New technology and old tactics have made buying a car a death march of deception

https://prospect.org/power/2024-07-08-car-dealership-fee-financing-scams/

by jseliger • 2 years ago

84 88 2 years ago

jseliger2• 2 years ago

This is interesting and also an inadvertent ad for Tesla. When my wife bought a Model Y in 2021, she ordered it online and the price was the price.

Turns out we probably should've gotten something else at that particular juncture due to life circumstances, but the process itself was painless.

guepe• 2 years ago

I don’t want my comment to feel like an ad, but I got a Rivian over the winter and it’s a similar process: it is a fantastic experience!

7e3• 2 years ago

The service experience with both Rivian and Tesla sucks. And that is why the manufacturer should never have a monopoly on the service of your car. Rivian wait times can be as long as five months. Tesla regularly denies warranty claims.

nox101• 2 years ago

This, that I had to wait was annoying but at least I got exactly what I wanted. Years ago I tried to by a BMW, exactly the model I wanted with the options I wanted. No one in the area had one so I went to a dealer and had them order it and they had me put down a $1000 deposit. I took the bus to/from work for 3 months waiting. I got a call it was in on a Sunday. I went to get it on Monday, they had sold it to someone else. If I wanted it I could wait another 3 months. I was so angry feel like burning the place to the ground.

Tesla (and maybe Rivian) don't feel like they'd do that. You order what you want, you get exactly that. I hope I never have to deal with a dealer again.

That said, the same seems to be happening to e-bikes in the bad direction. They've gotten expensive. You have to take what the dealers have or order through the dealer as the manufacture doesn't take direct orders. Then you have to pray the dealer doesn't sell the bike while you wait. That seems less likely with a bike but it's annoying that you have to go through a middle-company.

rasz• 2 years ago

The trick is to negotiate loaner for the time you wait.

ggm2• 2 years ago

I'd love to know how many of these selling techniques get exported overseas. I'm non US resident, I think quite a few because when we got our prior car we had a very heavy sell on post-price extras from "another company" which appears to be a sub lease in the same dealer, making vig on the special car finish coatings and window tinting.

Finance lies at the heart of this. I am sure a savvy cash buyer, or one using a bank loan pre approved not through the car company can do better but the point of the article is they know how to exploit young, naieve and keen buyers. People who don't have that cash, or pre-approval, and who will believe a trusting, smiling, wide eyed adult.

Net present value and delayed gratification/cost are a thing. We're chimps. We want the two bananas now, not a banana tree for life.

mywittyname• 2 years ago

We want the two bananas now, not a banana tree for life.

As the saying goes, a banana is hand is worth two on the tree.

Seriously though, car sales is cut throat and it's do or die. The people who walk in there thinking they are going to be the "good one" are out the door in a minute.

ggm2• 2 years ago

In this day and age, it stuns me how many salesfolk don't understand that women make 75%+ of all significant purchase decisions in a family, and in my family is the principle and good driver: I can drive, she's a natural. They've lost sale because of treating me as the buyer, looking at cars. The clues were all there.

wawayanda• 2 years ago

Dealerships should not exist and only exist due to terrible laws making it illegal for most automakers to sell direct. And there is a reason the dealer lobby has fought Tesla's direct selling model tooth and nail.

My rule when buying a car from a dealer is refuse everything they try to sell you. They will basically hold you hostage up to and including telling you that you are being foolish and irresponsible for refusing warranties and gap insurance and whatever else. (I even have had them take my wife aside to tell her how irresponsible I was being). But you have to ride it out.

mdgrech23• 2 years ago

I wouldn't put the blame entirely on the dealerships. The automakers are complicit in this whole thing too. Without the dealers there is no service model.

eppp• 2 years ago

What do the millions of independent mechanics do all day?

somerandomqaguy• 2 years ago

It's mostly on the car manufacturers. Most of them seem to want the dealership model nowadays.

