Auto Dealers Who Ignore Pricing Intricacies May Be Paying Too Much
Price transaction transparency is why TrueCar and others are making fortunes soothing retail buyers’ fears of paying too much for vehicles. Why so many dealers don’t take advantage of the same sort of price information on the wholesale side is hard to understand.
March 3, 2014
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To make this a little more manageable, let’s take the units in the list that had actual transaction prices between $10,000 and $10,500. There are 35 of them in this sample. If we plot them on a graph a quick glance will show that at $10,500, purchasers paid the same for under 30,000-mile (48,000-km) units and 58,000-mile (93,000-km) units.
It certainly makes one wonder if the dealer with the 40,000-mile (64,000-km) units purchased at $8,500-$9,000 is going to have an advantage over the dealer that paid $12,000. I am well aware that condition will have an impact, but 50% seems like quite a stretch.
How would the sellers respond to this? Look at the prices in the first chart at the 30,000-mile grid. You will see some sales at $12,300 and $10,000. Is it any wonder they will ratchet up their floor prices to $12,300 and try that for a while, especially with hard data that some dealers in some places actually paid that for 40,000-mile units, even though others paid the same for units with mileage in the high teens?
You can bet your last dollar on it.
A little homework will go a long way. The market always will win over time, but in a situation like we see now, with a handful of sophisticated sellers currently sitting on nearly 100,000 units that need to be remarketed, it may be worthwhile to pay attention to what really is going on.
John Schmid is an industry veteran, former General Motors and Mazda dealer and economic developer. He is a past chairman of the Kansas Auto Dealers Assn. and served for a number of years as its legislative chairman. A graduate of the University of Kansas School of Business and the Chevrolet School of Merchandising, he can be reached at [email protected]
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