale of their vehicles. The second issue is that a huge percentage of the buying public has marginal to poor credit. The auto dealership essentially preps and polishes the credit application, and then finds a lender willing to buy marginal paper.
These two criteria eliminate about 85% of the buying public from purchasing directly from the factory. Really.
"Man is nothing without the works of man" -- Helvetius
Look at the places where people still haggle over crap like a bag of rice or a pair of pants. Their economies are always underdeveloped with a low standard of living. Moreover, look at the most successful retailers: Walmart, Amazon, Target, that Swedish furniture chain, etc. They all have posted prices. They dominate global retail. If haggling was efficient and productive then some Egyptian or Bangladeshi retail chains would dominate global retail. This is not the case. The price tag was one of the most important innovations of capitalism. So why the fuck do we still by cars like some old lady in a 3rd world market haggling over some melons?
Walmart and other big chains offer rock bottom prices compared to smaller operations by amortizing losses over a broad range of products and geography. Lose money or make very little on this product; make a large margin on something else.
That said, I prefer not to haggle over the price of goods. But that said, other models like the sort-of-but-not-really crowd funding model of Gustin are intriguing.
Help fight poverty: Punch a poor person.
"RAM ProMaster van here in the US versus a 4x4 Fiat Ducato in the UK. Same van... the US version is pathetic."
Same bodyshell - completely different engine and transmission. US version has 280hp max , best you'll get out the euro versions wheezing 4 cyl diesel is 148hp.
most cars sold are sold by dealerships owned by large chains that span counties or states. you might call them regional businesses, but very few of them are small enough to be considered local.
If anything, the manufacturers are putting ever-increasing requirements on the franchised-dealers, such that many smaller dealers lose their franchises. Several years ago Chrysler ended agreements with probably a third of their dealers, many of them their oldest franchises, because those dealerships would not modernize their facilities and did not contribute much in the way of promotions. Ironically most of those dealerships were on land that was paid-off, so they didn't really have to sell many cars to keep afloat so long as the service department was successful. Not selling cars isn't good for the manufacturer though.
The only real services that dealerships offer that I value are new-car prep and warranty/recall service. I do not value their out-of-warranty or other paid-service, and I do not value the purchase process. Both are much more trouble than they're worth.
As far as corporate vs franchise, there are plenty of industries where there are both corporate end-retail locations and there are franchise end-retail locations. Restaurants immediately come to mind.
Do not look into laser with remaining eye.
Dealer-Only Parts & Service needs to go away.
Why would anyone go from dealer to dealer. Every dealer I've seen has their inventory posted online.
As for the dislike of haggling, that's not just about autos. Most people simply dislike negotiating because it seems too much like arguing. With sites like KBB and TruCar, you know what you should be able to buy the car for, it's just a matter of going in fully informed, and standing your ground. Auto companies love no haggle business...they make a lot more.
Just another day in Paradise
Deals make their money from used cars. Always have, always will.
New car sales profit: $1000 over invoice at a 'no-haggle' (which is about the average paid when haggling).
If you are *really* good you can work it down to oh say $600 or $700 if they dealership is really hurting for sales.
You are *always* getting screwed on your trade-in, *always*. ... so YMMV.
Advice: never bring a car to trade it. But then it's a colossal PITA to do a private party car sale
Manufacturer makes the money on a lease .. they are doing the financing through their wholly owned subsidiary.
If you by-pass the new car dealerships you still have the used car dealerships so I don't see it as much of a win.
1- Showroom; being as I'm a larger individual, I prefer to actually sit in the car I'm interested in to verify that I can drive it comfortably, that I'm happy with the visibility out the mirrors and rear window, etc.
2- Warranty Repair; if something goes wrong or there's a recall, I want to be able to take it to a manufacturer approved facility. Those are most often at dealerships.
I don't like to haggle, and I don't like to waste time. Ideally, I would like for purchasing a car to take only slightly more time than it takes to buy a suit and have it tailored.
Go on, citizen, stamp the vote card. R or D, your choice.
The point is that if I want a Tesla Model X, I have to pay at least 69,900. There is no way to negotiate, which is called price fixing.
Google: Price Fixing - the maintaining of prices at a certain level by agreement between competing sellers.
There are no competing sellers of Teslas, so it's not that. It's cases like airlines all charging the same fares for tickets to specific locations.
Just another day in Paradise
A "good" insurance agent can save you money by shopping around providers for the best price and determining the amount of coverage for your needs. If you only need a basic auto policy, chances are you don't need an agent. Once homeowner's insurance and other policy lines come into play, an agent could be helpful.
