Avoidable Contact #146: The real deal on dealerships in 2022

[Hagerty]

I feel sorry for anyone who never made a living, however uneasy that living might have been, by selling cars. The automobile dealership, particularly the independently owned auto dealership, was for many years one of the last authentically American places on Earth.
https://www.hagerty.com/media/opinion/avoidable-contact/avoidable-contact-146-the-real-deal-on-deale...

[Quadradeuce]

I never would have thought that buying a new car in 2019 was like hitting the lottery. $40k for a CX-9 Signature, it's essentially worth the same 50k miles later. If only GM would add Super Cruise to the Suburban, I'd be at the dealer dangling that trade-in right now...

[miata93]

Great, now I don't have to read the book. The only customers that might really have an advantage now are those who are coming off a lease with a buyout option. If they like their car and it is reliable it could be a bargain depending on the buyout price.

[Jack_Hagerty]

Don't look now, but a lot of lease agreements are being rewritten ON THE FLY to prevent buyouts. Because there's contract language in most leases permitting it.

[DogGone]

Sage advice, Jack. Thanks. I share your sympathies for those working the deals on both sides of the desk. In respect to the predicted duration of availability constraints, are your sources indicating vehicle-specific exceptions? Or are they referring to certain manufacturers as a whole or broader market segments (compact cars, etc.)? From my admittedly less knowledgeable, rather removed perspective, taking into account geopolitical and socioeconomic developments and their staggering pace this year, I'll wager that those constraints will last far longer than six months or even a year. I'm thinking several years, as disenchanting as that may be.

[Jack_Hagerty]

The announcement that the economy has been contracting under the, ahem, most competent administration in history -- well, that doesn't help matters.

This sounds political, but it's not, it's just my opinion, with some experience to back it up: The closer you are to the American Uniparty, the longer it's going to take to get production back up to normal levels. The Koreans will be there first, followed by the Japanese, followed by the Germans, followed by FCA and Ford. General Motors will be dead last.

One reason for this: Producing the EVs demanded by the Uniparty consumes a LOT of chips. The more compliance vehicles you're making, the fewer profitable vehicles you can make.

[HMV]

You had to make it political.  How unfortunate.  You represent Hagerty, and Hagerty has customers who span the full political spectrum.  It wasn’t necessary, nor was the tone of it, for the content of this piece.  Especially as it was a very good article otherwise.  And I would have said the same thing during the last administration.  Disappointing.

[win59]

did you READ Jack's reply??

[CitationMan]

If you live in in Realityville like some of us, you can look at a problem, decide what the solutions are, then make a reasonable inference as to why the solutions are being implemented or not. This process is irrespective of a person’s political affiliation, however, the end result of the solution being implemented or not can be due to political considerations.
I had a common place occurrence during the last administration you might choose to contrast to the information in the author’s article. I was able to walk into a Chevy dealer, order a brand new Corvette Grand Sport convertible with a manual transmission, along with the specific options I wanted, and get 10% off. If I didn’t want to place an order, my dealer had 50 new Corvettes in a warehouse I could have bought for an even bigger discount. My car magically appeared in my driveway 6 weeks later. I used to like that Realityville we lived in and miss it, even though I can sell my car for more than its MSRP now.

[Jack_Hagerty]

I'm old enough -- and I bet you are as well -- to remember when it was permissible to criticize the actions of a sitting President, particularly in the realm of economic and manufacturing policy. Mr. Trump was not above criticism, and neither is Mr. Biden. But this isn't about one man or even one political party. It's about a corporate-government alliance that has spent decades bullying automakers into building vehicles that nobody wants. It is about trade and environmental policies that explicitly encourage abandoning domestic suppliers in favor of overseas producers. And it is about a growing sentiment in the corporate-government-media alliance that owning a private vehicle is a moral failure, doubly so if that vehicle burns a fossil fuel. No one party has a monopoly on the above behaviors.

I assume, rightly so, that my opinions on various political "hot-button" topics are not worth discussing in these digital pages. But when the Detroit 2.5 are being explicitly pushed to keep the taps open on unwanted EVs while starving their dealers and customers of the products that would actually sell... I think that's worth discussing. I apologize for any offense it caused to you.

[limoguy]

Facts can be inconvenient.

[Geok86]

So telling the truth is political now?!?!

[Jeffreythorton]

So what are you saying? JB's "tone" is off the mark? Do you actually think the current administration is the most competent administration in history? Do you think they're competent at anything?

