Toys4RJill

I agree with you. I think there will be some who see the added value.

patgilm

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.

Johnhav430

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.

mmarshall

That's what a few Saturn dealers used to do on high-demand, hard-to-get vehicles, because they were forbidden by Saturn's policy from charging over list. (the ver-y hard-to-get 2-seat Sky roadster was probably the best example). Nothing in the franchise-rules, however, prevented them from charging more than list with second-sticker dealer-add-on accessories. Most Saturn shops, however, in the spirit of the company's customer-satisfaction policy, stuck firmly to the concept that list meant list (which already included a roughly 14% mark-up), and did not try and pad those figures any more, even with high-demand models.

I agree that supply/demand will be a factor (it has always been, since the dawn of economics), but a larger one will be that some people simply refuse to accept the no-haggle system. Most (or probably a majority) will appreciate getting a discount without haggle-stress, but there will always be the die-hards.

Johnhav430

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)?

mmarshall

Yes, CarMax has been doing that for quite some time (I myself have not bought a car there, because I buy new, but I've shopped wth several used-car buyers there). They do sometimes run a little more than typical used-car places. One reason why they do, however, is that they run, by used-car standards, a very impressive shop, with excellent facilities, up-to-date service equipment, well-trained ASE-Certified Technicians, and nice showrooms. It's a class act by used-car standards (similar, in some ways, to Lexus CPOs)...and, at least to an extent, you can expect to pay for what you get.

patgilm

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.

Johnhav430

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.....

patgilm

Which is also one of the reasons I don't buy from Amazon (although my wife does but I have no idea what she is even buying, its like Christmas every day at our house since we receive packages daily). They used to be cheap and I still go there when shopping but I too noticed that their prices are typically higher than other internet companies and even some brick and mortar stores. As a result, I don't use them anymore.

gengar

Of course not, hence why I said the end result would be some combination of relative prices dropping and added value to the consumer. But given how competitive the marketplace is now, I think we'll see both.


But they don't do it now! We know that because not every car at dealers comes full of dealer options. As I mentioned, only the three GS-F had undergone the full dealer option BS treatment. No other car I looked at in the showroom had all those dealer options added. Some had absolutely none, and most that did only had the rear bumper applique.

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.

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.

Just to be clear - Lexus' intended sales system is a no-haggle system, not a one-price system.

swajames

Isn't another plausible conclusion that dealers may be reluctant to move to Lexus Plus because they believe it may hurt sales?

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.

pavelekPL

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.

gengar

Well sure, maybe they believe so. Whether that actually happens is a different story (see, e.g., one dealership where sales increased, even with similar margins, after switching to Lexus Plus: Bloomberg article)

Why? People who want a vehicle, optioned to sell at a competitive price, will then flock to Lexus. Only people who are addicted to the sham of negotiation sales schemes and need their fix will go elsewhere so that salesmen can fool them into thinking they got a "deal".

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?

swajames

Because you're basically asking the fox to guard the hen house, and having to make a leap of faith that the fox has turned over a new leaf and can suddenly be replied upon...

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.

SW17LS

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.