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Car Buyers + Dealerships

Fix the Dysfunction

By Doug Brauner

If I went into a department store with $50,000 to spend, I know I’d get the attention of a competent salesperson, if not a bottle of water to sip on as I browsed the racks.
    But in the world of auto sales, all bets are off, as well as most of the basic rules of retailing. It’s a mean car world out there, and you and I are actually to blame for it.
    Now don’t get me wrong; there’s a ton of morons out there selling cars. But to be fair, there are probably a lot of morons practicing law, medicine and accounting, too. It’s just not as much fun picking on those guys.
So why then are the deficiencies in the car business so systemic and obvious? I believe in my heart that, like any other relationship gone bad, the communication that tends to occur between customer and car dealer is just plain awful.
    However, empathy for the men and women in suits standing out on the “point” can be hard to come by. That is, until you learn from an insider the challenges that car-sales folk face each and every day.

No. 1: They make less than minimum wage. They can make less than $6.25 an hour when you calculate the horribly long hours that auto salespeople work and the rather pathetic commission package. It’s no secret that sales commissions of new cars are but a fraction of what they were a few decades ago. Today, the total sales profit is often but a few hundred bucks, of which the sales guy will net about one-fifth. Given the woeful return, it’s not surprising their investment in the customer is marginal.

No. 2: Dealership “retention strategy” is an oxymoron. Employee turnover at dealership sales departments can rival that of fast-food establishments. Who’s to blame? For one, management. Compensation packages for these people need to be far more comprehensive and less reliant on commissions. If a dealer were to guarantee a salary to some of these folks, many more of them would be far less likely to jump ship after a few weeks of slow sales. Dealers need to learn not only how to attract professional sales talent but how to keep them around, as well.

No. 3: You and I are partially to blame. How’s that? What did we do besides plunk down tens of thousands of our hard-earned dollars for some car that will be outdated in just a few years? The answer is simple. We treat the dealers just as poorly as they treat us.
    Admit it; I certainly will: I’m a dirt bag when it comes to buying a new car. I spend endless hours on the internet frantically researching every possible way to grind the dealer for every last penny of his profit. I print out copies of the dealer invoice and gloriously wave them in the face of the salesperson who dares approach me on the lot. I love it when I can email two or even three dealerships with offers on cars and then play them against each other. I love to make those guys squirm. But it’s also bad for the industry. Really bad.
    Our collective poor treatment of car dealers breeds contempt and mistrust. It makes everyone in that industry assume the worst about us. Ultimately, it requires them to be ever more secretive about how they make money. It is a vicious cycle that has gone on far too long.
    Now, being that I aspire to be king of the world someday, it would be disingenuous not to offer solutions.

Solution No. 1: Customers should just shut up and pay the price. Cars today are more affordable than they’ve ever been. When I was a kid, if a new car rolled into the neighborhood, it was big news. Today, it’s big news if your Honda was built in the ’90s. Our lust for the haggle has disrupted and confused the buying process. It leads dealers to engage in back-office trickery with finance rates and forces them to hard-sell paint sealers and fabric protectant to make up for the money they lost on the haggle.

Solution No. 2: Dealers must set a fair price and stick to it. This may be harder than it sounds, because as nasty as some dealers can be to us, they can be even nastier to their own kind. Dealers will mercilessly undercut each other to get a sale even if it means taking a bad deal. Volume is volume, and whoever sells the most is often seen as the winner. Dealers need to be better controlled by their parent manufacturer and monitored on their pricing. It’s done in other industries with retailers all the time. Why can’t carmakers control their dealer networks? It’s time for them to step up and rein in these guys.

Solution No. 3: After viewing yet another dealership’s screaming TV ad about another tent sale, does anybody really believe any better deal can be made this weekend? Conversely, dealers know that when we tell them we’ll be right back to buy that car after we grab a bite to eat, it really translates to “we’re heading down the street to your competitor to buy somewhere else.” If we all act like grownups and respect the challenges dealers and customers face, we may be able to strike a new chord in the auto business: a new reality where the focus on buying a car would be based on the delivery of quality information that can be trusted. We’d have a new reality where a dealer doesn’t have to “hide” a percentage point in the finance rate to pay for dealership overhead and a new reality where salesperson and customer actually like each other.

Reality check: It will never happen. The auto industry is perhaps the least proactive industry in the world. It responds only when truly pressured to do so. Seat belts, air bags, fuel efficiency and more environmentally friendly engines are just a few examples of technologies that were forced on automakers. To expect the guys in the corner offices in Detroit to proactively change the culture they invented is horribly naive.
    As potential car buyers, we will have to expect more from the sales experience. In fact, we have to demand it. But be responsible. Be respectful. And be aware that car dealers don’t have steeples on the roofs. These places are not charitable institutions, and they need to make a profit. But don’t hold your breath; it could be a long, long ride toward change. Until then, I’m looking for a killer deal on a new SUV. Anyone know where I can pick one up at invoice? 

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