Getting the best car price doesn't involve messing with the sales manager's head. He knows the lowest price he can do.
You do online research and bring printouts from sites like Truecars and Autotrader.
Your method might make you feel good, but has no bearing on getting the lowest price possible that the dealership is able to do.
People who believe this are suckers. Everything is negotiable, you just have to decide how much your time and effort is worth in doing so. When you're dealing in low volume, or high dollar items, you don't execute the same way as mass marketers. You're talking about commodities, which are rarely ever worth your time in dickering over.
Just another day in Paradise
Service centers don't need to sell cars to be able to fix them. Basically you might need to beef up certification of third party repair shops, very little else is needed.
The point is that if I want a Tesla Model X, I have to pay at least 69,900. There is no way to negotiate, which is called price fixing.
Just like Apple - I offered a fair $125 price for a new iPhone, and they completely ignored my offer, they clearly are price fixing. Clearly, just like Tesla sells the only Tesla Model X available on the market, Apple sells the only iPhone on the market, so they are monopolies and we shouldn't let them get away with price fixing!
if chevy sells a car to a dealer for $16000 and the dealer after haggling and whatnot sell the car to me for $17600 then the dealer made their 10% profit. Cut out the dealer and buy from the manufacturer and they will just sell me the car direct for $17600. It is foolish to think anything else would happen. The main difference is now my 10% has left my community and is being spent in detroit (or wherever). This whole idea "if I can just buy my coke directly from the man My drugs will be cheaper" is unrealistic. That is not how the world works or has ever worked.
Then don't buy the Chevy - buy a Ford, or a Honda or a Kia. There are few cars that don't have comparable models across multiple manufacturers (Tesla is a notable example), and if Chevy can drop their price by selling direct, why wouldn't they do that to make their car more attractive to someone who would otherwise buy one from another manufacturer?
IANAL, but on the face of it, any law that improves the position of car dealers and old-school manufacturers at the expense of Tesla and their ilk is in violation of the Sherman Act, which is about as settled as settled law can get.
Manufacturers hide the real invoice price with incentives etc....
love is just extroverted narcissism
How dare you ever haggle and deprive your community of its cut.
The article claims that distributing cars to dealers is expensive. Well, yes, of course. But why would it be cheaper to distribute them if dealerships were company-owned?
NTB doesn't sell cars. They just sell car service.
It wouldn't surprise me to find out that lawyers and politicians are trusted more than car salesmen. Car dealerships are the worst kind of business, especially their maintenance shops which tend to charge ridiculous premiums for very minor maintenance and repairs. I think eliminating them is a very good idea.
The only thing these businesses do is pointlessly increase the cost to the consumer.
BeauHD. Worst editor since kdawson.
Amazon uses adaptive pricing. There is no set price for an Amazon item, it changes by the minute on some items, and per person on most items.
No, it is not necessary for repairs and maintenance. There are any number of other places one can take their car for this. Often this avenue is cheaper too.
BeauHD. Worst editor since kdawson.
Cars are more interchangeable than Apple vs a PC. I would rather have fewer middle men and be able to order my car with my options without ever setting foot in a dealership EVER AGAIN. The shiny showroom and annoying sales guys you suffer through are all costs the end up being peanut buttered onto the price you pay.
As long as hulu continues to play half measures I will not consider using their service. (Claims ad free but still has ads on certain shows)
Minimum threshold fixed. Thanks!
Agree on 1.
I'll call BS on item 2. Paying cash for a vehicle gets you no advantage...the dealership doesn't care. In fact, they'd rather you finance the car because they make more money that way.
As for 3, you're claiming there's a lack of free information? Really? And what "ridiculous heights" are you speaking of?...MSRP? (nobody in their right mind pays that).
Just another day in Paradise
Yeah! why can't we just go to a vehicle store? With several brands of cars/trucks instead of brand locked dealerships?
Minimum threshold fixed. Thanks!
So, actually going somewhere else isn't a "waste of time and energy"? It's all about what your time is worth, and how much you can save by using that time in negotiations. Your dislike of haggling is simply making more money for the salesmen...I'm sure they love you.
Just another day in Paradise
You can't fix an ECM/TCM by yourself, so for repairs, dealers are still a must.
Dealers don't fix an ECM/TCM, either. They just swap them out like any other shop would. They used to have better computers for testing individual actuators and solenoids and stuff, but you can buy a nice bi-directional scanner for the cost of one repair at a dealership. Nearly every shop will have one, or can borrow/rent the proprietary one from the dealership itself.
Take your car to the dealership for warranty repairs or the included first year of oil changes. There's no reason to give them more money after that.
