Mercedes-Benz Discounts are Dead: Price Negotiating Terminated from 2022
Mercedes-Benz Australia says your ability to negotiate a better price is dead. Here’s why the agency retail model is bad for consumers, but even worse for brands dumb enough to try it on...
BMW Australia and Audi Australia will be celebrating into the new year, thanks to the gift MercedesBenz has handed them.
From January 1st, 2022, Mercedes-Benz Australia will eliminate new-car discounts and customer negotiation, thereby destroying the proven, functional dealership business model.
You won’t even need to call them a ‘dealer-ship’, because no deals will be struck. It’s a brazen effort to bend the customer over - that’s you - even harder, from 2022 onward.
So, naturally, Dealers sue Mercedes-Benz for $650 Million in Goodwill Destruction Damages >>
The backstory here is that car dealers are generally franchises, like McDonald’s or Baker’s Delight. They fly the corporate flag, but they’re not actually part of the company, so they compete with each other for your business. The competition drives the price down and keeps the market healthy.
Dealers buy their new cars from the car company, and once they own those vehicles, they’re under significant pressure to sell them, because the interest costs a bomb. That’s motivation, which is good for you, if you know the game and understand how to play it. Even if you don’t, at least, it still gives you the chance to learn how to beat a dealer, which is my thing >>
Mercedes-Benz Australia’s dealer franchise agreements expire at the end of this year, and they won’t be renewed in their current form. Instead, the Benz lair will force dealers to move to a so-called ‘agency’ model, which is a term you’ll hear a lot in coming months, so here’s what it means.
Wanna pay full price on a Benz from 2022? Or would you rather haggle on getting a GLC AMG for under 200K?
Dealers will no longer own the new cars in stock. Mercedes-Benz Australia will own them - right up to the point where misguided, ignorant, unsuspecting individuals such as you actually buy them. This doesn’t include used cars or demonstrators.)
Instead of the dealer earning a profit on each sale, being the margin between what they paid and what they sell it to you for, dealers just get paid a fee from head office - a commission, basically. There will be no negotiation on the price: it’s fixed. (In the same way Luxury Car Tax is non-negotiable >>)
Incidentally, it would be illegal for Mercedes to mandate fixed pricing under the current ‘independent franchise’ model, or for a bunch of dealers to collude in the background to fix the pricing, so at the very least, this is a pretty neat (but still ethically bankrupt) way to sidestep existing anti ‘price fixing’ legislation.
It’s not illegal to do this, just to be clear. Mercedes Australia owns the cars you buy, from 2022. They can sell them at whatever price they want. They know there will be sufficient rich, ignorant Aussies blinded by the badge, prepared to hand over any sum, no matter how outrageous, just to be seen driving a Benz.
Mercedes-Benz is, among carmakers, what I am, among motoring so-called ‘journalists’. A cunning bastard.
That’s an excerpt from an official email, sent to clients from Angus Young and Ben Haywood, the dualling dealer principals of Mercedes-Benz Toowong, in Brisbane.
Citing “Access to the national fleet pool” and “consistent pricing” is an interesting choice of words. Who doesn’t want that? Answer: Anyone who wants to negotiate a discount, including consumers like you.
Unfortunately, they have more to say in defence of head office, probably because they’ve been instructed to, or they know what’s good for them, contractually.
I think we’re getting warm now. Don’t you? We’re getting closer to the truth behind why they’re really doing this and what the outcome will actually mean for consumers in the real world - y’know, on the showroom floor, AKA ‘the kill zone’.
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HOW THE FIXED-PRICE AGENCY MODEL WORKS
What does this mean if you’re desperate to get yourself into a Mercedes, for some self-destructive reason? Of course, you need to get in quick, before you miss out.
Now, this is just my interpretation, but here’s a dealership telling its customers that a worse deal will be a dependable certainty in 2022 and beyond. That’s what this is really all about.
And the only way you can avoid it, is to buy one now and get it quick.
Horst Von Sanden, pictured here with what I’m reliably informed is his happy face, is the chief managing director dude of Mercedes-Benz Australia. He was tasked with selling the virtues of this new arrangement to some of the nation’s finest political dickheads at a recent senate enquiry into whether carmakers are entitled to do such things to their dealers.
I think they’ve been limited to certain tactics, but then that nasty business with Holden and Honda happened; carmakers treating dealers the way dealers treated customers. It was Inception, only roles reversed.
I suggest you read into Professor Harry G Frankfurt’s definitive essay ‘On Bullshit’, because what’s coming up is, in my personal opinion, is ‘export grade’.
According to Horst Von Saddened, the virtue of this model for you is:
Get on with it, Horst.
A “level of confidence” is an interesting way to spin it. So, let’s just decipher this, and cut to the chase.
