Mercedes Benz UK bans dealer haggling!
Discussion
MikeDB1 said:
Definitely won't be. Not that I'd ever buy a Mercedes, but if other manufacturers go this route I'd demand many years of free servicing and so on to make the sale. Or even just a cashback cheque.
Well, yeah but - it's not the dealer making the sale. The way the email I got from MB is worded you'd think all the dealer salespeople actually worked for Mercedes (as some people already believe).
Be interesting to see how it all works out.
Fixed price is ridiculous.
You go to buy a car advertised at £20,500
You notice there's a nasty scuff which isn't visible in the pictures, one tyre is needing changing within <2000 miles, and brake pads are low-ish .
Ordinarily you can say knock £1000 off and I'll deal with those parts, now you're expected to pay a *price* which is in all likelyhood high anyway and you'll still need to rectify the issues!
You go to buy a car advertised at £20,500
You notice there's a nasty scuff which isn't visible in the pictures, one tyre is needing changing within <2000 miles, and brake pads are low-ish .
Ordinarily you can say knock £1000 off and I'll deal with those parts, now you're expected to pay a *price* which is in all likelyhood high anyway and you'll still need to rectify the issues!
CarCrazyDad said:
Fixed price is ridiculous.
You go to buy a car advertised at £20,500
You notice there's a nasty scuff which isn't visible in the pictures, one tyre is needing changing within <2000 miles, and brake pads are low-ish .
Ordinarily you can say knock £1000 off and I'll deal with those parts, now you're expected to pay a *price* which is in all likelyhood high anyway and you'll still need to rectify the issues!
This new policy only applies to new cars though?You go to buy a car advertised at £20,500
You notice there's a nasty scuff which isn't visible in the pictures, one tyre is needing changing within <2000 miles, and brake pads are low-ish .
Ordinarily you can say knock £1000 off and I'll deal with those parts, now you're expected to pay a *price* which is in all likelyhood high anyway and you'll still need to rectify the issues!
CarCrazyDad said:
Fixed price is ridiculous.
You go to buy a car advertised at £20,500
You notice there's a nasty scuff which isn't visible in the pictures, one tyre is needing changing within <2000 miles, and brake pads are low-ish .
Ordinarily you can say knock £1000 off and I'll deal with those parts, now you're expected to pay a *price* which is in all likelyhood high anyway and you'll still need to rectify the issues!
What you are talking about there is the used market, yes? That will remain the same. Dealers will be able to buy in their used stock and 'deal' on it as today. Hagglers will be able to haggle. You go to buy a car advertised at £20,500
You notice there's a nasty scuff which isn't visible in the pictures, one tyre is needing changing within <2000 miles, and brake pads are low-ish .
Ordinarily you can say knock £1000 off and I'll deal with those parts, now you're expected to pay a *price* which is in all likelyhood high anyway and you'll still need to rectify the issues!
The agency model applies to new and very nearly new (e.g. very low mileage demo cars etc)
Sheepshanks said:
Well, yeah but - it's not the dealer making the sale.
So who would you take to court if the car turns out to be a Friday afternoon special and they won't replace it - dealer or MB head office ?(Though in fact when the Mazda dealer wouldn't fix something even though they could charge back to Mazda, I had to threaten to sue whereupon Mazda head office intervened and did pick up the cost. But never ever buying a Mazda again - appalling dealers)
But in any case the dealer is getting his cheque from MB so I want a percentage of it as I'd get with any cashback deal.
MikeDB1 said:
MB head office ?
Them.And good luck - MB does have a reputation for taking people on.
That's another interesting aspect of all this - the manufacturers are saying they want a more direct relationship with their customers. Yet for years they've fobbed people off if they tried to escalate problems beyond the dealer.
Chris Stott said:
PurpleTurtle said:
25yrs working for manufacturers in sales support roles here.
People talking about price fixing need to stop and take a moment to realise that the nature of the market is changing.
Currently dealers buy their cars from the manufacturer and the dealer then carries the financial risk of the car until sold to end user.
Given that the dealer owns the car, they can sell it at whatever price they like, within the rules of their franchise agreement.
This has led to massive over-discounting just to land sales whilst manufacturers have chased volume, with a consequent knock-on effect to residuals.
It's a race to the bottom.
Given that most cars are bought with an element of finance, residual value and protection thereof is everything.
