Buying a New Car - Would This Be a Better Way??

Lironpaw101 on 08/03/2019 - 12:21
Last edited 08/03/2019 - 12:22

Hi Everyone,

After recently going through the exhausting experience of buying a new car I am glad I don't do it often. Deciding on what you want is the fun part but getting a good price is like dancing with wolves. Contacting local dealers is time consuming and frustrating - you can waste weekends. I tried a car broker but he bared his teeth when his price was not as good as a dealer and he was not going to get any commission.

As a software developer I am tempted to build the following - the ability for a customer to pick what car they want, state a price and place a deposit. This offer/contract would be sent to local dealers to see if they will accept or reject. If they accept the deal done and the deposit is paid to the dealer.

For example - I want a Hyundai Sportage Sports with a towbar. RRP is 33k but I offer 30k via this site and put down a 1k deposit. This offer is sent to all selected dealers I want the offer to go to. The dealer can accept, reject or counter offer.

I like it because the customer is in charge, saves time and making a 'hard' offer means no more dancing with wolves. I am hoping that dealers would like it as it would be like sales contracts landing in their lap.

Winner or loser idea? Would dealers hate it?

Cheers

Automotive Car

Comments

  • [Deactivated] on 08/03/2019 - 12:28
    +4

    In theory is sounds like a good idea.

    In practice, you're going to have to eventually prioritise the dealership or the customer, just like eBay. Your decision will depend on which one is scarcer, buyer or seller.

    Next is the deposit. How are you going to ensure that the money is available? A dealer is going wise up if they find many offers being void because they cannot process the payment or if payments bounce. This isn't good for the dealers since it gives up their financial position for absolutely nothing. This can have legal ramifications on your part since you are essentially acting as a broker.

    So will you hold the money is escrow? Once you hold money, you're legally bound and classified as a trader which means you have liability.

    The idea is a good one but not a new one. The theory always looks good but until you can fine tune the logistics, it is still nothing but a pretty drawing.

    Ps. If you cannot ensure payment of the deposit, this idea is no different than posting a WTB on gummy.

    • ironpaw101 on 08/03/2019 - 13:15
      -1

      Yes - the money would be held in Escrow and the customer would sign a contract. Once a seller is found the contract is sealed and the funds released.

      • [Deactivated] on 08/03/2019 - 14:40
        +2

        With an escrow, you're now a broker.

        I'm shopping for a car. I want the best price.

        Now I have to give up a few thousand dollars and I still do not have a car and potentially will not get a deal. I have lost my purchasing ability for myself until I get my money back.

        What guarantee can you offer that my offer is accepted? Are you going to advise me on an offer to place? If you are, that's essentially what a car broker does except I don't have to provide a deposit before a car is purchased. Also, how are you going to keep track of what a good price is?

        • ironpaw101 on 08/03/2019 - 16:06

          The customer would state the price they are willing to pay and a time limit (e.g. 24 hours) otherwise the refund would automatically happen. The system I am suggesting is just the facilitator.

          • abuch47 on 10/03/2019 - 10:34

            @ironpaw101: Have to be brand new cars and still there are differences the customer may not like/want.

    • Captain M on 09/03/2019 - 20:50

      How about holding the money in a smart contract on the blockchain? No escrow BS to deal with..

  • HighAndDry on 08/03/2019 - 12:46
    +1

    This offer is sent to all selected dealers I want the offer to go to.

    Sending this to dealers will be easy. Having dealers actually agree to work with you would be the hard part. You might get responses during slow periods, but if business is good, you may well end up with buyers having put money into your site with nothing to show for it because no dealer would reply. And then your users would dry up too. (Plus there's the hurdle of having buyers agree to trust a complete online stranger with a not-insignificant amount of money).

    • Kangal on 10/03/2019 - 02:13
      +2

      No, dealers won't agree with this at all because its taking their job away from them.
      However, if you presented it to the Car Companies (Ford, Holden, Hyundai, Kia, etc etc) they might bite….but it would be difficult.