If you want a vision of the future, imagine a youtube comments section scrolling - forever.
Everyone dreads going to a car dealership because the people you deal with (salesman) are the result of the most brutal, Darwinian economic system ever devised: commission sales. Their base salary - if they even get one - is absolute shit thus they lie, cheat, steal, back-stab, whatever it takes to make the very, very short-term sale. If it was a six-figure car, they would probably kill a drifter for you if that's what it took to get a signature. It's Glengarry Glen Ross and indeed: third place is you're fired.
Car dealers and their sales (and also selling unneeded repairs and service to clueless customers - even when they're in for just a recall, FFS!) stands in stark contrast to the current story on Slashdot about the credit card service company.
...has never had a better application.
That is why I do pretty much everything online.
I don't negotiate. I find what I want and order what I want.
When I go back to the USA if I have to have a car I will get a Tesla so I don't deal with any of that crap.
I don't like poker, I don't like bluffing, and I hate haggling. The whole competing thing just to get a car at a reasonable price is insane and a gigantic waste of time across the entire society.
Computer modeling for biotech drug manufacturing is HARD!
One year old used cars basically don't exist anymore.
But keep telling yourself whatever it takes...sucker.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Negotiating is key to any transaction, and the only thing your post says is that you don't have any negotiation skills whatsoever. You leave money on the table and this fear has probably cost you considerably.
Most people, myself included, don't find it worthwhile to negotiate prices on small items, but EVERYTHING has negotiating room.
In fact, if you ever recognize your weakness here and try to fix it, one of the first things an instructor of a negotiating class will tell you is how fearful North American are about negotiating on price compared to other places. It is massively in your self interest to increase your skill in that area.
Negotiation is a waste of time and energy.
I have no interesting in playing games with price. You charge a fair price and I will buy. You charge an unfair price and I won't. I won't even talk to you about the price. If I think it is unfair compared to a simple internet search I will just go elsewhere.
I care about solving problems related to making drugs for curing things like cancer available. I care about figuring out new ones to optimize a problem. Talking to a human to figure out a price on something just does not make the list of anything I am interested in. If I have to talk to you to figure out a price you already cost too much.
Computer modeling for biotech drug manufacturing is HARD!
If for no other reason, it would be great to finally kill the accepted protocol that buying a car needs to take several hours sat at the dealer's desk doin god knows what, or that you should pay them literally hundreds of dollars on top of the purchase price just for the privilege of having them sell you the car and doing their own damn paperwork.
But that's just it- I don't negotiate. I let them beat each other to death and when they've hit rock bottom, then I swoop in.
That is negotiating. Playing two vendors off against each other IS a form of negotiating. I do it all the time too.
Sure there's a markup, and I don't begrudge them a reasonable fee
I do. The dealer provides me NO value whatsoever. They are merely a middleman taking a cut that they haven't earned by providing me anything I need. I could just as easily buy a car from a dealer if I were allowed to do so. I begrudge the dealers every penny I pay them and they are not entitled or deserving of any profit from me unless they provide me actual value. Haven't had one do that yet.
My taxes take about 15-20 min and I have a investment portfolio, dividend income etc.
Then you have very simple taxes. Mine take considerably longer than that and mine aren't even especially complex compared to some.
And yes I'd rather do my taxes than negotiate with a car dealer. There is WAY more leg work involved with buying a car if you plan to not get ripped off. Determining a good price for a car involves far too much work in most cases.
those people, that building and those costs will still be there. They will jut be owned by the manufacturer instead of someone else.
ford doesnt sell a corvette and chevy doesnt sell a gt40. Having fewer choices does not address the issue.
Nowadays dealers make their money with service, not with sales.
Service, of course, needs to be local to make any sense.
I don't see a big problem for car dealers here ... except perhaps that as soon as robots drive around for us, owning a car will become way less feasible and large car-pool companies with subscription services will take the place of the privately-owned-cars.
The car dealers and service stations then will be replaced by local robot-car-pool service stations.
If the first robot trucks driving on Germanys streets right now are any indication, we're a year or two from moving into the transition phase.
We suffer more in our imagination than in reality. - Seneca
a lot of that "consumer getting screwed" stuff is less common now that it used to be. The difference today is that you as a consumer have a lot more information than you used to have about cars. It's pretty easy to find the invoice price for a given car or the KBB value for a car. That's pretty powerful information. Information you can use to get a better deal and, more importantly, avoid getting screwed and paying way too much.
The other option is to buy a used car. A new car is a terrible investment. A good, late model used car can be a great deal.
