Elon Musk and Tesla Motors have franchise car dealership owners scrambling to file lawsuits and convince consumers that the status quo benefits them. Despite the fact that more than 80% of consumers dislike the car-buying process, the National Auto Dealers Association has put together a slick (and entirely unconvincing video) to demonstrate the benefits of haggling.
NADA’s “Get The Facts” campaign claims that because of the way auto dealers work, most see a net profit of less than 1% on new cars, and for the most part that’s actually true. See, many car dealers make up that profit in three key areas; quantity of sales, used car sales, and maintenance costs. Automakers often deliver hefty cash bonuses to dealerships that meet certain sales quotas, sometimes to the tune of a half-million dollars or more. Traded-in and used car sales also represent a huge mark-up for auto dealers, and getting customers to come back in for service appointments is the bread-and-butter of many franchise dealerships.
Fair enough, everybody has to make money, right? But where the video lost me is when the dealerships claim that there is no “middle man” to car buying. Seriously? THEY ARE THE MIDDLEMAN! They have to put for the sales staff, the property, and all the local and state taxes associated with car sales. All those costs are worked into buying a car, one way or another, and the customer ends up paying those costs. While automakers might end up with a similar system, they could also offer a superior customer experience by eliminating haggling and building grand showrooms that few local millionaires could ever hope to compete with.
Not that you should feel bad for them. Have you ever met a poor car dealership owner? I certainly haven’t, though I know plenty of people who have had a wretched experience at a car dealership (yours truly included) at the hands of aggressive and dishonest salespeople. There’s a whole secret world of car dealer jargon related to screwing customers out of their money That’s because dealerships base pay on commission, whereas Tesla salespeople are paid a salary; they get the same amount of money regardless of how many cars they sell. This has led to an overwhelmingly positive view of the Tesla buying experience, which dealerships are trying so valiantly to demonize.
The fact of the matter is most people would rather pay a set price for a product, rather than go through the effort of haggling for the best deal. It works for just about every other consumer product on the planet, so why not cars as well? Edmunds pissed off dealership owners by suggesting that haggling was annoying and outdated, and eventually the magazine caved to advertiser presser by pulling the ads. Then in almost the same breath, they want buyers to believe that calling multiple dealerships to get the best price is somehow a good thing? Puh-leese.
I don’t buy it, and the computerized fembot voice they have narrating the video (really listen to it) indicates to me the two-faced nature of the car dealer lobby. They couldn’t spend the money to hire an actual voice actor, or is it because no living, breathing person that’s ever dealt with a car dealer believes this drivel? It’s only in the interest of fairness that I even decided to post this video, and it’s true that car dealerships employ a lot of people across the nation. Some dealership owners have even made the effort to make plug-in vehicles a cornerstone of their sales; others say there’s no market for such a liberal weenie-mobile. Overall, EV buyers rate their car buying experience even lower than the average car buyer, which is why Elon Musk wants to try a better way.
But that doesn’t mean there isn’t a better way.