The Problem with Dealerships

 Out to get you?

Out to get you?

Why don’t dealers want to sell cars?

You’d think, considering the news about struggling dealers and automakers, that sales managers at dealerships would be itching to make the best deals they can.

Instead, they’re tending to hoard their inventory, only willing to let cars go for top dollar. Maybe their strategy is to sell fewer cars, but at a higher profit. Or maybe they’re just too dang arrogant to admit they need to make the best deal possible.

I posted over the weekend about my experience shopping for a replacement car for my wife. Then a CarGurus blog reader sent us an e-mail expressing his frustrations with dealerships, which confirmed to me that my experience probably isn’t unique. 

From what I’m seeing so far, dealers are playing serious hardball. Here’s one example from this weekend:

I found a car I was interested in and began negotiations. My first step was to negotiate the price of my trade-in, for which they offered me $6,500. My research showed a trade-in value of about $9,000. Also, and here’s the kicker, the dealer had my exact car on their lot for $15,999. 

So I knew they’d price my car similarly, and I asked for $10K on my trade-in. I told my salesman I’d then negotiate a fair price on their car. I essentially got laughed at as I was walking out their door. They let me go when I was willing to make a deal and pay more than I probably should have for their car.

So now I’m changing strategies and doing what I should’ve done in the first place. I sold my car privately for $11,000, I’ve secured financing through my credit union, and now I’ll shop with cash in hand and work the best deal I can.

That’s my advice to the guy who emailed us and to anyone else car shopping right now. Dealers are hurting, but they’re still looking to take advantage of buyers in any way they can. Go with cash and make your best offer… if they still turn you down, well, maybe they’ll be one of the thousands more dealers to fail in the coming years.

Would any dealers care to put in their two cents here? Have any other car shoppers had experiences like this?

-tgriffith

4 Comments

  1. I’ve bought a lot of cars in my life and I’ve never seen dealers as stingy as they are now. I’ve always been able to negotiate killer deals on my trade-in (darn near private party value) and then get a good deal on the new car. It seems like times are changing. I see Randy’s point too, that these guys are just trying to make money, but tgriffith is right. Dealers can be very deceptive, and there’s no excuse for that. He has good advice, as do the other people commenting here: if you can, only negotiate on the price of their car. I love Amanda’s advice: here’s what I have, take it or leave it.

  2. This one should be retitled “tgriffith learns how the world works.” Right now the used car market is hot it’s the only thing keeping many dealers (including foreign nameplate dealers) are keeping afloat. Heck, used cars have almost always been a better profit center for dealers than new cars, and typically return higher profits per unit than new cars. Calling the salespeople arrogant because they need to earn a paycheck is like someone calling you arrogant because you won’t sell your product or service for less. The real problem here is that you walked in thinking you had them over a barrel when you really didn’t. Selling your old car (or horse) privately has been sound advice for millenia.

    BTW, were you really in a Cadillac dealership trying to buy a new Escalade for the wife, of is it just another chance to slam some innocent big three employees with an unrelated photo?

  3. Very similar but I got a fantastic deal. I was in the market for a new car for the past two months going through all the deals the dealerships were advertising because of the poor market. I knew my old car was not worth a penny so I saved cash so I didn’t have to pay the 9% interest rate all the dealers have (just insane). I was in the market for a “Ford Fusion”, they had a 6500 dollar price reduction from last years model as the 2010 was just launched. You could tell my sales guy really needed the commission when I said I would only pay 21,500.00 for a V6 SEL in total including ALL TAXES and PLATES. I got it. I was shocked. Sticker price for that car before taxes was at least $2000.00 more.

    The best advice is to give them your total and say their is no way you can go over. If they want a couple hundred in commission, maybe just maybe they will say yes.

    Also, I agree with the private sale of your car, I’ve been offered $1500 for my old beater when the dealer said he would give me $500.00

    Best of luck.
    Amanda.

  4. Both my sister and I have had similar experiences. My sister ended up taking a loss over what she owed on her trade in and added it to the purchase price of her next car (as a single woman she just didn’t want to sell her car privately). She got screwed as she actually ended up paying several grand more on the asking price of her newer car.
    Never would I just let a dealer screw me like that. I attempted to trade in a truck (Toyota Tundra) and was given a trade in value of $11,000-to which I basically said **ck off! I turned around and has it sold via a free Craig’s list add for $17000 less than 24 hours later.
    While you would think you have more negotiating power having a trade in, that actually makes it harder. Sell your old car yourself and make some cash, then negotiate your next vehicle. And learn from my sister- never add 2k to your next car loan from your trade- that will just sink you further and further into debt and take you that much longer to get any equity in your next car.
    And single females- don’t be afraid of privately selling your car! You can do it!

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