What are we talking about here? 

Car Buying Online or Car Buying? 

as far as #2 goes. Show me a product that is advertised including tax. 

RE: "The single biggest reason 99% of consumers expect car buying to be a hassle is because dealerships don’t offer consumers any real transparency."

So if a little transparency if good, more is better right?  Actually, we aren't talking about REAL transparency.  We're talking about "Relative Transparency."  If you want to be REALLY transparent, post your triple net cost and negotiate the margin.  That'll work right?  In the absence of that, why not just call it what it is.  Does ANYONE think consumers believe auto retails claims of "Transparency?"  The very claim makes us look like shysters.

RE: "Dealer advertising is consistently confusing." 

We know half of dealer advertising works.  We just don't know which half.  Dealer advertising either brings them in the door, or it doesn't.  After they're in the door, its up to us.  If our showroom strategy doesn't match the advertising, its probably a complete waste of time and money.  I say AVOID unneccessary fine print.  

I'd like to add some other items to the list of things Dealers do that aren't productive: 

First, LISTEN to the consumer but KNOW WHAT THEY MEAN.  Because what they say and what they mean are TWO DIFFERENT THINGS.  When they say, "I don't want to play the game,"  what they REALLY mean is "I DO want to play the game but I want to be guaranteed I'll win."  This is NOTHING NEW.  Doing business with consumers on high ticket items where the price is negotiated is all about the perception of the deal rather than the actual deal itself. 

Second: Understand that a high percentage of consumers come in "knowing what they want and armed with information."  After all, this is the information age, right?  BUT having a lot of information and being able to unpack it are two completely different things.  One of the biggest issues we face is the consumer who comes in with information that they don't understand, giving them unrealistic expectations.  Our challenge is straightening them out whole allowing them to save face enough to go ahead and do business with us.  Often, it has to do with unrealistic expectations for their trade in.  So many consumers still come in the dealership dead set on a particular make/model, but leave with something completely different because what they leave with can actually get financed base on lender's advance calls.  Sometime, the dealer is blamed for any hard feelings involved.

THIRD:  The 800 pound gorilla in the room that our industry chooses to ignore.  Sales staff turnover.  Our industry has ground on sales people for the last few decades, transferring the gross to "behind invoice trunk money," increasing packs, increasing hold back, taking away fringe benefits, etc.   What has NOT changed is the fact that our closing percentage is 3 TIMES HIGHER when our customer isn't meeting their sales person for the first time.  Who is to blame?  BOTH dealers and OEMs.  The link in the chain with the least power is the sales person. When our margins are under attack, the first place looked is sales staff compensation.  And we're paying a long term price for that.  The best dealers are the ones with the least amount of turnover.  They have the highest closing ratios.  They pay the least per unit in advertising and marketing.  They have the highest grosses AND, most likely, their sales staff compensation as a percentage of gross profit is probably higher than other dealers. 

And there you have it, from someone who has been in the industry for almost 5 decades.  Just my opinion.  Tell me if I'm wrong.

Some states take issue with “tax included” pricing. In Washington State it was illegal to advertise prices as including tax until a 2012 court case forced the state to change its policy. Still, Washington imposes conditions on the way retailers can advertise tax-included prices and even the tone of voice with which they speak to customers about the included sales tax (no joke).

Other states, including Texas and California, have their own regulations about advertising tax-included pricing. If you want to include sales tax in the price of goods you sell online, you will need to research the policies of every state where you have nexus. It never pays to anger the tax collectors.

Following my retirement after 30 years in sales and marketing, sales training, and leadership development, I decided I wanted to learn the car sales business.  I worked for 3 dealerships over a period of 6 years and then started my own used car business.  This article is just another example that things don't change in the car business. The current business model hasn't changed in decades and it's doubtful that it will in the near future unless outside forces continue to make it even more antiquated.  This was my experience:

1- Staff Turnover.  Still the same year after year.  To improve here it takes Leadership, not Sales Management.  The environment in many dealerships is quite harsh, with foul language,  shame based leadership, and beat down meetings that are total failures.  Every action a sales manager takes is either pride based or shame based.  There is no in between.  Sales people who have Pride based leaders are far more likely to succeed, sell significantly more, and stay in the business.  If you are a leader begin testing every thing you say and do to your people and ask is this pride based or shame based.  This will be very revealing.  Stop managing and start leading.

2- Advertising.  Sales people are told that the one car with the vin number in the ad is to just bring people in, not to be sold.  I once sold "the" car in the ad and the General Sales Manager wouldn't approve the sale because "I can't let the car go for that."  Punish the customer and the sales person.  What do customers think of these ads?

