Lexus expanding the "no haggle" programs
#61
Lexus Fanatic
I agree with you. I think there will be some who see the added value.
#62
Lead Lap
It's not just the price but also the value to the end consumer. Prices will necessarily have a relative drop because costs will drop, but we'll also see added value because dealers won't feel the need to option their cars with high-margin BS just to up the sticker. Perfect example of this was right after the GS-F came out and I was at a Lexus dealership that had THREE of them just sitting in the showroom unsold. All three were chock full of dealer options like tint, clearbra, wheel protector, etc. etc. etc. Why? Because they knew they were going to have to discount them to move them anyway, so the dealer loaded them all up with hundreds/thousands in extra dealer options so they can appear to discount the cars even more - even though those options cost pennies on the dollar. Based on this thread, I'm sure a buyer who wouldn't even have wanted tints / clear bra / whatever would have eaten that all up, hook line and sinker.
Under a system where the dealers actually have to move cars without negotiation, there's no incentive for this BS. In order to sell cars, Lexus will have to option the cars the way the end consumer wants them and price the cars the way the end consumer wants them.
The incentives are all messed up in the current system - because the negotiation scheme is nothing more than a sales gimmick. As I've said before, it's like the shady kiosks at the outlet mall that say "50% off today" but those signs are up every day. Be naive enough and you will feel good about getting a deal "today". To me, it's amazing the lengths people will put themselves through just to have a utterly faux feel-good feeling.
Under a system where the dealers actually have to move cars without negotiation, there's no incentive for this BS. In order to sell cars, Lexus will have to option the cars the way the end consumer wants them and price the cars the way the end consumer wants them.
The incentives are all messed up in the current system - because the negotiation scheme is nothing more than a sales gimmick. As I've said before, it's like the shady kiosks at the outlet mall that say "50% off today" but those signs are up every day. Be naive enough and you will feel good about getting a deal "today". To me, it's amazing the lengths people will put themselves through just to have a utterly faux feel-good feeling.
I just have a hard time seeing this work unless the whole industry did it which is not likely to happen and I doubt that the price everyone is going to pay would be as low as you can negotiate now. I also don't think they would leave money on the table if they don't have to. There is always going to be a supply and demand issue and prices will have to be adjusted to deal with this or they will sit on lots. Tesla doesn't have this problem right now but if they had some apples to apples competition, I wonder how their one price system would work.
#63
Lexus Fanatic
One thing that I've found through my travels, wealthy people care more about money, than those who don't have it. I dunno, for example, a billionaire likely wants to know why his new iPad Pro costs $1300, it's not that $1300 is a lot to him, he wants to make sure it's the right way to spend $1300 and that he's not overpaying. Just like he needs to make sure his Lear 75 is billing the correct number of hours according to the business plan. To use an oversimplification, imho wealthy people are looking for the marginal benefit vs. what it costs to get it. A "no haggle" program likely doesn't pass that muster....the person I am describing above, no he's not going into the dealer and haggling for his new M5, but he's gonna make sure that when he sees someone else at the club with the same car, that he didn't pay more than the other guy. Or somebody is getting fired.
#64
Lexus Fanatic
Just because the costs may drop doesn't mean they will automatically pass those savings on to the consumer. Also there is no way a dealer won't option up a car with their add on BS of pinstripes, clear bra, door edge guards, etc. As you mentioned, if they cost pennies on the dollar to them and can apply a nice margin to sell to the consumer, they will do it just like they do now.
I just have a hard time seeing this work unless the whole industry did it which is not likely to happen and I doubt that the price everyone is going to pay would be as low as you can negotiate now. I also don't think they would leave money on the table if they don't have to. There is always going to be a supply and demand issue and prices will have to be adjusted to deal with this or they will sit on lots. Tesla doesn't have this problem right now but if they had some apples to apples competition, I wonder how their one price system would work.
#65
Lexus Fanatic
Dunno if this is an accurate analogy, but look at Carmax. They appear to be successful. People have told me they do NOT negotiate the price. imho, at least for used LS430's and BMW 335's, their prices are out of this stratosphere. amazon.com, on the majority of goods, their prices are out of the stratosphere. Yet people are willing to join as prime members and get free 2 day shipping included, and exclusive benefits. Non prime, orders sit for 5-7 days untouched. Playing devil's advocate, maybe ordinary people are willing to pay more, for convenience (again I don't feel wealthy are willing)?
