Woman’s Car Story Is Cautionary Tale on Bargaining
If my messages are any measure, telephone companies and HMOs have the highest number of dissatisfied consumers, followed by people who have had problems buying or leasing new or used automobiles, repairing cars and insuring them.
Perhaps because bargaining is not a customary part of our way of purchasing goods and services, there often seems to be tremendous uncertainty about whether one has gotten a good deal after an auto purchase or lease.
And it doesn’t help that many auto dealers mix up matters in the bargaining process, moving rapidly among complex issues, like the asking price, monthly payments, interest rates, trade-ins, and extras. Afterward, customers can’t decide just what the transaction did cost them.
Clarity is everything in making such deals. But most buyers are not skilled in obtaining it. For a customer to insist successfully on clarity is a major accomplishment. Finding out what the dealer’s profit actually was--the key to knowing whether you’ve negotiated a good deal--is even harder.
This is a story about Delores Cox of Torrance, and her deal with McKenna Motors of Norwalk. Cox traded in a 1997 Saturn with 38,000 miles, and leased a new Volkswagen Passat.
As this played out, if McKenna made anything, it wasn’t much.
For goodwill and publicity reasons, after I went to the dealer about Cox’s complaint, McKenna wrote Cox a check for $3,868, more than she had originally claimed was owed her in a dispute over how much she was due for her trade-in.
Earlier, Cox’s own plea for redress was turned down several times.
Stuart Green, one of the dealer’s general sales managers, told me after Cox cashed her check: “We actually lost money on the entire transaction. . . . You cost us $4,000.”
But an expert on buying cars, W. James Bragg of Long Beach, founder of Fighting Chance--an information service for new car shoppers at https://www.fightingchance.com--analyzed the deal for me in detail and concluded that even after paying off Cox, McKenna still probably made about $650.
The Cox complaint was that during lengthy discussions over her Dec. 15 transaction, a McKenna salesman, Mike Felix, implied in passing, but not explicitly, that she would get $10,575 in a trade-in for her Saturn.
Meanwhile, he spent most of his time talking about what her monthly payment on the lease would be. That mounted from the $300 she originally wanted to the $397 he finally offered her.
Cox said that when she noticed that the lease agreement listed only $6,300 for her trade-in, she complained, but was told that the finance manager had gone home. She was told to take the new car home, and to call to rectify matters the next day.
But when she did call in, she was unable to get any satisfaction. She was finally informed, in curt language, she says, that no changes would be made.
Discussions on the art of negotiation at the Wharton School at the University of Pennsylvania indicate that many auto dealers feel that if they can get a customer to take a car home without nailing down details, they seldom insist on returning the car later, even if they are furious at parts of the final deal. It’s called the “endowment effect.” Once you’ve got something, you don’t want to give it up.
Bragg says Cox made three key mistakes.
First, he said, whenever anybody has a trade-in, it’s advisable to firmly establish the value of the new car first. Otherwise, the dealer will agree to almost anything on the trade-in and then add it to the price of the new car.
Second, he said, Cox should have taken her old car to a Saturn dealer for resale, not to McKenna, which doesn’t sell Saturn used cars.
Third, Cox relied on setting her trade-in goal on Kelley Blue Book figures. Most dealers pay about $1,500 less than the Blue Book prices, and such values are fuzzy anyway, since the Kelley Blue Book for the Western region covers everything from Guam to Utah and there are many local variations.
When Cox complained to me, and I went to McKenna, it did not take long before sales manager Green indicated that they would pay off the customer on her terms.
“Our final position is to do what we need to do to make this woman happy,” he told me. “One unhappy person tells 30 people about their bad experience and we lose 30 customers. One happy customer tells three. So we need 10 happy customers for every unhappy one.”
Even before I got back to my office, Green had called Cox and invited her in the next day. When she showed up, he declined to give her a cashier’s check and a letter of apology, as she wanted. But he did give her a company check, assuring her that it wouldn’t be withdrawn. He even paid her $425 more than she had asked for in her complaint. Cox, in turn, signed a letter saying she would not sue.
Despite Green’s insistence that McKenna had lost money on the transaction, Bragg would agree only that the profit was far less than the $4,500 that McKenna would have made had the first deal stood up.
The fair trade-in on the Saturn might have been $8,000 or a little more, Bragg said, so the dealership lost out in giving her much more. But, he said, Cox had still agreed to eventually pay full sticker price in leasing the Passat, which most customers would not have done, and had purchased an extended warranty for $1,675, about twice the break-even price. The dealer also gained other “holdback” profits and maybe $1,000 from reselling the used car to Saturn.
Cox would probably have had little leverage in bringing McKenna to her terms without getting my attention to her complaint. But had she insisted on clarity in the first place, and not made some of the mistakes Bragg listed, Bragg felt the McKenna profit might have been little more than half what it was before the dealer paid her off, instead of $650.
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Ken Reich can be contacted with your accounts of true consumer adventures at (213) 237-7060 or by e-mail at ken.reich@latimes.com.