There's no such laws in place requiring independent dealerships in Canada. Aside from the usual direct sales car companies, Genesis dealerships in Canada are all owned by Genesis Canada and I can order a car direct from Genesis. Yet most of the big names in cars operate with independent dealerships, as well as practically every motorcycle manufacturer as far as I know. In fact, Mercedes-Benz Canada just sold off all their Toronto dealerships to a AWIN/Zanchin [1] and AFAIK it wasn't because they were forced to.

I don't have any real insight into why this is the case. Most I can say is that if direct sales was so lucrative for car makers, one has to wonder why they didn't take advantage of it here. That being said, FortNine released a video on why motorcycle dealerships work this way; I suspect a lot of it applies to cars as well: https://www.youtube.com/watch?v=meHYBhcpdvQ

[1]https://media.mercedes-benz.ca/releases/release-048f50ed0ac9...

7e3• 2 years ago

No, dealerships exist so that the manufacturer doesn’t have a monopoly on the sales, and especially post-sale warranty service, of your car. Witness Tesla’s service deception and customer abuse along the Rivian shit show as plain evidence that monopolies are bad.

amluto• 2 years ago

It’s certainly the case that the Tesla service centers suck, and perhaps they would be better if they were independent and competed with each other. But I’m not sure what this has to do with new car sales. I think my personal preference would be to buy a car from the manufacturer (the actual thing I want to buy, i.e. the car, is identical no matter what route it takes from a manufacturer to me), but perhaps service should be a competitive market. After all, a Tesla owner is not buying corporate Tesla service — they’re buying service from a specific customer service operation and a specific set of technicians.

I’m not familiar with the “Rivian shit show”.

grecy• 2 years ago

Dealerships should not exist

Don't fret too much, they won't survive much longer.

brandonmenc• 2 years ago

I've been hearing this for like a decade now on hn.

nradov• 2 years ago

I think automakers should be allowed to sell direct but most prefer to sell through franchised dealers. Building out a nationwide dealer network and holding inventory takes an enormous amount of capital.

AnotherGoodName• 2 years ago

The dealership service centre's are only good for oil changes that cost a premium. They don’t the time to care about anything other than routine servicing at a huge markup. Got an oddball issue? Your average self run mechanic is a much better option.

newsclues• 2 years ago

Dealerships should exist, their exclusive right to sell cars should not.

Customers should have the option to buy from a factory and to buy from a dealership.

Maybe I need a car now or want a curated selection instead of infinite choice, but I also want to buy from the factory and get my dream car or work truck in the exact specification I need without the dealer markup.

By allowing the choice they would be forced to compete and that should be good for the customer!

xarope• 2 years ago

The last time I bought a car I wanted to pay cash, and the sales person gave me this wet puppy look. So I negotiated a 5 year finance rate where I calculated it would be net-zero in difference to me, literally; let's say it was 50K in cash, so I would pay $25K now, and finance $25K over the next 5 years, and they would get ~2% more, which in the grand scheme of inflation, meant a net-zero loss on my purchasing power.

I considered it a win-win situation, since it left me with more money in the bank, the sale person got their kick backs from the finance company (they proceeded to give me the free replacement car mats and other freebies associated with the finance deal), and I got positive credit ratings.

But yes, what a pain.

etrautmann2• 2 years ago

Isn’t the pain of even thinking about the existence of a monthly payment a true cost? I’d so much rather just pay upfront and never think about it again.

thunky• 2 years ago

I considered it a win-win situation
the sale person got their kick backs

I don't understand why this is your concern, to the point where you were willing to take on debt to satisfy this stranger's arbitrary incentive.

