- A lot of car models are in high demand, so dealers are charging thousands above MSRP.
- Consumers, flush with cash, may be willing to pay the “dealer adjustments,” but eventually, supply will outstrip demand.
- The damage done to car brands because of disreputable dealers may be long-lasting.
- The auto industry is ripe for disruption.
“It’s the market forces,” said the Kia car dealer informing me why he was charging $8,000 above MSRP on a new Telluride. All over the country, car dealers, especially Kia dealers, are wringing consumers for new Telluride’s because people are stupid enough to pay them. According to my license, I wasn’t born yesterday, so the experience turned me off of the car and the brand.
Consumers have cash, and car dealers know it, but obviously, when a car model is named “car of the year,” customers lose common sense and gladly pat a dealer thousands over MSRP. While the law of supply and demand has some merit, one has to wonder about the possible damage to the brand?
I decided to do some online research on the Kia Telluride pricing and found many very pissed-off consumers. Many remarked that Kia was not a brand to be considered in the near future, and Kia America has largely been silent about the price gouging.
Already the WSJ is reporting that car sales are starting to cool, and soon the 2022 models will be coming into showrooms forcing dealers to start discounting again to move inventory. Right now, consumers have money to burn, but at some point in time, those who were dumb enough to pay “deal adjustment” fees are going to feel the sting of their foolish purchase.
What about the brand?
There are two issues here. First, the potential damage that care dealers are doing to the brand and second the brand’s inability to control dealers.
Yesterday as I was leaving the Kia dealer, I overheard a couple saying, “I would never pay that much for a Kia; it was a mistake to come here.” That sentiment was echoed all over social media as high prices and hard sales tactics turned off potential first-time Kia buyers.
If ever an industry was ripe for disruption, it’s the auto industry. All over the Internet, there are tips on navigating the difficult process of working with a salesperson. The industry cannot continue to rely on dealers whose only goal is to get as much money out of a customer as possible. If the industry doesn’t change, car brands will be hurt by their own dealers whose only goal is “turn and burn.”
GM tried disruption with the launch of their Saturn brand but it didn’t work well because of poor execution. Some dealers are actually compensated by branded surveys that customers fill out after a service or purchasing visit. Obviously it’s not working for some brands.
Some dealers also require salespeople to go through extensive sales training before dealing with customers. However, more and more that training is about “closing the sale,” not helping People;e buy a car. One of my friends worked at a Toyota dealership and said it was the worst experience of his career. He told me that he would often be chastised if a customer walked away from a deal and the only metric was sales.
Consulting firm Deloitte’s 2021 Global Automotive Consumer Study found that 71% of American consumers still want to buy in person. The Harris Poll similarly observed that 64% aren’t comfortable buying entirely online. Both studies, however, discovered there are many parts of the process that customers prefer to do online, especially when they streamline the process, making it easier, more transparent and giving customers more control.
Car buyers want to complete most or all of their research and paperwork online as well as guide their own financing process. They also want to evaluate extras like extended warranties in a more transparent way and at their own pace. But in-person test drives and close-up evaluations of vehicles are must-haves for many people—and barriers to online shopping. But how long are most people interested in spending at a physical dealership? One hour, max.
Other key findings from the survey include:
- 80% of shoppers say they would likely configure a payment online.
- 60% said they would configure payment and provide contact information.
- Of those surveyed, more than half said they would configure payment and start the credit process.
- 6% of shoppers would buy more cars if the process was easier.
- Auto sales could rise about 25% if the retail experience improves.
Someday car dealers will “get it” but for now it’s get the customer in the showroom and apply the high pressure sales technique.