Generally speaking I enjoy the whole car buying process, I find the process fascinating. I enjoy interacting with salespeople and learning what seems to work for them and more importantly what their approach is to sales - whether it be pushy, non-pushy, hard, good cop bad cop negotiators, etc. Normally, I find it engaging. This time, however, it was truly a strange almost surreal experience. I bought a car or so I thought only to have it rescinded the next day. I actually got into an argument with the dealership. How is that possible? I’ll try to distill how that happened and hopefully be able to provide some gems of learning for both you and I. Here are my key learnings and takeaways:
1. As a business you are NOT entitled to customers. I don’t care what business you run, but customers are not there to serve you and should never be treated as such. I understand there are businesses that have been successful despite this principle, but usually it is shortlived. At this particular dealership, they were particularly arrogant that they had a “hot” car that was very hard to get. Needless to say, they made it very clear that we should feel “grateful” that we were getting this car and the hard work they did to help us get it. NO!! The customer is parting with hard earned cash and should be treated graciously for taking the time to spend their cash at the dealership. Takeaway - even if you have a hot and highly desirable item, treat your customer always with respect, there will be word-of-mouth sales, and future opportunities with that customer.
2. Being transparent rather than opaque makes the transaction smoother. Most dealerships aim to fleece the customer, they’d rather trade long-term gain for short term profits. This dealership on many occasions argued that they were making nearly “nothing” on this transaction when they were charging MSRP and in fact, they argued most dealers were charging markups on top of MSRP. This was really troubling to me. Not one dealer I called asked for more than MSRP and invoice price is very transparent on the Internet. I was told I was “way off” on their margins. Sure, I might be off on their net margins, but I was pretty darn close on Gross Margins and I know average Gross Margins for most dealers is 1-2%. This particular car had a gross margin of 8%. The real margins are the add-ons and service, which makes it all the more appalling that they would go after the jugular and fleece customers up front. Once the customer discovers this, do you think they’ll ever come back? Do you think they’ll be sharing their story with everyone they know? The cost of being opaque is very high. Throughout the transaction process, we were told we needed to sign a lot of paperwork. It’s been a while since I bought a car, but it did seem like a ton of paperwork, so we’d ask questions only to be pushed - “haven’t you bought a car before? This is all standard paperwork, you don’t need to read it.” That sure doesn’t instill confidence that we’re working with reputable dealers.
3. A deal is a deal when it’s completed. Let’s get to the crazy part of this story. We spent over 45 minutes to drive to the dealership. We then spend nearly 4.5 hours at the dealership and paid our money and signed all the paperwork to buy the vehicle, with handshakes driving off the lot thinking we were done. Oh, were we wrong! They call the next day to tell us that they need a check for the amount we paid on credit card not because the credit card was declined, but because they didn’t get the deal done right the night before. This would cost us more time to drive out there both ways, get a check which we usually don’t carry around with us, and forfeit all the points and 0% interest that we get with our credit card. I was told we needed to do this because they had done so much for us and again they were “entitled” to inconvenience us even after the deal was done because of all the hard work they had done. Hey, I understand you needed to do some work to close the deal, but I also had to earn the cash to pay you for the vehicle. Also, have you ever heard of a dealer asking for their car back after it was sold? Totally surreal. Needless to say, that didn’t sit well with me and they didn’t like the fact that I wasn’t going to just blindly agree with their approach.
4. Take your time on larger deals, don’t rush it. Get comfortable with people you are going to do business with, make them earn your trust, respect and business. In Japan, often times deals are done after several business meetings over long dinners and cocktails. Our venture firm knew my co-founder and I for several years before funding us. I had bells ringing in my head when the General Sales Manager called me after the deal was done saying that he didn’t even know this deal was done which was untrue - I had received a call from the salesperson stating very specifically this deal was approved by the General Sales Manager. Several inconsistencies also ranged from potential liability that I would receive vs. all the liability they would receive. I had originally asked for my deposit back only to find out it was never returned and was applied to a new vehicle that arrived later (should have been a red flag, but I wanted the car). Do your diligence and if the other party loses your trust in the process, it’s best to move on. In the end, they came and picked up the car and we walked away. It was best for us and we will never do business with them again.
