A Vox reader wrote: How do consumers avoid them? Is everyone annoyed? ”
Americans have long hated the car buying experience. It’s not uncommon to spend hours (sometimes a whole day) at a dealership, and end up closing a deal, only to walk away feeling vaguely cheated.
“This is generally a stinky process, and it’s designed that way,” says Tom, founder of Automatch Consulting, a service that helps car buyers find the best price for the car they want. McParland says.
Much of the discomfort stems from the uncertainty of what you will end up paying. In an age where you can buy almost anything online without interacting with another human being, and where you can easily shop for the best deals, cars still depend on an individual’s negotiation skills and, in some cases, race, gender and income. may determine the price.
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Tactics used by car salespeople can be more than just a pushy sale and can be completely deceptive. One common trap is bait prices. This is done when the car is initially advertised as one price (usually achieved by stacking discounts that you don’t qualify for). When you run into the dealership to get the deal, you’re told the car is already on sale, but there’s a similar car out there that costs more. Or, in the case of a yo-yo salesman, you might drive home your new car only to be told a few days later that your loan has fallen through and you’ll have to accept a higher interest rate or make a larger down payment. Dealers may also try to sneak unnecessary extras into the car’s total price, such as extended warranties or protective coatings.
Last year, the Federal Trade Commission received more than 184,000 consumer complaints related to automobiles, making it the third most common complaint after complaints about credit bureaus, banks, and lenders.
While there are some fair dealers, there are “a number of harsh and unethical business practices in the auto market that consumers are harmed by,” said Chuck Bell, director of advocacy programs at Consumer Reports. he says. “Consumers feel like they’re fighting a battle before they even walk out the door.”
Why is car buying done this way?
The first hint that you’re on an unequal footing with a car salesperson is if they’re reluctant to give you a price quote in writing or even over the phone. McParland said dealers who call on behalf of their customers often tell them to “come to the dealership to get the price.” “They’re basically just telling us to go pound sand,” he says.
The dealer wants you to come. Because then it will be much easier to upsell to you. Because you have put some effort into this process, the salesperson will be able to consider how eager you are to buy a car, how inexperienced you are with car buying, and many other factors in your favor. You will be able to utilize it. On the other hand, if you are given a published price, including all additional fees and charges, before you meet in person, you can easily take that price to a competing dealer and ask if they can do you a better job. McParland said online used car dealers like CarMax and Carvana have made “no-haggle” car pricing popular, but often come with premium prices. Some traditional car dealers offer a fixed price, but it’s probably beneficial to try to negotiate a lower price.
Why did we come up with this system?
The common practice of negotiating the price of a car instead of paying a fixed price may actually have its roots in horse trading. In horse trading, buyers and sellers would also haggle, and buyers would even trade old horses to offset the price of new horses. Today’s car.
But the model has survived so long in part because of state franchise laws that make it easier for these intermediary car dealerships to go out of business. Most states prohibit automakers from selling directly to consumers. Tesla is a rare exception among car companies that sell directly, and has battled with car dealers over the rights to do so. Car dealer trade associations have considerable political power and can lobby against reforms that threaten the status quo, such as changes to franchise laws that give them exclusive rights to sell certain car brands in certain territories. They have sufficient organization and financial resources. region. The National Automobile Dealers Association (NADA) argues that franchising laws actually increase competitiveness and benefit consumers, while creating local jobs.
“They are a very powerful lobby,” Bell said.
Look at how the industry resisted law enforcement to curb auto loan discrimination. Car dealers often arrange financing for their customers, but because they can keep that extra money for themselves, they add a markup to the interest rate offered by banks. How much of a markup is applied is at the dealer’s discretion, and unlike mortgage lenders, they don’t have to collect data on a customer’s race, so they can be sure they’re complying with fair lending laws. much more difficult to do. . Research shows that car dealers often charge higher interest rates to people of color. When the Consumer Financial Protection Bureau began cracking down on the practice in 2013, the industry fought back and won.
Do you have any desire to improve the car buying process?
Still, there are reasons to be optimistic about the future of car buying. Late last year, the FTC announced new regulations targeting the most prevalent deceptive practices used by auto dealers. One example would be that dealers would be required to disclose the full public price of a car, including all additional equipment, to the dealer before a customer visits the dealership. The price and other terms associated with the purchase of a car should also be expressed in simple terms. Dealers are also not allowed to charge customers for useless add-ons. The FTC estimates that this rule will save customers $3.4 billion and reduce the time they spend car shopping by 72 million hours.
The rule was scheduled to go into effect this summer, but was delayed after two auto dealer trade groups, including NADA, filed an objection. The association told Box that the rules would make the car buying experience worse. “Consumers will have to spend an additional 60 to 80 minutes at the dealership and fill out up to five new, untested forms, and we stand to lose at least $1.3 billion annually as a result of this rule,” a spokesperson said. wrote in an email. .
But Bell is confident the rules will eventually be enforced, and if you’re looking for a car, you should act as if these protections already apply. McParland advises asking the dealer to provide a “detailed public price” of the car you’re interested in via email. If the dealer refuses, he says, “that’s usually a red flag and you should move on to someone else.” .
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