Steve_Eisenberg

RANT WARNING ALERT

We’re close to buying and getting a bit inundated with phoning salespeople. Yes, when my wife Barbara checked out dealers – there are a bunch around here -- she didn’t have to give them our phone number, or ask them to add up the bottom line (cash purchase of new base xB, no trade-in, no extras, plus Pennsylvania tax and new tags), or tell then the last dealer’s price. However, she did and the results are a bit interesting in light of Pure Price.

We already have heard one phone call on our answering machine (Faulkner Scion, Trevose, PA) lowering a written price by $22 – they say they will do this by waiving the web fee, which is interesting because their site fails to mention this fee. Another dealer is calling the house asking what he can do to earn our business. Uh, why don’t you lower the price for everybody? I assure you I will notice.

Our 12 year old: Dad, are you going to buy the car from the man we promised we would buy it from? Me: That’s his memory, mine is that we didn’t make that promise. Comment for my readers here: And the fellow who said we promised is NOT the worst!

Let’s think this through. Why is it that every dealer has the same posted price, even though the Scion Covenant clearly allows each dealer to set his own prices? Shouldn’t some dealers by now be lowering their prices a bit so they can sell their allocation more asily and, hopefully, get a higher allocation? Apparently they don’t have to because, at least some of them, are undercutting the competition with the old check-with-the-manager tricks. This isn’t a matter of $20 here and there. So long as they can get away with reducing prices a bit for the minority of buyers who don’t accept Pure Price without testing dealer commitment, the entire process of open price competition will not start. Once it does start, prices will fall by hundreds. High rent district, or otherwise inefficient, dealers which can’t make a profit at the true market price resulting from ruthless competition might have to drop the Scion line, but they still could service Scions, so this would be no real loss for us.

There are some dealers who are honestly competing by offering free extras, like free service items on top of the 3 oil changes which Scion mandates. I even found one dealer on the web, Walser Scion in Minnesota, that gives discounted gasoline. However, we don’t like near any of those dealers.

One of the main initial attractions to me of Scion was that idea that I won’t feel other people with better negotiating skills got a lower price. But surely some will. Barbara is suggesting we should hold out for an extra keyless entry (retail $85) since we lose things so much. Maybe we won’t get it. But somewhere there is probably someone else, with better negotiating skills, who got that and more.

Is it beyond human nature for commissioned salespeople to stick to a posted price plus tax and the tag fee sent to the state DMV, without adding unposted nuisance fees, without haggling, and without calling? No. Barbara used to sell sewing machines, including some I found amazingly expensive, in a store where they posted low prices and, unlike the competition, never haggled. She had to explain to customers that, unlike the other stores, they always sold at posted prices. Some walked away to test her seriousness, and then came back, even though she did not telephone them to see whether they had possibly forgotten their desire to buy a sewing machine. This was a smart move on her customers' part, since most sellers of big ticket item do resist haggling at first, and then do it. Their true pure low price policy did not stop Barbara or the store generally from selling a lot of machines.

tcperconti

I've done my share of "power bargaining" over the years for new cars. I usually go in with all my figures set up, and have a range that I'm willing to pay. More recently, I've purchased vehicles with "fixed prices".... Mini Cooper and Scion xB.

With a fixed price or "Pure Price", it makes it easier to decide whether or not I will end up purchasing the car. I can make the decision based on the sticker.... the way it SHOULD be.

The xB is worth to me what I paid for it. Will I get upset or annoyed if I were to find out that someone was able to haggle and get a set of free floormats? Nope. Or if someone managed to pay $200 less? Nope... that's only 1.5% of the purchase price.

When I buy a car, and my xB experience was no different, I state up-front that I want the bottom-line price... all fees etc. included before I'll agree or sign anything.

When I bought my xB (just last week), I went in to the dealership, test drove an auto and manual xB, told them what I wanted... and they gave me the price. I had driven up with my trade-in so they took the info and gave me a price for it. (Extremely generous I might add) Everything went smooth as silk.... no glitches, no hidden fees, no attempts to squeeze more out of the deal. And they had exactly what I wanted on the lot.

Car salesmen are like sharks... they smell blood... they smell fear.... they smell insecurity. If you give the salesman the impression that you don't know what you're doing or that you can be manipulated, they'll take advantage of the situation. It doesn't matter what car they're selling.... it's the nature of the beast.

mfbenson

That assumes there is hundreds of dollars of "slack" between what the dealership paid for the car and what they retail it for. There may indeed be hundreds of Gross Margin dollars in there, but the dealer's overhead has to come out of it.

And if prices did fall by hundreds through negotiation, you may as well throw away the whole idea of pure price. On the one hand you're griping about pure price not being followed closely enough by the dealers, and on the other your wanting to chuck the idea of pure price? Nothing like trying to have your cake and eat it too, I guess.

