As we read yesterday, a good portion of the population would rather give up sex or do all kinds of unpleasant things rather than negotiate with dealerships to buy a car. With this type of aversion to the auto purchasing process it is no wonder Tesla's direct sales model has struck a chord with consumers, and faced so much resistance from dealerships. People want a better way. But why is car-buying such a stressful process? It all comes down to how our brain handles these types of interactions, because buying a car is not like buying any other product. People are emotional creatures, and we try to avoid feelings of fear, uncertainty, and regret.
Picking the "right" car-
Car-buyers are afraid they will choose the wrong product. Vehicles are expensive, they are not (for the most part) a purchase that increases in value. Wading through the number of makes, models, trims and options can be overwhelming. Barry Schwartz wrote about "The Paradox of Choice" while this theory isn't universally accepted, Shwartz and other psychologists hypothesized that more choices actually reduce our freedom and increase stress. Because we are emotional creatures picking the right vehicle is not as simple as...I have 3 kids and need a family vehicle, therefore minivan. In addition to our "needs," our wants, desires, and lifestyle all play a role in the car we choose. The mental baggage we bring to getting our next ride can psychoanalyzed in much greater detail, but what it comes down to is...research doesn't always help. Say you are looking for a mid-size sedan, you can read 5 different sources and get 5 different answers. While this can be true for any other product, picking the wrong cell-phone does not have the same impact on our daily lives as choosing the wrong car.
Getting a "good" deal-
When you shop for a new computer how does it go? You pick your model and features, you browse various online retailers and usually purchase from the vendor that has the lowest price (and preferably free shipping). If the MSRP of your computer is $900 and you snag it for $750 you feel good that you landed a "deal." With cars this is not so easy, what is a considered a good "deal" on one car is not the same as another. Manufacturer incentives and dealer discounts can vary widely from brand and model. Several thousands off a full-size pickup truck is pretty standard, but due to the low profit margins of subcompacts you are lucky to get $1500 off. The percentage discounts for vehicles in various price categories is confusing for those not familiar with the industry. Even comparing deals on the same vehicle can be dependent on location, creditworthiness, trade-value etc…
Knowledge is Power-
Pardon the cliche, but 21st century car-buyers are much more prepared than previous generations when it comes to access to information. For the longest time the dealers were the gatekeepers of the numbers. Now consumers have access to invoice pricing, incentives, trade-values and the ability to cross-shop their own financing all before making first contact with the dealer. This has caused a transformative shift in how cars are bought and sold. But it is still not enough...
It all comes down to trust-
People don't want to be taken advantage of, when another person or group of people deceive us that mental and emotional violation stays with us for a long time. Practically everyone has either been duped or know someone who has been duped by a dealership. As I have mentioned before I have work with dealers every day and while their goal is to make money the majority of them are not out to screw customers. Most establishments understand that the internet can quickly expose shady business practices and savvy shoppers will stay away. Despite the slowly changing tide on the showroom floor, there is still a small percentage of sleazy, rip-off artists looking for the next sucker and given there is no shortage of uninformed consumers these "old school" dealerships will continue to operate. Thus perpetuating the stereotypes for the rest of the field. These are the stories we hear, we never forget our aunt who bought a lemon and the dealer refused to help a month after purchase, we remember our friend who got suckered into an extended warranty that didn't cover the one thing that broke, we remember the dealer that quoted one price only to show something much different once the paperwork arrived and so on….
When we are engaged in a significant financial transaction with another party, we desire a level of trust to prevent us from getting duped. This is why good salespeople are trained to "connect" with customers and "establish relationships." Now again, a good number of them genuinely want to give buyers a fair deal, but some don't. Some of them want to take every penny possible. Therefore, car-buyers have a historical distrust of the car salesperson and have begun looking to intermediaries that can establish that "trust."
The rise of 3rd party buying tools-
I will come right out and admit that I used Edmund's survey statistics to do some shameless self-promotion. I provide a service that people can do on their own but for whatever reason choose not to. So if I used this survey for personal gain, how do you think Edmunds used it? Remember they have the "pure price promise," like TrueCar, Edmunds is attempting to appease our overwhelmed, and emotional state to establish more "trust and transparency" in the car-buying process. By highlighting how horrible most people view haggling, Edmunds is using this study as PR to make the case that they have "a better way."