Car Buying: Who's in the Driver's Seat?
April 17 -- Every two years a certain doctor comes to Linda Cerrone's Nissan dealership in Tewksbury, Mass. and buys a Pathfinder or a Maxima from her. The doctor comes well prepared.
Using the Internet, he knows the car's specs, the options and the invoice price. Because of this, she says, she can squeeze just $500 over invoice from him — as much as $2,200 under Nissan's $27,100 suggested retail price for a high-end Maxima. "He grinds me worse than anyone," Cerrone, 53, says.
But don't cry for Cerrone. When she pulls up the doctor's name on her computer, she sees the gross profit she's made off him in parts, service and sales for the eight years he's been coming to her dealership.
"I can see I'll have the ability to make another $1,800 or $2,000 on his trade-in, and I know he's going to service the new car, which will be another $1,000 over the next two years. So it's $3,500 in profit on the deal, not just $500," says Cerrone.
She wouldn't cut the same deal for someone who drove 100 miles to try to save $100 — someone she will likely never see again.
Car dealers would be happy to see the Internet go away — what retailer wants shoppers to know their wholesale costs? But they are not being killed by the Internet, as the most avid dot-com fans were predicting a few years ago. They are fighting back quite adroitly.
Slowing Sales Create Seller Urgency
The old-fashioned dealers have almost completely stomped out the Internet sites that promised to sell cars directly to consumers. Now they are exploiting computers and the Internet to improve service and boost volume, especially for used cars.
And don't think their salespeople aren't well-primed for buyers who walk smugly into a dealership carrying Internet-generated pricing information.
Not that life is easy for dealers. Scores get merged out of existence or go bankrupt every year. Their gross profit margin on new cars has been falling for 40 years, to 6 percent last year. Strong vehicle sales (17.2 million sold last year) have shielded them from worse times, but sales will slow a bit this year.
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