Car Dealerships Now ‘Stealerships’ Since the Pandemic-Here’s How
Unfortunately, with the whole supply-chain debacle making both new and used cars rather scarce, car dealerships are in the driver’s seat, no pun intended. And when that happens, the shenanigans explode. Hagglers need not bother, as there is probably somebody else sitting down with a different salesman buying the same car. Which of you can sign on the dotted line fastest? So it has turned dealerships more into “stealerships.”
Why do some dealerships charge more to some than others?
And the way a car is sold is by how the salesperson sizes you up. Some are already handicapped for terrible reasons. According to both JSTOR and the Detroit Free Press, some groups pay more. Colored people, older people, and especially older women, are far more likely to pay a higher price for a car.
Analysis of sales transactions and motivations, according to NPR, paints a dirty picture. Some dealerships size you up based on what they perceive as your willingness to pay. Dealers will use dubious marketing strategies, hidden fees, and add-ons marked up ridiculous amounts. Things like car mats, warranties, and alarm systems.
Is telling a dealership you have a trade-in a good idea?
In general, announcing you have a trade-in signals to the salesperson you are willing to pay more because you’re taking less for your trade-in. They look at it as if you’re either unwitting or will spend more to get the car you want. And the type of car you’re trading in tells them some things about you as well.
But the problem for dealers is that those who don’t use these duplicitous tactics end up with no cars on their lots. Car buyers shop around. So if the dealer in the next town, for whatever reason, is demanding a few thousand more than the dealer you’re at, you are going to buy from this dealer.
And with no cars left on the lot, some dealerships wait weeks and months for a new shipment of cars. That’s why for both dealerships and stealerships, it pays to hold out for the over-the-top dollar. But a Growth for Knowledge study found by NPR shows that a bad car purchase not only reflects on the stealership but also the brand.
What do manufacturers say about dealership tricks?
So with prices being sometimes tens of thousands over MSRP, automakers don’t like the optics. It’s not helping the brand. But as dealers are independent businesses, there is only so much that manufacturers can do. Plus, there are state franchise laws protecting dealerships.
Ford, GM, Hyundai, and maybe others, have sent notices to their dealers asking that they not spike prices. But based on what we’re seeing, the stealerships follow their own plans. So, what good are dealerships? Actually, there are many reasons.
For automakers, the most immediate reason is they provide both distribution and service. For the consumer, it’s their first real look at the car they’re interested in buying. They can see how it feels, test it, and compare it to other vehicles on the lot. Dealerships also tackle recalls and warranty work.
What does NADA say?
When asked by NPR, the National Automobile Dealers Association said, “State legislatures passed franchise laws, and continue to overwhelmingly support franchise laws, to separate car sales from manufacturing, prevent monopoly pricing by factories, promote competition in auto sales and service, and keep jobs and investment local,” according to NADA Vice President of Communications Jared Allen. “The franchise system delivers these tremendous benefits better than anyone.”
But now the feds are trying to loosen the grip of car franchises. It proposed new rules aimed at making it easier for other forms of car sales, like Tesla’s direct-to-customer model, to offer an alternative. “As auto prices surge, the Commission is seeking to eliminate the tricks and traps that make it hard or impossible to comparison shop or leave consumers saddled with thousands of dollars in unwanted junk charges,” the FTC said.
Do you believe NADA?
But NADA’s response was to be expected. “The FTC’s proposed rules would cause great harm to consumers by significantly extending transaction times, making the customer experience much more complex and inefficient, and increasing prices and NADA again urges the FTC to go back to the drawing board before forcing the implementation of a series of unstudied and untested mandates that will have such significant negative impacts on customers,” says Allen.
So what should car buyers do? NPR asked industry analyst Michelle Krebs. “I always say pack your patience and persistence. You have to keep looking, keep shopping. Be flexible in your choice. You may not get the brand or car style you want. And, importantly, expand your geographic search. Most people don’t want to shop more than 25 miles away, but you may need to go farther than that.”
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