Why Have Auto Dealerships Stopped Negotiating?

This past weekend I had the pleasure of accompanying my mother in her quest to find a new car. We visited a couple of smaller dealerships and each one was singing the same tune: We don’t negotiate.

In fact, as soon as we got into the car with the salesman from the second dealership, he made it a point to tell us (as if it was a great service to the customer) they set their car prices competitively and take negotiating out of the equation.

“It’s kind of like Target. Most people don’t want to walk into the store and have to haggle over the prices of everything. It is what it is. People don’t like to negotiate prices.”

“I do,” I blurted out. I couldn’t help myself.

dealers wont negotiate

Why many car dealers stopped negotiating

I think I understand the issue here. (But, if you are in the car business – please jump in! – I’d love to get your thoughts).

Since Kelley Blue Book went online – and now everybody and their grandma has access to the same pricing information – a vehicle’s value is no longer a mystery. All one has to do is plug in the details of an automobile and you soon have its worth. This is a great tool for anyone looking to sell their used car to someone else OR looking to buy one.

Dealers have turned this into their advantage by taking negotiations out of the picture completely and just going by the Blue Book OR – (as my mother was told by one dealership) – “the bank sets the price for me and I can’t go any less”.

For many people, negotiating anything is a bit of a chore. It’s uncomfortable, can be awkward and – if we’re honest – a little scary. Unlike other cultures, we generally accept what the price is and pay it. Oftentimes, negotiating can make you look “cheap”. No one wants that label.

Dealerships have used this fear of negotiating to their advantage too – by eliminating it all together.

“We want your car buying process to be pleasant – our prices are AS IS, no negotiating necessary!”

But here’s my problem

Of all places – I thought small-town America would still be in to negotiating car prices! But, this philosophy has infiltrated our great country-side! (unfortunately)

While I think I understand the issue at hand and many dealers are turning to a policy of non-negotiation, I’m not entirely comfortable with it. Why?

Here’s the thing. I don’t know what Ace Dealership paid for that vehicle. Sure, the Kelley Blue Book prices it at $4,500 – but whose to say Ace didn’t pay $2,000 for it? Many dealers buy their inventory at auctions – often times getting great deals on cars that us average car buyers don’t have access to (or the time / know-how to access).

So, while the car may be worth a said amount – there is often “room to negotiate”. Now, I’m okay with capitalism and the dealer getting their fair share. But, we’re not negotiating the price of a lamp stand here. A vehicle purchase is one of those big-ticket items we want to make sure we are getting the best possible price on.

What do you think?

I’d love to hear if you share this frustration with car buying OR perhaps you are happy with the new way of purchasing a vehicle.

(Here’s an interesting article – with good comments – written in ’13 about non-negotiation car sales)

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  1. Sheila says:

    I love it. I hate trying to negotiate with a professional negotiator. I can walk away if I don’t like their price. Market value will drive the prices.

    • Aaron says:

      Good point Sheila. However, we kinda tried the “walk-away” method and it got us no-where, of course. :)

      • Gwan says:

        It’s not about being able to walk away as a method, it’s about not wasting your own time, you just don’t buy the car if you don’t like the price. And just because they don’t negotiate does not mean they make money on that car sale

        • Ben Franklin says:

          What are you talking about? I always make money off of a car sale. Even if they sell it at a loss fat cell goes into a sales volume quota which gets the massive bonuses at certain milestones. Any bean counter can look at the claimed invoice prices that dealers supposedly pay and compare it to MSRP. Even if every dealer sold every car at MSRP, which rarely ever happens, they would barely be able to keep the lights on and the doors open let alone providing their employees with enough money to buy their own cars. For an example look at the Mazda CX-5. It’s supposed dealer invoice price is literally 2% under MSRP and I can still get a few hundred off MSRP by just using TrueCar. The real cost to the dealers is Now hidden in a myriad of bonus and incentive programs that are totally hidden from the consumer mostly based on volume.

          So please refrain from singing the sympathy song for car dealerships. Just ask Paul Miller or Jack Daniels… Both individuals who own several car dealerships in my area and are multimillionaires.

  2. Allison Au says:

    I have never bought a car from a dealer. But I love negotiating! I drive a hard bargain. But I grew up in the Vietnamese culture, where everything is negotiable. Grocery at the market etc. so for me, it’s just part of life. Even if the price of the car is not negotiable, perhaps other aspect of the sale may be; oil changes, car washes, etc.

    • Aaron says:

      Appreciate your perspective Allison. Excellent point about looking outside the box in negotiating (oil changes, washes, etc).

  3. Lynn Ramdin says:

    I dread stepping into a dealership. My time is too valuable to me to spend hours at a dealership between the test drive, waiting for the “finance” person to speak with me and then going through line by line of the invoice for all of the hidden fees. In most major cities, you can find a private dealer. Private dealers sometimes have used car dealerships, sometimes they just look for a specific car for their client and some do both. They usually just charge their finders fee and the sales tax and then you walk out the door with your keys to your new car. I have bought my last two cars from the same private dealer and have no regrets. One car (a 2009 Volvo V50) I got under Kelly Blue Book Value and the other one ( a 2011 Mercedes C300) was right at KBB value. The cars will alway be used but that’s what I prefer since new cars have depreciated as soon as you drive them off the lot. I would highly recommend finding a reputable private dealer in your area (that’s the challenging part).

