I think I have as good a sense of humor as the next car seller. Hopefully it shows in this blog. But people! … enough with the ridiculous offers! Especially when you don’t think you’re being funny, just a good shopper. You’re not.
Low-ball offers really gained momentum when that Midwestern Dodge dealer hit the national news last year with his Two for the Price of One deal. “Wow,” shrieked the media. “New cars for half price!!!!!” … jumping to the conclusion that if you buy two vehicles and only pay for one, they must be equivalent. (By the way, I never use multiple exclamation points. That’s the media talking there.) Of course it was actually smoke and mirrors.
The way the twofer deal really worked was you had to buy a new, loaded high-dollar pickup truck … the kind you could probably negotiate about $10,000 off sticker after rebates … for full sticker price and then they’d give you another vehicle for free. The fine print shows the other vehicle to be an inexpensive fleet car that had just come out of rental or demo service … not an equivalent second fancy truck. Oh sure, it was the same model year as the truck that you were paying for. But the retail value of this used “freebie” was probably around $10k and the dealer was probably in it for about 6. So, who was the real winner here? Obviously the dealer for creating a great illusion and getting free national exposure as a bonus.
But the fallout has been that everyone who can stumble onto a website and push the “send me a quote” link now thinks that not only is half price actually do-able, but that’s it’s just a jumping off point for further negotiations.
I recently received an offer for a new, unused leftover 2008 GMC Yukon Denali I have, and have had on my lot since last Spring.
“I will give $22000 out dor” (sic). (I don’t actually know what “sic” means, but the editor at Car and Driver magazine has been using it to make fun of misspellings in Letters to the Ed. for years, so I thought I’d give it a whirl.)
Oh really? 22k, huh? Now, this is a vehicle that stickers for over $57,000. That’s more than $62,000 with tax and license … which I will gladly discount to 50k and some change, cash on the barrell head. (Attention shoppers. As of this writing, it’s still available.) My slightly intrigued reply…
“Thank you for your offer. Do I understand correctly that you want to purchase a new Denali with a sticker price of $57,270 for $22,000 including tax and license? In other words, you want a $40,000 discount. Is that right?”
The response didn’t make me laugh. Its ridiculousness made me smile … sorta. But since the inquirer seemed perfectly serious, I distinctly remember not laughing.
Unfortunately, this is not an isolated or particularly extreme example for me or most other dealers. And therein lies some of the problem for the current state of the auto industry. An alarmingly growing number of people seem to think that since industries like electronics have a history of slashing prices and other industries, like retail clothing seem to have the unlimited ability to mark things down, that the same characteristics should apply to the auto industry. They don’t.
New vehicles cost more and more for dealers to buy from manufacturers and don’t even have as much markup, percentage-wise as they did five years ago. Honest. My hand to Heaven and hope to kiss a duck. They don’t. Not like for example, the garment industry, where something selling for a mere double the cost of its manufacture is considered by shoppers to be a bargain and most regular rack prices are several times cost.
So how did my email buddy decide he should get 65% off? I have an idea. Let’s call it “The Sponge Bob Gets Soaked Theory.” It works like this. A Sponge Bob Square pants t-shirt goes for ten bucks in most stores. But Hank, Peggy and Bobby Hill can find it in the closeout rack at Mega-Lo-Mart for $4.88. That’s about half off. However, once Peggy washes it a few times, it’s no longer worth as much … say about two bucks now. So, if Hank and Peggy were to pay $3.50 for Sponge Bob after washing … now remember, Bobby hasn’t worn or used the shirt in any way. Peggy’s just washed it … that’s 65% off. And since it’s only worth $2, that means Mega-Lo-Mart still made a handy buck fifty profit … probably more, since the giant big box retailer bought 5,000 gross of the nasty, undersized little poly-cotton rags direct from the Bangladesh factory for 89.3 cents each.
Stay with me now. My $57,000 brand new 2008 Denali has been on our lot for about a year. It’s been washed at least once a week. Let’s say 70 times total … we try to keep our inventory clean. That means it’s no longer worth the $50-51,000 we’ll owe the factory once it’s sold. Maybe, if like Sponge Bob, we’d never washed it, former GM Chairman “Uncle Rick” Wagoner would have taken pity and allowed us to sell it for half off. Could happen, right? But nooooo … we stupidly washed it and it lost about 1 percent of its value every time its gleaming Onyx Black flanks were insulted by the “pucketa-pucketa” power sprayer mounted in the bed of our ’92 Sonoma lot truck. OK, so that’s a $35,000 discount. Now subtract the $6,000 in factory rebates and, voila! There ya go! $41,000 off. Mr. Can’t-Spell-for-Diddly has his $40,000 discount and we still made a tidy$1,000 on one of those sinful, gas-guzzling monuments to vehicular overindulgence that righteous, greenie consumers have completely turned their backs on … unless it’s a “good deal.”
Halelujah! Mystery solved! God bless capitalism! Move over Obama and Geitner! I’ve solved it! The recession is over!! (Oops … extra “!” My bad.)