Please don't take this the wrong way but I think you might want to revaluate if it really was a win-win, or rather if you caved to their pressure tactics and now you're lying to yourself about it.

datavirtue5• 2 years ago

Don't go to dealerships that play these games. Seek out dealers that focus on business sales where the direct to consumer is not the bulk of their business. A lot of countryside dealers (deep country) have the same attitude. They let you drive the vehicle, if you want it they will find financing if you need them to. Sign the papers and leave. They will probably pitch some accessories and a warrantee extension. Zero drama. At those dealerships if they try that shit (sneaking in charges or playing any games) they could lose generations of business from a person. City dealerships are a pressure cooker because they have so much competition. If someone leaves they are never coming back. There is no philosophy of repeat business from a particular customer. If that happens it's just gravy.

dangrossman3• 2 years ago

Dealerships should not exist and only exist due to terrible laws making it illegal for most automakers to sell direct.

Dealerships exist because the automakers wanted them, and those laws exist due to the automakers' foul play.

Automakers want to make cars. They don't want to manage stores, deal with thousands of different municipalities' rules for selling and registering vehicles, repair vehicles they've already sold, or store millions of cars in inventory until they're sold. They let someone else do all that, and it lets them run their factories at a nice even pace with essentially guaranteed buyers for their output.

Automakers did, in the 1990s, start to get jealous of the money their dealerships were making on the back of their products. Ford and GM both opened factory stores competing directly with their own dealers. They knew just where to open those stores and what to sell at them, because they had full knowledge of where their successful dealers were, and what they were best at selling at those dealerships. The franchisees were taking all the risk in selecting sites and financing inventory just for their franchisor to swoop in and undercut their business with their own store next door.

That unfairness is what led the dealers to lobby for those state laws banning the automaker from competing with its own franchisees.

survirtual2• 2 years ago

Unfairness? It is completely fair.

If the dealerships don't like it, they should learn advanced engineering and industrial manufacturing, and make their own cars. If they can't, then they should have been let to fail since they couldn't adapt.

bradknowles• 2 years ago

My wife has a negotiation technique that has worked well for her:

“I’m a lawyer. I have a pre-approved loan. Give me your best and final offer.”

And that worked! We were in and done in less than five minutes.

Sadly, not everyone can use that technique.

sxp• 2 years ago

I'm so glad I don't have to deal with this crap for my last two Teslas. My previous Tesla was a purely online order due to Covid, but when I went in for a lease on the Tesla before that, I had a zero-pressure sale where the salesrep just put me in front of a computer and walked me through the website. It was the most efficient car sale I've ever been a part of. The closest I've ever felt to being pressured by Tesla was the fact that they have limited sales at the end of each quarter where you need to take delivery by the end of the month to get the perks. But if you know this beforehand, you can use to it your advantage and only buy Teslas at the end of the quarter.

Regardless of what you think of Tesla, the old car cartels need to die because of how anti-consumer they are.

crooked-v• 2 years ago

If it wasn't being run by Elon, Tesla would be at the top of my list.

Unfortunately, it is, and his management is style is such that I can't trust he won't randomly destroy the company one day.

shiroiushi• 2 years ago

There's also the fact that the latest models are downright dangerous, with no stalks on the steering wheels, everything needing to be done through a touchscreen, etc. Plus you'll get sunburned just sitting in the car since the roof is glass.

1992spacemovie2• 2 years ago

The anti-Musk hatred here is hilarious. You nerds are so insulated you’ve forgot what things you should get pissed off about. Think Elon is one of them? Lmao GOT EM.

7e3• 2 years ago

Tesla is absolutely anti-consumer. The quality of their cars is terrible and they manipulate prices regularly. During COVID the gouging was especially obscene.

hn_throwaway_992• 2 years ago

I really, really don't like to be conspiratorial, but I think the only explanation of why there isn't some sort of "negotiating large purchases" class in school is because our economy needs some amount of suckers at some level.

I mean, it's hard to argue with the common refrain "when am I ever going to use calculus?" that you often hear from high school kids, but then nearly everyone in the US buys a car at some point and there is no simple guidance or courses for that. Why can't schools have a short class that teaches:

1. Never sign something without reading it first. It's scary to me how many sales situations (e.g. a gym membership, house closing, etc.) give you stacks of paper with the implicit (or not so implicit) understanding that "nobody actually reads all this".

