Sunday, May 03, 2009
Sunday, November 11, 2007
Wednesday, November 07, 2007
3 years ago I experienced internet car buying for the first time.
After a screaming and yelling match with a dealer that tried to scam us (dealer tried push us lower trim than originally promised, hint: always get a detailed invoice/list on what you are paying for or order). We tried the internet route. We were impressed, the process was simple: we submitted quote request, dealers emailed us with offer, and we could pick the one offering us lowest rate, or ask if the nearest dealer would match the best offer we got.
Not only the internet simplified the process, it also leveled the playing field between dealer and customer. I was surprised when I bought my wife’s car below invoice price. After a little googling I learned that the invoice is not the dealer’s true price. Manufacturers do provide dealers with volume discounts and other incentives like hold back which means dealer may still profit 2% to 10% selling at invoice. We learned that the best way to negotiate is to limit the variables, negotiate only the car price with the dealer, arrange own financing and sell your own old car.
I was predicting that the car retail business model would definitely change dramatically and customer will only benefit. The days of haggling with salespeople who won’t be able to feed his/her babies unless he makes 100% profit is gone. Buying a car will be as easy as buying a Playstation-3 from Amazon.com or eBay. Manufacturers will gain more direct control of dealerships or even switch to the direct selling model. Some precedents: Saturn had success with this model early on, but sputtered lately. I am arguing that it is mostly because of the car, not the selling model. Carmax also had success in the used car segment.
Dealers are feeling the pinch too. With margins squeeze, they all start consolidating into mega groups like Autonation and beef up their internet presence.
Fast forward 3 years. I was so surprised with my recent experience trying to buy a new car I just described. Now most dealers refuse to provide upfront pricing via the internet. Trying to lure customers to the sales floor and then use pressure and some questionable sales tactics.
BMW of Mountain View was part of the Autonation group which has one of the biggest internet presence. The company knows that the information gap between them and customers is narrowing as it says in its annual report:
“the majority of new car buyers nationwide consult the Internet for new car information, which is resulting in better-informed customers and a more efficient sales process.”
Boy I was surprised when BMW of Mountain View lied about their invoice price, which was readily available through the internet. They also tried to deceive me on the financing process, that’s why I chose to obtain my own financing. It is perplexing this dealership is selling a high end vehicle like BMW in the Silicon Valley area with the most informed and educated customer base, yet it is still underestimating customers’ intelligence.
It is also surprising that manufacturers still don’t push the direct selling model harder, or at least try to reign in the dealers. Some manufacturers like Toyota tried this a while ago and failed when the dealers revolted. I wonder why customers never revolted and start demanding to be treated with dignity by the dealer. Despite the fact that many people still prefer getting a root canal than dealing with car dealership, product managers and marketing executives are ignoring the problem.
I was tempted to forward story of my ordeal to the BMW and Autonation Corporate, but I know it will just be ignored. BMW will say that BMW dealers are independently franchised, so my problems are none of their business. However, judging from all the problems other customer have with dealers(just look at sites like Bimmerfest.com, and customerafairs.com), they are cheapening the brand equity of the car, which I have to admit is a great piece of engineering. So it is time for the automakers care about what their “independent dealership” flashing their logos/trademark do. And oh the dealers will keep their CSI scores high because some customers who buy can be easily bribed to give perfect CSI scores with free mat ($130 value). And the disgruntled customers who refused to play the game just vent through their blog. By the way, any BMW corporate/marketing readers here, can I fill out a CSI survey for BMW of Mountain View even though I don't buy?
Well, enough ranting. Bottom line: I am putting BMW and Autonation on my possible short sale list. I believe that BMW’s brand equity will decline unless they can improve the customer experience. And about Autonation, please let me know if anyone is planning a class action or customer boycott!PS: look at AN's stock chart! :)
Random rantings by My Sudarshan Chakra at 11:07 PM
To expand on my previous post. I was shopping for a new BMW. I was expecting that BMW dealers would provide me with first class shopping experience that I expect from the brand image. However, boy, I was wrong. The experience wasn’t even better than my experience buying a used clunker 12 years ago in college. So here’s the story. (The names in the copied emails have been changed) .
