Car-buying services overlook that price isn't everything

Ron Loveys

TADA PRESIDENT

Some recent articles in the media have raised important issues about new-vehicle buying services and whether they serve consumers' best interests.

These articles have focused on companies that purport to help customers simplify the car-buying process and to get the best deals. They charge about $40 for their services and claim to have helped thousands of Canadians save money on their new-vehicle purchases.

A car-buying service will assert that it possesses specialized knowledge about dealerships' buying and selling practices. There is an assumption that buying a new car is an intimidating and confusing experience, and that dealers are taking advantage of car buyers.

New-car dealerships don't make excessive profits and they don't mislead customers. The average net operating profit for a franchised new car dealership is between 1 and 3 per cent. Other retail industries earn five to 10 times that.

New-car dealers invest $5 million to $10 million before even opening for business. Fixed costs (hydro, insurance, security, salaries, interest charges on inventory) amount to tens of thousands of dollars per month.

Dealerships invest hundreds of thousands in new technologies, new vehicle inventory, and staff training and development. Most satisfied customers don't begrudge dealers a modest return on that investment.

Car-buying services (and auto brokers) are for-profit businesses that have no equivalent investments to those of auto dealerships in providing service for their customers. These companies essentially sell invoice lists so that prospective buyers know how much dealers pay the manufacturers for given vehicles.

In reality, this information is readily available to any car buyer who is willing to do some comparative shopping and conduct basic research.

Sales staff and sales managers are trained to assist potential car buyers, and to discuss any programs and bonuses for which a customer might be eligible (such as graduate rebate programs, loyalty bonuses, incentives for military personnel and credit-card point programs).

Such programs are often offered by the manufacturer, and it's in a dealership's best interest to inform customers of them, not to conceal them.

Besides, these car-buying services fail to acknowledge a critical part of the car buying process: it's not always about price.

Years ago, I met a man at a curling club who expressed interested in buying a Lincoln from our dealership. He visited me and we talked about the various options, accessories and service requirements.

When the conversation turned to price, I promised the customer a fair price for the vehicle. He replied: "I'm not looking for a great deal. I'm looking for a great relationship."

He was buying the vehicle for his wife, and he wanted to know that he could trust our dealership to address any warranty issues and to provide a high level of customer service.

Price is an important part of the car-buying process, and I'm not suggesting that customers aren't looking for a great deal.

It's about the customer experience and the quality of service that you receive when buying and servicing your vehicle.

People who intend to buy a new car don't need to pay a company to walk them through the process of selecting and negotiating a vehicle or to strike a better deal.

If you don't like negotiating, then bring along a friend or relative who is more comfortable with it.

Consumers should conduct their own research and visit several dealerships before selecting one to do business with.

The retail car business is highly competitive. Dealerships want to form long-term relationships with their customers, and to gain repeat and referral business.

So my advice to consumers is this: take control of the negotiation, do your research, shop several dealerships, select your dealership based on value and service, and don't leave the car-buying process to third parties.

This column represents the views

of TADA. Email president@tada.ca

or visit www.tada.ca.

Ron Loveys, president of the Toronto Automobile Dealers Association, is a new-car dealer in the GTA.

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