Personally, I don't think it should really matter where you are "across the spectrum" to simply acknowledge observable reality and state the obvious: this might possibly be the most incompetent administration in history, if only for their pretty clear track record of f-ing up everything they touch...

[BMD4800]

Lighten up, Francis.

[MoparMarq]

JB wants to be that "Big Toe".

[KeninFL]

Like I come here to get political info from a, ahem, insurance peddler.

[limoguy]

What a putz.

[BMD4800]

*an*

Putz.

[BMD4800]

Those who seek outrage will find it.

[PecosBill]

People thrust into this market, due to circumstances, have it bad right now. Don't laugh, we were maintaining our '12 Suzuki Grand Vitara (12k in bills in 10 years, just got tires and 4 KYB's) before we were blasted in the azz by a lifted CJ7, winch bumper, minimum property damage loser on tiktok who never bothered hitting the brakes 2 weeks ago.

So I'm juggling a total loss settlement-and sourcing a new ride. USAA sucks **bleep** thru a straw (their boy was cited), and there are no effing units on the ground to be had.

[Jack_Hagerty]

Note that my wife totaled our truck in SEPTEMBER and I'm just replacing it in APRIL. This despite the fact that I have every major name in the auto business in my Rolodex and I had someone to literally walk next to my truck at the plant to make sure it got built.

You might be best off finding another Grand Vitara...

[BMD4800]

Jack, this is real problem.

I see it every day. People who need a vehicle, for what ever the reason, are upside down and forced to finance that deficit into another loan, which is probably over 120% of the MSRP, which means the rates skyrocket. They are desperate, so they sign.
So the single mom, with 2 kids, a cr@p job, has a 12% loan on some worn out Camry, at 72 months term.
They are taking whatever they can get.

Shameful.

[miata93]

Check out Suzuki Grand Vitaras by subscribing to Car Gurus. I have noticed that there are a few nice ones still around especially in the Pacific northwest.

[BMD4800]

You think USSA performs fellatio through a straw? (Your words) Be grateful you weren’t blasted by the General, or any of the others.
You’re going through his carrier, why? Don’t you have your own? Laws of subrogation are quite brutal, just as policy limits. You see, USSA has a contract. Whatever the limits, that’s what they are. It could be state farm, Allstate, Liberty Bibbity, or anyone else. The limit is what it is. You know who took out and signed that policy? The vehicle owner.

You probably rolled the dice and thought either you didn’t need comp/collision, or worse felt filing against your own policy was a bad idea.

Let me share something: your carrier has a contract with you. File the claim. If the other guy is at fault, they subrogate. At THEIR expense. He had $5k CA limits? Oh well, they complete discovery, asset search, etc, get a judgement.
You file through their carrier, they pay limits, close the file. Can’t pay more, it is a binding contract. Get it?

Car worth $5,000? Carry comp/collision with a $1,000 deductible. Someone hits you, your company has 30-45 days to pay, they subrogate on your behalf. You just sit their like a lump and wait. You carry liability only, you get hosed by someone just like you.

Don’t hate the player, hate the game.

Btw, I don’t work for USAA, but I learned the laws. Full coverage, on everything. You can spend thousands trying to get a fair settlement in 1 accident.

[topside]

Hey, Jack, did you happen to work at a German car dealership in 'Frisco in the '90s ? That description of the Sales Mgr fits a certain GM I worked for closely enough I had to laugh...
Solid advice, and accurate scenarios here folks...and Jack, with your recent purchases, maybe I should reply to the next Nigerian barrister who claims to have my millions of dollars waiting, as perhaps you've done.

[Jack_Hagerty]

No sir. I worked for David Hobbs BMW, Infiniti of Columbus, and Bob Keim Ford, all in central Ohio. I also worked for Ford Credit as an analyst-and-random-taskrabbit, and for BMW Financial services in title procurement and deal review.

[golfnut53083]

Loved your article! I have been in the car business since 1976 and have seen so many different scenarios, never thought I would experience the situation we are in today. I seriously considered writing a sitcom about the never ending changes and stories that go on at a dealership. Never a shortage of material! Keep up the good work Hagerty.

[Jack_Hagerty]

Any time you want to share anecdotes or experience, we'd like to hear it!

[JSievers]

Great article. Also, Remar Sutton's book is one of the very best looks into the car selling/buying game. Thanks for letting others know about it.