On another level, these "get rid of X industry" things seem to sound good on the surface. But when you look a little deeper it doesn't make so much sense. So if we get rid of all car dealers then how many people will suddenly be out of a job? Not just salespeople but the office manager and the receptionist and the people in the parts department and the service shop. Those car dealerships also kick in a lot of money for the local tax base - both property tax and sales tax. Who is going to replace those jobs and revenue?
In the early age of the auto industry dealer franchise fees were used to fund the start up costs. In exchange for those funds certain rules and agreements were made to ensure those investments were protected. Otherwise a car maker could simply put the dealer out of business once their cars became common place. That's why the auto dealer franchise laws exist in the first place. Even foreign auto makers used the franchise fees to fund their US expansions.
Tesla on the other hand never took a dime of franchise fee. From that standpoint I think they should be exempt.
I wind up paying 20% to 50% more for a vehicle than my counterparts in the UK or Germany, and wind up with a shittier vehicle to boot.
I have relatives in the UK, and lived there for years. My rule of thumb is that most things there cost in pounds what they do in dollars in the US. Cars aren't quite that bad, but a quick search shows a Toyota Yaris starts at ~$16k in the UK, ~$14k in the US. So I'm not seeing your 20% markup in the US.
Negotiating is key to any transaction, and the only thing your post says is that you don't have any negotiation skills whatsoever. You leave money on the table and this fear has probably cost you considerably.
What about that makes Ambassador Kosh's point any less valid? If you aren't any good at haggling, then of course, it pays in time and money to avoid haggling when you can. That's a no brainer.
Incidentally, I buy my cars from private parties precisely so I can avoid most of that haggling game as well. The bonus is that I can be incredibly lazy at haggling and still get a better deal.
This is basically what truecar does for you, automatically. They already know the lowest price paid in your area for the model you are looking for. They send out the request to the dealers locally then give you back the responses of the ones that were willing to match or beat the lowest price someone just paid.
I did it for my last car. Researched online, found lowest price, used truecar and compared it to their local lowest and it was close, they had a dealer get back to me the next day. Walk-in with my printout of the guaranteed price, say no to all the dealer crap, done and paid
ford doesnt sell a corvette and chevy doesnt sell a gt40. Having fewer choices does not address the issue.
If you're buying a $50K - $100K sports car, you can stop complaining about being price gouged. What do you mean "fewer choices"? If manufactures sold direct, they would (or at least could) still manufacturer the same cars. But even today, if you *have* to have a Corvette, you still have only one manufacturer to choose from. You might have dozens of dealers to buy from,but they get the cars from the same source and pricing is not going to be radically different, and depends on how good you are at negotiation.
If the Corvette is too pricey, you still have other options, there are plenty of other cars in that price range, Ford, Porsche, Lotus, BMW, Mercedes, etc, and even Tesla, has performance cars in that price range. Sure, they are not a Corvette, but no one *needs* a Corvette, they may want one, but they don't need one, so GM can't endlessly jack up the price. But GM can price it at a premium (as high as the market will bear) whether it's sold through a dealer or not. Lots of people *want* an iPhone, but for those that can't afford $900 for a phone, there are lots of other options.
I was buying a used car from a dealer a number of years ago. I told them how much I wanted to pay (low balling) and they balked. They first showed me a printout of how much the car was worth. That was great until I pointed out that their printout was for the model of the car that was 4 years newer than what I was looking to buy. Whoops. Eventually I got tired of their insane sales tactics and said never mind and got up and started walking away. I was serious about leaving but they flipped out and within a few minutes we had a deal that I was happy with. That was my first time trying that tactic and I was amazed at how well it worked. The ability to walk away really is important.
How about removing the franchise monopoly provisions.
Make it like any other product. You don't need to go to the Coke store vs Pepsi store to get the respective products. You can choose from both at the same store. Car's should be no different.
Let whoever wants to open a car store open one. Let me open a shop where I sell you any brand of car under one roof. Heck let costco, walmart, target etc sell cars if they wanted to.
Its not Dealers vs Direct sales which is a problem. Its Dealers vs everyone else (including direct sales) that is the problem.
People get together and form a government which decides how to spend societies collective wealth. You have two alternative choices:
1. "law of the jungle" : people who want your stuff just kill you and take it
2. autocratic rule : there's a king who gets all your stuff
Which alternative do you prefer?
Price fixing is not paying the sticker price. You don't go to the grocery store, buy a bottle of cola for the price listed on the shelf, and then complain of price fixing. Tesla made the choice to take haggling for the price out of their buying experience. You obviously don't like it. Many car buyers don't like haggling for the price.
Now if Tesla got together with BMW, Mercedes, and other high-end electric car manufacturers and said that all of their cars were going to be $69,000 and they wouldn't undercut one another then that would be price fixing. And illegal.