3- Sales people will do anything to sell the car.  No, more all knowing sales managers will do anything to sell the car.  Multiple sales people working with the customer is called the TO or take over.  I had a very good closing ratio but had to report to the desk before letting a customer go.  In 6 years I had 2 TO's work and in both cases the sales manager brought the prices down even lower, but wouldn't when I had to make my multiple trips to the desk.  The writer suggests bring an advocate.  A friend of mine accompanies his 4 daughters when they go car shopping.  When the TO is introduced he gets up and walks out.  And, many finance managers can further destroy many customer relationships while adding to the faces the customer must deal with.

4- Paperwork.  The business sales model is antiquated and so is the paper work and the time and motion it takes to process it.  The process was the same in all 3 dealerships and was extremely time consuming.  None of the dealerships was interested in a time and motion study that could streamline this process and make the experience less excruciating for the customer while freeing up sales people to sell more cars.

5- Transparency, what's new here.  Because of the disparities in pricing services like True Car and Car Gurus will continue to grow.  It's amazing to me that dealers don't even provide transparency to their sales people.  Their excuse is that the sales person would give the car away.  My experience was that sales managers will sell at any price to move iron and make it up by reducing the sales persons compensation and even fudge the books such as trade in values to reduce commission net.  What sales person would want to produce under these practices?

Chris, we're talking about a transparent, online purchase. I'm not suggesting dealers advertise the "total price," rather that today's consumer purchase paradigm is to an "ad price," place an item in a shopping cart to see the total price, make a buying decision. Car dealers make it too hard to buy...

David, the average transaction price has nothing to do with invoice or cost. I too have spent my life in the business, so like you, am guilty of more than few "invoice closes." If you have the only 2018 Corvette the price may be MSRP plus, but if you've got 75 days supply of anything put them on the numbers. Sale price, all incentives, taxes and fees.

(David Part 2)

You are preaching to choir on the other challenges you detailed. The simple truth is that if a consumer comes in well informed, you can sell a car, make a fair profit and give the consumer a great purchase experience. The challenge is that the morass of information used to drive leads is extraordinarily confusing. The reason an online purchase is such a turning point for the industry is that allowing a consumer to see the total price and accurate payment options (not loaded 4 square payments) allows them to digest reality and reset their expectations without suffering embarrassment  in front of a salesperson, sales manager, F&I manager and their family. Buying a car is a kitchen table discussion for 90% plus of your customers. Where they decide if they can buy a house, pay for the kids college and when they can retire. Forcing them to decide with bits and pieces of information costs billions, real transparency is a game changer like it has been for so many other industries. 

Best comp for how online car buying will work? Home buying. Imagine if you went to see a few houses, fell in love with one, your realtor asked you to sit down at the kitchen table (of the house you want to buy) and began to work the entire deal in a piecemeal fashion with an unprepared customer and didn't let you leave until you signed a 4 inch stack of documents? Instead, we leave the house, write an informed offer, get a sense for credit approval, stips and contingencies, then set a date to close and take delivery, right? See it live @ www.vinadvisor.net 

Michael, I am not recommending advertising a total purchase price but rather allowing the consumer to put a car in a shopping cart to see their total price - including taxes and fees since these numbers aren't a mystery - and payments so they can make an informed offer and purchase decision.

Mark, you're preaching to the choir. All of your points are dead on, dealers are reticent to change and the industry is addicted to selling price. The solution is to walk around to the other side of the table and inform customers so they can make a decision to buy rather than hammering them. Salesperson turnover is caused by a lack of efficiency. The average sales person in a new car dealership 2016 sold sold 10-11 cars per month. A whopping 1 more than a salesperson 30 years ago. Why? Because it takes 3 to 5 hours to sell a car when the starting point is, "hi, welcome to ABC Toyota, my name is Jim."

Consumers loath the experience and sales people can't make a living. Imagine a sales person who stopped getting leads and started getting email offers - properly structured - purchase or lease? Now it takes a salesperson 90 of floor time including delivery. If the average sales per salesperson rose to 15 cars per month, they can make a living, the store improves profits, and best of all, the consumer enjoys the process. Take a look at www.vinadvisor.net to see how our online purchase aligns the interests of consumers, dealers and manufacturers.

The sooner dealerships get that car buying and car buying online are not different, the better shape they will be in to move forward.  The auto sales funnel is changing.

