Pricing your used car - retail price vs internet price and amount of discount
- Thread starter danoneil
- Start date
DD,
Do they REALLY know the price? I say they don't.
For example do they have Historical Recollection of prices? I don't see it. Wholesale prices at the used car market are WILDLY fluctuating and this gets passed thru to buyers. Has it impacted buyers? Are they saying "Just 3 months ago, that same car was $___!". Nope.
.
.
- Do they know the 6 trim/pkg levels to the Audi TT?
- Do they know that GM Rental units delete Onstar, Bluetooth, etc?
- Do they know they're comparing a rental vs a non-rental?
- Do they know how to factor in mileage and trims when comparing 2 similar units? (i.e. Chev Impala LS w/11k vs LT w/22k)
.
IMO, when shoppers shop, they gather lots of info, but they don't go granular, it gets too confusing AND time consuming. They use the 'net to create a short list of finalists. They use the net to eliminate choices.
This is a graph of their journey:
This comes from an article I wrote 2.5 years ago: Charting The Internet Car Shopper Experience on this topic.
p.s. I am talking about people in general, not the outliers.
Joe, I think you are right. "They use the 'net to create a short list of finalists. They use the net to eliminate choices." They have a vague idea of the value of a vehicle. They might think they know what a vehicle is worth ..maybe more dangerous.
I watched 5 out of 6 used car deals closed with a printout from vAuto that shows all of the competitive vehicles within a set radius. You have the ability to show miles, equipment, and certified or not. The customers were saying "we can do better elsewhere". Half probably thought they could and the other half knew better.
For the record, I am not responsible (this time) for offending anyone, on this thread.
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Clay,
Just read this on your website.
1/14/2012
I had a great experience at Muller Toyota, using the consumer reports/zag buying program. They gave me all prices upfront and had my car ready upon arrival. The whole transaction took less than 30 minutes once we had the price agreed. Pricing was so,so, but they had the exact car I wanted, and the other reviews here made me confident that it would be a painless experience. Bob Tobias was attentive to our needs. Couldn't ask for better customer service.
Isn't this kind of opposite of what you are saying right now? So, you use TrueCar through ZAG and you provide prices upfront? I think it's awesome that your time took less than 30 mins, since that is what almost all customers are looking for (quick delivery process) It does say that pricing was so, so.. so maybe you are pricing it up pretty solid, which is great, but don't claim that we all endorse TrueCar.
I can't speak for the group (but think in this case I probably do), you are absolutely welcome here!
Difference of opinion is vital. There are as many ways to market and sell cars are there are car dealers. The folks that are arguing for a strategy different than your own aren't "whoring" their cars out, or neglecting to build value, they've simply bought into the studies from Google, Polk, JD Power, Autotrader, etc, that show consumers are conducting extensive research online before they ever contact a dealer. With that in mind, they've opted to discount the cars online to drive more traffic. Once the customer comes into the store, it's imperative that these dealers build value and justify their pricing. Since they've given the discounting up front, they don't have much room to work with.
Granted, this is a very different model, philosophy, and process from the 'Traditional" car sale, but it's one that generates more "at bats".
- Apr 7, 2009
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- Joe
You already know this Bill, but I'll say it anyways.
This model works as long as your competitors are asleep with the lights off. You know how reps talk to reps and managers to managers. The word leaks out and 8 turns later your competitive advantage... isn't.
As your market matures, your NEW competitive advantage becomes "hyper efficient internal operations". Here you learn to squeeze costs out of your organization so you can operate nicely on less profit, offset by more turns. It's your hope that your competitors go on life support in this new battle field.
Heck, its possible that you might be one of the late arrivals to your market and your raining on a competitors parade
Regardless, it's a new day and there ain't no turning back.
I'd say Ed that you hit the nail on the head. Forgive me as I am new here, but the funny thing is, after reading Velocity, I thought to myself "Geez, that's what I did with my silly little used car lot that I had for 6 years".
Guess what, I made a fortune there.
We've had big meetings about this where I work, and it's really a complete change in mindset. We have 3 stores in New Jersey; Dodge/Chrysler/Jeep/Ram, Hyundai and Nissan. And there are people who are all for this new way of working and some who haven't seen the light yet (But are starting to like the results) so they are coming around.
Can you make $8,000 front end on a ex-rental class of vehicle? Yup, and ya know what, I've come close to it before myself. But it's not the norm, and it's not what is going to work most of the time.
Most 2010 Camrys out there are LEs with, I dunno, 20-30k miles on em? They are what the British call "White Goods" or generic units. Just like our Nissan store with 1-2 year old Altima 2.5Ss. I have a bunch, Hackensack has a bunch, so does Ramsey, Meadowlands, Rockland, Hawthorne, 46, all the guys in NY City, etc etc. Sometimes you will get lucky on them, but the majority of your customers are looking online. If there's one in Philadelphia that's $1,000 less than us, I don't need to lose sleep over it. If the stores within 10 miles of me are $1-2k less than me on otherwise comparable cars, then I am going to end up with a pile of aged units. There's just not that many fools out there anymore.