One year old used cars basically don't exist anymore.
Where did you get that wacky idea? Go to any used car sales site and look, there's plenty of them.
You don't think anyone ever gets their car repossessed any more?
I'm sure someone could start up a business where after you find the car you want they would come into the dealership with you and do the haggling on your behalf. They would get something like 10% of what they manage to save you.
In fact, they have to, because haggling is their entire profit margin.
Actually, haggling only represents part of their profit margin. Nearly every manufacturer provides a dealer with a holdback on every sale, usually around 3%. In addition, there are also factory-to-dealer incentives (which dealers are not obligated to pass along to customers), where manufacturers sell cars for less than the invoice price. There are various other rebate programs that manufacturers use to help dealers with their margins and move vehicles. Many manufacturers are willing to sell greater volumes at lower margins (especially when it comes to fleet sales).
It doesn't invalidate your point, but dealers don't survive on the haggling process alone.
Also, if a manufacturer sells directly, what stops states and localities from collecting taxes on the same and use of the vehicle?
-Turkey
I am a bit of an aficionado so I buy a lot of cars and own a stupidly large number of vehicles. I never, ever, trade in my car. Well, okay, I've done it twice - sort of. One was an exchange where the dealer paid me money and a new car. It's a long story. I'll share it if you really want...
Anyhow, it's not hard to do a private sale. Just do it on your terms. I've moved more cars than I can think of right now. The internet really helps with this as does a cell phone. Just take it to the mechanic first (really, usually, worth it) and also get it detailed. Some cars are not worth that effort but usually they are if you're actually hoping to sell it for any real money.
You can use Craigslist, I can even do that in Maine. If you need to then set up a block of scheduled time for interested parties to view/test the car on a weekend. It does help to avoid tire kickers but that's something you learn with time. So, there's that. Another, if you really have something worth selling, is to go to a site that has a forum specifically geared towards your car. There are a lot of people who are into a whole variety of vehicles and are very dedicated to a specific model - even specific years, such as myself. (An example, as silly as this may sound to you - I own a fully restored 1982 Volvo 245 with the Canadian trim - meaning square headlights. I love that car. I paid a metric ton for that car and the restoration.)
There are sites that will let you list your car for a fee - I've actually heard good things about buying a car from eBay but I've never known anyone who sold a car with it. A buddy sold his Harley and was happy with the service, there's that - I guess. If you've taken good care of it then there's probably a market and communication is nearly free and very easy today. You can find a buyer - make the buyer do the work but try to be reasonable about it.
I dunno... I just figured that I'd throw this out there. It's not really that much work and it's worth it. If you've really got something nice then visit a car show. They're not all antiques or the likes. I don't own any vehicles that don't get driven, at least some of the time, and even I bring a new car to the weekly show that I attend at least some of the time. I've a standing offer for the above mentioned Volvo, $18,000. Sadly, I have more than that in it. Either way, it's not for sale. It's what I often take out on snowy nights - it's like a tank but rear wheel drive. Sure, 0 to 60 in three point two days but that doesn't matter in the snow. I'm pretty passionate about it and unless you're trying to unload a shitty econobox then someone may be very specifically interested in your used car.
"So long and thanks for all the fish."
If price discrimination is even possible, the market is already well on it's way to failure.
Yes, but the owner of Best Buy does not play golf with the city mayor or state governor.
Because it works.
Price tags are nonsense for non-daily-purchase articles. What your examples have in common is that they sell mass-market low-price items (even IKEA, though that's a borderline case). A car is not such a thing, neither is a house.
But even for everyday items, you can almost always haggle. I'm slowly learning that from my girlfriend who is brilliant at that, sometimes simply because she has the chuzpe to ask for less. That's all there is to it, it's amazing. "can you make the price lower?" - "I can give you 10 bucks off, but no more."
I completely agree with you that the arab style of haggling is crazy. First inflate prices by 500% and as soon as someone says "too expensive", drop the price by 400%, from there start haggling. Been there, done that, insane waste of time.
But turning the table on a sales guy and reminding him that he wants you money just as much if not more than you want his product is just fair game.
Assorted stuff I do sometimes: Lemuria.org
More specifically, it hurts people with poor negotiation skills. Half of us are below the median, and therefore will wind up paying more than everyone else.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
How about a law that states that the sales price is shipped attached to the window and the car can never, ever, be sold for less than the original sticker price and that a dealer may not tack on any other fees? That would stop the nonsense and the customer can order from the dealer any combination offered by the factory rather than worry about inventories. We might also want to standardize all parts and accessories across all states and dealerships.
