Why Does It Seem Like I Can’t Trust Car Dealers?

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Photo credit: Flickr, Rob. 

Question:  Why is there such a lack of transparency with car sales? … Maybe I’m missing something but I feel like the car buying experience would be so much nicer if there was no haggling. The price you see is the price you pay. Sure there are people that will be stuck in the old mindset of haggling but eventually the culture could change especially if they want it bad enough.

Answer: Automotive industry insiders say that transparency – when buyers can tell the actual price of the car they are buying – can be clouded by price negotiations, mistrust, trade-in values, loan interest rates, fees, and pressure to sign contracts.

“There’s a trust gap between consumers and dealers because consumers do not know if they a paying a fair price when buying a new car or truck. Transparency overcomes the trust gap,” said Stewart Easterby, chief operating officer at TrueCar.

Before the Internet, two car buyers could walk into the same dealership and walk out paying a 30 to 40 percent price difference for the same car on the same day, said Easterby.

But car buyers can overcome this lack of transparency by doing some research. 

“If you are informed, you don’t feel like there is lack of transparency,” said Lisa Copeland, managing partner of Fiat of Austin, the top Fiat retailer in North America.

Consumers can see what the dealer pays for the vehicle, find the latest incentives and find the approximate value of their cars online says Copeland. 

Before negotiating, buyers can research interest rates, know what competitive rates are and understand how much interest they are paying, says Stephanie Brinley, senior analyst at IHS Automotive.

There are several ways dealers can add to the car price, confusing buyers, such as add-ons, trade-in values, loan interest rates, extended warranties, fees and credit life policies, says Jeff Ostroff, editor-in-chief of CarBuyingTips.com.  He said buyers should not go by what the salesperson says. Instead, take time to check the contract item by item before signing it. Ostroff suggests emailing dealers for written quotes and to look at the total price of the car not the monthly payment.

Car pricing is all about supply and demand, especially when buying a used car. When buying a popular well-reviewed model and there are only a few available in the area, buyers will pay higher prices. However, if a car has been on the lot for a month and there are several in the same color and model, buyers can negotiate a better deal. Used car dealers base their prices on data which changes every month and how long the car has been on the lot, said Copeland. 

“She who studies the data wins,” said Copeland.

If consumers don’t feel there is transparency when buying a car, Copeland suggests that they not sign a contract unless they feel good about the dealer and love the car. She warns that no one should sign under pressure, because once the deal is signed, the buyer owns the car. She lets her clients take home their Fiat of choice over night.

  “It’s like puppy, take it home with you, if you don’t fall in love with it, bring it back,” said Copeland, who noted that many dealers will let take the car home to try it out.

Overall, it could make a lot of people happier if car dealers would just offer one price and quit with the haggling, a strategy Saturn used successfully and that Lexus just announced it will experiment with at some dealerships. 

“Dealers who embrace price transparency will sell more cars and provide a more delightful customer experience,” said Easterby.

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