So I decided that I want to spoil myself a bit and buy a new fun car. Not that there was my 2000 Acura TL , which by the way still runs like new, it’s just I got that childish urge to get new toy. I drove a friend’s 328i and realized how it earned its reputation as the best sport sedan around, so I decided to get one myself. When I and my wife went to the dealer on a Sunday to browse a dealer lot to see how the different colors and options look like in real life. I and my wife were largely ignored (similar treatment we got when we flew Lufthansa Business Class). Not unexpected since I wore my dinky jeans and wrinkled up Abercrombie T-shirt, also the salespeople probably thought I don’t have a driver’s license yet with my boyish oriental look. It was also a blessing in disguise, as I know that if I am going to buy the car it would be through the internet, the (what I thought to be) hassle free way. We had great experience buying my wife’s car over the internet last time.
I submitted quote requests through all the leading internet sites like yahoo, cars.com, autobytel, autotrader.com, edmunds and Capital One car buying service. I found it weird that I thought I had submitted quote request to all 90 BMW dealers within my radius in the bay area, but I only got 2 offers with quote amount. The rest asked me to call a salesperson, internet manager or whoever, which I thought beats the purpose of my shopping over the internet.
So I got this offer from BMW of Mountain View for to order a 2008 328i from the factory with my desired options (auto transmission and sports package):
If I make it $34,250, would you order the car from me, today?
It was $2,375 below MSRP and about $300 above invoice (according to cars.com, see below, double click to enlarge), which based on my research seems to be a good deal. So after confirming with my dear rep Stiffler that the price is all inclusive (Except for tax and license), I replied the next day to accept the deal. I decided to ignore the “today” request as I hate exploding offer, as it is usually not a sign of good faith.
So three days passed without any news, so I guessed the offer was really an exploding offer. Well, life goes on…. Then this email came:
My name is Marvin Bobblehead and I am the Internet Manager at BMW of Mountain View. Stiffler is no longer here and asked that I follow up with his customers. Please let me know if and how I may assist you. Thank you and have a great day!
So I guess that explained why Mr. Stiffler didn’t get back to me. So I forwarded Stiffler’s offer to Marvin and asked if the deal was still on. So he replied:
Thank you very much for your email! Invoice on your BMW is $34,350 and $400 above that is $34,750. Unfortunately, we do not sell BMWs below invoice. I will honor $400 over invoice and also include free floor mats (Retail $130). If interested please let me know. Thanks again and have a great evening!
Oh boy, I decided not to trust these people. As you see above my research showed that the invoice was in high $33k’s (it varies a bit between sites like Cars.com and Edmunds.com). I also have a Wholesale Price List from BMW of North America (I don’t think I can post it here, but search around!), which shows that invoice was $33,860, so in the same ballpark as the one in Cars.com I posted above. I am sure they can come up with excuses why they have special invoice price (e.g. the Euro, Yen, Yuan, light sweet crude price, and their futures/other derivatives and their contango curve, etc). However, my trust-o-meter gauge for this dealership was slowly sinking. I told Marvin “Never mind then.”
Well Marvin was a better salesman than I thought. He tried to salvage the relationship.
Thank you for your email! I am not available in the evenings. However, if you still want to place your order, I will honor Stiffler’s quote of $34,250 as a show of good faith. If you are no longer interested, thank you very much for the opportunity!
After deliberating overnight and confirming the offer and terms of the deal ($1,000 deposit to place the factory order and rest at delivery). I decided to recommit. Well the deal was a good one and the dealer was the closest to my place. I was ready to put down the refundable $1,000 deposit to secure my order from BMW.
