Car buyers fare better with no-haggle pricing

SUNDAY OUTLOOK

October 16, 1994|By Ted Shelsby

The Justice Department reportedly is looking into the increasingly popular practice of no-haggle selling by car dealers, including whether some may be engaging in price-fixing by the manufacturers and dealers, or perhaps even among dealers themselves.

4 Is no-haggle pricing of cars good for consumers?

Peter Brown

Editor, Automotive News

The answer is yes for the great majority of consumers. There is a strong correlation in the car business between people who pay the listed price and know they are paying the same as everybody else and satisfaction.

If you look at the individual car dealers that have no-haggling pricing, their prices tend to be quite competitive.

Might you be able to go someplace else and save 50 bucks? Yeah, you might, but is it worth it?

Once you eliminate the mind-set that the buying process is a battle of wits between the dealer and the consumer, in general the whole dealership seems to run better.

Dealers begin to serve their customers better. The customer is not the enemy. In the sales process you can talk about the character of the car rather than go through that goofy dance on price. And when it comes to service, the customer is more of a partner than this adversarial person who came out of the haggling process.

A no-haggle dealer has to be really in tune with what people are paying for cars in the market place, and if the dealer is not at the low end, they are not going to get the business.

The tough negotiator, the lawyer who loves this adversarial relationship, may beat the no-haggle price, but is it worth it?

Doris Ehlers

Account director, J.D. Power and Associates

In setting up no-haggle pricing, auto manufacturers are doing more than just slapping a price on their cars.

They are looking at the auto industry the way Baskin-Robbins looked at the ice cream industry and in the long run this could benefit car buyers.

Baskin Robins figured out a long time ago that 80 percent of people who come in to buy ice cream still buy chocolate, vanilla and strawberry. The auto industry is seeing 80 percent of the car buyers purchase cars that are equipped a certain way and come in certain colors.

With that information in hand, the manufacturers can streamline their production process, produce cars more efficiently, price them competitively, and pass the savings on to customers.

zTC I think the manufacturers that are experimenting with no-haggle pricing are trying to give the majority of consumers some rational pricing system. Our studies indicate that the vast majority -- 78 percent -- of car buyers dislike the haggling process. They are also confused by all the rebates and all the different deals being offered in negotiations.

I think no-haggle pricing can be good for consumers, because it puts the pressure of establishing market value where it belongs.

Instead of it being on the consumer, who buys a car every four or five years, it puts the burden of pricing on the experts, the auto manufacturers and the dealers.

They are the ones that do this for a living. Why should a consumer suddenly have to be so knowledgeable. If I'm a doctor, why do I suddenly have have to be an auto expert when I go in to buy a car. The people offering the item for sale should be the ones responsible for pricing.

When you look at the manufacturer's value pricing, no-haggling programs what you see is that most of them do have flexibility in the system. They are not saying through dealers, "You can't negotiate the price." They are simply giving a rational reason why you wouldn't want to.

Brett Smith

Research consultant, University of Michigan Study of Automotive Transportation

No-haggle pricing has been very advantageous to customers in several aspects. But then again it has been to some customer's disadvantage.

It makes the car-buying process more pleasant for most car buyers. It gives most customers the feeling that they aren't being wheeled and dealed by the traditional cars salesman.

But for those who are good at haggling, it takes away that option and their ability to get a great deal.

In effect, a lot of the haggling that take place involves the trade-in. And the trade-in has a direct impact on the real price of the new vehicle and determines what the customer is actually paying. So there is still haggling going on.

No-haggling takes away a customer's concern of not getting as good a deal as his neighbor. It allows the car buyer to concentrate on the car, the dealership's service policy, financing and other things. So in essence, it has been very helpful for customers.

But no-haggle is a generic title. Some dealers follow it to the letter, but others will work deals that can bring the price of the car down or take it up. Consumers should know that policies vary from dealer to dealer.

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