There is nothing worse than someone in the media lecturing their consumer audience on how a retail industry works when in fact they know little or nothing about it. Yet for the 42 years I’ve been around the automobile business, there have been those constantly warning the public about the “secret tricks” the auto industry uses to fleece buyers out of their hard-earned money.
True, a small minority in the auto industry gives everyone else their bad name. But the complainers believe they’ve been fleeced if they find out the dealer made any money at all.
Still, you’ve got to appreciate the irony is this type of reporting from time to time. Breathtaking exposés on how to pay the lowest possible price are followed, sometimes just days later, by even more shocking exposés of what happened to people who thought they’d found the lowest possible price.
Doubt that? The Washington Post’s August 17 issue carried a Jonnelle Marte column headlined, “How to Buy a Car by E-mail.” Her second paragraph began, “The car buying process is painful,” but shifted to, “Buyers today can pit car dealers against one another in the search for a lower price, all while sitting at home in their PJs.” She even subheads one paragraph, “Next, e-mail as many dealers as possible.”
Fifteen Percent Grumpy
Last weekend I read parts of Marte’s column on air with two guests on my show. Klint Guerry manages Carl Sewell’s Mini dealership in Plano and often is responsible for selling 20 percent of all Minis in Texas. John Ingram runs John Eagle Honda in Dallas. I focused on her line, “The car buying process is painful,” and asked both men to let the audience know their dealership’s Customer Satisfaction Index score for sales. Sewell Mini’s CSI score was over 98 percent, while John Eagle Honda’s is over 97 percent. Again, the national average for new car dealers is close to the same 85 percent that it was back in the early Eighties, when J.D. Power started his infamous satisfaction surveys.
For the record, the last dealership I ran came with the lowest CSI score of any major volume dealership with that manufacturer nationwide, and 14 months later had the highest CSI score. And our score was not as good as Sewell’s or Eagle’s. Close, but close. So, even the national average of 85 percent of all car buyers rating their last experience purchasing a car as either “satisfactory” or “very satisfactory” disproves her statement that “the car buying process is painful.” -At least for 85 out of 100 purchasers.
But the likelihood of having a truly nasty experience buying your next car multiplies greatly if you take Ms. Marte’s advice and “e-mail as many dealers as possible.” Why? Because the more dealers you e-mail, the more likely you are to run across that one in 20 who will pull you in under the worst possible promises of big savings and then proceed to demonstrate why so many people don’t trust car salespeople.
For example, today on my desktop are buyer’s orders from two different Metroplex dealers, who quote every last person who e-mails them a figure that includes every conceivable rebate possible. That can be thousands of dollars less than the average buyer will ever be able to purchase that vehicle for.
How’s that? When one goes in to purchase that car for their quoted price, the salesperson will ask you what branch of the military you served in. When you respond that you weren’t ever in the military, you’ll be informed that this changes the price you were quoted by the $1,000 military rebate you weren’t eligible for. Possibly you are paying cash, so the $1,000 rebate they gave you to use their manufacturer’s finance arm is no longer valid. Further, most still have trade-ins, and it’s just not that hard to hold back $500 to $1,000 on the actual wholesale value.
Just in those few things, some can bump that lowest possible sales price they quoted by up to $3,000.
You Can Get Satisfaction
What’s missing in legitimate “how to buy a new car” reporting are some useful truths. Car shoppers need columns explaining:
- the mathematics of new car ownership;
- how to determine whether the fundamentals for leasing are favorable;
- how to find exactly the right car or truck for your needs; and, most important,
- how to find the new car dealers in your area with the absolute best reputations.
Fifteen years ago for Auto World magazine, I wrote a column suggesting that if car companies really cared about how customers are treated when they purchase their automotive products, they would quit putting prices on their websites and instead publish their dealers’ Customer Satisfaction Index scores online for all of America to see. Wouldn’t that solve the reported sales problems of the auto industry?
For what it’s worth, since I left the auto industry I’ve leased five cars and purchased one online, because that was the only way to get the Mitsubishi iMiev. It never takes me more than about 5 – 10 minutes to make these transactions. I simply ask the dealer to capitalize my lease at the average profit they make on that particular model. In four of the five leases I knew the interest rate on the loan was under 1 percent, and I did the leases when sales tax credits were available. Meaning, my dealers made good money leasing me those vehicles, but because of the cheap interest and no sales tax on those leases, I effectively paid a couple hundred less per month than if I’d leased at a less opportune time.
And this doesn’t happen because dealers treat me any differently. No, it’s because I was in the business for decades and I’m realistic about what can and can’t happen in a car transaction.
What’s Quality Worth?
The great irony of this last column in the Washington Post — full of silly advice on how to buy a car, with the underlying theme of price, price, price, price and price — is that just three days later another column slammed the modern aviation travel industry. The headline read, “Gripes about air travel have some people swearing off certain carriers.”
That column goes on to warn readers about all the massive fees the nation’s airlines now charge passengers, insidiously hitting up passengers for services such as a $1.99 for a cup of coffee on a Frontier flight from Washington to Denver. So how did it happen that airlines worldwide have made the automobile industry look like a paragon of virtue?
You guessed it: years of the media reporting on how to get cheap airline tickets and only focusing on price, price, price, price and price.
For decades all we’ve read and heard is that no matter what you paid, it was too much. We got used to demanding the lowest possible price, no matter what. So now we’re surprised that exceptional service and high quality goods have gotten scarce?
Or maybe all that does matter is the price. After all, in the most recent American Consumer Satisfaction Index, JetBlue came in as the best airline with 81 percent approval ratings, while Spirit came in with only a 54 percent approval score. Meaning almost half of their fliers didn’t like the experience — and yet they keep flying that airline. Then again, in the same 2015 survey, the average new car dealer has a satisfaction score of 82 vs. the average airline at 71 — and guess which industry some in the media love to slam with lines like “car buying is painful”?
If all one cares about is the price, one shouldn’t care about the outcome. If you truly care about the outcome, you’ll find the right place to spend your money.
© Ed Wallace 2015
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Association. He hosts the top-rated talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: firstname.lastname@example.org, and read all of Ed’s work at www.insideautomotive.com