We revamped our online pricing of these things and have gotten really aggressive with them, and guess what? We're all of a sudden selling 2.5S Altimas! You know, a car with a market days supply comparable to snow shovels in Miami.
But even with a high market days supply, there's still a lot of these getting sold and delivered.
Recently we had an Immaculate 2004 F150 Lightning with 27k miles on it come in. I actually talked to our Dodge store and we raised the online price $2,000. We still sold it quickly, because that's a specialty car and that's a car that you can get greedy with early on and try and take a shot with. There's just NONE of them out there and this was probably the nicest.
But in my experience, a car like a 2010 Camry LE fresh from Enterprise with nicked up bumpers isn't a car to take a shot with. Maybe a really low mile 4Runner Limited with Navi in Black? Well yeah sure, those aren't all over the place. But there's no way I would stay greedy for 30 days.
When I had my car lot I initially was undercapitalized, so I had to work as a "Velocity" dealer. I simply bought cars that I knew I could auction off on eBay at $1 with no reserve for a profit. Back 10 years ago this was stuff like BMW 528i Sports, Boxsters, XJ6 Vanden Plas, M3s, Land Cruisers, Saabs, Subaru foresters, etc. And I didn't look at Gross per unit, I looked at how much money I could make each month. I had $X to work with and I had to figure out how to make that $X + $asmuchashumanlypossible every month.
The problem is, if you aren't competitive out of the box, a huge percentage of the buyers out there aren't even clicking on your ads online. Why not look at the VDPs of your 30day and under inventory? I buy a fuel additive for my antique cars on eBay, about 3 people sell it. So I search for it and one seller is always the lowest. So I click on his auction and buy from him; do you think that your buyers are doing anything differently?
Not trying to be confrontational, but the business has changed and we can either adapt or we can die. And I ain't dead yet.
Guess what, I made a fortune there.
We've had big meetings about this where I work, and it's really a complete change in mindset. We have 3 stores in New Jersey; Dodge/Chrysler/Jeep/Ram, Hyundai and Nissan. And there are people who are all for this new way of working and some who haven't seen the light yet (But are starting to like the results) so they are coming around.
Can you make $8,000 front end on a ex-rental class of vehicle? Yup, and ya know what, I've come close to it before myself. But it's not the norm, and it's not what is going to work most of the time.
Most 2010 Camrys out there are LEs with, I dunno, 20-30k miles on em? They are what the British call "White Goods" or generic units. Just like our Nissan store with 1-2 year old Altima 2.5Ss. I have a bunch, Hackensack has a bunch, so does Ramsey, Meadowlands, Rockland, Hawthorne, 46, all the guys in NY City, etc etc. Sometimes you will get lucky on them, but the majority of your customers are looking online. If there's one in Philadelphia that's $1,000 less than us, I don't need to lose sleep over it. If the stores within 10 miles of me are $1-2k less than me on otherwise comparable cars, then I am going to end up with a pile of aged units. There's just not that many fools out there anymore.
We revamped our online pricing of these things and have gotten really aggressive with them, and guess what? We're all of a sudden selling 2.5S Altimas! You know, a car with a market days supply comparable to snow shovels in Miami.
But even with a high market days supply, there's still a lot of these getting sold and delivered.
Recently we had an Immaculate 2004 F150 Lightning with 27k miles on it come in. I actually talked to our Dodge store and we raised the online price $2,000. We still sold it quickly, because that's a specialty car and that's a car that you can get greedy with early on and try and take a shot with. There's just NONE of them out there and this was probably the nicest.
But in my experience, a car like a 2010 Camry LE fresh from Enterprise with nicked up bumpers isn't a car to take a shot with. Maybe a really low mile 4Runner Limited with Navi in Black? Well yeah sure, those aren't all over the place. But there's no way I would stay greedy for 30 days.
When I had my car lot I initially was undercapitalized, so I had to work as a "Velocity" dealer. I simply bought cars that I knew I could auction off on eBay at $1 with no reserve for a profit. Back 10 years ago this was stuff like BMW 528i Sports, Boxsters, XJ6 Vanden Plas, M3s, Land Cruisers, Saabs, Subaru foresters, etc. And I didn't look at Gross per unit, I looked at how much money I could make each month. I had $X to work with and I had to figure out how to make that $X + $asmuchashumanlypossible every month.
The problem is, if you aren't competitive out of the box, a huge percentage of the buyers out there aren't even clicking on your ads online. Why not look at the VDPs of your 30day and under inventory? I buy a fuel additive for my antique cars on eBay, about 3 people sell it. So I search for it and one seller is always the lowest. So I click on his auction and buy from him; do you think that your buyers are doing anything differently?
