Posted on 07/18/2022 4:17:10 PM PDT by Responsibility2nd
Turns out buying a car in the U.S. is wildly different from buying one in the UK—and not in a good way.
I've been working at The Drive for more than a year now and there are a lot of things I've discovered I don't know about the United States. Like, what is Fahrenheit and how you spell words like "color." But one of the biggest ones is that I've had to try and find out how U.S. car dealerships work. Right around the formation of Stellantis, I got the idea this might be something I didn't totally understand. After 18 months of research, however, I'm pleased to announce this is how I think y'all buy cars.
Here in (sort of) Europe, we don't have dealerships. Or, well, we have what I interpret as dealerships but which I've come to discover is nothing at all like the U.S. model of a dealership. Let's say that you specifically want to buy a Nissan here in England; then you just look up a Nissan dealer and go there to check out its Nissans. The salespeople will probably try and upsell you from the Nissan you want to a nicer Nissan, but there might be some specific incentives from the automaker to get that one specifically. Other non-Nissan-specialist car places (car lots) might not have said incentives. Or really, you can just go online and buy one, but most new cars here are bought directly from the manufacturer at our version of dealerships because that, uh, makes the most sense.
Let's recap how it works in the UK: People say they want a car, the manufacturer makes and delivers the car (pending any delays for chip shortages, etc.)—that's it. I was surprised to discover this is not how people buy cars in the U.S.
Car Manufacturers Cannot Sell You a Vehicle
This might seem obvious to anyone in America, but for me, it was a genuine surprise to find out you cannot buy cars from car manufacturers. This was probably where I first realized I was way out of my depth, as the idea that gigantic, multinational, multi-billion-dollar companies are beholden to a bunch of dealerships still has me pretty baffled.
Dealers Can Charge You Whatever They Want
In these car-starved times, I hear prices at dealerships in the U.S. are up, which again makes no sense to me because surely a dealership shouldn't be allowed to just put whatever price it wants on a car that a manufacturer delivered to them to sell to you. This, I've come to understand, is naive. In fact, it's basically enshrined in law that dealers can triple the price of whatever Jeep you want to buy and you can go suck it if you don't want to pay that.
You Have to Go to a Dealership to Buy a Car
This is wild to me, and although things are changing in the U.S. after the pandemic with at-home deliveries and all, folks for the most part still have to go to a dealership to buy a car. This reminds me, why in the world would I still need to go to a place and speak to a guy to get a car in the year 2022? I don't want to do that—that's massively inconvenient. If I wanted the hassle of trying to deal with some weirdo trying to mug me off and forcing me to meet them then I'd be searching for Suzuki Jimnys on Facebook Marketplace.
You May Not Get the Car You Really Want
Okay, this is where it gets even wilder to me. So you have to go to a dealership and talk to a guy who's likely trying to rip you off with a markup nowadays, and then he tells you what car he's going to sell you. You get to choose from whatever inventory they have at that location, and if it's not the spec you really want, you're stuck. I guess you could maybe go to another place and speak to another guy to find out what they got, but otherwise, you just have to take whatever's in. This is not how we do things here in the UK, where if you buy a new car you can choose what car you get. Crazy, I know.
Dealers Have Infinite Power Over You and Car Manufacturers
So you've gone to a dealer and essentially been forced to become besties with the guy who sold you a car that you may or may not have wanted, but at least you've got a car now. Now the whole process is wildly different than it is here in the UK, but perhaps the biggest difference is just how much power dealers and the National Dealers Association (NADA) have over consumers and automakers alike. As far as I can gather, dealers choose which car you buy and who you buy it from, and even how much you'll buy it for. It sounds like there's some kind of legal deal that stops anyone from speaking directly to a manufacturer—oh wait, there is! Dealers appear to rule the whole automotive industry and if anyone questions it then you can't have a car, buddy.
If you ever wondered how a British person sees car buying in the U.S., well, now you know.
“The writer obviously doesn’t know how to negotiate.”
I’d rather negotiate with car dealers in the style of Korben Dallas in The Fifth Element. BAM! “Anyone else want to negotiate?”
You can order a car like in the UK from any dealership.
What an idiot.
Though I’ve never worked at a car dealership I have several friends who made nice careers of selling for new and used lots. In fact, I have a friend who has worked for the Toyota dealership for decades. In fact he’s the New Car Manager there.
