I recently received an e-mail from Ryan Bachman, an operations manager at an automobile dealership in Louisville, who sincerely wanted to know the answer to some questions about car buyers.
Bachman, who hopes to become a fourth-generation owner of a car dealership, wondered why the relationship between car buyers and car sellers is so adversarial.
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For example, he was annoyed at me for encouraging consumers to demand to see the invoice for the car they want to buy.
"It bugs me that consumers feel it's their right to see the invoice price and to know exactly what profit you are making," said Bachman, who works at his father's dealership. "If we sell every car at invoice or under invoice, we obviously would not be able to stay in business."
Bachman then asked three questions that I think deserve an answer:
Is there any other retail industry where customers know (or even care) how much profit the business is making on their purchase? Imagine purchasing a house, a TV or a gallon of milk and demanding to know what the seller paid for the commodity.
Why is the perception of the car industry so different?
Why does the word "profit" carry such a negative connotation?
These are good questions. Of course not everyone who sells a used or new car is an agent of Satan. There are many honest, hardworking people in the industry. Yet it is also true that there are lots of tricks to this trade, and an uninformed consumer can end up paying hundreds of dollars more for a car than is necessary.
Having said that, let me address the first two questions, which really ask the same thing.