What ways could dealers be more transparent, IDEAS anyone?

[Jeff Kershner]

50% of consumers (survey) believe that a dealers NET Profit on a used vehicle sale averages over $2,000.

There's an article over on the blog with some interesting stats around what consumers believe dealers make on a used car sale. Be sure to read and review the chart.

Consumers will walk into an Apple store and lay down some big money and never once complain about the 21% NET MARGIN they just made. But boy oh boy they're quick to bitch over the average 2.2% net margin a dealers makes on a used car.

Check out the actual Google Consumer Insight chart

The truth is - the average consumer (possibly half) believes a dealer makes over a $2000 net margin on a used car sale. Could this possibly be a cause for the complaints? Seems obvious.

So how does one overcome this while helping consumers become more aware? Would it be wrong to disclose how the automotive market works?

What are some ways through transparency and education you can think of (or currently doing) that would educate the customer on the actual profit a dealer makes on a used car sale?

 

[Jeff Kershner]

The blog article was shared on the few different pages/profiles, including the My personal, DealerRefresh page, Carbucks group AND has received several comments across.

I didn't want these comments to be lost after a few days (like most posts on facebook) so I have copied most of them below...


Ryan Leslie - I think the problem is that transparency must be predicated by trust. Look at how many consumers know "invoice price" and expect to negotiate down from there. They either believe that the dealer will take a loss to move a unit or that the "invoice" isn't really the invoice. It is a system that has conditioned them to not believe what they have been told. I think you'd have to solve for that before you could really educate them about how thin margins are compared to other industries.



Dave Pignato - I think your analogy using Apple is probably a bad example. Apple has such a cult like following. But I certainly get your point. The internet has educated consumers on car values (the vanilla stuff...not a sports car that several years old with 2k one owner miles). Im a big fan of vAuto, and can show the value of the unit they are on. If im the lowest price (or close to it) within 50/100/200 miles, and the unit is producing leads I would walk them. 50% of them usually never leave the parking lot and come back in and buy. Be as transparent as possible. Some may disagree with this and write the deal hoping that their avg backend PVR will save the day. If its an aged unit that all the sales people are walking right by and I can get close to ACV or take a short deal, you can bet im taking it. Its another customer that someone else wont sell. Plus you have another plate frame out there, another person to solicit for referrals, and hopefully you see back in your service dept.



Ed Brooks - They don't care about a dealer's profit (or loss). Trying to educate a customer about a dealer's profit structure is, respectfully, a little crazy.



Adam Thrasher - 1. People are treated with respect when they walk into an Apple Store. Their employees engage customers and ask questions. 2. People have had bad experiences at dealerships for decades.
3. The dealers who have screwed people over in the past are the ones to blame for the current situation.
4. It's up to dealers in business today to go above and beyond to dispel the myth that all car dealers are bad.


Jeff Kershner - Great points Adam. I believe the article was also asking for some ideas on how dealerships today could help overcome this - as in out of the box ideas beyond the obvious.



Adam Thrasher - Jeff I agree. It's a monumental task to shed the stereotype. I think if dealers focus on providing an exceptional shopping/purchase experience that would be a great first step. Then they'll need to change their marketing so showcase what buying a car at their store is like. Too many dealerships still run commercial after commercial shouting about low monthly prices and huge discounts. Shoppers are savvy enough to figure out what rebates and incentives are being offered by the manufacturer. Start telling the shopper why they should buy from your store and let them know what kind of experience they'll have while doing so.




Dave Pignato - Even though the AG allows us to do it, I've fought it for years. I've always advertised true 0 down sign and drive leases with all incentives that everyone would qualify for.



Jeff Kershner - Adam you said "Shoppers are savvy enough to figure out what rebates and incentives are being offered by the manufacturer."

Shoppers are more savvy than 10 years ago BUT on average, they're not as savvy as we think they are. Although we (progressive dealers, industry leaders) can't stand and don't partake in the "commercial shouting about low monthly prices and huge discounts", they're still effective when going after a particular segment of consumers. And unfortunately it's a larger group than we want to admit to. This would be one supportive reason why being overly transparent on dealer operations would fail.

