We know the little drama. We’re negotiating a deal for a new car with a sales person. The distances between prices offered and asked has narrowed but remains substantial. The sales person then says “I’ll see what I can get from my manager” and leaves the office. After a suitable interval, he or she returns with a grin on the face. “I can give you a great deal” are the first words out of their mouth.
We’ve come to believe that this little act is a piece of performance art, a little attempt to push the customer into the deal. I worked in a dealership for 2 years and generally believe that to be the case. Yet, at the same time, it hints at real conflict between the interest of dealer and manufacturer.
The manufacture wants to sell new cars. This means that they want the used cars to be expensive – high trade-in value to encourage new car sales, high market value to discourage used car sales. The dealer wants used cars to be inexpensive – greater margins on new car sales and a greater opportunity to make profits on used car sales.
This is a difficult problem that can’t be easily solved by having good management policies for the manufacture or better information flow. Policies can blunt the issue to substantial extent but can’t eliminate it. Better information flow only strengthens the manufacturers flow.
During my employment, the information flow was handled by paper and requirements. Once or twice a month, I would have to drive to the district with a pouch of paper that listed the vehicle sales, new and used with prices. In return, I got a check for profits that the manufacturer had held.