I bought a boat engine direct that had issues and was a nightmare to get serviced under warranty. Next engine I paid some extra $$ and bought from a local dealer who was happy to fix it when needed. Choice is good.
They are pros. They now all the tricks. They will beat you. They have what you want. You are at a disadvantage. After all your haggling they are going to screw you anyway because they are experts. Save yourself the anxiety, time, and effort, give them their price, and take your car home. It will only be as difficult as you make it.
Go to a store and accept the price on the sticker? No difference than going to a dealer and accepting their price.
Tesla sales are banned in Michigan, yet there are a LOT of teslas here. Because it seems that consumers can go out of state to buy them. States can not block you from buying something outside of your state and bringing it in.
So that is what they do. Hell I drive out of state to buy a car a LOT. you get a lot better deal if you are willing to drive 4 hours.
Do not look at laser with remaining good eye.
Price discrimination can sometimes be a positive to society. Imagine a high-fixed cost business. Say the first phone company. Some things, businesses, are willing to pay X for telecommunication. Some things, homes, are willing to pay X/20. It is totally conceivable that charging businesses X alone or charging businesses and homes X/20 does not generate the marginal profits to offset your huge fixed costs. But, charging business X and homes X/20, does.
In this case, price discrimination allows for the service to exist, and everyone benefits. At one point, first class on airplanes was the same principle. So are discounts on software prices for students.
Your ad here. Ask me how!
Yes, but the owner of Best Buy does not play golf with the city mayor or state governor.
Well, no one plays golf with he governor of Texas. And I don't see the Houston Mayor doing to much golf either... Kinda poor examples there.
It's more the LARGER dealerships that people hate. My father worked in a small town, population less than 5,000 people with 3 different car dealerships. He made a good living at it. Why? Because he was HONEST with his customers. He never lied to them, never tried to up sell them, always was willing to help them out to find a good deal, even if it meant losing a deal. He was always approachable, never pushy, gave a personal touch. Even went so far as to photograph them when they picked up the car, sending them a thank you card, with the photo included. (he still has the photos! Tons of them!). He had business, not only in our little town, but nationwide. Word of mouth from relatives and other customers. He even had sales over the years, in Central America. I still wear his Ford Grand Master sales ring. (I've had kids ask what superbowl I was in because it is so large). Car dealers...mostly are a cut throat business. It's based on VOLUME. Drive up on a lot, here comes the pack of wolves. Then if they get you inside, the "slick" guy will talk you into buying one. Then, you go to the finance guy, who will try to push extra features on you. If it's one you order, versus driving it off the lot, once you get it...they forget who you were. That why I never deal with large city dealerships, only the small town ones, since most of their business is local, they usually treat you better. Hat's off to my pop! (Still alive @ 82) He taught me a valuable lesson. Always treat & respect your customers! They pay your salary. Must be working. I've been in the line of work I'm in for 34 years next week. I've had a ton of customers, follow me through 4 different companies in the same field. I've got over a dozen customers that have been with me since day one. A couple of them even said, they retire, if I retire because they don't want to deal with anyone else.
If most of the cost of a car is in the distribution, then at least inside the USA, let me trade that cost for the cost of air fare to the automobile assembly plant. I would be willing to buy it there, and "distribute" it myself, driving it home.
But that's only one fight. And if someone like Tesla has public sentiment in their favor, they can push things in the right direction.
Have gnu, will travel.
You are *always* getting screwed on your trade-in, *always*. ... so YMMV.
Advice: never bring a car to trade it. But then it's a colossal PITA to do a private party car sale
You could always auction. Less effort but you wont get as much as a private sale.
But dealers don't make money in new car sales any more. They barely even make money in used car sales as most dealers auction off their trades or have a separate dealer network who deals in used cars. Dealers make money on finance, services and a little on options. This is why dealers try to rope you into servicing with them using dubious terms in the warranty (in Australia it's illegal for a dealer or manufacturer to force you to service with them, using any accredited mechanic will not void the warranty). Services are where all the fat is, they pay peanuts to monkeys to change your oil.
Calling someone a "hater" only means you can not rationally rebut their argument.
To be honest I only buy used vehicles so its rather moot point for me (craigslist mostly). However my complaint is that Dealerships generally only sell one brand of vehicle. Also it would be pretty cool if I could buy a car at walmart.
Minimum threshold fixed. Thanks!
if chevy sells a car to a dealer for $16000 and the dealer after haggling and whatnot sell the car to me for $17600 then the dealer made their 10% profit.