If you are this worked up about the salesmen, wait until you get to the finance guy...

Steve_Eisenberg

I know from reading this board that there is about $1,000 + nuisance fees as the margin on each base model car, with greater margin when there is any option or customization taken. Until there is real competition, as opposed to every dealer coincidentally posting the same basic prices, we will never know how low they can go. Even the dealers don’t know, because, in face of real blistering competition, they would have to take creative actions to wring out costs. In the current environment, no one is doing that creative thinking. Could someone sell five times as many cars and make ten percent more profit if they halved that margin? No one knows, because no one has tried, because no one has had to try, because the few dealers who are in the vanguard of lowering prices find they can do it for selected customers only. This is what prevents the whole price competition thing from getting started.

Opportunities for greater retail efficiency? Certainly there are . Otherwise they wouldn't have slack staff time to telephone potential customers. Otherwise I wouldn't have an email in my inbox, from a dealer I may buy from and thus will not name, stating: "I will do whatever I have to in order to make sure that the time we have spent earns us/me the deal in the end." (No time really except my wife went for a test drive there 4-5 months ago.)

In other parts of the retail sector, there are great differences in efficiency between different sellers, opening up a range of opportunities for competition. Department stores teetered on the brink of bankruptcy while Sam Walton, selling for less, became one of the world’s richest men. It just beggars belief that the way Scions (forget about Toyotas) are sold is the most efficient possible.

Consider the fact that Scion of Manhattan sells for basically the same price as dealers in distant Pennsylvania suburbs of Philadelphia, where land, housing, and the cost of living generally is far less. Looking at the web site of San Francisco Scion, where housing costs are even worse than in metro New York, they claim to charge MSRP plus a $45 doc fee, lower than any dealer around here (suburban Philadelphia). Obviously our dealers would be able to beat out those in Silicon Valley – if only they had to.

Sorry, you did not get the point. Negotiation is what keeps prices HIGH. With negotiation, they can lower the price for the few sharp negotiators, gaining those sales, while keeping the price high for everybody else. I’ve read on this very board a salesman saying that Scions offer less commission than Toyotas but are an easier sale. So Pure Price with limited negotiation is already helping to make for lower prices and more retail efficiency – I’m just saying that there is a way to go.

No, as I said before, I hate haggling because I think I am bad at it. Quite possibly we will get a case of new car fever and buy for preferred color in stock at a dealer who refuses to haggle. Of course, unless you walk away, leaving your phone number, and come back a few times, there is no way to know for sure that they refuse to further haggle. This is the yucky part that most Americans think they are good at, but aren’t. Now me, I know I’m bad at it.

Is more money being left on the table on the Toyota side of the house than on the Scion? Probably. But every buyer should be highly suspicious when Toyota lets each Scion dealer post its own price and then they all post the same.

Cash sale. But worked up? Na, I’m just not into cheerleading.

tcperconti

I guess the question that I have is, "why does it bother you so much that others may be paying less than you?"

mfbenson

If negotiation is keeping prices high, why are you negotiating? Just use whatever dealer gives you the lowest fees and the best value on your trade-in and be done with it. I feel sorry for whatever salesman has to deal with you - sorting out your contradictions is tough.

Most of the margin is in the options, I agree with that much.

grnxb

X2

Just e-mail the local dealers with what you want, find out price of car including options and taxes/fees and approx. wait times. Make your decision and be done with it.

Scott17

Give the people a good car at a good price and let the _____ing begin. The old adage " you can't please everyone" was never more true. Make sure you get a TC so you can get more miles per _____ (MPB).

Steve_Eisenberg

Na, I'm a puppy-dog.

I started this thread to talk about a Scion policy issue -- the lack of significant open price competition between dealers. Presumably people who read this thread are interested in questions of how Scion dealers operate, apart from their personal financial interest. I wouldn't try to tell a dealer how to run his franchise in person, but any reading here, are, one hopes, interested in that kind of stuff. Otherwise, they would have skipped this thread based on topic, no?

Steve_Eisenberg

The price is good compared to what it would be if there was no Pure Price. I'm just explaining how we can get more of that good thing. If semi-Pure Price is good, Pure Price is excellent.

I think both cheerleaders and _____ers have their place in their world of ours, and on this site.

grnxb

actually, I clicked on this topic to read about someone crying over nothing.

