Will Future Car Prices be Fixed?

By Automotive Staff | October 31, 2007
If there's one aspect almost all car buyers hate is haggling with the dealers. The guys are pros in the process while most shoppers are neophytes, novices, beginners. Unfortunately, the reputation of such salespeople has taken a hit in recent years, and the car dealerships don't like the reputation. More and more dealerships are turning to no haggling; Lithia Automotive Group, for example, which has 108 stores and is the eighth largest dealership chain in the U.S., has ended haggling. Toyota has operated under a negotiation-free policy in its Scion dealerships. Market changes has affected haggling. According to Kelley Blue Book, more women are buying cars on their own and 72 percent don't want to haggle. 65 percent of car buyers -- regardless of sex -- in general don't want to haggle, period. Besides the differences in sexes is also the the generational differences. The so-called Generation Y buyer doesn't like to haggle because it takes too long. The process of buying a car takes 4 hours or more. Scion dalerships, cognizant of their customer's "impatience", say that it takes them about 45 minutes now to sell a car. The transition to no haggle hasn't been smoothed for some dealerships. Some who have tried it have found that their competition is undercutting them as far as price is concerned. But others who have stuck with such policies have found the no haggling policy saves them money. They don't have to advertise the sale of the week so advertising costs have dropped. Also, fewer sales managers are needed because there is less of a need for salespeople to get an okay for a negotiated price. And with sales managers making about $150,000 a year, those dealerships end up saving some bucks by not having them. Salespeople who work for dealerships that have a no haggling policy do better as well. Most of them are being paid an hourly wage and a bonus for selling more cars. Many make $50,000 a year. Salespeople who work on commission at dealerships that haggle make $35,000. Finally, another advantage for dealerships that offer no haggle is that there is more loyalty to the dealerships from the buyers. People come back to buy their next car. Moreover, more buyers come back to buy parts and service. Our take? There is still a great number of dealerships that haggle. So the transition has not be quick. But we guess this works out well enough. After all, there are buyers out there who believe that they can out haggle a dealership's salesperson and who believe that if they don't haggle, then they must not have gotten a good deal for their car. via BusinessWeek