If they buy a car for $16,000 and sell it for $17,600 they dont make 10% profit because they have overheads, in fact having run my own business I'd bet they'd barely be making 1% profit off of that with rents, utilities, wages and what not... then you've got to pay tax on that 1%.
Cut out the dealer and buy from the manufacturer and they will just sell me the car direct for $17600. It is foolish to think anything else would happen.
This.
First off, products are not priced to be the lowest they can be, they are priced at what the market will bear.
Secondly, selling direct to the public has a great deal of overheads that you don't get when you're just wholesale. Not just in showrooms and staff, but after sales service as well. Not only are they unwilling to lower the price, but they also wont be able to lower it by much.
I've seen this many times before, particularly with taxes. A government cuts a tax on something as a vote winning tactic and all that happens is the companies adsorb the difference into their profit margin.
Calling someone a "hater" only means you can not rationally rebut their argument.
Those are examples of product differentiation. Business phone service has a better SLA than residential as well as offering services only interesting to a business such as hunt groups and T. Student editions of software are generally licensed for non-commercial use only and may have limitations of functionality. We all know there are distinct differences between coach and first class.
Some forms of product differentiation are perfectly reasonable. The different price reflects the different cost to provide the service. Or, in the case of student editions (sometimes), the price wouldn't cover the prorated development cost. It's tallied against advertising and promotion since there is the hope the student will one day advocate for the pro edition.
Other forms of product differentiation are not reasonable. For example, when all models in the line are built as the top of the line model and features are then disabled to produce the lesser models. There, the marginal cost of production is actually a bit greater for the low cost models. That play wouldn't work in a healthy market.
Price discrimination is when exactly the same product with exactly the same production cost is sold for a higher price in markets that aren't functional enough to drive the price towards the marginal cost of production.
Those are examples of price discrimination, with a thin veener of product discrimination. A different example is how airlines charge less for flights that include a weekend stay. That tends to eliminate price insensitive business travellers.
But my example actually didn't rely on SLAs or anything like that. I said without price discrimination, blatant or disguised, the fixed costs couldn't be covered and the industry would cease to exist.
Student versions are given out to hook the nexst generation, and also because sutdents are more likely to justify pirating it otherwise.
And your example of deactivated features happens all the fucking time in the real world. Laptops used to be famous for charging more for ethernet connections... but the ones "without" the connections had them behind the plastic punchouts. Totally played until noone cared about ethernet anymore.
Your ad here. Ask me how!
A different example is how airlines charge less for flights that include a weekend stay. That tends to eliminate price insensitive business travellers.
And a healthy market would drive the non-weekend price down.
And your example of deactivated features happens all the fucking time in the real world.
I am all too aware of that. It's a shame we don't have a healthy market. A vigorous market with well informed buyers would force the manufacturers to enable the high end features at mid to low end prices to compete.
So, you just want to keep "No True Scotsmaning" on a "healthy market" till it meets Econ 101? Or pay attention to what Econ 201 on up say are the regular and predictable failures markets constantly experience.
But what's the advantage of the first person to enable high-end features at mid-end prices? You know full well your competitors will follow suit, so your bump will be temporary. But the long term costs from no high end versions would be permanent.
Your ad here. Ask me how!
Sure, but eventually, someone unlocks something, perhaps a last ditch effort to stay afloat, and there you have it. Or someone takes on half of a percent off the price of their top end model, and about the same off of their mid model, then you cut a tiny bit more. The low end doesn't ghet cut as much because it's actually priced about right.
Fast forward and there's no point in having the mid model so it just goes away.
Of do you claim that healthy markets don't actually do any of the good things claimed for them? If that's the case, we'd better try Communism.
Note, I have not used a No True Scotsman fallacy. That would first require that you give an actual example of price discrimination that is actually good for the consumer.
Obviously the issue with NOx pollution from diesels passed you by.
Negotiation is fundamental to our economic system, and life in general when you consider negotiation not relating to money. I mean it's fair enough that you feel your own time is better spent on more important things which you're probably very good at, but it's not correct to say that negotiation in general is a waste of time and energy. The cost of all the expensive equipment and materials you use in your professional life has been negotiated. Had it not been negotiated by someone within your organisation, you would have fewer resources with which to do your job with; and it's not a particularly nice attitude to have toward your colleagues that are working to support you in your profession.
Me and my girlfriend both both new cars this year. My experience has been horrible, they do not know what they are talking about and don't know how to communicate or just refuse to communicate after the deal has been signed.
I had to correct the offer my girlfriend got from the dealer multiple times because they just put stuff in there that was impossible, and refused to put stuff in there that was possible because they thought it wasn't. In the end I came with proof and they changed to offer as we wanted...
