Is no-haggle new-car pricing poised for expansion?
Recently, a chain of new-car dealerships announced that over the next several years it will convert all of its stores to no-haggle pricing. This, of course, follows the national policy at General Motors' Saturn dealerships.
But how "no-haggle" is no-haggle pricing?
Does it mean a buyer is guaranteed to pay the same price as the next person who walks through the door? Will no-haggle dealerships refuse to shave a few hundred dollars from the deal rather than lose a sale?
Perhaps the biggest question is whether most consumers really want no-haggle pricing. Buyers may be so conditioned to negotiate a deal that they feel they are leaving money on the table in a no-haggle dealership.
The jury is a long way from a verdict on no-haggle pricing, but there are some things today's new car shoppers should know.
First, dealers -- even the much-heralded Saturn dealers -- are not absolutely bound to avoid haggling. Federal law says that manufacturers can't dictate pricing to dealers. That's where the phrase manufacturer's suggested retail price, or MSRP, comes from.
The issue came up over how some dealers handled the debut of the hot-selling Saturn Sky roadster. With more buyers than vehicles in stock, some dealers jacked up the price above the MSRP and then bargained from there -- not exactly a no-haggle attitude.
A representative for Saturn admitted there was little that GM could do to discourage such practices, aside from counseling the offending dealers that their attitude could limit future sales.
Even if a dealership adheres to a one-price-fits-all policy, there are other ways in which a buyer can wind up paying more -- or less -- than another customer.
The value of a trade-in, the cost of financing and prices for extended warranties can all pad the price of that no-haggle vehicle. So buyers need to keep their eyes on the bottom line and not be dazzled by the low-pressure sales approach over the posted price of the vehicle. Otherwise, they could end up giving away hundreds or even thousands of dollars in other parts of the purchase process.
Then there's the issue of whether significant numbers of buyers will ever be comfortable with no-haggle pricing.
After a century of buying new cars through an adversarial process, people are understandably distrustful of deals where they have no apparent leverage.
And don't forget the ego factor. Many buyers love to boast they "bargained" the dealer down to an incredibly low price, even claiming they bought the car for less than the dealer paid. Of course, no dealer can sell cars at a true loss, but that doesn't stop the bragging.
The buyers who unquestionably benefit from no-haggle pricing are those who have an abject fear of the car-buying process. Even if those folks give up some extra dollars, no-haggle is probably worth the cost.
Here are this week's readers' questions:
- No-haggle pricing can mask hidden costs
- Should I use home equity to buy a car?
- How can I clarify why my car was repossessed?
- Will I get my down payment back after rescission?
If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car -- sign up for Bankrate's new weekend Car & Money newsletter.