Not trying to be confrontational, but the business has changed and we can either adapt or we can die. And I ain't dead yet.
You already know this Bill, but I'll say it anyways.
This model works as long as your competitors are asleep with the lights off. You know how reps talk to reps and managers to managers. The word leaks out and 8 turns later your competitive advantage... isn't.
As your market matures, your NEW competitive advantage becomes "hyper efficient internal operations". Here you learn to squeeze costs out of your organization so you can operate nicely on less profit, offset by more turns. It's your hope that your competitors go on life support in this new battle field.
Heck, its possible that you might be one of the late arrivals to your market and your raining on a competitors parade
Regardless, it's a new day and there ain't no turning back.
Well said Joe. We're just starting to "get it" and we have a long way to go. The owner is really sharp and is looking at the bigger picture as well as the future. And the way I see it, we have nowhere to go but up.
Curious about what some of you guys think about hand writing personalized comments vs using something like MaxAd (Which we have and which I detest). I'm of the opinion that well written comments make a difference. Am I right?
Paraphrasing the major points I took from this thread...
Customers may not understand the difference between vehicle trim/series/equipment or how it might impact price. Primary drives for leads... price. The purpose for online marketing is not to sell the car but to drive leads.
Would you agree that in many cases your customers are more educated, on the unitt they are looking at, than your sales person?... However, customers do not necessarily understand the value of your vehicle relative to the market? Have you taken a long look at your dealer site, third party sites, descriptions, options? How were the vehicle options, packages, and descriptors presented?... Large and Readable? Format Familiar? Interesting? Easy and Quick?
Before coming into your store many customers go to the OEM site -- be they looking for a new or a used car. They build the new version of what they want and mostly understand the cost of that new car and the options selected on the new car sticker.
CREATE VALUE - Present options and packages to the customer in a format that is familiar. Generate new car stickers for your used cars both online and on your lot. This will accomplish the task of educating your sales staff and allowing them to talk more intelligently about the vehicle. In many cases it will add value to your vehicle over the competition.
Next time you are on Auto Trader... how hard is it to find and compare BMW 3 series with Premium Packages?
HOW DOES THE MARKET PERCEIVE YOU - Do you know who in your market is the "Big Truck Guy" or the "High-End Import Guy"... Of course you do... and they have spent time and money to develop that reputation. Ever consider why the guy across the street does well with some units you can't give that same unit away?
I identify 4 types of units...
- Vehicles I do well with
- Vehicles the market around me does well with (market performers)
- Units I do not have experience with
- Units I do poor with
Your lot has its own identity and customers expect you to have specific units based off that identity. These are the units you sell consistently and should be turning quicker and making more money on. You should be asking? Are we keeping the proper stocking levels of those units or are we missing deals? Secondly, how do we begin to expand what we do well with (we can save this for another discussion)?
PRICING: Online customers are not comparing apples to apples simply looking at price? Could this better be explained as part value proposition and part price? Is the design of 3rd party sites costing us gross? Should my pricing and turn strategy be impacted by vehicles I do well with as opposed to those I have little experience?
Whatever the case, I hope we can all agree that before you purchase a vehicle you should have both a retail and a whole sale strategy for this specific unit. If the vehicle in question is one I am performing well with I am certainly going to have a different turn and pricing philosophy relative to the other categories. I am not suggesting you have a pricing bucket labeled 1-30. What I am saying is these units should represent the majority of your gross and be managed along with your turn strategy.
Looking at units that are market performers, but I have limited experience, I generally recommend you set a tight turn and pricing strategy (I like 7-10 day buckets) until you know how this unit performs on your lot. More importantly I look to these market performers to expand my base of what I do well with. I define units I do well with as units that have multiple sales (Price Band/Series/Trim) over a 90 day period, turn quicker, and a make higher than average gross.
When determing what turn and pricing methodology to utilize consider that our dealers experience 60% of their sales and 78% of their gross in the first 30 days --After which average gross drops significantly.
HOW DO YOU SET YOURSELF APART: Are you able to create value in your product or do you compete primarily based on price? Would you drive more leads and your brand name more effectively if you focused more on your dealer site and less on 3rd party sites? How easy is it for a consumer to get a response from you? Response Time? Are they looking at the next vehicle before you can respond? What product could drive more leads for me?
Have you considered utilizing a managed chat product? What types of customers use a chat service? They may be a house wife not wanting the hassle of a sales person or someone in the office who is not able to talk on the phone. In many cases the tolerance for response time is shorter than email. I have seen many a dealer do their own chat, hopefully through a BDC, or some form of blended product. I do recommend, based on a limited response window, that you utilize a dedicated service; heck, if you are going to spend the money to drive leads don’t miss them.
