Car Biz: Must we negotiate?

In this transcript, the customer's name and identifying information have been changed to protect his identity. The remainder is transcribed from my e-mail records, with minimal editing and emphasis added.

'Mark Folks' and I have been corresponding about a vehicle he wants to purchase. In our last exchange, 'Mark' explained that he wants to do as much as possible by e-mail, because he lives a considerable distance from our dealership. He ended his e-mail with the poignant question: 'Why is negotiation necessary, anyway?' My response offers some facts and opinions that may be of value to other customers or vendors who, like me, share Mark's aversion to haggling over price in the sale of a motor vehicle. I'd appreciate the input of any readers who'd like to respond to Mark's question or my answer!

Dear Mark,

Great question. Negotiation is my least-favorite part of this job I've been doing since July 2003.

My opinion is: first, motor vehicle sales has been one of the few areas of commerce in which it's been traditional to negotiate in our culture; and second, our culture is changing, and one direction is toward more negotiation and haggling, as the population reflects an increasing proportion of people whose cultures of origin encourage negotiation in most or all transactions, and for whom it is a survival skill and art form.

In this particular case, you want to pay less than my GM wants to charge for the 2009 Civic LX. I'll get paid my fee only if I can faciliate agreement between the two of you.

One alternative to negotiation is offered by various third parties which provide information and suggestions about the car-buying process. For example, Edmunds.com [see http://www.edmunds.com/] has a 'True Market Value' price for any motor vehicle sold in the U.S., based on good information, a national data base, and real information about sales in every location, adjusted by ZIP code and even body color. I'd be glad to sell you any Honda at the TMV price, and probably could get approval in a heartbeat. That alone may well make the alternative unacceptable--'I wouldn't pay any price they'd readily accept.' And, of course, any such third party has its own profit motive, so their presence can stimulate further suspicion for some sellers and buyers.

Two related observations:

1. The customers who get the lowest prices are almost never the ones most satisfied with their purchase or with the shopping experience. Quite the contrary--typically, such customers are bitter and angry, and often leave the dealership staff in a similar frame of heart and mind.
2. Telling the truth and offering an honest low-cost/high-value transaction seldom is enough in itself to earn a sale in this highly competitive and highly mistrustful context. Hence, my sharing your distaste for negotiation.

So: when I responded favorably, offering to sell you the vehicle you wanted at the sellling price you mentioned initially ($16,600 plus $670 destination, to include window tint at no further charge), you replied that your 'offer' was intended as a driveout offer. And later (as far as I can read it), you decided to further reduce your initial offer by $770 and the cost of the tint.

My question would be--where did you get these numbers, Mark? Here's how I get mine. The vehicle in question, a 2009 Civic FA165 (LX sedan with automatic) costs the dealership ($16,618.49 [national invoice] - 2 percent [dealer holdback] + $870 [destination plus Houston-area consortium marketing] =) $17,156.02. Now, this car comes from Honda with tinted windows; but if you meant you wanted the darker tint applied and warranted for the life of your vehicle by our dealership, that costs us $220 => $17,376.02 in pure cost. Minimum driveout based on that pure cost would be $18,683. So when I offered to accept your figure of $17,270, I was accepting an offer that would lose my dealership about $176. If I accepted your most recent offer, the loss would be about $900. And if I accepted your offer of $17,270 as a driveout price, the real loss would be $1413.

Somewhere in all this is an answer as to why, though you and I hate it, negotiation becomes necessary. And probably, there are also some hints as to why, as you wrote, 'the economy seems to be deteriorating.'

Blessings and best wishes,
Will Hensel, Honda of Clear Lake