      They're more likely to laugh at you, then go back to their drawing-board, close down their dealerships, and adopt the Tesla Model (have showrooms, but purchase through their Web Store).

  • Gronk on 08/03/2019 - 12:55
    +2

    If you've ever worked in automotive sales, then you'd understand that one of the main tactics a salesperson employs is to remain in control of as much of the process as possible - this is why attempting to negotiate via email, phone or any other remote method is generally not going to fly.

    The only thing that's new about the idea you've posted is building this into a piece of software, but I saw plenty of this type of approach to buying when I was selling and that was years ago - generally those communications went directly to the bin.

    Realistically, I reckon you'll have a couple of issues -

    1. Dealers aren't going to want to sign up to this unless you can prove that it will improve their bottom line.

    2. Wouldn't customers effectively be buying a vehicle sight unseen? A customer who doesn't know the difference between a MY18 and MY19 could easily be misled or misinterpret what they thought they were buying.

    • ironpaw101 on 08/03/2019 - 13:13
      -1

      Some good points but the future is buying a car sign unseen. 78% of Tesla Model 3's were bought online and most never even went for a test drive.

      • spackbace on 08/03/2019 - 13:18

        but the future is buying a car sign unseen.

        No it's not. Have you ever bought a car without sitting in it? If you have, you're a muppet. People wanna make sure a car suits their needs.

        Instead what will happen is you'll have "brand specialists" employed to go through the features of the car, and you'll buy from a list price, choosing which accessories you want and paying the final price shown on the screen/ipad.

        Telsa is an exception. It's a brand name. It's a new type of vehicle, being good proper EV. It's a status symbol.

        • ironpaw101 on 08/03/2019 - 13:23

          My point is that a car is a Commodity. You buy a car of a specific make and model but you don't necessarily get to see the exact car you are going to get. That could be in a boat from Korea.

          • spackbace on 08/03/2019 - 13:25
            +1

            @ironpaw101: And the minute it gets like that, you pay list price for a car. And the manufacturer can set the profit margins, which may or may not mean you pay more for the car.

        • DonWilson on 10/03/2019 - 13:02
          +1

          You can insult the people who'll do it to your heart's content and argue whether it's good for the consumer or not but it doesn't mean it's not a thing that's going to happen. People said the same stuff about clothes, shoes, TVs, furniture etc. etc.

          People buy houses sight unseen on the regular. Because there's photos and videos and 3D models and exhaustive measurements and regulations and certificates and guarantees. New cars are potentially more online buying friendly because they're standardised and reviewed as well.

          The reason Tesla is the exception isn't because it's a recognisable name. That plays into it but by your logic they never could have become a recognisable name because of how they were selling.

          The reason Tesla is the exception is because they're new and they're not already heavily invested in the dealership model.

          When one of the big existing manufacturers decides to go all in on direct to consumer we'll see a good ole fashioned paradigm shift.

  • bobbified on 08/03/2019 - 12:56
    +1

    I tried a car broker but he bared his teeth when his price was not as good as a dealer and he was not going to get any commission.

    Your idea is really no different to you being a broker (aka the middleman), except you're online so there's proabably a little less overhead.

    Either way, you're going to have to get paid for this service and that money is either going to come out of the buyer's pocket or the dealer's pocket. In other words, whatever the final price ends up being, it is still not the cheapest for the buyer. Similar to your experience where the broker couldn't offer the same or cheaper as the the price you got directly from the dealer.

    • ironpaw101 on 08/03/2019 - 13:17
      +3

      The difference between a car broker and this option is the removal of snake oil :-)

      • bobbified on 08/03/2019 - 13:19
        +3

        You're not planning on charging for the service?

        Someone's got to pay for the operation and upkeep of the service so it's either out of your own pocket or out of the buyer/dealer's pocket.

      • HighAndDry on 08/03/2019 - 13:23
        +4

        There's no way you can charge nothing for the service - the instant you're collecting and holding other people's money on trust, sheer regulatory compliance alone will incur significant costs.