If you begin looking at a services consider if the service knows what site the customer is on -- or are they having to ask? Does the person doing chat have access to your inventory and are they able to make recommendations accordingly? While there is no conversation in chat... ask if the person on the other end is in the US? Bilingual?... It may make a difference as to the effectiveness of the chat and lead conversion rate.
Customers may not understand the difference between vehicle trim/series/equipment or how it might impact price. Primary drives for leads... price. The purpose for online marketing is not to sell the car but to drive leads.
Would you agree that in many cases your customers are more educated, on the unitt they are looking at, than your sales person?... However, customers do not necessarily understand the value of your vehicle relative to the market? Have you taken a long look at your dealer site, third party sites, descriptions, options? How were the vehicle options, packages, and descriptors presented?... Large and Readable? Format Familiar? Interesting? Easy and Quick?
Before coming into your store many customers go to the OEM site -- be they looking for a new or a used car. They build the new version of what they want and mostly understand the cost of that new car and the options selected on the new car sticker.
CREATE VALUE - Present options and packages to the customer in a format that is familiar. Generate new car stickers for your used cars both online and on your lot. This will accomplish the task of educating your sales staff and allowing them to talk more intelligently about the vehicle. In many cases it will add value to your vehicle over the competition.
Next time you are on Auto Trader... how hard is it to find and compare BMW 3 series with Premium Packages?
HOW DOES THE MARKET PERCEIVE YOU - Do you know who in your market is the "Big Truck Guy" or the "High-End Import Guy"... Of course you do... and they have spent time and money to develop that reputation. Ever consider why the guy across the street does well with some units you can't give that same unit away?
I identify 4 types of units...
- Vehicles I do well with
- Vehicles the market around me does well with (market performers)
- Units I do not have experience with
- Units I do poor with
Your lot has its own identity and customers expect you to have specific units based off that identity. These are the units you sell consistently and should be turning quicker and making more money on. You should be asking? Are we keeping the proper stocking levels of those units or are we missing deals? Secondly, how do we begin to expand what we do well with (we can save this for another discussion)?
PRICING: Online customers are not comparing apples to apples simply looking at price? Could this better be explained as part value proposition and part price? Is the design of 3rd party sites costing us gross? Should my pricing and turn strategy be impacted by vehicles I do well with as opposed to those I have little experience?
Whatever the case, I hope we can all agree that before you purchase a vehicle you should have both a retail and a whole sale strategy for this specific unit. If the vehicle in question is one I am performing well with I am certainly going to have a different turn and pricing philosophy relative to the other categories. I am not suggesting you have a pricing bucket labeled 1-30. What I am saying is these units should represent the majority of your gross and be managed along with your turn strategy.
Looking at units that are market performers, but I have limited experience, I generally recommend you set a tight turn and pricing strategy (I like 7-10 day buckets) until you know how this unit performs on your lot. More importantly I look to these market performers to expand my base of what I do well with. I define units I do well with as units that have multiple sales (Price Band/Series/Trim) over a 90 day period, turn quicker, and a make higher than average gross.
When determing what turn and pricing methodology to utilize consider that our dealers experience 60% of their sales and 78% of their gross in the first 30 days --After which average gross drops significantly.
HOW DO YOU SET YOURSELF APART: Are you able to create value in your product or do you compete primarily based on price? Would you drive more leads and your brand name more effectively if you focused more on your dealer site and less on 3rd party sites? How easy is it for a consumer to get a response from you? Response Time? Are they looking at the next vehicle before you can respond? What product could drive more leads for me?
Have you considered utilizing a managed chat product? What types of customers use a chat service? They may be a house wife not wanting the hassle of a sales person or someone in the office who is not able to talk on the phone. In many cases the tolerance for response time is shorter than email. I have seen many a dealer do their own chat, hopefully through a BDC, or some form of blended product. I do recommend, based on a limited response window, that you utilize a dedicated service; heck, if you are going to spend the money to drive leads don’t miss them.
If you begin looking at a services consider if the service knows what site the customer is on -- or are they having to ask? Does the person doing chat have access to your inventory and are they able to make recommendations accordingly? While there is no conversation in chat... ask if the person on the other end is in the US? Bilingual?... It may make a difference as to the effectiveness of the chat and lead conversion rate.
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You are welcome here as we all try to learn best practices from eachother. It all comes down to pricing your vehicle right and getting the foot traffic in your store most effectively. Here is a blog I wrote almost a year ago on Velocity and taking it to the next level. Basically, would you rather sell 50 cars at $2000 gross or 75 at $1500 per car? Which is better? We all want market share and the second is better for the store and your salesmen. Here is the link. Do You Have the ‘Velocity’? « Automotive Sales Strategies from Jim