Why the push to selling online?  These are big ticket items with negotiable elements.  Why the push to "transparency," whatever that means in this context?  What is the objective?  A sale for the sake of a sale isn't rewarding.  Its all about gross profit.  If you want to post your bottom dollar price, more power to you.  If you want to put a chopping cart on your sitre, more power to you.  The cart will sove the major issues we have, right?  Consumers will no longer have unrealistic expectations for their trade, right?  Everyone will have 720 credit scores.  No one will be upside down.  The cart will be able to unpack the information the consumer is carrying around without a hitch, right?  And the bank will finance whatever "carry" is needed so the consumer will get what they want and be happy.  Hell, we can hire a blind dog with a note in his mouth to do the job.  We can cut the pay for sales people again.  What a smashing idea.

Our competitor down the street HOPES we do this.  He/she can advertise "We beat the best posted price in the market" and sell off your prices.  Consumers are more trustworthy and sincere these days, right?  They wouldn't think of using your posted prices against you, right?  Today's consumer wouldn't think of pissing on your leg, now would they?

The savviest Dealers I know advertise, "We beat TrueCar pricing," and use the TrueCar site as a closing tool to validate their own pricing.  Of course, they avoid paying the TrueCar fee.  If you want to help your competitor, price your new cars online, and don't forget to put a shopping cart.  That'll make all the difference. 

I should mention, pricing USED vehicles on line is a MUST, and a dealer must have a sound strategy and work it daily.

I would say the Top thing that makes Car Buying Difficult is most dealerships are not meeting the customer where they are at in the sales process and they try to start them at step 1.

David,

Why push selling online? 99% of consumers expect a hassle & 70% of sales people turnover annually because at the US average of 10 cars per month they can't make a living. Move the sale online, let the consumer do his/her part, let the salesperson negotiate with them online and then set a time to sign and drive in < an hour. Make it more like closing on a house. Reducing the average time a buyer spends in the showroom from 3-4 hours to 75 minutes dramatically improves profitability. Instead of 20 salespeople who sell 200 cars, imaging 12 to 15. They can now make a living and are less likely to turnover. The dealer reduces fixed cost (headcount) by 25% to 40% while also lowering hiring costs.

They'll even find the grosses most likely to go up from these buyers. Ever had a "write your own deal" event? Why move the sale online? Lower costs, raise loyalty and grow sustainable profits.

Brad,

You're absolutely right. So what do they do? Start over. Really frustrating for the customer.

RE: "Why push selling online? 99% of consumers expect a hassle & 70% of sales people turnover annually because at the US average of 10 cars per month they can't make a living."

So what do you do to prevent "the hassle?"  Do you try to sell automobiles like electronic gadgets?  Do you pretend it isn't a big ticket item, full of complexity that includes credit issues, negative equity issues, unrealistic expectations, etc?  Maybe we should focus on making MORE money rather than less so we can pay our sales people better and keep them around.

"Move the sale online, let the consumer do his/her part, let the salesperson negotiate with them online and then set a time to sign and drive in < an hour."

Negotiate on line?  Negotiate BEFORE they've driven the vehicle?  Before we've seen their trade?  Before we know their credit? 

RE: "Make it more like closing on a house."

You don't close on a house until the price is agreed on.And THAT requires an OFFER from the BUYER backed up with CASH.  I LIKE that!

RE: "Reducing the average time a buyer spends in the showroom from 3-4 hours to 75 minutes dramatically improves profitability."

Only in your fantasies.  There IS a way to reduce the AVERAGE time in the showroom.  Broom all the difficult customers, and send them down the road.  Keep only the 720 credit scores, the people with positive trade equity, and those who are realistic.  You profits will go up.  Your volume will SUCK.

RE: "Instead of 20 salespeople who sell 200 cars, imaging 12 to 15."

Its about gross profit per unit.  That has to happen first.  Your consumers don't want to give it to you.  It takes time to extract it from them.  IF you have a staff that stays with you, your volume will increase based on repeat sales. 

RE: "They can now make a living and are less likely to turnover. The dealer reduces fixed cost (headcount) by 25% to 40% while also lowering hiring costs."

You structure your sales staff based on an actual prospect count FIRST.  Each sales person can reasonable handle 60 prospects a month.  Most dealers don't know their actual prospect count because they don't use a rotation system.  They don't mystery shop themselves either.  Everyone knows the more "UPS" you log, the lower your closing percentage is.  CRM systems have largely turned counter productive and aren't used correctly.

"They'll even find the grosses most likely to go up from these buyers."

Well, the grosses won't go up.  Your average might as you send those time consuming customers DDR.  (Chicago for Down De Road)

RE: Ever had a "write your own deal" event?"

Yes, in the Seventies.

RE: "Why move the sale online? Lower costs, raise loyalty and grow sustainable profits."

Really.  Is this a sales pitch for someone who will come in and show you how to do this for a fee?  BTW, How's "Shop Click Drive" doing?