5. Think Long-Term. No need to beat a dead horse, but it’s an easy trap to fall into - closing the deal at all costs without regard to the means. The brands and retailers that have longevity generally have a long-term view of the customer even if the initial sale or return may be a loss-leader. They work hard to make sure the customer is happy sacrificing a couple of points for long-term loyalty, great word-of-mouth referrals, and a sustainable business. This dealership not only lost me as a first-time customer which is costly because the cost of getting 1 person through the door is extremely expensive, but will ultimately lead to the loss of future sales is just way too costly. If someone doesn’t convert on that first visit, that’s fine, but you can ill-afford to have an unpleasant experience for them. We will be sharing about our unpleasant experience during the sales process and the highly unusual after-sales experience for years to come.
6. Don’t buy a hot new car. Have patience. Enough said.
I understand that there are reputable dealers out there and I hope they are rewarded well in the long-term through this difficult economy - this is not meant to be a blind rant on dealerships. I’ve also never run a dealership so I don’t pretend to understand all the stress that they must go through, so this may be an isolated incident. Nevertheless, as in life, ridiculous stories such as these are learning opportunities. I’ve picked up some lessons through the lens of the consumer of how we should run our businesses. Let me know your thoughts and your crazy car buying stories!
Hi Andy,
I can only respond with shock and awe that a business would behave in such an antiquated and short-sighted way, not only in this economy but in this era of social media.
It used to be that a dissatisfied customer would tell a few of their closest friends about an unpleasant buying experience; today that person may tell their story to thousands of (formerly) potential customers of that business.
The GSM’s attitude is particularly telling. As they say in many leadership trainings, “This fish stinks from the head.”
Laurie Lamoureux
Out of the Box Unpacking Service
Bellevue, WA
Weird that you mention Toyota of Kirkland in the tag, but not the article… I’d call em out, suckas!
What kind of car were you trying to get?
I’ve bought two vehicles from Toyota of Seattle in Belltown. They have good, relatively low-pressure service. Of course, both times I went in there saying I was going to buy through the Costco program and had financing through my credit union, so there wasn’t really any haggling to be done.
I love the timing of your story. Like yourself I was also in the process of purchasing a new car. With the government rebate still being offered, the incentive for me to trade in my gas guzzler and get a more fuel efficient car was good.
I visited two dealerships and unfortunately, my situation adds another kink. I live in an isolated region where there is only one dealer of any particular brand. Some of the power automatically falls with the dealer, because if you want the car you’re going to have to play ball. I myself hate the negotiating process, not because I’m not firm or assertive, but because it’s frustrating. I feel like I’m being treated like a child where math and calculations are beyond me. Commenting on your point number 2, I had a deal give me the msrp price and the proceed to add on taxes and fees. I asked him to break it down for me so I knew the exact amount because to my recollection I did a little math at home, and my amount was significantly lower than his. He beat around the bush with his response, from “oh it’s complicated” or “the finance manager can explain it, but he’s not here today”. I find this strategy is one of their most frequently used. This is also tied into the wear you down strategy. Kudos to your staying power, but as you mentioned you drove 45 mins to the deal and spent 4-5 hrs there. For the average person that’s enough to break them down and have them agree to almost any terms that the dealer presents them. I myself spent 2 hrs, but walked away because I didn’t feel comfortable with the purchase, though I have to admit I really wanted the car and I was on the edge. The transparency issue is the biggest for me.
To illustrate, I was so put off by my experience and because I only have 1 dealer of that brand here. I didn’t know where to go to try and re-negotiate. I can’t just walk back into the same dealer the next day and find another salesperson. The GSM is still the same. So fortunately, the dealer had an internet sales department and I contacted them. Selected the same model, trim and color and proceeded to ask the MSRP and fees. The managed responded within the day and provided all the details I was asking for. It took me 15 mins and though no negotiation is ever truly wasteful because you can learn from everything. I wished I had started this route and used the quote as leverage, and would you know it. Even though the internet sales manager has never seen me…. she was able to undercut her floor sales people by almost $300. I haven’t bought a car yet, but I got a better price even though the GSM said his was the lowest ever. Even one small little lie like that destroys the working relationship, because I’ll be hard pressed to believe anything that comes out of his mouth again. “Oh, we’ll do this, we’ll fix that.”