To make you feel better, from the 1st of January, they’re going to ‘level the playing field’ by offering everyone the same, worst-possible high price. The cure for disappointment is equality, apparently. Offer everyone the same equally maximum disappointing price, which is only what the shittest negotiator on the planet would pay, prior to January 1.
Now sure, some consumers are poor negotiators and just pay whatever number they see without ever questioning whether it could be a smaller figure. Some of you might be adverse to even the remotest form of conflict and pay just to avoid the mere anxiety of confrontation.
But that disappointing experience of the few should not be the way for everyone.
This is perhaps the most Orwellian approach to overcoming disappointment and offering parity on price, that I can imagine. Well done, Mercedes-Benz.
It’s hard to grapple with the logic. Some people have had a disappointing experience in the past, negotiating with dealers, apparently, so Mercedes plans to eliminate all future bad experiences by making bad experiences absolute. Okay, the price sucked, but at least we all got extorted, equally. That German rationalism.
Respect for being able to say this with a straight face, and conviction, in parliament, Horst.
Apparently, Mercedes-Benz Australia cited (let’s call it) ‘research’ for Horst to regurgitate in his senate submission, which quoted (let’s call it) ‘data’ to the effect that 60 per cent of people want a haggle-free car buying experience. We all want something.
The point I’m making is: We all want something whimsically out of touch with reality.
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Obviously, this 60 per cent claim is not the same thing as ‘60 per cent of people want a haggle-free buying experience if it also means paying the worst possible price’. But let’s overlook that pesky detail.
It means, by definition, mathematically, 40 per cent of people are okay with, or indifferent to, negotiating over a new car. This means roughly 12,000 of the roughly 30,000 Mercedes Australia sales transactions in 2020 involved a person who was okay with negotiating the price, in the way that they’re probably not okay with the future price being set too high.
That’s a big chunk of the market to get offside - 40 per cent. But it gets worse, of course. I’m told that if you drop in to the Benz dealer near work, they’re not going to be that motivated to assist you because there’s going to be a strict protocol of each dealer only selling into its primary market area.
So unless you live close to that dealer, he’s really not going to fight for your sale if you’re from across town. Basically, freedom of choice, concerning which dealer you use, is essentially also dead because of this new agency model. It’s quite anti-competitive and anti-consumer in this regard, so if you want to support your local Benz dealer because, maybe you have a friend or relative employed there, your business is redundant.
About the only thing you’ll be negotiating is the trade-in. And that’s always skewed in the dealer’s favour because that’s how it works.
CONCLUSION: DON’T BUY A MERCEDES-BENZ IN AUSTRALIA…
Basically, my default position on Mercedes, for years, has been: Don’t buy one.
They’re beyond terrible at customer support, and this is generally a ‘head office’ thing, not a dealer thing. Head office seems to think consumer law doesn’t apply to Mercedes-Benzes, and only to toasters and Mazdas. That hasn’t changed.
Nor have the gag orders, the third-rate technology under the hood (that Command Online fiasco with Microsoft XP >>), the AWD ‘crabbing’ fiasco - suggesting it’s an ‘operational characteristic, not a defect - it never ends.
The Jury’s in. Buying a Mercedes-Benz in Australia is a crazy-brave risk for consumers to take, and that will not change.
I’d suggest, BMW, for example, is a competitor that is functionally identical and line-ball on price in practically every market niche where Mercedes plays.
An M3 and a C 63 AMG are both gorgeous and both awesome. But BMW is substantially less philosophically dangerous to buy a car from, when it comes to resolving legitimate in-service problems. Same goes for Lexus versus Mercedes, which is why I also recommend that brand.
And in 2022, you’ll only be able to negotiate a fairer price on BMW and Lexus, not Mercedes-Benz. So why would you bother with a Benz?
As I see it, Mercedes-Benz Australia has just handed 12,000 of its customers a solid-gold reason to visit their local BMW or Lexus dealer at trade-in time. That’s a big chunk of the competition to motivate to shop elsewhere. It’s a bold plan that sounded really good in the boardroom, I bet, as an attempt to bone a few dealers and skim more of the cream in-house.
Mercedes-Benz HQ, in Stuttgart, is so convinced that this is the future of automotive retailing that they’re rolling it out in Australia, South Africa and Sweden - markets that really don’t matter, basically - so that if it all goes wrong in due course, it won’t be a big deal.
What do you think, as a consumer? Is the upcoming Mercedes Shit Price Guarantee enough to stop you from buying one? Is it really an example of a commercially healthier environment to ensure that everyone pays the highest possible price henceforth?
And do you think the ACCC, and by extension our federal politicians, are asleep at the wheel for even allowing this quasi price-fixing bullshit to go ahead?
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