Every morning, while savoring my first cup of Lipton tea, I browse the electric car sub-reddit to see if any interesting developments have occurred in the EV world over the past 24 hours. Recently, I found one that I want to share with our readers. Here is the original post from Reddit user (and Audi e-tron owner) David Maybury, who wants to buy a new Mustang Mach-E:
“We had picked out the car, brought a quote on our trade-in from CarMax, and my own financing offer. Dealer could get me a better interest rate, so that’s as good, but the payments didn’t seem to add up. So I asked for the breakdown. First they had “forgotten” to include the trade-in, and then said they couldn’t match CarMax. (Salesman had said they would). Fine. I’ll take it to CarMax.
“Then they did the “did your salesman talk to you about pricing?” and admitted they marked the car up $5k. But there was a $1600 rebate. I told them I wouldn’t pay one dollar of markup. They added another $3000 rebate, bringing the net markup to $400. So I told them we were out and started walking. They tried really hard to get us to stay, where I began getting pissy. They made a last call to the GM, who wouldn’t let go of the $400, so I walked.
“Driving from Riverside to Culver City in rush hour (well over an hour) to get this treatment was aggressively not worth it. I still have one reserved at a dealership that promises to be better behaved, but I’m now reconsidering my options. Just needed to vent a bit.”
Maybury’s post has received over 365 comments, many of them from people who have had similar experiences at other dealers. The issue is not confined to Ford dealers by any means. There are even a few from Tesla owners who found their purchase experience to be somewhat less than the “no hassle” process the company promises.
In theory, Ford is putting pressure on its dealers not to pull this “market adjustment” stuff with Mach-E shoppers. Mark Levine, Ford’s director of communications, posted a tweet recently that promises to assist any Mach-E buyers with dealer markup issues. He also uses the occasion to take a shot at Tesla but that’s OK. That’s his job, I suppose.
Any Mach-E customer who sees a dealer adding a markup can reach out to me. I’ll help them find another dealer. Good luck reaching out to Tesla to get your FSD.
— Mike Levine (@mrlevine) March 21, 2021
Maybury has tweeted Levine but gotten no response as of yet. In an update to his original post, he reports similar shenanigans at two other Ford dealers he has contacted. Part of the problem may be that he lives in California, which is ground zero for the electric car movement in America. Would someone in Peoria or Poughkeepsie have similar issues? If you have anything to add to this story, please let us know in the comments section.
Dealers Are In It For The Money!
Horrors! It turns out car dealers are in it for the money. Who’d a thunk it, huh? As strange as it may seem, there isn’t all that much money in selling the cars themselves. The real money is made in the service department and in the finance office. Oil changes, brakes, and tires are profitable items. So are the commissions credit unions and finance companies pay for the business the F&I departments send their way. Undercoating, paint protection (cue that famous scene from the movie Fargo), LoJack, extended warranties — those are just some of the extras dealers rely on to keep them profitable. Then there are all the bizarro financial dealings between the manufacturers and the dealers that can affect the dealer’s profit that few customers know anything about.
You may bring The Incredible Hulk with you help you negotiate with a dealer, but you are an amateur. They do this for a living and have an entire checklist of sales techniques perfected over decades. Dealer schools run by NADA and others actually teach dealers how to extract the maximum number of dollars from each customer. Whatever strategy you think you have, they have heard it all before and have a response that has been gamed out years in advance. They do this 7 days a week. You do it once every three years or so. If you are a weekend tennis player and go up against Serena Williams, who do you think is going to win?
In the bad old days, a salesman would ask for your keys as soon as you walked in so they could “evaluate your trade.” At some dealers, they would actually throw the keys up on the roof and say you needed to buy a car from them in order to drive home. Things aren’t quite as Wild West as that today, but the customer is definitely at a disadvantage in most new (or used) car negotiations.
A Contrary View
Last month, we did a story about how dealers are a major roadblock on the highway to an all EV future. A person using the Disqus user name of DealerVoice posted a comment to that story in which he defended the dealership model and his industry. I give him a lot of credit for walking into the lion’s den. Every story has at least two sides and we seldom get input from actual dealers. Here is what he said in his comment:
“Thanks Steve for this Article. As an owner of a family based dealership that has spanned 4 generations.. I can assure you that it is not the dealer that is a barrier to EV sales. We welcome the change. We have invested in EV Displays, Tech training, Charging stations, etc…. I believe you afford us more power than what we actually have. Transportation in America is a SYSTEM, interdependent upon roads, fuel, service, etc. Dropping the square peg that is an EV into the round hole of American private ICE transportation will result in slow adaptation.
“The fact is the majority of Americans are not ASKING for EVs…and it is not the dealers making these millions of ICE vehicles every year. We sell what is available and what is in demand, and service them when they break, take in them in trade. And if its not independent dealers, there will be factory owned stores, operating under the SAME model as a traditional dealer – selling ICEs. The consumer will just have less power in this scenario, and price competition is reduced (no intra-brand competition between dealerships)
“Instead of pointing the finger at dealerships, here are the questions you should be asking:
1. Can the average American afford an EV?
2. Do they have the time to wait 30-45 minutes for a pure electric to recharge?
3. Do they OWN a residence in which they are willing to drop $$ on a charging station?
4. Does an EV fit their needs? How long is their commute?
5. What does the secondary USED market look like for EVs (BTW this is where most people buy their cars in America)
6. What’s the replacement cost of a battery pack in an EV? What’s the value after 10yrs
7. What will my electric bill be under a world of ALL EVs? Who will I be paying?
“Most EV buyers who walk into our dealerships ALSO own an ICE vehicle. The EV is a second car, a toy – because when they need to make long trips, or the EV failed to charge, they know they can start up the old reliable ICE and get the job done.
“So the REAL BARRIER is consumer DEMAND. Dealers don’t create the demand…they cater to it. Manufacture’s now are claiming all EV lineup to simply bump stock value in reaction to the Tesla curiously high Market Cap value…..But Ford GM and others will make ICE, as long as it make ECONOMIC sense..
“Dealers sell cars because people need convenient, private, affordable transportation…and they could car less what’s pushing the wheels ICE gasoline or EV COAL based-electric…..
Again, I give this person high marks for taking the time to state his position. I was in the “car bidness” myself for a number of years and know the people I worked for ran an ethical operation, which did not prevent them from making a good living. Did we offer customers paint protection and LoJacks and extended warranties? Yes, we did. Some bought them, some did not, but they were not strongarmed into buying them. During my 5 years with that company, no car had a “market adjustment” applied to the MSRP. Not one.
Brave New World
The issue is not whether Ford (or any other dealers) have a right to feed their families. The issue is that EV shoppers are participants in a new experiment and are highly resistant to the old ways. Apple doesn’t negotiate the price of its iPhones and iPads. Amazon doesn’t negotiate the price of the products it offers. Best Buy doesn’t negotiate the price of its digital TVs. People who are used to doing business online expect to be treated in a certain way. The traditional dealer model just strikes them as so last century and in conflict with their needs and expectations.
The EV revolution is going to disrupt the conventional dealership model just as surely as it is going to disrupt the auto manufacturing business. The dealers who thrive will be the ones who recognize the new market realities and embrace them. Some well established car companies will go out of business as EVs take over more and more of the market. It’s inevitable. And some well established dealerships will go out of business as well.
It doesn’t have to be that way. The only constant in life is change and those who refuse to recognize that principle are doomed. As Bob Dylan would say, “Your old road is rapidly aging. Please get out of the new one if you can’t lend your hand, for the times they are a’changing.” Amen to that.