Bakaduin

Pure Pricing is a great thing. It makes set prices on the actual car and allows the dealer to charge whatever additional fees he may want e.g. delivery and handling. It too no more then 15 minutes for me to call all my dealerships within 2 hours and find out that one did not charge any additional fees. But the bottom line is. Even if you get charged every fee in the book compared to someone who didn't they only got what 500 bucks extra off you? On a car without pricing I know cars that range in the thousands. On a brand new Malibu my grandpa(the ignorant car buyer he is) traded in his 3 year old Diamante, 1 year old Elantra, and still payed money for the car. I can bet someone out there got it for thousands cheaper. But atleast with Scion you know this won't happen.

uberscionofglendale

dunno, at my dealership i let everyone walk. if you don't believe me, fine, i'm not gonna argue with you. the price is set, at what we posted on the website and on the showroom floor. i have people trying to haggle something out all day. in LA (biggest car market in the US), people are just used to it. i live in a middle eastern dominant area too, and haggling is part of their culture. so, i lose a lot of deals because of this. there are only a handful of people, who will make a fuss, then come back to me when they find out that what i said was true.

oh, and the scions have about 650 dollars of markup from invoice to MSRP (not a 1000). so, if i sell you a base scion, without any accessories, thats what the dealership makes. minus inventory costs and paying out comissions. pure price is great, i think scion needs a better way of enforcing it though.

i was talking to the rep the other day, and he was telling me that scion is more concerned about selling cars right, then total units sold. they don't release unit numbers to the dealerships, so in general we don't know where we rank in our region, or nationally. whereas on the toyota side, we can look that up in the comp. he also said "there are dealerships that sell scions, and there are dealerships that sell scions right." i think they just have to figure out a better way to police the way dealerships are complying, and it will end up a very good thing.

tcperconti

You've lost me. I thought that I knew what you were complaining about, but now I'm not so sure. It first sounded like you were complaining that "Pure Price" wasn't so pure... that some people were able to get a better deal because of their negotiation skills. Now you are talking about "getting more of that good thing".

You started this thread complaining that some people may pay less than you because of their "superior" negotiation skills. Why does it bother you that someone may pay less than you?

Steve_Eisenberg

That's because I change what I think after reading responses. It is also because I'm still figuring out what I think. Sorry if doing this in public annoys anyone. Really.

As far as the _____in' part is concerned, the post by uberscionofglendale (two posts up if nobody slips in while I am writing this) was, because more subtle, better -- at least if people read uberscionofglendale the way I do. The way I read uberscionofglendale is that, even if he or she can't prove it, it looks like he is losing sales to dealers, or maybe to just one dealer, who fails to follow the Scion covenant.

Human nature, friend. But it doesn't bother me a lot, and as my views, uh, evolve, that is not my main point. A better point is that dickering on price, by even a few dealers, discourages every other dealer from lowering its posted price. This is because lowering prices for everyone puts you at a competitive disadvantage against dealers who just lower prices for a select few. If I am wrong, how else can we explain the fact that the posted price by dealers in suburbs of Philadelphia, where land and the cost of living generally is fairly low, are exactly the same as prices charged by our friendly metro LA dealer, who has to face much higher costs?

Realistically, can anything be done? Most will say no, but I say yes. If people on this board honestly and fairly report dealers who fail to abide by Pure Price, as I did in the first post of this thread, it would discourage dealers from giving breaks to a select few middle-eastern style haggling customers. Would just a few dealing dealers then decide they had to lower the price to all comers rather than a select few? And would other dealers respond, ushering in gradual but widespread reductions? I thing the answer to both is an Economics 101 give-me of yes, but others will disagree. Will we ever find out who's right? Not likely, but, hey, isn't chewing this stuff around what we are about here? Or it it just rah rah Scion?

kahuba

I was told at the Toyota/ Scion dealership in Cincinnati last week that if they don't sell for the sticker price, they can lose their franchise because they are audited on a regular basis. The no haggle price is the only issue i have with purchasing a new tC. I find it more efficient to go to www.edmunds.com, price the car with the options (if any) that i want, take that price into the dealer and say ill give you $300 over invoice. We compare numbers, and sign the paperwork. If the dealer doesnt go for this, fine. I go to his competitor down the street. Eventually, it works. With the internet, and all of the readily available invoice pricing, negotiating is substantially reduced. If you do your research, know the invoice prices, their is no reason that you dont pay a fair price.

cliffy1

Strange topic. I'll try to wade through a few of the points here from a dealer's perspective.

1. Scion is different. The whole "pure price" concept is hard for some salesmen to grasp. The ones that get it, love it. Those that don't get frustrated and make idiotic calls asking what they can do to make a deal. Those morons will have to learn how to deal with the new reality because I don't think Toyota is too many years away from switching to this model for all its cars.