      • spackbace on 08/03/2019 - 13:23

        But you need to know your dealers are quoting the right model/variant/spec.

        You need a dealer to pay for their time to go through the process with the customer.

        You're offering a car broker service, and it's the reason why brokers charge money (both ways too, they charge the customer and the dealer). They need an income, need to advertise, etc.

  • spackbace on 08/03/2019 - 13:01

    Aww that's nice. But yeah, ain't gonna work.

    Dealers will happily "quote and hope" with fleet deals, not retail.

    In order to do your price, how about I give you the old car off the lot, that's had a few people test drive it, is the older model (but still matches your requirements, you just didn't specify) and I'll put 6 months rego on it, not 12.

    Honestly, sales people prefer customers in person and ready to shake hands, not an email blast to all dealers. We spend time with you to sell you a car, and then also to run through the car on delivery. If there's zero rapport, "here's the keys, there's the car, off ya go" is not uncommon.

    Your best chance of haggling is at the desk, with a signed offer on the desk. We'll do everything we can to make that happen there and then. We won't let you leave to call you later, those days are in the past. If it's in stock and doable, we'll just do it.

    Within the next 10 years we'll be redundant anyway I think, and cars will be sold at fixed price. There will be zero negotiation, you just go in and buy. It'll be interesting to see, with all those people not happy to pay current sale prices and who still negotiate down.

    • bobbified on 08/03/2019 - 13:13

      It'll be interesting to see, with all those people not happy to pay current sale prices and who still negotiate down.

      Out of curiosity, when the prices are put together, do they incorporate any "fat" into the prices for the sole purpose of negotiation?

      Or is it simply up to the dealer to "balance the books" between those who negotiate hard and those who don't negotiate at all?

      • spackbace on 08/03/2019 - 13:15

        The manufacturer sometimes leaves little margin to work with on a car. They leave enough for a dealership to make money out of, and all depends on how much.
        It's a long complicated answer tbh discussing dealership loads etc etc.

        It's a known thing that sales loses money, service & parts make money. It's the only way dealerships can afford to open the doors every day.

        • bobbified on 08/03/2019 - 13:17
          +1

          Thanks for that info. I was just curious with the car scene because at retail shops like JB Hifi and Good Guys, I assume that the people who walk in and buy at the shelf price pretty much pays for the amount I negotiate off my own purchase.

          • spackbace on 08/03/2019 - 13:22

            @bobbified: Even if you negotiate your price down to $0 profit, and the dealer shows you that figure, the dealership has still made their assigned profit (loads), and the manufacturer has already sold it to the dealer for the price they want.

            So while you think you're not overpaying, you are. You're really just getting a deal of where you think it's a deal. Bargains are all in the buyer's perception, it's what you believe to be a bargain. Without knowing exact cost prices, you don't actually know if you're being gouged, but you believe you got a bargain because you got 10% off list price (for example.)

            • bobbified on 08/03/2019 - 14:22

              @spackbace:

              Even if you negotiate your price down to $0 profit, and the dealer shows you that figure,

              To be honest, I never really believe the figures that I'm shown. Having said that, I woudln't expect that they do show me their bottomline. There's costs that need to be paid by the dealership and of course, the salesman needs to put food on the table for themselves.

              Bargains are all in the buyer's perception, it's what you believe to be a bargain.

              That is definitely true! Sometimes, it's better not to look around after a purchase. If there's an agreement on both sides to pay a price, then be it.

              I'm actually in the market for a car now and because it's not that common of a car, it looks like I'm going to be heading to your hood to look around soon! I'll be bargaining hard! haha

              • spackbace on 08/03/2019 - 14:22

                @bobbified:

                it looks like I'm going to be heading to your hood to look around soon! I'll be bargaining hard! haha

                Ah fk lol

                What car?

        • Gronk on 08/03/2019 - 13:39

          It's a known thing that sales loses money, service & parts make money.

