ANATOMY OF A CAR DEALERSHIP RIP-OFF
You've short-listed some new cars for sale. Can you trust quoted new car prices at the dealership? This story really tells me how essential it is to do your homework before setting foot in a new car dealership. It also tells me you should not view a car dealer as an impartial source of information about your next new car. If you go in to a car dealer uninformed, you might as well be the lamb at the abattoir, following the 'bell wether' up the ramp - especially if you’re a woman flying solo.
A couple of weeks ago I reported on a delightful lady named Michaella, who wanted help deciding between a Land Rover Discovery Sport and a Hyundai Santa Fe. So we did the objective analysis, which you can see here >>.
That analysis came down pretty convincingly in favour of the Hyundai Santa Fe - the Land Rover Discovery Sport doesn't measure up on value. When I posted that report, I flicked Michaella an update, just to keep her in the loop. She got back to me, unexpectedly, with the full story of what happened to her at the Land Rover new car dealership, and she sent me the documents that corroborate it. My jaw just hit the floor. I could not believe it. (Scroll down for a cut/paste of Michaella's documentation.)
New car dealers love to bitch and moan about how tough it is, today, selling cars. And yet the Palazzo Versace during a dealer conference still has the highest density of ill-fitting Armani in the entire first world. Drug dealers are close, but their Armani is generally first rate. They certainly know how to wear it, whereas a room full of car dealers remains a monument to human ugliness. Drug dealers are at least authentically criminal. They don’t hide behind some trumped-up pretext of underlying respectability.
THE OUTRAGEOUS CAR DEALER QUOTE
Land Rover’s marketing had done the job. Michaella wanted a new Land Rover Discovery Sport. It was a done deal. The rest should be history. So Michaella trotted off to her local Land Rover dealer in Sydney. She wanted a Discovery Sport TD4 SE auto, with seven seats, grey, and with that ridiculous glass roof that doesn’t even open. (Nice engineering touch there, Land Rover.)
Recommended retail price on that new Discovery Sport: Almost $61,000. (That’s not including on-road costs.)
The scumbag selling Michaella this car crunches his numbers, and hits Michaella with a quoted drive-away price of $78,500. Unbelievable.
Thankfully, Michaella elected not to proceed. But it makes me wonder: In what universe is it reasonable, honest, ethical - or even just outwardly plausible - for a car that’s listed at just over $60,000 to be a commercially defensible drive-away proposition at just under $80,000? How exactly does that work?
WHAT'S A FAIR PRICE ANYWAY?
I asked myself: Do all premium car makers try to squeeze in a lazy $20k on top? So I clicked across to Mercedes-Benz's Australian website. I found one of their cars online with the same recommended retail price. It’s the base-model C-Class pus-box that runs and hides in the corner every time it sees the skin on a rice custard.
Let’s not forget that the boys from Benz are pretty good at extracting money from customers under tenuous pretenses. But even the hallowed three-pointed star - formerly, in my mind, the grand, high poobah of trying it on, financially - seems to think a reasonable figure for driving away with a $61,000 recommended retail price, is about $67,000.
DEALER DELIVERY: THE BIGGEST RIP-OFF
You can break down these Mercedes-Benz costs easily - they're right under your nose. You can’t argue the statutory charges. They’re fixed by law. Rego and stamp duty. Call it three-and-a-half grand. But dealer delivery - that’s interesting. And by ‘interesting’ I mean: an institutionalised, industry-wide, unjustifiable rip-off.
Here’s what you’re actually paying for: fit the rego plates, detail the car, check the fluids and fill up the petrol tank. At Benz, that’ll be $2500. Seems expensive. They don’t even deliver the car; you come in and pick it up. So even the name is a falsity.
But Mercedes-Benz’s already extortionate $2500 recommended delivery fee appears to be holding an empty sack in comparison to this particular Land Rover dealer, whose recommended delivery fee was - wait for it - $6999. If I was Land Rover’s marketing manager: a) I’d kill myself, and b) I would be beyond livid that any dealer had the audacity to undermine so completely my efforts to make that vehicle seem even vestigially attractive.