Dave just to note, I'm not the author of the article. But I thought it would bring about conversation so I wanted to share.

 

[joe.pistell]

WWLD?

 

[joe.pistell]

I'm totally in Ed's camp.

..

Ed Brooks - They don't care about a dealer's profit (or loss). Trying to educate a customer about a dealer's profit structure is, respectfully, a little crazy.



 

[ed.brooks]

A dealer's profit on a sale doesn't concern customers - they don't care.

Trying to 'educate' consumers on how tough the car business can be is fighting a losing battle. One look at the palace of a showroom that many dealers have is enough to rid them of that idea. If YOUR showroom isn't a palace, they think your dealer is lining his pockets or is incompetent.

I'm going to say something that many will find hard to believe - Your buyer doesn't have to trust you.

Your goal doesn't have to be trust, but it should be credibility. Trust is like faith, "Faith is confidence or trust in a person or thing or a belief not based on proof". Credibility, on the other hand, can be gained thru two paths; Negotiation or Market-Based Proof. Neither relies on a need to disclose your profit structure.

 

[ruggles]

50% of consumers (survey) believe that a dealers NET Profit on a used vehicle sale averages over $2,000.

There's an article over on the blog with some interesting stats around what consumers believe dealers make on a used car sale. Be sure to read and review the chart.

Consumers will walk into an Apple store and lay down some big money and never once complain about the 21% NET MARGIN they just made. But boy oh boy they're quick to bitch over the average 2.2% net margin a dealers makes on a used car.

Check out the actual Google Consumer Insight chart

The truth is - the average consumer (possibly half) believes a dealer makes over a $2000 net margin on a used car sale. Could this possibly be a cause for the complaints? Seems obvious.

So how does one overcome this while helping consumers become more aware? Would it be wrong to disclose how the automotive market works?

What are some ways through transparency and education you can think of (or currently doing) that would educate the customer on the actual profit a dealer makes on a used car sale?

 

[ruggles]

Perhaps the better question is, "Why should auto dealers feel compelled to be "transparent?" Why the sudden fascination with the word? We aren't transparent. We aren't going to be. Why not give it a rest? When we claim to be transparent does ANYONE think consumers believe us?

Transparency is when buyer and seller have the same information, and the equal ability to interpret that information. The fact is, our industry has gone out of it s way to be LESS transparent that in previous decades. Claiming we are more transparent doesn't make it so. It hurts our already shaky credibility.

 

[joe.pistell]

Ed knocks it over the fence! 2 thumbs up, wayyy up!

A dealer's profit on a sale doesn't concern customers - they don't care.

Trying to 'educate' consumers on how tough the car business can be is fighting a losing battle. One look at the palace of a showroom that many dealers have is enough to rid them of that idea. If YOUR showroom isn't a palace, they think your dealer is lining his pockets or is incompetent.

I'm going to say something that many will find hard to believe - Your buyer doesn't have to trust you.

Your goal doesn't have to be trust, but it should be credibility. Trust is like faith, "Faith is confidence or trust in a person or thing or a belief not based on proof". Credibility, on the other hand, can be gained thru two paths; Negotiation or Market-Based Proof. Neither relies on a need to disclose your profit structure.

 

[Jeff Kershner]

I'm going to say something that many will find hard to believe - Your buyer doesn't have to trust you.

Your goal doesn't have to be trust, but it should be credibility. Trust is like faith, "Faith is confidence or trust in a person or thing or a belief not based on proof". Credibility, on the other hand, can be gained thru two paths; Negotiation or Market-Based Proof. Neither relies on a need to disclose your profit structure.

PRICELESS.

 

[Tallcool1]

I think that the survey itself is dealing with completely "skewed" numbers.

Sure the survey question seems pretty straight forward to us, because we all understand what NET PROFIT means.

Have 500 of our sales people take the same survey, and I would bet that the results are even further off. My salespeople don't even understand that their own damn commission factors as an expense!

As far as the general idea of transparency, I am not sure it matters. A "good deal" is perception.