          I'm not sure I completely agree with you on that point -

          I used to run a fleet department some time ago and was one of the only people in the dealership along with the retail sales manager who could gross a vehicle down to the very last cent, almost every retail deal was made to appear as a loss because you can do that rather easily with a highly customizable DMS system but in reality this was never the case.

          Without revealing too many secrets, in my experience there was more than 1 type of margin and most non-prestige manufacturers run a monthly bonus matrix to help dealers move aged stock.

          • spackbace on 08/03/2019 - 14:04

            @Gronk:

            almost every retail deal was made to appear as a loss

            Why would you do that…?

            Without revealing too many secrets, in my experience there was more than 1 type of margin and most non-prestige manufacturers run a monthly bonus matrix to help dealers move aged stock.

            Yeah, there's loads, there's back-end money, etc etc. As a whole though, with floorplan, insurance, salaries, commissions etc etc, new vehicle sales are barely break even.

            • Gronk on 08/03/2019 - 14:16

              @spackbace:

              Why would you do that…?

              It's a conditioning thing - to convince the customer that they had, indeed, received the best deal available and that it was not possible to negotiate any further.

              • spackbace on 08/03/2019 - 14:19

                @Gronk: Ah yeah I've seen that done, that's not hard. That wasn't what I was referring to though

  • ironpaw101 on 08/03/2019 - 13:43
    +1

    Maybe I should simplify my question - can a car broker be replaced by a bot?? Brokers in other industries have but why not car brokers?

    • spackbace on 08/03/2019 - 14:02
      +5

      As it is, car brokers are seen as the scum of the industry.

      • They charge the buyer commission, and the dealer, which cuts the bottom line of any deal.
      • They don't do any negotiation that you could do yourself. Dealers are more inclined to sharpen the pencil with a customer sitting in their showroom, and via email. Bonus points if the customer lives locally to the dealership.

      Now couple that with you, being a 1-man band, coming into a dealership and offering a service which will mean they sell cars at break-even, with dubious thoughts about how the deposit is getting to them? The logistics mean this would never be taken seriously by anyone.

      Woohoo a neg vote! Was waiting for that one lol

      • Gronk on 08/03/2019 - 14:18
        +1

        Woohoo a neg vote! Was waiting for that one lol

        You appear to have misplaced your neg vote, sorry :)

        That was actually a good answer, I don't get why it was downvoted…

      • BLAIL on 08/03/2019 - 15:15

        When you say Car Broker - you mean services like Motorscout and private fleet? A lot of their reviews seem to have customers who genuinely got
        a better deal through them rather than trying to negotiate themselves.
        And these services are rated over 4 stars out of 5.

        • spackbace on 08/03/2019 - 17:04

          Anyone who buys through a broker, doesn't know how to negotiate, so believes they're getting the best deal. I've been part of the quote process for car brokers/car locators before, and I can assure you it's not the best possible. We still have to work in their "finders fee" into the deal (~$500). Put that in a car with low margins, and your deal isn't great.

          If you simply used a broker to get a quote, but you got a better deal through the dealer, would you find time in your day to leave a negative review? Doubtful.

  • HardlyCharly on 08/03/2019 - 14:03

    The whole almost mandatory negotiation crap is long outdated, unnecessary, uncomfortable and has to go. The same can be said of the entire traditional dealer system in the first place. Change is already slowly coming, within the next 10 years, 15 max, we should be able to buy almost all new cars online at a set price like Tesla. There's a prolific american car broker who posts articles on Jalopnik regularly, and he conducts all of his business via email and phone, the tides are turning. The Carwow service in the UK is kind of similar to what you are suggesting and you should check it out, I would love to have something like that here in Australia.

    • spackbace on 08/03/2019 - 14:07

      The Carwow service in the UK is kind of similar

      Hehe despised by dealers too.

      It would be interesting to see how the average consumer goes paying list price for a vehicle. Imagine that change overnight, if you couldn't walk in and negotiate off the sale prices. Would you still perceive your purchase to be a bargain, or would you be happy with "RRP"?

