A friend of mine recently bought a 2017 Chevy Tahoe from a local Chevrolet dealer. He ended up using Edmonds.com to give him confidence in the price he should pay for the new vehicle.

I had to ask the obvious question: “Why did you, of all people, use Edmonds?”

Now, you should know this guy is smarter than the average bear. He’s been around the car business for years, holds dealers in high regard and understands more than his fair share about how dealers make money. In other words, he’s a well-educated buyer who should know how to get a good deal.

“Brian, I didn’t want the headache. I spent a couple hours online and quickly came to one conclusion — ‘this isn’t going to be easy, and I don’t have time to play the back-and-forth game this time.’ Edmonds got me where I needed to be right away — a reasonable price, which I cross-checked, and local dealers who’d play ball rather than back-and-forth in the showroom.”

“OK. Cool,” I said. “But let me ask you another question: How would it have been different if you’d found a dealer promoting a price that you found reasonable and promised to, as you say, ‘play ball’?”

“No doubt about it. I actually wanted to “find that dealer, and would have called them immediately. Well, immediately…I would have cross-referenced the dealer’s price at KBB.com, or maybe even TrueCar, to make sure we were in the ballpark.”

“Interesting,” I said. “One last question…would you have negotiated the price if the dealer told you ‘this is the price you’ll pay” once you got to the dealership?”

“Probably not, as long as I felt comfortable I was getting a fair and reasonable price. I don’t think I’m all that different from other customers who are only suspicious of dealer prices because we’ve been taught to be suspicious. Other than dealers and doctors, I don’t really question the prices I’m asked to pay as a customer.”

To me, my friend’s vehicle purchase experience reflects three new realities that I believe dealers must recognize, if not embrace, to ensure the long-term profitability and vitality of their new and used vehicle departments:

1. Transparency works. I don’t think my friend’s desire for an easy path to a fair transaction price is all that unique — especially among Gen Y buyers who are 20 years younger than him. Indeed, most dealers recognize the power of transparency in used vehicles to attract customers. Some have adopted market-based pricing and minimal-negotiation sales processes. These dealers are consistently selling more cars. In new and used cars, embracing transparency remains a matter of choice for dealers, for now. Over time, however, I think transparency in pricing and sales processes will become an operational necessity if a dealer wants to be profitable and competitive.
2. Negotiation is outdated and over-rated. Dealers have long been trained to “hold gross” through negotiating with customers. In fact, You love this aspect of the business if you are a dealer. The problem: Negotiation only really works when both sides want to negotiate. And, in today’s market, there are a lot more customers like my friend — ones for whom the thought of negotiation signals a less-than-satisfying and time-consuming experience. I’m reminded of a quote from a one-price dealer friend in Michigan: “Dealers aren’t really negotiating with customers anymore. They’re negotiating with themselves. We see it in our grosses. Customers will pay a bit more when you give them the up-front experience they want.” 
3. If you don’t embrace transparency, another dealership will. My friend’s vehicle shopping trajectory is telling and completely understandable. He chose what he determined to be the path of least resistance (e.g., Edmonds) to purchase his new Chevy Tahoe. But he made this choice because he felt he had to, given he didn’t readily find satisfactory alternatives from dealerships themselves.

This situation strikes me as an opportunity for dealerships: Those who embrace transparency and promote themselves as trail guides for consumers actively seeking market-credible pricing and a satisfying, trustworthy experience will command more attention and sell more new/used vehicles.

I should add here that a greater degree of price and sales process transparency won’t fix the problem if you’re talking to a guest about the wrong car. Let’s face it, there is no such thing as a good deal on the wrong vehicle. I’ll address new ways to ensure your sales consultants are helping customers select the “right” car that solves their problems and satisfied their needs.

Think Big!
Brian Maxwell