Re:Car Dealers Wince at a Site to End Sales Haggling
by ScottBurson on Saturday February 11, 2012 @08:48PM
(#3580809)
It could, however, put some of the less-well-run dealerships out of business. The equilibrium number of dealerships might be smaller than it is now, as reduced margins support fewer salespeople. I'm not saying that's necessarily a bad thing overall, but I can see why the dealers might not be too keen on it.
Re:Car Dealers Wince at a Site to End Sales Haggling
by Retric on Saturday February 11, 2012 @08:55PM
(#3580826)
Hardly, they have great marketing, but not exactly bare bones pricing. They cost the dealer 300$ for the sales lead which means their price is always higher than what a dealer will do directly. Last time I checked they where 600$ above what the dealer was willing to offer after a few minutes of haggling. Though, it's not a bad price if you hate haggling.
Hint, most dealerships make more money from their service departments than their sales floors. Use that to your advantage when buying a new car.
Re:Car Dealers Wince at a Site to End Sales Haggling
by winstonm on Saturday February 11, 2012 @08:42PM
(#3580793)
Interestingly, dealers already sell some of their new cars below cost. But they make their money back with service and financing charges, so the basic laws of economics still apply.
http://blog.truecar.com/2009/04/24/more-than-ever-dealers-ar...
http://www.justice.gov/atr/public/eag/246374a.jpg (from http://www.justice.gov/atr/public/eag/246374.htm)
If you assume a simplified, econ 101 model, a competitive and transparent market will drive prices down to the point where most firms are making a low but sustainable profit. It should never drive prices down to the point where most firms are losing money in the long run.
Now, the real world is more complex than econ 101. But even so, I can't imagine a scenario where transparency and competition would have the long-run effect of putting an industry out of business. If all car dealerships were totally transparent about their pricing, and buyers could easily view pricing data from every dealership, how would that force dealerships to price cars below cost? A race to the bottom does not assume a bottom of zero, or even a bottom that's below sustainable levels. Rather, it should imply a bottom where companies make a small, but reasonable profit.