    • MrBear on 09/03/2019 - 10:23

      The issue is that the more you pay for something, the more you are willing to haggle.

      • You buy a book for $25, the shop has a markup of 30-40%. Do you negotiate a book down to $17? No, you pay full price.
      • You buy a car for $25,000, the dealer has a markup of 1-3%. Do you negotiate a car down to $22,000. Absolutely!

      What is the difference in the above scenarios?

      • andyhui01 on 09/03/2019 - 21:36
        -1

        You'd just buy the book on Amazon for 20% off. The manufacturer cannot legally force every dealer to sell at a set price. Apple is really good at trying to maintain a consistent price across dealers but you can still see small variances. Same thing will happen to cars.

  • Seraphin7 on 08/03/2019 - 16:29
    +3

    There are two threads in this conversation that will ultimately converge …

    1. Car buyers are increasingly sick of the hassle of haggling and want to simply name a price to dealers on a take it or leave it basis without having to (1) individually deal with them, and (2) have the dealers then incessantly hassle them to "chase up" a sale.
    2. The future of car buying will be done on a list price/"RRP" basis as @Spackbase has outlined.

    Until we get to point 2 above, a service such as that suggested by OP would be welcomed by many consumers (while noting perhaps not by dealers).

    • ironpaw101 on 08/03/2019 - 17:33
      +1

      Nice summary

  • pegaxs on 09/03/2019 - 12:16

    Seems like a great idea until the money was mentioned. I would use a service like this if I could post what I wanted and my budget and have dealers call me. What I would not do is give the money to a random site as commitment to a non-existent contract, it's a turn off.

    It would be a good union of buyers looking for a deal and a way for dealers to offer discounts on old stock. There is (fropanity) all money in brand new cars and the buyers would all be low balling drongos, so I can't really see it working that well for brand new cars, but for ex-demo and old stockers, it would possibly work quite well.

  • Myone888 on 09/03/2019 - 12:59

    Does broadhunt or private fleet do demo cars? They can save a lot. I am also in the market for a car.

  • reactor-au on 09/03/2019 - 20:25

    It's not a new concept, it's called reverse bidding. Something like SAP Ariba allows a company to put out a request for device/service to tender, and all the vendors bid lower and lower because they can see the other bids. I don't think it would work as well with car dealers because they would instantly tell you to knob off if you came with lower offers and asked them if they would price beat.

  • neilpatrickharris on 09/03/2019 - 20:44

    Have you tried Motome? They have access to wholesale pricing from dealers because of the volume of cars they purchase. There's no fee, they make money from financing (part of Macquarie Bank).

  • bvdbvd on 09/03/2019 - 21:02
    +1

    Well, I believe this ideal somehow similar to Carwow (https://www.carwow.co.uk) is doing, instead you offer the price of the car you want, these dealers will offer the price that they can do for the car you want. If you accept it, then you have a deal.

  • wozz on 09/03/2019 - 21:21

    I like the idea.. would love something like this as a buyer

  • soan papdi on 10/03/2019 - 09:36

    Choice magazine already offers (or did 7 years back) where you call them and tell them your best price and their network of dealers would quote their lowest price to beat it. Only downside is that you don't get a choice of the dealer and not all dealers in Australia will participate. The order is placed immediately. Also you have to be a Choice member, approx $25 per 3 months.

  • conservative on 10/03/2019 - 11:01
    -1

    I bought my toyota camry online, or rather, I paid the deposit online, turned up to dealership, discussed options then walked out an hour later. Was pretty easy.

    I understand for these gimmiky car brands like Hyundai, Mercedes and Audi you have to decide what colour wheels you want, the type of leather you want on your front left brake calipers, the kind of steering wheel you want, colours of your foot pedals and the size of your 10 retarded screens.

  • DiscoJango on 10/03/2019 - 12:07
    +1

    the ozbargain neg comment crew is in full swing in this thread

    op: dont let the haters discourage you. remember, the average income here is now $300,000. they dont want to waste their time with $30k hyndai's

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