Michaella pressed the dealer on cost. Here’s the understatement of the year response, right, from snake-boy back at the dealership (Scroll down for the unedited version):
I don't know about you, but I interpret that to mean: Aren’t you lucky I’m just bending you over the desk here at Land Rover, with no lubrication? Because if you were over at Porsche right now you’d be copping all of this, plus the hot wax and the ants.
It’s playground stuff, and the 'logic' (if that's the right word) is breathtaking: ‘We’re arseholes, but they’re even bigger arseholes than us. So that makes us much nicer than you first thought. Right?’ Nobel prize for philosophy, anyone?
Seven grand - just for the plates, the detail and a tank of fuel. Absurd. And even that doesn’t fully explain the incredible $12,000 total disparity between the drive-away price of a $61,000rrp Mercedes-Benz and a notionally $61,000rrp Land Rover. That’s masochism writ large - and its was offered to Michaella, clearly, by a sadist.
Michaella was way too diplomatic, in my view. How exactly is this behaviour by them supposed to help you form a relationship with the brand?
Just to be perfectly clear. One of the biggest problems car companies face is the commercial behaviour of the dealer network. Dealers are generally separate businesses with a franchise, so the ability of the parent company to control dealership practices first implemented by the Roman Empire, then by Hitler, and later by the Mafia is actually very limited. It's perfectly legal for the dealer to sell you the Discovery Sport for almost $80,000 - but if the world were fair it would be a crime for you to be dumb enough to buy it at that.
Land Rover (the company, not the dealership) has its own problems - the Discovery Sport is definitely not the poster boy for value in medium SUVs. It’s lousy value, objectively, at $67,000 drive-away. At just under $80 grand: Why even bother importing it? Or turning on the lights in the factory?
Let’s not forget: that Land Rover dealership would be walking away with a very tidy profit at $67 grand, drive-away. In fact, that’s the maximum anyone should ever pay for that car - there’s always room for negotiation built into the price. If you can’t get a few thousand dollars off, it’s a complete free kick for the dealership.
And here's how I get from $67,000 to $63,000: Let's slash $1000 from the $2500 dealer delivery fee. We're down to $66,000. If Japanese car companies like Mazda can offer premium paint as a no-cost option, then I'm tipping Land Rover can do it for free as well - so let's not be greedy, and bargain that down by $1000 as well: $65,000. That's all entirely fair - just eliminating unfair fees and costs in the price. Shoot for a five per cent discount on that, concede two per cent in the negotiation, and you're down to $63,000: voila!
Dealerships comporting themselves like this one, in the manner of Mahmoud Ahmadinejad - are why buying a new car still sucks for almost everyone in the market now.You need to have a finely tuned bullshit detector, and the capacity to act as a very effective advocate for your own self-interest. Or just use a good broker, who will do all of that for you, and ensure the lowest price.
In the 21st Century, especially if you’re a woman, buying a new car is terribly stressful, always unpleasant and often repulsive. At its extreme, like this, it’s a violation. But it need not be this way. Cars are really just commodities. Dealers don’t add any value. Dealer A, Dealer B - who cares? They’re just a place where you buy a car. The dealership is therefore nothing more than a glorified vending machine.
Watch my video on how to beat a car dealer >>
In this commercial environment, the only thing that matters is the price. And the only effective way to get that down is to get different dealers competing for your business. Increase supply, relative to your demand. Economics 101: do that, and the price drops. The obvious question is: What have you got to lose? (In Michaella’s case, the answer is: about 15 grand.) So, if you’d prefer to be several thousand dollars in front, just click the red link immediately below, or contact me here >>
MICHAELLA'S FOLLOW-UP DOCUMENTATION
After reading this post on Discovery Sport -vs- Santa Fe >> Michaella sent me this information:
Oh thank you so much! I really enjoyed receiving your email response and this video report is just brilliant. I was laughing my head off as your commentary mirrored much of my own experience after visiting [dealership name withheld] on Thursday last week for the mid-range Land Rover Disco Sport, the price ending up to be over $78K. Start laughing!
