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Why transparent pricing sells cars | comment

Last week Volkswagen limboed to a staggering low of $22,990 drive-away for a new Golf.

Last week's story about the hassle of simply getting a price on a new car certainly hit a raw nerve.

It seems we're not alone in our frustration, if the overwhelming feedback from readers is a guide. Some car dealers also weighed in on the debate.

Reader Riki Waugh tried to buy for his daughter a brand-new Toyota Corolla off the showroom floor, but walked out after being bumped up through three layers of sales staff, none of whom would supply a price. Suffice to say, he bought elsewhere.

Reader Hubert Breitenstein summed up the view of many buyers who struggle to obtain a price: "It seems like some crazy form of self sabotage." He added: "Everyone who has any sense does price comparisons, no matter what they buy. Why do car dealers think that they are sacrosanct? What do they think they gain by withholding prices?"

Mr Breitenstein says he has walked away from three potential purchases because he could not get a price on a vehicle he was intending to buy.

Incredibly, one dealer refused to reveal the "change-over" price from his trade-in to a new car until a deposit had been paid. This may sound fanciful but, sadly, it is not the first time we have heard of this practice.

Reader David Toohey understood our point, too: "If dealers could just be transparent they would sell more cars". Mr Toohey says he experienced the same wall of silence when it came to a straight answer on the trade-in and drive-away prices.

"Surprisingly the salesman who was looking after us couldn't supply an answer and suddenly transformed into a school boy going to see the headmaster," wrote Mr Toohey. "He had to consult the dealer principal and he met us with the response ‘we will tell you that when you are ready to buy'."

Some dealers accused us of trying to push car sales staff below the poverty line. Others understood our point: that an open negotiation can lead to more sales. Dealership employee John Bellizia wrote: "You're absolutely right, dealers are their own worst enemy at times and can make the experience somewhat draining."

However, he said: "Not all dealers have a code of ethics but (some) customers come out punching harder than Mike Tyson!" Mr Bellizia said at his dealership it was policy to "treat every customer with honesty and integrity, every day, every time, without fail ... no exceptions." But, he lamented, "it seems that only the nice customers get to experience this".

As we wrote last week, we were merely trying to highlight the point that if sales staff were more forthcoming with a price, they would sell more cars. No-one is paying full price for cars these days, so dealers who try to find the one customer a year who might pay full tilt actually end up losing countless other potential sales.

The smart brands that are doing well have all moved to transaction pricing, with little to no wriggle room because the deal is already sharp -- and the customer can see that.

For example, last week Honda put up the price of its Civic hatch by $1000 -- just as Volkswagen limboed to a staggering low of $22,990 drive-away for a new Golf (including metallic paint), $2000 off the launch price less than a year.

The VW deal is so skinny that dealers apparently can't even afford to include free floormats -- but we suspect there would be room to move on the Honda pricing.

Which is why customers go in fighting: it's hard for inexperienced buyers to pick the good deals from the bad. As we wrote last week, we don't begrudge dealers from making a profit. The cost to run a dealership and employ all the staff is massive, even before the lights are turned on. Indeed, showroom stock costs the dealership money just sitting there until it's sold.

One industry insider revealed it costs an average of $1860 just to sell one car -- regardless of the cost of the vehicle -- when you include dealership rent, wages, advertising, demonstrator models, fuel and other expenses.

Which is why it's so perplexing that many dealers don't move heaven and earth in order to move metal. Why don't more dealers break down the barriers, and reveal a fair drive-away price from the get-go?

Understandably, not every car has a $12,000 discount in it, like the BMW X1 we mentioned last week, which went from $62,000 to $50,000 in 37 minutes.

But surely it's better for consumers -- and the long term health of the dealership -- to charge everyone a fair but competitive price, rather than make no money on some deals and try to make up for the losses on others.

This reporter is on Twitter: @JoshuaDowling