2. "Profit" and "junk fees" do not constitute $1000 on the Scion. The xB has exactly $719 worth of difference between invoice and sticker. There is no holdback, nor hidden money. $719 is the gross profit on every xB with the automatic transmission. Out of that money, the dealer has to pay the salesman, manager, advertising expenses, floorplan costs (interest on cars sitting on the lot), and a host of variable expenses before a net profit can be calculated. I'm not complaining about this, but just correcting an error from above.

3. While there is very little room for discount in these cars, some discounting is happening within the confines of the dealer covenant. One dealer close to me has discounted all xBs by $500 and their web site reflects this. I spoke to thier manager and they have more than 20 of those cars in stock and most are 5 speeds in thunder cloud. I'm advertising a January special that waives the processing fee on the xA and xB which saves $225. These are specials that every customer gets and you don't need to negotiate to get them.

JUMBO

1. Someone has already corrected your misinformation regarding our profit margin, so I will leave that be. However, I think your theories on 'creative' thinking in the retail environment reek of closed-minded-ness. All you attribute to creative thinking is 'pricing'. I think that you are missing the point. If you look at Scion, its marketing, the product offering, and the dealership experience - you'll see that Scion is perhaps the most forward thinking of car brand currently on sale in the U.S. Have you ever seen an ad on TV screaming at you about rebates and interest rates? Sure, all the time. That is about as creative as most car brands get nowadays. Do you ever remember who they are? Have you ever seen a Scion ad like that? NO. Will you ever? Unlikely. Isn't that refreshing? And creative? YES.

2. Do you REALLY want price competition? Due to information on the internet, every customer is now an expert on OUR costs, and nobody wants to pay the dealer a dime. Why is that? It's a mob mentallity. "Hey, that guy got close to invoice - I want close to invoice!" or "Some guy I know thinks he got screwed on a car deal, and since I don't want to get screwed, the dealership shouldn't make any profit." That's the mindset, and it's contagious. The way it's set up in Scion, if you like the car, buy the car. Not unlike a can of tuna or a CD - you don't haggle or negotiate at the grocery store or Best Buy, do you? And you don't even think twice about it.

3. With regards to a salesperson following up with you - you'd better be ready for it. At least if the salesperson is any sort of professional. You may not think that a test drive 4 or 5 months ago is any big thing, but you have TAKEN THAT PERSON'S TIME, the one commodity that they can NEVER get back. By calling and writing to you, they are trying to convert some of that spent time into income. This is how we make our living. Any minute spent with a customer is spent with the idea that we will somehow make money in the process. Yes, we forge bonds in this business, but this is not a hobby for us. So, if you don't want to talk to a salesperson, don't go to a car dealership. It's pretty simple. You need to value their time as much as you value your own. My time is at least as important as yours, and I won't be calling you unless I have some value to add to our relationship.

4. Your example using WalMart is flawed at best. The reason why Sam Walton is rich is due to the bullying tactics employed by WalMart in the marketplace. WalMart beats the suppliers into selling for less and less and less until there is NO profit, and then Walmart can sell it cheaper. In fact, Walmart is about the worst thing to happen to the American Free Enterprise system ever. Walmart is the enemy of small business, and does not help the American economy. It fosters poverty level pay scales, all the while making suppliers take their operations overseas and out of the country in order to meet Walmart's pricing demands. Toyota would rather help the economy and let everyone up the chain thrive because of the relationship. Walmart is only concerned with dominating the landscape with more Walmarts.

If every dealer in the Scion network sold using the Scion Promise and Pure Pricing, we would have a wonderfully efficient model of car retailing, with happy customers and a profitable car line.

Of course there will be bad apples, but there are bad apples in every industry. BUt you can be sure if Toyota spent the kind of money they did to bring this system to market, they did their homework. And if it's broken (unlikely), it won't stay broken for long.

LATER

Steve_Eisenberg

Thanks for pointing this out, a fact which refutes some of what I previously posted here.

Previously, I had carefully checked the web sites of most dealers in Eastern Pennsylvania, and breezed over those in neighboring states. cliffy1 inspired me to check some out of state Scion web pages again. I didn’t find any $500 discounts, but I did find that Cherry Hill (New Jersey) Scion, just 45 minutes away, is running a $300 off (before $149 doc fee and actual tax and tag cost) xB special. Told Barbara, we went right over to check it out, and we now have an xB in the back driveway. I’ll probably register in Scion Life tomorrow – I just mention this to explain why it still says I’m a future buyer.

uberscionofglendale

are you already a scion owner? just wondering, if you priced edmunds, they reflect sticker for the scion as their price on the car. just don't want people spreading misinformation. because, (didn't check if they display the invoice), if you came into my dealership and asked for 300 over my invoice on a scion, i would have to politely not sell you a car. the better way to do it, would be to check our scion websites, that way you can see exactly what we sell it for.