Does it really make sense for the industry?
I was having a conversation with my brother-in-law a few weeks back and although he knows what I do, he asked me if I would describe myself as working in the automobile business or the automotive business.
The question made me think for a moment or two because in my mind I had always worked in the “automotive” business. To me, the automobile business is a narrower sub-set of the automotive business involving perhaps the selling and servicing of automobiles.
The job I am involved in has more to do with the policy and legislative framework that ends up being established provincially and federally that allows automobile manufacturers and distributors to hopefully thrive in Canada and make a positive contribution to the economy here.
That said, whether one is part of the automobile business or what I consider to be the broader automotive business both are supported by, and cannot exist without, a consumer deciding to purchase a car. Next to a house, purchasing a car is the second largest expenditure most people will ever make, so it is a very important decision and one that should be made with as much information as possible and after much research and deliberation — given the hundreds of makes and models of vehicles in the marketplace.
SO MANY SOURCES
We are fortunate that with today’s technology, conducting research and finding out information about the various makes and models of vehicles for sale in the Canadian market could not be easier. Most manufacturers’ websites are excellent in providing detailed information, photographs and video about the various models they have for sale and most have detailed “build your own vehicle” tools that allow you to option and price out the vehicle you may be interested in purchasing. When you combine the manufacturer’s website with a multiplicity of other automotive websites and blogs available you can find out more about the vehicle you would like to purchase — including what a fair price to pay for that vehicle might be, than ever before. My friends in the dealer community might not like me mentioning that last fact, but the point is, the information is out there and available to any consumer with access to the Internet and $40.
The larger point is that the whole car purchasing experience has come a long way from the days when I first went through auto sales and lease training almost 30 years ago. Then, there were few computers, and no one had heard about the Internet. Dealers and salespeople were essentially the only ones with all of the information about the makes and models of vehicles — as well as the pricing. So if you really wanted to find out information about the vehicle you might be interested in you had to actually visit a dealership and spend some time with a salesperson to go over the features, benefits and price of the new vehicle you might be considering buying.
Today, going to the dealership is closer to the end of the consumer’s purchasing process than the beginning. Consumers coming into the dealership today are much better informed and knowledgeable about the vehicle they wish to purchase. Furthermore, they may simply want to take it out for a test drive to confirm that this vehicle really is the right one for them.
BOUND BY LAW
I’ve mentioned vehicle price a number of times in this article already and the title of this piece alludes to the concept of “all-inclusive” or “all-in” pricing, which is the law for dealers in Ontario and a few other provinces across Canada.
Manufacturers are not bound by the “all-inclusive” advertising provisions in any province other than Quebec, however, manufacturers have long had to make special provisions for advertising this in Quebec, so all inclusive advertising by vehicle manufacturers can be more readily accommodated in that context.
The real question in my mind is “all inclusive” price advertising realistic and does it even make sense as applied to the automotive context — whether applicable to the dealers or the manufacturers? I do not think of myself as a backward Neanderthal, so I ask you to hear me out.
Manufacturers have long argued that they do not sell directly to consumers and as such, their advertising should not be subject to the “all inclusive” provisions. Moreover, manufacturers tend to advertise MSRP prices and/or special finance deals and lease rates for a range of their products as opposed to what vehicles might actually be selling for on a dealer’s lot.
The argument for having the dealers advertise all inclusive pricing is perhaps a little more persuasive in that if they are advertising a vehicle or vehicles for sale, the vehicle(s) should presumably be available on the dealer’s lot, as depicted in the picture of the ad, with the equipment as listed in the ad, for the price advertised.
Governments have suggested that a consumer should have the ability to go down to a dealership and purchase the vehicle advertised at the advertised price with the only extras being essentially the HST or federal and provincial sales taxes, as the case may be. Theoretically, this sounds simple but in practice it is often much more difficult to do and I think the dealers themselves — while supportive of the “all-inclusive” pricing — would probably be able to tell a multitude of stories about the issues and challenges of “all-inclusive”pricing.
For most of us, when we see a product advertised we have a high degree of confidence that we can go to the supermarket or department store and purchase that advertised good at the advertised price.
OLD HABITS DIE HARD
That makes sense to us, but is that how the car business works? No. We have a 100-year history of vehicle transactions that have essentially been conducted through a negotiation process.
Consumers expect to negotiate for the price of their vehicle and dealers expect this as well. My dealer friends may tell me otherwise but I suspect that the “all-inclusive” advertising provisions have not resulted in consumers coming to the dealership, ad in hand saying, “Okay, your ad says $19,995 plus taxes for this car, here is my money now let’s close the deal.”
I suspect what occurs (and has for many decades) is that consumers will come to the dealership with ad in hand saying “Okay, your ad says $19,995 for this car but I’ll give you $18,700.”
If that is indeed the case then what is the point of all-inclusive advertising? It has certainly made the dealers’ lives more complicated. If the dealer were able to insist that the consumer pay the all-inclusive advertised price that might be one thing, but I’d bet dollars to donuts that doesn’t happen; rather, the age-old negotiation process of automotive sales continues to prevail.
Certainly all-inclusive pricing and price advertising has been at the forefront of the airline and cell phone industries. In my mind, all in pricing makes sense for these products and services, which are far less costly than automobiles, yet have associated fees and surcharges that can effectively double the advertised price of the flight or the monthly cell phone rate.
That is not the case with automobiles and, as I noted at the beginning of this article there are far more tools available for the consumer to know fairly accurately what is the maximum they should pay for the vehicle they desire as well as services that can accurately inform them what they realistically should be able to purchase the vehicle for.
Perhaps the real issue then is not whether auto manufacturers should be brought under the “all-inclusive” price advertising regime but rather whether the “all-inclusive” price continues to make sense for the industry or if there are other mechanisms for addressing what may be perceived gaps in consumer information as it relates to vehicle advertising and sales.