RV dictates the monthlies, which of course have a huge impact on the market. Strong residuals = lower relative monthlies = more business, in theory.
The sea change here is that the dealer will no longer buy the car from the manufacturer
It is to stop the race to the bottom, protect the RV, make the car worth its expected future value in 3yrs.
The key point being the sales contract is between manufacturer and end user. The buyer will not pay the dealer anything. The dealer will in future be a handling agent, paid appropriately by the manufacturer. .
There will still be deals to be had, but they will be determined by the manufacturer, at central level. There will still be competition on price between manufacturers (because manufacturers colluding together on price would of course be illegal) but they are abundantly aware of obligations there and should not be doing that.
We will still get today's situation:
- Popular car in short supply: bugger all chance of discount
- Absolute lemon with 2,000 of them sat in a compound somewhere with their battery degrading: discounts to be had.
- Everything else: something in between.
The salient point being that the manufacturer decides when and how much to discount anything by, and it is the same if you're in Land's End or John O'Groats.
The flipside of those complaining about not being able to get a discount from their dealer is that the car will theoretically manage a much stronger residual when you come to sell or trade it, than it would under the current model. So you 'save' on your part-ex on your next one. so to speak.
Who makes money out of this and who loses money?People talking about price fixing need to stop and take a moment to realise that the nature of the market is changing.
Currently dealers buy their cars from the manufacturer and the dealer then carries the financial risk of the car until sold to end user.
Given that the dealer owns the car, they can sell it at whatever price they like, within the rules of their franchise agreement.
This has led to massive over-discounting just to land sales whilst manufacturers have chased volume, with a consequent knock-on effect to residuals.
It's a race to the bottom.
Given that most cars are bought with an element of finance, residual value and protection thereof is everything.
RV dictates the monthlies, which of course have a huge impact on the market. Strong residuals = lower relative monthlies = more business, in theory.
The sea change here is that the dealer will no longer buy the car from the manufacturer
It is to stop the race to the bottom, protect the RV, make the car worth its expected future value in 3yrs.
The key point being the sales contract is between manufacturer and end user. The buyer will not pay the dealer anything. The dealer will in future be a handling agent, paid appropriately by the manufacturer. .
There will still be deals to be had, but they will be determined by the manufacturer, at central level. There will still be competition on price between manufacturers (because manufacturers colluding together on price would of course be illegal) but they are abundantly aware of obligations there and should not be doing that.
We will still get today's situation:
- Popular car in short supply: bugger all chance of discount
- Absolute lemon with 2,000 of them sat in a compound somewhere with their battery degrading: discounts to be had.
- Everything else: something in between.
The salient point being that the manufacturer decides when and how much to discount anything by, and it is the same if you're in Land's End or John O'Groats.
The flipside of those complaining about not being able to get a discount from their dealer is that the car will theoretically manage a much stronger residual when you come to sell or trade it, than it would under the current model. So you 'save' on your part-ex on your next one. so to speak.
1. Manufacturer - makes a lot more
2. Dealer - probably makes a bit more
3. New car buyer - pays more upfront but this may be offset by higher residuals... lets say neutral
4. Second hand buyer (if 3 is true) - pays significantly more
Trying to position this as being designed to benefit to the consumer is hilarious... the manufacturers are the ones that will benefit most and they are already making double digit EBIT margins... This is anti competitive in so far as it's removing all price competition within a brand, and it will be a massive value transfer from consumer to manufacturer.
Volume is one of the things that makes the UK interesting for the car buyer... dealers and manufacturers fighting for volume and share, feeding cars in to the market that filter down to the 2nd hand market. The UK market will end up like Spain, where people hardly ever change cars and 2nd hand prices are ridiculous... volumes end up so low that there's little choice in the 2nd hand market and the quality of the dealers is appalling.
The underlying message at my manufacturer is that *most* customers don't like haggling. The majority want price transparency across the board so that they feel they aren't getting stiffed by the dealer. That generates brand loyalty.
Cars, especially in the BEV age we are moving into, are like white goods for most people. They have a monthly budget and want the best they can get for that. This current business model of catching a salesperson on the proverbial last day of the quarter when their sales manager has a fictitious special offer to give away to make his target makes lots of people feel very uncomfortable and isn't how they transact any other purchase, property aside. It's one step away from the double glazing industry, and look at the regard in which that is held.