This final figure of $78.5K was for the TD4 SE, with automatic, panoramic fixed roof, grey paint and 5/2 seating as the only extras. I couldn't believe the mid-$5OK car ended up just under $8OK. Honestly, the crap I was told was rather outstanding, including a $6999 Dealer Delivery fee for the Discovery Sport. I couldn't help but bite back and the conversation is attached in the word document for your amusement.
I pressed for a Corporate Discount saying I worked in [name withheld], and hoping that he'd change his tune if he knew I was in the industry and could potentially know the tricks of the trade [I don't, by the way]. But he rang back to say he'd done a brilliant job and was able to get me the car for just shy of $7OK. Still a long way from the mid $5OKs! And still being majorly taken advantage of... wondering if it is because I'm a female???
In discussion with your broker (thank you) on Friday, he confirmed that he'd recently he'd arranged a top of the range Disco Sport HSE for a client, with all the bells and whistles for $71K, so I knew this sales guy was telling some huge porkers. Your broker also advised dealer delivery should not be more than $29OO - that's a little different to $6999.
I couldn't resist but enjoy politely advising the Land Rover guy that I knew he was being a shyster and, well, the email response says it all... The comparison to a Porsche is hilarious! And this sales guy also provided me with a tutorial on brokers and how dodgy they are apparently. Pot, Kettle, Black!!!!!
Thanks to this experience and thanks to your report, I wouldn't touch this Disco Sport with a barge pole now. And I feel that dealerships like this one should be shot!! $78.5K for this car is just ludicrous.
Thank you for your assistance, I'm going off to test drive the Hyundi Sante Fe very soon and will be back in contact with the brokers! And if you have any cheaper seven-seater SUVs to recommend please don't hesitate to send them through. Thanks again!
WHAT THE DEALERSHIP SAID
Sent: Friday, 27 March 2015 4:00 PM
I have spoken with the work contacts today and they have advised they can get a much better deal than what we have discussed. A broker has advised me that he ordered the higher model SD4 HSE for $71,500 with all the bells and whistles and included dealer delivery, which he said should be $2900 at the most.
He said without a discount the cost of the TD4 SE auto should be $65,497 and I can see on Carsales (attached) that the car that I was after is listed at $63,256 drive away (excluding govt costs, which from memory were just over $1,000). This is a long way from your quote over $78,000! And also a long way away from your corporate rate of just under $70k.
So thank you for meeting with me yesterday but I think I will be looking at alternative opportunities for purchasing this car, if I do indeed decide to buy.
On 27 Mar 2015, at 5:31 pm
FROM THE DEALERSHIP
I used to do brokerage for a company called [name withheld] before I took this roll. I am very aware as to how they operate. Putting aside the RRP shown to you yesterday the figures that were presented to you correlate with the latter figure I presented to you. $65,497 plus your roof/$1890 plus 5+2 seating/$2089 equals $69,479.
Corporate get a discount of $5000 and free servicing for three years. We do have a dealer delivery that is high; it is quite standard across Land Rover. To give you an idea the Porsche Macaan has a dealer delivery of $12,000! (I know that I am taking apples with oranges )
I do not know exactly what the broker has told you how he gets paid but most brokers 'sell' you the car at a higher price then get the dealerships to quote them a lower price. You pay the dealer the whole amount and post delivery the broker invoices the dealership for the difference.
Anyways you are more than welcome to go any way you want if you choose to purchase the vehicle but I did want to clear things up and hopefully give you an insight into how we operate.
Hopefully you do not think I was trying to be dishonest.
Thanks [name withheld], but it's confusing to me as your top of the range Range Rover is nearly $350k drive away and is clearly listed for NSW on your website at $3500 dealer delivery charges and the top Land Rover is quoted at $2500 dealer delivery on your website, so there is a questionable gap to the $6999 quoted to me - and therefore the Porsche comparison isn't the concern, it's to your own brand.
If the corporate rate is indeed $5000 off, the $69,479 then it's not 'just under $70k' as you mentioned, it's well worth saying it's just under $65,000.
Appreciate the new figures you have quoted which are more in line with what I had anticipated.