2. Understanding who is on your side and who isn't, legally.

3. Understanding common negotiating and pressure tactics.

etc.

Seems like a course in these important life skills could be done in a couple hours at most yet most of us only learn these lessons if we have family members who teach them to us.

readthenotes12• 2 years ago

There is probably a shortage of qualified instructors...

saulpw2• 2 years ago

Never sign something without reading it first.

I have an hour on my lunch break and I just want a gym membership. Am I supposed to take it home and spend 2 hours reading through fine-print legalese that I won't be able to parse the subtlety of anyway? Or find and hire a lawyer to review the document? You can say "find another gym" but what about when they all do that?

hn_throwaway_992• 2 years ago

There are tons of stories of people who were basically tricked into signing long term gym memberships that were basically impossible to get out of without outrageous fees. And while they are long and dense, it's not like it's that hard to understand a gym membership.

486sx33• 2 years ago

The dealerships are just an arms length b*ch of the automaker

Just remember these simple things when buying a car at a dealership

1. Don’t play 4 square, cut to the chase. If they ask if youre paying cash or financing say you are open to either option, but focus on the bottom dollar

2. Whoever you’re talking to is not the person you’re negotiating with, they are just a front. This is the case with most retail sales including windows, flooring, siding, and curtains. The first time the guy pauses and has to ask or talk to a manager is the first time you’ve actually negotiated anything. The first time they “ask their manager” they might just go for coffee. Don’t just accept that they leave their office to talk to the manager, watch where they go. Find a reason for them to leave the room at least 3 times.

3. Even if you don’t think you are you’re going to end up in “the box” it’s harder to say no to a female statically so you may end up with a woman. Don’t be hung up on gender, ask questions, don’t get bullied. If your question doesn’t get answered, don’t move to the next topic.

4. Just watch the movie “Used Cars” it’s fun. Do not think it’s all a joke

5. In the words of “Casino” (1995) . It’s all been arranged to get your money.

photonbeam• 2 years ago

If they ask to talk to their manager then just talk to the manager yourself, no point negotiating with someone who lacks authority

more_corn• 2 years ago

How about the only winning move is not to play? Go to your credit union and get a loan you can afford. go find a private party seller. buy a used car that’s a few years old, in excellent condition and has low miles.

You’ll be a lot happier and richer.

seoulmetro2• 2 years ago

buy a used car that’s a few years old, in excellent condition and has low miles.

Most people don't have the skill to understand what excellent condition is, and it can often look the same as about to die condition.

pdimitar2• 2 years ago

I don't have the skills and experience to recognize an almost new car, and for all I know I might be getting something that's going to last just 1000km.

tim333• 2 years ago

I don't know how it is in the US but in the UK when buying new cars I've gone online and looked at the new cars for cheap ads. You can often click and have the one you want delivered to your door for a reasonable amount cheaper than the dealer price.

I haven't bought new for a while though. My current one was like 12% of the new price at 12 years old and works fine.

datavirtue5• 2 years ago

When they leave to go see their manager I leave while they are in the back.

I don't shop at dealerships that do that shit. It is an old manipulation for suckers. I grew up running around a Ford dealership. The sales people had a book that showed the complete financial picture of each vehicle and they knew what they needed to sell them for. Anything else is a game that is playing your ignorance and leveraging your inexperience.

cainxinth• 2 years ago

I was a fan of King of Cars. It was a 2006 reality show set at Towbin Dodge in Nevada, the top selling Dodge dealership in the world.

https://en.wikipedia.org/wiki/King_of_Cars

torton• 2 years ago

CarMax / Carvana earn money on promising and delivering a better buying experience. They have other issues (such as missing simple maintenance items and overpricing their extended warranties) but the buying process is shockingly straightforward and upsell free.

None of the last several cars I owned were from a regular dealership buy. One was a private sale. One was an ex-rental, bought from the rental company's sales division. And the last one was from CarMax. Of course, the price was right every time to seal the deal, but articles like these certainly did influence my choice.