Although I’m truly upset with my experience, I know that now everyone is able to walk away. Some do fall for those opaque sales techniques and the flattery and the feeling of obligation to make a deal happen. It really does give car dealers (not all, but some) a bad name.
I really hope that works out for you. Buying a car should be a joy, and sometimes I feel like it would just bring me a sense of relief to be done with it.
Car dealers will never change.
I can’t think of a single Toyota that would qualify as a “hot car”… unless of course the dealer’s definition of hot is bland and reliable.
Favorite time going to a car dealership to by a used car (sorry, “Certified Pre-Owned”):
Went to a Jaguar dealership and were discussing the car, and other cars I was interested in. I was looking at a few Nissan models and Toyotas at the time. He told me: “See, the difference between buying a Jaguar and a Japanese car is that 5 years from now you’ll still have a Jaguar whereas if you get a Nissan, 5 years from now you’ll just have a poor quality old Japanese car.”
I’m Japanese. Learn your customer before you trash talk their interests. I ended up leasing a Nissan Altima, which I loved.
Five years ago, my company gave me a truck allowance and told me to go buy a truck for work. So, I walked into our local Ford dealer and tried to buy an F-150. I told them I had a down payment and was receiving a truck allowance, so I had to buy a truck this weekend. In other words, I was a for-sure sale.
After two and a half hours of being treated like a moron, watching a good-cop bad-cop routine and then having the salesperson act insulted by my fair offer, I finally got up and walked out.
It’s bizarre watching car salespeople perform these silly little skits and then act like you are clueless about it. All I really wanted was to buy a truck and drive away. Instead, I had to leave with my dignity in tact. And, car dealers wonder why they are going out of business.
The next day, I bought the exact truck I wanted for half as much on AutoTrader. It was used, but it only had 39K miles on it. I still have the truck and will never shop at that dealer again, not even for parts or service.
Interesting story.
I bought a Toyota vehicle about a year ago. I negotiated with Toyota dealers at Bellevue, Kirkland, Downtown Seattle, Lake City, and Burien.
I did tons of research. Here is a summary of what I learned about buying brand new Toyota in the greater Seattle area.
1) If you search purchase price on Edmunds, you’ll find that the average buying price in Seattle area tend to be higher than California, or most parts of the countries. I don’t know why, but my guess is that there’re fewer dealerships in Seattle area. For example, for the vehicle I bought, if you buy it at Maryland, you can get one for $800 below invoice.
2) I want to make it very clear — even at Invoice price, dealers are making money — this is because there is a “cash back” given by manufacturers. Also, as part of the Invoice price, you might see things such as “storage cost” or other things, which is questionable. So, even at Invoice price, the dealer will make a profit.
3) Given the current economy, for most Toyota cars, I’d start with $500 below Invoice as my initial offer. I know it sounds crazy, but at this time of the year (July/August), you will be surprised by what dealers might agree to. For a $28K vehicle, dealer will still make 2-3% profits if it’s still $500 below invoice. I know it sounds unbelievable, but you can find detailed Excel spreadsheet on the Internet that give you the dealer’s cost structure.
4) Lack City Toyota is the biggest one, and has the most selections. If you’re looking for a hybrid vehicle, I would go there first because they simply have more cars. If you need to be put on a waiting list, you get a better chance to get off the waiting list.
5) Don’t believe in the “no hassle” environment at Downtown Seattle Toyota. They have a very small lot, very limited selection, and the sales guys/gals still have to make money. Their price will end up higher than a traditional dealership.
6) If you can wait, start your negotiation in beginning of the month, but wait until 29th or 30th of the month. It really works — the sales guys will give in.
7) If you don’t want to deal with car sales people, try carsdirect.com — you can order a car online, and they’ll deliver to your house. Their price is not the lowest, but it’s pretty good.
I’ve heard that cars are cheaper in California because many cars are literally shipped, and being on the coast cuts down the transportation cost. I don’t know if that’s true, but that’s what I heard.
My friend and I went to a dealership. We test drove. We did the price negotiation thing. We spent a few hours there. They even brought the car out front and said if we agreed to the deal, we would just finish the paperwork and take it home right then. But we walked. This was pretty early in the process. I’ve contacted dealerships but not all replies are in yet. Their price was not the highest, but since I am still waiting for other replies, I walked. I just wasn’t comfortable buying a car on pretty much the first price offered.