    • Aaron says:

      Thanks for mentioning the private dealer Lynn. I’ve heard of others having good success with them too – and they are generally out for your best interests/needs.

  4. Steph says:

    Try “shopping” online-a lot of dealerships will give you a price online, then I go into the dealership and see the car with the sales person. The last three times we have purchased a car-the price I was given online was thousands less than the “best” price when I talked to the sales person at the same dealership. Not negotiating (which I don’t like) but still useful. Hope useful!

  5. Kat says:

    I will be buying a new car next week. I hope that armed with the MSRP, walking in with credit union financing, and blue book knowledge I can negotiate a slightly above invoice price with the specs that I am looking for BEFORE my trade in and have this paid off ASAP. Any parting advice? Wish me luck!

  6. Andy says:

    For a used car, if they say “we don’t negotiate,” I’d run away as far as possible.

    For a new car purchase, I wouldn’t even bother with salespeople anymore. I’ve used Truecar.com to purchase my last two vehicles and using creative geography, paid thousands less than I would have attempting to negotiate with idiot car salesmen. Being that I’m in NJ and have numerous states within driving/bus/train/plane distance, I simply shopped around the general area of 300 miles away and found the cheapest dealership. Confirmed the price with the dealership and then picked up the car and drove home. In 2010, I picked up a new Hyundai Sonata in Maryland for $3,000 less than the cost in NJ. Just makes sense to shop around … even out of state.

    • Aaron says:

      Hi Andy – yeah, these were all used car dealers. Haven’t tried Truecar.com. Great idea about shopping around in different locations!

  7. Rebecca says:

    I got a quote for a new car , a week later I ask my son to go get a quote for the same car, when he returned his quote was $3500 less than mine. So I went a few days later and asked to talk to the manager and ask why my sons quote was different than the one I received. When it came down to it he told me it was because I was a woman. He offered to sell me the car for the lower price, I said no thank you and I would tell everyone I could not to deal with his dealership. He called me a few days later and offered to take $7000 off the new car. I told him I wouldn’t deal with his dealership for the way he treats men and women different.

    • Aaron says:

      Ugh. I applaud you for standing up against the salesperson on principle Rebecca – even though you could have gotten a good deal.

  8. Janel says:

    These are all good points. I just contacted a dealership yesterday about a car, used of course. They were only willing to take 300 dollars off the price and I thought that was ridiculous. When I searched outside of my state I found the same vehicle actually better with less miles and the price was like almost $2000 less so now I’m trying to decide if I want to go ahead and make the drive. I was thinking about calling the dealership and seeing if they had a closer location instead of driving 2 hours, instead i could just drive 1 hr. But yeah it was it was really interesting. Waiting it out is good also, that’s if you can.

    • Aaron says:

      Wild! I have found that too – if you are willing to look elsewhere (often in smaller towns) and are up for the drive, you can catch a better deal. Best to you!

  9. Joseph Freitas says:

    “We don’t negotiate” was their opening line of the negotiation. You just decided to accept it. Unless they have a line of people waiting to buy that car it is negotiable.

    • Aaron says:

      Oh, I pushed em on this Joseph – but they weren’t having it. Very interesting way to do business! It’s actually policy at several dealerships here in my city.

  10. Gwan says:

    It’s too bad that all there is is bitterness towards all this, not all places operate like this and if you go to a place of business prepared you will not be taken advantage of, and just because they are selling something doesn’t mean it’s bad. When you actually listen you hear more than if you try to shout your point out louder than someone else. I personally sell cars and when people walk in and tell me what they want I let them know everything I can up front, and if they don’t like it I shake their hand and let them know good luck elsewhere. Because I do want them to get the deal they are searching for weather it is from me or not… Luckily I’m not paid on commission so it doesn’t make a difference to me weather they buy from me or not, but that attitude has actually sold me the most cars over the course of the year at my location. Those who choose to make it a miserable experience only have themselves to blame, control what you can, let go of that in which you can’t ..

  11. Nathan Adams says:

    I am in the car business and I know exactly why this happens.

    People do have access to all of the information now. So when they do all of their homework and they find out what KBB or TrueCar calls a good price, they come into the dealership and use that as their starting point.

    It does not matter what I say as a salesperson. No buyer will EVER believe me. Even if the dealership is actually losing 1, 2, or even THREE thousand dollars… Buyers don’t believe you.

    There are so many restrictions now for car dealers and it is necessary. I can see how dangerous it would be if we had to power to rip everybody off. But the truth is that we have to disclose everything by law and most of us do.

    I have been fortunate enough to work with good honest dealerships and I genuinely like to help people but it’s difficult when they automatically think of me as the bad guy. In reality, I don’t get a paycheck unless the client is happy and purchases a car.

    So, yes, some dealerships resort to no-haggle prices so that there is no mystery. And for people that accept that, it can make it go a lot more smoothly.

    A tip that I would give to car buyers is to shop for the right salesperson. If he/she makes you comfortable and you can reasonably trust them, then you can work together to get a fair deal. They want to earn your business and your repeat business. If they are rude or pushy then don’t work with them.

  12. Robert says:

    I work at a negotiation free dealer, and I have to say, the feedback we have gotten since going to our process is unbelievable. Not only does everyone pay the same for a vehicle, but I am a non-commissioned salesperson. I receive a salary with bonuses based on volume and guest satisfaction. We also have a money back guarantee, which means that if they change their mind in a certain time period and mileage period, they can bring the car back and we cut the entire deal, at no cost to the customer.

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