Marvin told me to come to sign an order form and a credit application. I replied that I am not going to buy with financing from dealer, as I have secured my own financing and even considering paying cash. Marvin replied: “Even if you are paying cash, I still need two lines of information and a signature, so we know how to register the vehicle.”
So I went to the dealership to pick up the paper Marvin wanted me to do. Marvin was out so he left the papers with the receptionist. I was expecting some sort of an invoice or BMW boilerplate order form with the car and options I ordered with price and terms, signed by the dealership and a dotted line for me to sign. But guess what I found:
1) An authorization form “to charge my credit card for the services rendered.” (Nowhere it specifies what services was rendered). And nowhere there was a firm itemized invoice/quote for the car.
2) A credit application, complete with all the necessary fields to steal my ID highlighted (SSN, Driver’s license #, 5 yrs residence). The highlighted field was 6 lines total (vs. the 2 he claimed)
So I called Marvin back demanding an invoice and explanation for the credit application form. I told him it’s standard business practice, especially for capital goods to invoice before the buyer sends payment. Also, if you eat at a 3 star restaurant, would you give your credit card without an itemized bill? He responded “wasn’t my itemized e-mail enough?” Well it would probably be enough if they didn’t try to play games earlier.
I asked why would I sign a credit application when I am not planning to use their financing services. He assured me it’s not a credit application, dealer just want to know if I am “OK.” I told him so why does the form has “CREDIT APPLICATION” header with fine prints in the bottom saying that I:
1) Authorize financial institutions to obtain consumer credit reports on me periodically and to gather employment history as they consider necessary and appropriate
2) Authorize your affiliates to obtain consumer credit reports on me
3) The financial institutions below may be requested to purchase a sales finance contract, to be written, in connection with your purchase. You are notified pursuant to the FCRA, that your application may be submitted to them or to other financial institution
Did he think I was stupid not knowing that this is a legal document? I also told him that I am not authorizing anyone to run my credit check (as it will affect my FICO). If he is scared that I would run away, I can give the dealer a proof of my income (copy of pay stub without SSN or reference from my employer), or I can give them copy of my credit report (again with the SSN and other info blacked out). I was approved for financing by my bank, and I was prepared to give him the approval notice.
Over the phone, he finally agreed to give me invoice with the car description/spec and receipt for my deposit. He also agreed that I didn’t need to fill the “Credit Application” if I pay by cashier’s check or let my payment check clear before taking delivery. I told him I agreed to that. I promised Marvin that I would come the next day to finalize the deal.
However in the evening my wife brought me to back to reason. She knew that I was drooling for the car, but is it worth playing games with these people? We agree that dealers deserve to profit, but we’d rather grant our business to another party with integrity rather than a bait and switch operations.
The next day I emailed Marvin to thank him and inform him that I was backing off the deal.
I think I am not buying another car until my current car is dead, probably in another decade at least.
I just couldn’t believe that apparently the process of buying a BMW is not much different from buying a cow in rural Uyghur, China.
OK I found out several items that put some of the numbers in context:
1) Invoice numbers discrepancy can also come from Advertising fee (DAG/MACO/whatever). This amounts to about $400 and $500. OK well I think this should not be charged to customers, but seems to be SOP anyway. But why wasn't the dealer straightforward and itemize invoice.
2) checking your credit with SSN and DL# seems to be Standard SOP these days, at least in CA even though you're not applying for credit. Some says this is due to Patriots act... I am OK if you want to check my background, but make sure the form states what my personal info will be used for.
Few years ago some dufus apartment manager tried to steal my ID and apply for credit card on my name, based on an appartment rental application. Thank God I Monitor my credit report regularly.
Random rantings by My Sudarshan Chakra at 8:26 PM
Tuesday, November 06, 2007
I am in the process of buying a car from a luxury brand. I was expecting for a painless experience, thinking that the sellers would pamper me. Boy I am wrong. I got better treatments from street vendors in a pasar malam.
I wonder if Amazon.com would start selling car soon.
Random rantings by My Sudarshan Chakra at 12:14 AM