Afterwards, my friend and I called and emailed around. There are a few that gives replies like “come in and take a look and we’ll talk”. We basically just ignored those. Most of the offers we did get, though, are on par or lower than what the dealership we visited offered. I think when you are doing the communications online, it’s obvious that you are shopping around and they are more likely to give you a more competitive price. We also looked up the prices on CarsDirect.com, which was lower. We started using that as a bargaining chip to ask if dealerships were willing to match the price. Two did.
I ended up getting the car $200 below invoice. They said they are selling it at a loss for sales numbers, but I don’t really believe them (I am sure there are other incentives, so as a whole, they are probably not selling at a loss although the paper says so). Still, I could’ve something like two or three more grands if I didn’t shop around.
Interesting experience, I went ahead and added a page on BuyersVote.com for it here:
http://buyersvote.com/categories/car-dealerships-in-seattle-wa-reviews
The internet has made it easier than ever to call these people out. Hopefully we’ll see bad companies like this disappear as word spreads!
Hi Andy,
Buying a car in Japan is an amazing experience. My salesman brought the car to test drive to my house, I didn’t need to go to the dealer.
Prices are very transparent in Japan. I learned that the maximum any dealership discounts was 70,000 yen (roughly $700) so with some extras I wanted, I told him to give me $1000 off and I would buy it now.
The salesman went outside and called his manager and they said they would give the $1000 discount.
Every time, the car needs maintenance or a check up the dealer comes and picks up the car and drops off a loaner for the day. Our salesman has come by a couple of times with newer model vehicles to test drive, but we don’t really need a new car.
However, I guarantee that if I ever buy another car in Japan it will be from the same dealership and the same salesman. This is one of many reasons Japanese car companies are so successful. It is too bad the American dealers don’t understand this level of service.
OMG my head would have exploded. I cannot stand the car buying experience and have never trusted dealerships.
Also just an FYI but a dealership in Northern Colorado here called “Iron Mountain” closed down just recently. Well the state shut them down for not paying off liens on autos they where taking in on trade…beware!
Funny thing is that you would hear their commercials on the radio all the time. About how they were a reputable dealer and how they wanted to make and honest deal and never treat the customer bad…blah…blah…blah.
I think dealerships are getting what they deserve right now.
For some reason, I always subject myself to the pain of chasing the “hit car.” I wound-yp purchasing a 2010 Prius Model V Tech Package from Bob Bridge Toyota in Renton before the tax subsidy ended and they were great.
But before I landed there, I called six different Toyota dealers — including Toyota of Kirkland — and told them what I wanted and resisted the pitch that my request was impossible. (Great advice, Andy, on surfing these sleazebags!) Dale @ Bob Bridge was the only guy who followed-up even once and he told me that Toyota had forbidden “Market Adjustment” pricing above sticker.
So I guess my experience with Toyota waa a lot of laziness but a stand-up guy at the end. Ford of Kirkland, on the other hand, threw up all kinds of warning flags with a $10k (!) markup on o a fugly green 2010 Ford Fusion Hybrid which, when challenged, they said they were doing “because they could on a hot car” and because their sales “had sucked for 6 months” and they had to pay the bills. Nice!
As an ex-Detroit native, the attitude I saw @ the Ford dealer is exactly what killed Motor City. Detroit can invest a billion dollars in a new technology and model, only to have the dealer network deliver a big FAIL.
I also am a reader of contracts LOL.
When we refinanced our house a few years ago, the woman coming over said it would only take a few minutes. To her horror I sat down in front of her for about three hours and read the few hundred pages of documents I was being asked to sign.
One of the great realizations I had on contracts presented to me, that I KNOW you are aware of, is no matter how official they look, there is nothing to stop you from crossing out lines, initialing them, and making that part of the deal.
My Toyota by the way, my 91 Land Cruiser which I use as my surfing car, just hit 305,000 miles on it. I can’t be happier with the car, and with a very minor amount of maintenance just keeps rolling.
Car Dealers are the worst of them all!
You would have to take the help of car buying guides they contain every information. there are some companies like http://www.fourwheelreviews.com, providing the whole car industry information.