#66
Lexus Fanatic
Dunno if this is an accurate analogy, but look at Carmax. They appear to be successful. People have told me they do NOT negotiate the price. imho, at least for used LS430's and BMW 335's, their prices are out of this stratosphere. amazon.com, on the majority of goods, their prices are out of the stratosphere. Yet people are willing to join as prime members and get free 2 day shipping included, and exclusive benefits. Non prime, orders sit for 5-7 days untouched. Playing devil's advocate, maybe ordinary people are willing to pay more, for convenience (again I don't feel wealthy are willing)?
#67
Lead Lap
Dunno if this is an accurate analogy, but look at Carmax. They appear to be successful. People have told me they do NOT negotiate the price. imho, at least for used LS430's and BMW 335's, their prices are out of this stratosphere. amazon.com, on the majority of goods, their prices are out of the stratosphere. Yet people are willing to join as prime members and get free 2 day shipping included, and exclusive benefits. Non prime, orders sit for 5-7 days untouched. Playing devil's advocate, maybe ordinary people are willing to pay more, for convenience (again I don't feel wealthy are willing)?
#68
Lexus Fanatic
And thus the reason I would never go to Carmax to buy a car. I looked at some used cars there before and they are IMO typically overpriced and the ones I looked at were not in as good condition as the price reflected. You are right though, people do like going there, not only for a non-negotiable price, but their used car lot is huge.
So I suppose that if one nailed their processes, people (ordinary) are willing to pay more. I would argue amazon provides less value, and you pay more. Example, want Asian Zerex 50/50 which is Toyota SLLC2, and don't want to pay Toyota $26 gal for 50/50? Walmart.com, order it for $8.79/gal., pickup at store. (It's $12 without ordering online in advance) Amazon could never touch that $8.xx price with a 10 foot pole, yet people probably would still order it and have it delivered for free....watch Lexus succeed, who knows!
edit: checked amazon, it's $15.99/gal and they even offer a "subscription" What, for leakers? btw free shipping, how free is that shipping when Walmart sells for $8.xx.....
Last edited by Johnhav430; 05-19-17 at 07:31 AM.
#69
Lead Lap
I acknowledge that amazon is a joke, very successful, and their processes are all nailed--they know what they're doing, shareholders happy, founder will be richest man on earth, and customers are actually happy. But they are expensive on most items. They even caved in and are set to collect sales tax in all 50 states--this is a co. that once said you want tax, we move our D center out.
So I suppose that if one nailed their processes, people (ordinary) are willing to pay more. I would argue amazon provides less value, and you pay more. Example, want Asian Zerex 50/50 which is Toyota SLLC2, and don't want to pay Toyota $26 gal for 50/50? Walmart.com, order it for $8.79/gal., pickup at store. (It's $12 without ordering online in advance) Amazon could never touch that $8.xx price with a 10 foot pole, yet people probably would still order it and have it delivered for free....watch Lexus succeed, who knows!
edit: checked amazon, it's $15.99/gal and they even offer a "subscription" What, for leakers? btw free shipping, how free is that shipping when Walmart sells for $8.xx.....
So I suppose that if one nailed their processes, people (ordinary) are willing to pay more. I would argue amazon provides less value, and you pay more. Example, want Asian Zerex 50/50 which is Toyota SLLC2, and don't want to pay Toyota $26 gal for 50/50? Walmart.com, order it for $8.79/gal., pickup at store. (It's $12 without ordering online in advance) Amazon could never touch that $8.xx price with a 10 foot pole, yet people probably would still order it and have it delivered for free....watch Lexus succeed, who knows!
edit: checked amazon, it's $15.99/gal and they even offer a "subscription" What, for leakers? btw free shipping, how free is that shipping when Walmart sells for $8.xx.....
#70
Lexus Test Driver
Also there is no way a dealer won't option up a car with their add on BS of pinstripes, clear bra, door edge guards, etc. As you mentioned, if they cost pennies on the dollar to them and can apply a nice margin to sell to the consumer, they will do it just like they do now.
That's my whole point as far as incentives being messed up. They knew the GS-F was not priced competitively and they would need to discount, so they did everything they could to boost the sticker just to inflate the appearance of the end discount. That's the whole problem with a negotiation sales scheme. Initial asking prices will always be inflated over market value because negotiation is expected. When the vehicles are actually priced so that customers want to buy them, the dealer has no incentive to artificially inflate sticker by adding options of questionable value just so the dealer can try to make the end consumer feel good about getting a better "discount".
Even today, typically the dealer will try to get you to add the window tint, clear bra, platinum warranties, wheel/tire warranties, etc. after the customer decides to buy the car. They don't normally lump these things in just to inflate the sticker and increase room for negotiation.