DoneWithAllThat• 2 years ago

It’s just a fact that in the US that any item over a particular cost is not a fixed cost item. There’s always room for negotiation. It’s not awesome for those bad at haggling but it is what it is and it’s not limited to cars.

mvkel4• 2 years ago

Yes and no. Ultimately there's about 5-10% of wiggle room. I would prefer not to spend an entire day in a dealership in a sales brinksmanship scenario for a 10% discount.

mjcohen• 2 years ago

10% of $40,000 is quite significant (at least to me).

s1artibartfast• 2 years ago

Prefer not to as in you would rather leave 5-6k on the table, or that you prefer to buy exclusively from fixed price vendors

ghaff4• 2 years ago

That's probably true pretty much everywhere--and, of course, in many places lots of things that are sticker price in the US are a negotiation.

Honestly, if you're paying cash, it's not a big deal. I bought a car a couple years ago. At the time, there wasn't really any point in haggling on the car's price given how in short supply everything was. I got them to toss in some extra trade-in to cover the "factory options" on a car that wasn't even built yet--with the proviso that they had a deal if they agreed to it. I took a very discounted extended warranty which may or may not have been a good deal but it was cheap.

The whole thing, including test drive, took me maybe 30 minutes. I said "no" quite a few times but it was hardly a pressure-packed negotiating session.

mvkel4• 2 years ago

In the market for a new car and our experience at four dealerships has forced us to choose between Rivian or Tesla, simply because of its DTC model (and, importantly, shipping better EVs).

Just can't stomach driving to the dealership for routine maintenance, having to deal with such a predatory culture.

I wonder if traditional auto cos are aware of the opportunity cost of dealerships. The cost is growing

hahajk• 2 years ago

I've owned several cars (Ford, Subaru, all ICE), and never went to the dealership after buying the cars. Are you buying high end European models or electric that require dealership maintenance?

dangrossman3• 2 years ago

You've got it backwards. Buying a Rivian or Tesla means you're locked in to servicing the car with the company you bought it from, and have nowhere else to turn if you're unhappy with that service. Buying a car from a make with a dealership network means you can get it serviced anywhere, and never have to deal with the company that sold you the vehicle again if you prefer not to.

1992spacemovie2• 2 years ago

That’s a nice “in theory” take. In reality, you end up fighting the manufacturer over what may be considered in warranty v not, and the dealership is usually a pure middleman with a vested interest to make sure their money arrives.

bigiain2• 2 years ago

forced us to choose between Rivian or Tesla
Just can't stomach driving to the dealership for routine maintenance, having to deal with such a predatory culture.

Ummmm, are you sure you've done your research and due diligence on the Tesla maintenance and repair experience? They are, ummmm, widely regarded as more predatory than pretty much every other manufacturer/dealership.

jurassicfoxy• 2 years ago

My recent visit to a BMW dealership (for parts for an old car) was so awful. Every aspect of the dealership feels scummy. The coffee machine "lounge", the shiny cars, the branded "merch", the sales staff, the "service department" layout. It's just a creepy experience at every step. I have never bought a new car (although I have bought used, from a few dealerships) and honestly I am not sure I ever would.

wrs• 2 years ago

I’ve always (meaning since my first car in 1990) bought new cars through car brokers. You hire someone who knows the industry intimately to go deal with the dealers for you.

We bought a van recently. It arrived with no weird extras, at a price that seemed fair, and we never even talked to a dealer (I researched models online). She charged us about $400 for the broker service and we picked up the van at her office.

It seems like it’s just the dealer financing that forces you into this murky slimy world of dealer sales departments.

kasey_junk• 2 years ago

I think it’s worth noting that the CARS rule mentioned in the article is almost certainly going to get tossed now that Chevron has been replaced.

Basically anytime you see an agency rule being used to enforce something now you should presume it wont hold up in at least one federal district.

SoftTalker• 2 years ago

I've bought a few cars at dealerships. The first time I was pretty young and got pressured into buying an extended warranty, but that was the first and last time.

