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Thursday 23 March 2017
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The High Cost Of No-Haggle Pricing

The High Cost Of No-Haggle Pricing

I can’t help but chuckle to myself when someone tells me he or she bought a vehicle from a place that doesn’t negotiate prices and had a wonderful experience.  My first thought is always: of course!  You can have a wonderful experience at any car lot in America if you pay what the dealer is asking for any given car.  The contentious nature of car buying started 100 years ago when some salesperson discounted a car for the first time.

Of course, we all want to have a great car buying experience, and of course, we all want the best possible price.  The question of the day is, can you get both?

As I say on the air all the time, places that market themselves as no haggle-no hassle dealerships are often priced higher than traditional dealerships that negotiate.  As a consumer, you have to decide if easy and pleasant is worth more to you than saving money.  CarMax, for instance, has built a brand around easy purchases and no negotiations, and they have been successful.  Remember that their inventory has to be purchased and to keep as many cars in inventory as they do, they have to pay top dollar, then charge top dollar.

I’ve had a lot of questions recently about a new place called Carvana. Besides being a no hassle-no haggle place, their niche is they build high-rise buildings that are supposed to be car vending machines, right down to a person putting a large coin into the machine, which sets in motion elevators to bring your car down from the tower and on to a Launchpad.  Probably a cool experience and there is little doubt it would make for a memorable delivery, but what is that worth to you as a car buyer?

As someone who owned dealerships for many years, I can’t help but wonder what it must cost to build one of these high-rise mechanical structures they call vending machines.  Make no mistake, the cost of a dealership structure affects the price of every vehicle it sells.  Carvana’s CEO has been quoted as saying due to their cost structure, he believes he can save consumers $1500 to $2000 per used vehicle sold.  I thought it might be a fun exercise to check that.

I went to the Carvana website to pick a vehicle at random, and as I scrolled through, a 2013 Ford F-150 Super Crew FX2 caught my eye.  It was extremely clean, there were plenty of pictures, and the miles were incredibly low at 22,000.  The no hassle, non-negotiable price was $31,000.  Then I moved to AutoTrader.com to search for comparable 2013 model vehicles with similar mileage, also 4-door, two-wheel drive FX2 packages for sale at traditional new car dealerships.

I found one with 27,361 miles for $26,995.  Next was one with 14,541 miles for $26,971.  A Car Pro Ford dealer had a factory certified one with 20,500 miles (which comes with warranty and roadside assistance to 100,000 miles) for $25,000.  Bear in mind, with all three of these comparison prices, we don’t know if that was the rock bottom price or if there was more room if someone wanted to make a serious offer.

While I was online, I thought I’d check the CarMax website to see if they had something that fit the criteria, and sure enough, they had a 27,000 mile 2013 SuperCrew XLT with a non-negotiable price of $30,988.

I decided to check Carvana on an SUV also.  At random, I picked a 2015 Mercedes-Benz GLA with 18,000 miles with a price tag of $30,750.  Obviously, there are not as many GLA models on the market since they are fairly new, but a Car Pro Mercedes-Benz dealer had a factory certified one with only 16,066 miles advertised at $28,487, with an unlimited mileage factory warranty.  Again, I don’t know with certainty if the online price at the Mercedes dealership was set in stone or not.

To be fair, Carvana appears to deliver on their promise of a pleasant car buying experience, the online ratings are very good.  The question you must ask yourself is this: is getting your car out of a vending machine worth $2000 to $6000?

I’ll let you decide that.



Photo Credit: Business Wire