[Jack_Hagerty]

I think it was most useful from 1975 to 1995. After that, Sutton's growing distance from the business led his revisions into some odd territory, especially when it came to leasing. I still like the idea of the newly undercoated 450SEL, though!

[9lbhammer]

Is there a resource you'd recommend for buying cars in the year of our Lord 2022? I'm thinking about buying a new miata. I'm in the great position of wanting it but not needing it so I can wait to avoid paying MSRP plus my first born son.

[Jack_Hagerty]

I believe there is a lot of good advice on the Web but when the car supply loosens up I might write a quick guide myself as well.

[Gary_Bechtold]

I don't miss dealership life and I was not selling cars. I will say that sales managers do seem to come up with new ways to deny their salesmen (or at least the ones they don't like) a commission or have to split it with someone. I have been waiting many months with many more to be waited it seems for my car. I work at home so I guess it's not a big deal but at the same time I have never had to wait like this ever. Selling my lease car last year did net me $10.5k so I won't complain about that.

[win59]

Great insight, Jack. I started washing cars at a dealership in 1967 and recently retired as a Mngr. many dealerships later. What a ride. Worked alongside some of the best - and worst - people ever.
You nailed it.
Again.

[espo70]

The Truth! I sold cars from 1994-2000, and at the time, I thought the advent of the internet was the beginning of the end for any real profit. 250-400 sounds amazing! Back in the day, I was lucky to make 100-150 average on a new car. And that was fighting tooth and nail. "Dealership A, offered me this price", "Whats hold back on that?", "Whadya mean my 89 Corsica is only worth 1200?", etc. A lease deal was even worse, 50-100 bucks. I was fortunate enough to get a piddly 300 a week plus 20% commission. A lot of the newer sales guys were hired on the draw system-they give you 300 a week, but you had to pay it back from any sales profit you made. Used cars and huge mark-up trucks were the only place to make any real money. The rest was in new car volume if you were lucky enough to work at a highway store with a popular brand. I worked at a Pontiac/GMC store in the heart of a small town-not exactly where the action was. Still, to this day, it was probably the most fun job I had. Or as Jack says, I'm wearing my rose colored Raybans 30 years later.

[Jack_Hagerty]

The funny thing is that I had the identical thought: "$250 for a mini deal? THAT'S AMAZING!"

But then I sat down and thought about it for a minute. The $100 mini-deal spiff I got in 1995 was more money in real terms than $250 is now. The duplex I rented for $475 a month in 1995 would cost $1800 to rent today. My health insurance costs four times what it used to. A gallon of gas is $3.89 in the Midwest instead of the $1.29 it cost me to fill up my F-150 demo in 1995.

Plus, I bet you and I both had a lot of deals that WEREN'T minis. In 1995 I had one deal on an Explorer that put $3100 in my pocket. Paid for my very modest honeymoon. Today's salespeople don't get a chance at those big hits.

[espo70]

I dont recall any that high for me, but there was a $2400 deal once on a used Suburban. What a week of decadence that was! Other than that, the occasional Pontiac spiff and free 4-head VCR got me through the dark times.

I like where you lived a lot better! In 1995, in northern NJ, I was paying $600 a month for a 1 room studio that did not include utilities, but included one psychotic ex-girlfriend. Thankfully she did not become my wife.

[Gary]

Have bought a lot of vehicles over the years but the last one blew me away. May 2021 thought about buying a new Toyota Camry hybrid. Researched models & prices and decided I would not pay more than $25000. An add came up on the computer for TrueCar so I filled it out and by the end of the day I had three prices from three local dealers. The lowest price was $3000 less than the other two and had more extras and a sunroof ( the two option packages listed for a little over $3000) so basically $6000 less, all were LE hybrids. Called the dealership to confirm price and was told they had none on the lot but this was one of three being shipped and were due next week and they sent me a copy of the invoice. Went over the next day and signed paperwork. They called me the next week car was in and I picked it up on Wednesday. No pressure no add ons. Gave them a check for the car and drove it home, great car. Price out the door $23667 plus tax and license of course, still can’t figure out how they sold it for that price

[MoparMarq]

And my neighbor wonders why I let my sisters park their old cars in my driveway. They bought new ones and didn't want to get scammed on the trade-ins. So now I have a choice of vehicles from which to purchase at a decent price, either for my soon-to-be-licensed daughter, or for myself, in the hopefully-unlikely event I get hit by a UIM.
Dealerships don't make the purchase experience pleasant, but manufacturers don't help the matter at all with what they're offering these days. Wouldn't mind a Dodge Magnum R/T. Love those wagons, but oh, wait a minute, they stopped building in 2008.