It happens, but is very rare (plenty my ass), and the cars are often trashed. Also they are all in the hands of stealerships, who of course, like to make new cars look like values.
Even the 'trade them in regularly for a new car payment' chumps keep them 3 years these days.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
The Federal bailout did several things. It gave GM and Mopar a chance to get financing at low interest rates from the Federal Govt. What they had to do was close over 1/3 to 1/2 of all dealers, why because there was too much competition. Compitition drives the price down and the Big 3 want the prices to rise not fall. The next thing they did was to close the only profitable business unit that GM had, Saturn, why because it was a non union shop and Obama and the democrats did not want it around any more. So killing Saturn was giving a fish to the big union bosses. Next thing they did was crush up mid life cars. Not old crappy cars but cars that were around 5 years old and were at mid life. They did all of this to drive up the price of cars. This is your tax dollars working against you. Don't you all love it? I don't know if the price of new cars will go down if automakers are allowed to sell direct, it could be a consequence but it might not. The big 3 are somewhat accountable to their dealerships and if cars get too expensive the dealers will be stuck with inventory and they will complain. Also where would we go to kick the tires and to test drive. Most people don't know what kind of car they want to buy. They might have an idea like a small car with the best gas mileage or an SUV that packs in all 20 kids and counting but they don't know from car company to car company which one has the grunt to get all 20 brats to the television shoot and has all the accessories to keep all 20 brats entertained with of course cup holder for all 20 brats, unless they went to a dealership to test drive them. With the average car costing around 30K and the average truck approaching 40K I don't know who can afford to purchase a new vehicle, not me. I'm sure whatever the big 3 do it will drive the price of cars up....
Paul E. Bahre
Which is one reason companies don't always try to put each other out of business. And about-to-fail competitors get bought out. I mean, it's a nice theory, and I get the justification. It just doesn't seem to bear out in practice. I mean, look at Pepsi and Coke (and your generic Cola), and how the price plummetted as they approached marginal costs. It's cheaper to buy decayed dinosaurs imported from across the globe to blow up in cars than to buy sugar water.
Whatever else you want to say about capitalism, prices at or near marginal cost have never been considered "priced right". In fact, the only "priced right" theory has to do with crossing of supply and demand curves. The idea that supply wouldn't be artificially constrained to drive that price up is clearly, factually, incorrect. Even when there are multiple firms. Because they are engaged in long-term prisoner's dilemmas, and know they should cooperate.
Example please? Because cars and more.
That's a false dilemma. For one, you're advantages have focused solely on costs. And things like "choice in clothing" is a good thing.
But, yeah, I think most people who talk about the efficiency of the markets need to pay more attention to all those reasonable conditions that need be met. Easy market entrance/exit. Lack of network/scale effects. Etc.
I did provide such an example, although abstract and hypothetical, with the need to have business customers paying X and home customers paying X/20 to have suffienct marginal profit to cover the high fixed costs. You went on some diatribe about SLAs (which I never mentioned) and how that's product differentiation (which again, I never mentioned.) I am providing an example of how literally everyone wins due to price discrimination. Because the businesses pay X for a service they think is worth X. And customers pay X/20 for a service they think is worth X/20. And the service exists, which it wouldn't if the price wasn't discriminated.
Your ad here. Ask me how!
What has happened in my area (north Florida) the owner is local but owns all the different makes dealerships.
You provided a hypothetical not seen in nature. I asked to see an actual dog and you drew a picture of a dragon and figured that was just as good.
I then pointed out the ways that a dragon is not a dog. Now I am also pointing out that a drawing is not actually a thing in the real world ( a drawing of a dog is not an actual dog).
For the rest, honestly most modern economic theory is based on describing how and why our markets are not healthy. Some actually suggest things we could do to improve the situation, but they rarely get done because it would interfere with major political contributor's ability to profit on the failures and because it would trample various people's ideologies and/or political aspirations.
I do agree that people are keeping their cars longer than ever now, however your idea about stealerships is incorrect I think. They make *more* profit off used cars than they do new cars. New cars really don't do much for them; they make all their money on either used-car sales, or on service, accessories, etc. New cars are like gasoline: there's no profit in it, it's just a way to get you in the door so they can money on you with other stuff.
I haggle for car prices and many other things. I'm not about to give up my freedom and ability for real capitalism because you're a pussy
I've found small independent used dealerships care, cash is king. I think they don't get the benefits of the credit system the big guys do an have to take higher fee
so you're what p.t. barnum would call a "sucker"
fool and his money are soon parted and all that
I'll agree used vehicles is a different matter entirely. I was only referring to new.
Just another day in Paradise