Unless things have changed drastically manufacturers DO NOT force cars onto dealerships. Each dealer has a New Car Manager who is responsible for ordering the new cars from the manufacturer. He or she is usually a former salesman who has moved up. They order the vehicles they want for their lot choosing the color and trim packages, engines, transmissions, even down to the tires.
The manufacturer would be crazy to force vehicles onto a dealer if that dealer can’t sell them.
A small lot in “Podunk” may order some extra high end vehicles that are hot ticket items and then trade them to other dealers and make a killing on the trade. One Ford dealership did that for years just to stay in business.
Financing is a huge money maker for the manufacturer. GM didn’t start GMAC just to be nice. They did it for extra money. Why let a bank make that dough?
Each new car also has something called “hold back” which is a dollar amount the manufacturer pays the dealership as each car is sold. Higher end vehicles naturally have a bigger hold back than the cheaper cars.
If needed the dealership can use that hold back to make a better deal for a valuable customer.
That’s an interesting strategy.
The European brands tend to stand firm on MSRP. Toyota is similar to the European model. Nissan, Mazda, Honda, Hyundai, and Detroit all have about 8 1/2% margin built into the MSRP. So there is a lot of negotiability. Their willingness to haggle is based on the sales manager’s perception of you, as you walk in the door. Your best deal is between 5% - 5 1/2%. I’ve never been able to get them to 6%. They simply won’t go there.
‘
Buy a used one from an individual or a fleet operator.
The main issue is he using one dealer and one carline. Different dealers and manufacturers have come a long way in the last few years streamlining the buying processes. As far as marking up vehicles…. The manufacturers do not condone it and some will punish franchisees for doing so. With that being said , it’s still supply and demand. If you insist on buying a vehicle during a supply chain crisis you may not get the car you want. I’ll assume the same applies the the UK as well. I doubt Nissan is allotting a surplus of cars for England and leaving dealers here with empty cupboards.
Indeed
If you aren’t picky on trim levels or colors, grab what they have left off the lot a month or so after the new models come out. They’ve been paying intrest on those on their floor plan for a while at that point, and are more motivated to get it off the pavement. Last purchase we paid close to list price of the bottom of the line, but got a couple of trim levels up taking the previous year’s model that had been sitting around for at least 5 months at that point. Not one of my better outings, but too early in the day.
Okay sweetie. Now tell us how we can walk into the liquor store and by a machine gun.
When I bought my 2016 Honda Accord Sport the finance guy was a woman with really nice cleavage.
I was at a disadvantage...!
She up sold the security package and the coating on the car to keep that glossy look and who knows what else.
Kyle CheromchaThis was from LinkedIn
Editor-in-Chief, The DriveExperience
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My uncle was a silent partner in several dealerships in Ohio, but that was probably thirty-plus years ago.
I know the manufacturers often had some slow selling cars and they simply allotted them to dealerships. Although this was after my uncle’s time in the business, I know that GM had a terrible time selling the electric cars after the government essentially told them to flood the market as the people in Obama’s office who were doing this had zero experience in the business. The Obama office told GM, “The only reason people aren’t buying the cars is you aren’t making them.” Thus, every dealer had way too many of them.
When manufacturers have a slow selling line they usually offer incentives for dealerships to take on more of that line. They either juice the hold back or plain cut the cost. That way dealerships can cut the retail cost without suffering themselves. The manufacturer gets a tidy tax write off.
I do know a dealer can’t be forced to take a vehicle they didn’t order but do have to accept every vehicle they did order.
The whole dealership model of business can be very byzantine when you get into the nuts and bolts of it, but it has gotten better.
The coal powered cars (EV’s) were a one off that really shouldn’t be counted. Just another example of government screwing something up.
Saturn tried a direct from manufacturer model of sales didn’t it?
No, when GM decided to launch the Saturn as a standalone brand they opened Saturn dealerships.
One of the Saturn dealers claim to fame was the No Haggle pricing. GM set a MSRP price for the cars that was a good deal for everyone and you paid that price. Like buying a new refrigerator.
If you are willing to be a complete a-hole and are willing to buy off their lot then you can drive a really hard bargain with them.
Never let them know you like a particular color even if it’s the color you want. Always be nebulas when asked about color. It is always the wrong color, always.
Always shop on a gloomy cold rainy Tuesday morning preferably in February. A day when car shopping is the last thing on most peoples mind. Make sure you are the only customer.
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