You are the buyer, you ultimately are in control because you are the one paying for the car. You can buy a car for a fair price at a dealer, but you have to have a strategy and understand who you are dealing with, or you will get played like a fiddle. Walking out is your superpower. If they pressure you to sign a "statement of commitment" to buy a car, or if they ask you to sign anything that's not the actual sales contract for the specific vehicle you are buying, walk out. If they say you can't see the contract before you sign it, walk out. Do not sign anything until you've gotten your final deal in place, and do not sign if they then try to change something. Get up and head for the door. At that point they are as vested in the sale as you are. The salesman is already thinking about what his commission will be.

Many states have a 48 or 72 hour "buyers remorse" law where you can unwind a car purchase even after you've signed the contract. Find out if you have that and understand how it works.

Do not fall in love with a car. It's a car. There are thousands of others for sale right now. If you can't make a deal on this one, there are many other cars and many other dealers.

I don't buy cars at dealers anymore. I'm just not willing to sit through the lies, bullshit, and games, even when I know it's coming. I buy from private sellers, and pay cash. Some of the cars have been better than others, but they have all been far better deals in terms of total costs during the time I've owned them than any new car has been.

pdonis• 2 years ago

My best car buying experiences were when I was an employee of a car company, and could buy any car built by that company at a price they designated (a pretty small amount over the cost to build it). The company designated a dealer to go to, and I would walk in with a certified loan draft from my credit union, and walk out with the car. One dealer did try to sell me alternate financing, but I just said no.

bloomingeek• 2 years ago

Another option is to go to your banking institution and ask them how much they will loan you to purchase a car. After telling the dealership you absolutely won't use whatever financing they are offering, have them write up a cost sheet of the vehicle you're interested in and tell them you will show this to your bank. This will usually do one of two things: the dealership now knows you have a bank behind you who is looking out for your interests. (If they're not, change banks!) And it gives you an opportunity to get a possible better interest rate from your bank, who will surely want your business.

The cost sheet also makes then spell out exactly what the cost and the extras are on the vehicle.

datavirtue5• 2 years ago

Credit unions are perfect for this.

Lord_Zero• 2 years ago

This makes my blood boil. The part about having to gear up for war before you walk in the door of a dealership resonated with me.

I recently bought a car of carvana it was a mixed experience. On one side it was fantastic to have an upfront price, click a few buttons and be done with it. It. But on the other side when I got to see the car in person it was not in very good shape and things were wrong that they did not show me on the website. In fact is in the shop right now for mechanical issues. I would completely ignore their 150 point inspection. It's a joke. Be fully prepared to refuse the car and to select a different car. Pay close attention to shipping fees as well.

5/10 experience and still better than a dealership.

coffeecloud• 2 years ago

I bought my last car by emailing half a dozen car dealerships in my area about specific cars they had on lot. I told them I was looking to buy it within a week if the price was right and asked for the “out the door” price.

Some tried to play the typical games but several gave me a really good price right off the bat. I ended up paying about 12% under MSRP without having to haggle. I arranged a pick up time, showed up, filled out the paperwork, paid the agreed upon price and was out of the dealership in about an hour.

All I hope is that by the next time I need my next car dealerships still do business through email.

datavirtue5• 2 years ago

Ha ha...they will use whatever medium you ask them to.

nojvek2• 2 years ago

TIL: dealership mafia paid for Trump’s $175 million bond in return for future favors.

Trump has immunity for “presidential actions” as ruled by his friends at Supreme Court.

Dealerships got in law that consumer protection cannot regulate them.

Supreme Court ruled that favor done after cannot be called “corruption” and is “gratuity”.

We mock Russia, but corruption also runs deep in US at the highest levels.

nojvek2• 2 years ago

I bought once from a Toyota dealership and later realized how bad of a financial decision it was.

Never financing from dealership again.

New technology and old tactics have made buying a car a death march of deception

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