I just have a hard time seeing this work unless the whole industry did it which is not likely to happen and I doubt that the price everyone is going to pay would be as low as you can negotiate now. I also don't think they would leave money on the table if they don't have to.
Lexus has downright stated that they have had to incentivize dealers to move to Lexus Plus, btw.
There is always going to be a supply and demand issue and prices will have to be adjusted to deal with this or they will sit on lots. Tesla doesn't have this problem right now but if they had some apples to apples competition, I wonder how their one price system would work.
Last edited by gengar; 05-19-17 at 01:27 PM.
#71
Pole Position
But if you really believe that's true, then why hasn't every dealer opted to join Lexus Plus? The reality is they haven't. So if you believe what you say, then your conclusion must be that most dealers think the current system is more profitable for them.
Lexus has downright stated that they have had to incentivize dealers to move to Lexus Plus, btw.
If Lexus dealers in one locality moved to no-haggle pricing, but the premium marques typically crossed-shopped with Lexus such as MB, BMW and Audi etc maintain the traditional model in that market, my own view is that makes no-haggle a pretty hard sell. Customers don't really trust car dealers as is, and while both "sides" in the thread have made cogent arguments in support of their position I personally think it's that the lack of trust, with considerable justification, that kills the no-haggle model. Even if the no-haggle prices were reasonably fair, customers are, i believe more likely to take a deal they negotiated themselves (regardless of whether the starting point was inflated) over one that was set for them. No-haggle as a concept has merit, but I believe it ultimately fails as the consumer has less confidence in the price and less skin in the game than when the deal is there own. There's a lot of fun to be had test driving cars and working deals, and as long as you're not wasting anyone's time working deals you have no intention of closing a lot of satisfaction to be had in the process.
As for loading cars with bogus dealer-added extras, that happens in my local market too. We also see dealers add bogus "market adjustments" to the window sticker, even on low demand cars. I've always approached the deals as if neither exist and and totally disregarded them. I always start at invoice anyway and am aiming for invoice minus, not invoice plus or MSRP minus. In part, that dealers play these games is what erodes the credibility needed to successfully move to a no-haggle model.
Simply put, i don't believe Lexus alone can move a no-haggle model on their own. It could only work if their competitors did the same thing, and i just don't see that. MB and BMW in particular use aggressive incentives to enable "deals" to be made to move inventory. Customers to my mind will continue to prefer that model. You can get to same point with no-haggle (i.e. BMW and MB dealers could sell at the exact same price as they would sell for on a negotiated deal), but customers will, I think, have more confidence in the their own negotiated deal than a dealer-mandated one and are thus more likely to push the button and actually do the deal.
Last edited by swajames; 05-19-17 at 05:29 PM.
#72
Still don't understand why some of people here think the 'no haggle' program is good. If you don't like to haggle, fine, pay the asking price and problem solved. Nobody is forcing you to haggle and get a potentially better deal. Meanwhile others would put an extra effort into the transaction that may reward them with a discount/lower price.
#73
Lexus Test Driver
I think the better argument is that this model is harder to gain traction where there are many Lexus dealerships and some adopt no-haggle and some don't, because obviously a proximate haggling-accepted dealer is better suited to respond to another's no-haggle price.
I also don't get your comment about consumers not trusting a non-negotiable price. You yourself in the very same post already identified why consumers don't trust dealers, i.e., all the BS that dealers build in to pricing so that they can appear to cut people a deal in negotiation. But this BS only exists because of the negotiation sales scheme. I mean, you even picked out one of the best examples of this - how invoice isn't actually invoice. Dealer incentives, holdbacks, rebates, etc. all add to the opaqueness of the pricing model, and dealers desire opaqueness because - once again - they want consumers to think that they got a good deal.
So if the problem is lack of trust, why isn't the obvious solution to get rid of the system that created that lack of trust?
Last edited by gengar; 05-19-17 at 08:14 PM.
#74
Pole Position
Maybe we should look to the take-up to date from dealers - that it appears reasonably limited so far is probably an indication that the dealers know that this may not fly with their customers. I don't disagree with you that the current model is flawed, it obviously is, I just don't see much to make me think that this particular idea is a better alternative.
Anyway - time will tell. If more dealers come on board AND Lexus sales volume doesn't drop then maybe you are right. I'm not even sure I'm right. For now, though, I continue to have more confidence the current model will result in a smaller check from me. Ultimately that's what it's all about. It doesn't matter what the sticker price is or how you get from there to your purchase price, what matters is how big the check is.
#75
Lexus Fanatic
LOL, if you know your numbers and you've shopped the deal across multiple dealers, nobody is fooling you into thinking you got a good deal. This is what's going to fool people into thinking it's a deal.