[BMD4800]

2 is 1, 1 is none.
Desperation is worst position for negotiation.

[1956meteor]

My son has been leasing an 18 Cruze that he can buyout this Sept. for 8k. The same equipped car is selling on local lots for 19-22 k with more mileage than he has on his. I am advising him to buy and drive it . He wants to buy and then sell it to make some money. I am trying to convince him he will over pay for anything he buys . This article claiming 35% mark up on used cars presently helps my argument. Thanks.

[miata93]

He will never get a better deal on a car in his life. I hope he buys it and runs the wheels off of it. Tell him to put some of his car budget into a no load market index mutual fund. That's the way to get even with dealers.

[BMD4800]

Don’t finance a depreciating asset.

That’s the real win.

[Zephyr]

I have wondered for many decades how it is possible that new autos are the only thing still being sold the same way that everything else was in 1880. Why should the price I pay depend on how good of a negotiator I am? My father was so good at wearing down salesman that more than one salesman got fired after selling him a car, roof or appliance. I did not inherit that skill, which is why I haven't bought a new car since 1973. I prefer to get a nice used one from CarMax or someone else with fixed pricing.

[Jack_Hagerty]

I think the way you're seeing this is absolutely valid, but here's another perspective: When you walk into an Apple Store and buy an iPhone, you're paying $1099 for something that was made in China for a third of that price. You're providing a massive corporation with an insane amount of profit.

When you walk into a dealership, there's usually about ten percent's worth of negotiation to be done, because most new cars have about a five percent markup and about a five percent holdback. Even paying sticker is a much fairer deal than buying anything at an Apple Store. And yet people feel miserable about it.

When I sold Fords in 1995, I would occasionally have someone say, "Why can't you sell cars the way Saturn does?" My immediate response: "We CAN! Just sign the paper and pay the sticker price. We can have you out of here in twenty minutes. That's how Saturn does it, and that's how we can do it." At which point the customer would hem and haw and say... "But I don't want to pay sticker price."

[Soggytom]

Sold new Pontiacs and GMC's in 2000- this happened EVERY DAY. Didn't help that the principal also had the local Saturn franchise.

[carelallen]

Informative article. Thanks! Comments are from another planet. Jack Baruth writes the article and Jack Hagerty replies as if the comments are directed at him. I hope most readers are smart enough to know the current market conditions have nothing to do with who is in the White House.

[Geok86]

Umm…Jack_Hagerty is Jack Baruth…and today’s situation TOTALLY has to do with the Far Leftists who are currently in control.

[OldBird]

Thanks for the informative article and your perspectives. For those of us not connected in the industry and who don't buy and sell on the regular it is useful to know what's going on out there.

One minor quibble: in your comparision of ethics, in the first example, you have an agreed upon commitment to purchase a vehicle from the dealer. Whether it is legally enforceable is besides the point - you obligated yourself, and in theory, the dealer obligated themselves, to consummate the deal. According to your piece, either party can walk away from this obligation. The only difference is that today the dealer is more likely to skip out, whereas in the past, the buyer might be more likely if they found a better deal elsewhere.

In your second examples, you walked into a situation (dealer desperate to sell, etc.) and offered them something. The dealer is under no obligation to accept. The vehicle is worth exactly what each party is willing to sign a deal for. This is not the same ethical situation as the first example. A better comparison to this example is that today you are having to pay full sticker.

[Jack_Hagerty]

"in your comparision of ethics, in the first example, you have an agreed upon commitment to purchase a vehicle from the dealer. Whether it is legally enforceable is besides the point - you obligated yourself, and in theory, the dealer obligated themselves, to consummate the deal."

I totally see where you're coming from, but don't think of it that way, because the law hasn't been written that way since the Eighties. The purchase agreement governs the TERMS of the deal, not the FACT of the deal. They can and do get rewritten on-the-fly all the time; you'd be amazed (or maybe not!) by the changes-of-heart regarding financing, aftersale equipment, and even CAR people have during the process.

During my time in the business, I'd say that only about two out of three ordered units actually got bought by the people who ordered them. Sometimes it was as simple as them changing their minds; other times, people would order a car, sign the agreement based on an appraisal of their car, then put 11,000 miles on it in 75 days.

The "not sold until rolled" laws have helped a lot of people over the past five decades. Now, the dealers can be numbered among the list of people they've helped 🙂