I'm a retired salesman
I really enjoy this forum and have found quite a bit of valuable information... and appreciate everyone sharing their knowledge and experience. But I have never seen so many disparaging comments st...
Forum Discussion
monkey44 wrote:
JALLEN4 Quote: "Saturn was established on that premise and we all know where that went. Vehicle sales are unique in that they are the only industry where they regularly trade in that which they originally sold you. This alone makes variable pricing necessary and normal."
Not sure that fact was the only reason Saturn ate it, and Saturn gave a fixed price but still manipulated the trade-in values ... but "vehicle sales are unique ..." and "makes variable pricing necessary and normal."
Not true, that cost model has developed in order to facilitate financing on upside-down value on trade-in vs. a new car purchase because a buyer frequently trades in a car before its value pays down enough. It has nothing to do with 'necessary' except that buyers generally want something they can't afford to buy, so they finance it, which adds to the price of the vehicle beyond its actual value because that financing cost (and tax and fees) adds to the price of the vehicle no matter what label you attach to the additional $$.
If a dealer bought a trade-in for it's trade value, and sold a new vehicle for its true sales price (value), the variable could disappear.
The reason a 'sliding value' exists - so the dealer can pay out the difference between what is owed on the trade-in and the value of the trade-in. And, that's because the buyer hasn't paid for the trade vehicle yet because when you add the interest on a loan, it means a buyer always pays several thousand dollars 'extra', over the actual value. SO, the buyer is also paying off the depreciation and interest on the trade-in AND the price on the new vehicle. And next time, will need even more 'variable' ...
IF the dealer allowed exactly what the trade-in is worth, and sold the new vehicle for a fixed price, and didn't manipulate those values, there'd be no need for the variable sales price. But instead, the dealer has a 'cushion' so that value on both can be manipulated and the financing approved. That is the only reason for 'variables' in pricing = financing.
Think about exactly how you would execute a car purchase if you did not finance, and if you had a trade in that was paid off. That's how the true sales and trade value will show accurately.
From a lay-person's perspective, all of that is logical. From a Dealer's perspective it makes very little sense and has very little to do with why transaction prices are negotiated and not constant.