Consider Apple: the fanboys pile in for the new iPhone every time there's a new model, but they all know they are paying the same price, not reliant on their super negotiation powers. Everyone in that market seems happy with that. This is what car manufacturers want to get to.
I'm sure there's a few Powerfully Built Company Directors on PH who will be upset that they don't get to see the whites of a salesperson's eyes across the desk when they manage to crush every last penny out of a deal but they are a tiny minority of the market.
Equally, if 'the market' is working perfectly and Merc/BMW/Audi etc are all competing on price then they should all be offering competitive deals, priced centrally, to win that business.
It'll either work, or be a massive flop and we'll revert to the current model, but there's no getting away from this change coming across the board.
(FWIW I can see the pros and cons of both approaches and I'm very much on the fence, but this is coming from each manufacturer's global HQ so there's no way of stopping it)
Edited by PurpleTurtle on Thursday 15th December 17:45
Sounds a bit like Resale Price Maintenance - somewhat illegal. EU may frown on it even if UK government too scared to rock the boat with anti-competition legislation.
This will work until supply exceeds demand so manufacturers start to encourage pre-registration, selling through car supermarkets, really cheap deals to car hire companies and direct to fleet users, etc. We start to see grey imports again, eg from Ireland. New manufacturers, eg Asian EV's, come into the market since margins appear to be more attractive.
Be interesting to see if MB do this in other markets and for other products where competition is different, eg commercial vehicles.
This will work until supply exceeds demand so manufacturers start to encourage pre-registration, selling through car supermarkets, really cheap deals to car hire companies and direct to fleet users, etc. We start to see grey imports again, eg from Ireland. New manufacturers, eg Asian EV's, come into the market since margins appear to be more attractive.
Be interesting to see if MB do this in other markets and for other products where competition is different, eg commercial vehicles.
PurpleTurtle said:
Well of course the manufacturers will be benefitting, otherwise they wouldn't be going to the massive expense of doing it.
'Massive expense'... seriously, don't swallow the BS 
There's obviously a short term cash flow/balance sheet impact as they will own the stock, but there's a massive benefit in the mid/long-term.
From what I know, Mercedes are holding 1,000's of cars back from dealers (10-15k cars) to launch this... it's a massive consumer con
PurpleTurtle said:
The underlying message at my manufacturer is that *most* customers don't like haggling. The majority want price transparency across the board so that they feel they aren't getting stiffed by the dealer. That generates brand loyalty.
So, instead of the poor negotiators getting stiffed by a dealer, every single customer gets stiffed by the manufacturer... Everyone ends up at the price level of those that can't/don't want to negotiate This change is simply moving every customer to the highest price point in the market.
PurpleTurtle said:
Consider Apple: the fanboys pile in for the new iPhone every time there's a new model, but they all know they are paying the same price, not reliant on their super negotiation powers. Everyone in that market seems happy with that. This is what car manufacturers want to get to.
How the hell Apple haven't been prosecuted for price fixing is beyond me... anyone who knows anything about the workings of that part of the retail industry knows Apple's GTM strategy is at best borderline, and more likely is price maintenance. And anyone who's dealt with a retailer who stocks Apple products knows that, in private, the retailer isn't exactly comfortable, or happy with how Apple operate.And there's a massive difference between buying a c.£1k iphone and a £40k car.
In addition, the car market is far more fragmented than the mobile phone market, and Mercedes equity and market share isn't quite at the same level as Apple's.
PurpleTurtle said:
I'm sure there's a few Powerfully Built Company Directors on PH who will be upset that they don't get to see the whites of a salesperson's eyes across the desk when they manage to crush every last penny out of a deal but they are a tiny minority of the market.
But that's not the point... it's not a minor percentage that will end up with a significantly worst deal... every single punter will end up with the equivalent of the worst possible deal.PurpleTurtle said:
Equally, if 'the market' is working perfectly and Merc/BMW/Audi etc are all competing on price then they should all be offering competitive deals, priced centrally, to win that business.
We already have competition between manufacturers... this adds nothing new. Competition between manufacturers is only 1 element of a competitive market place... competition between retailers for a particular product is equally important. Taking something as simple as Heinz beans... there will likely always be a price differential between Heinz and, say, Tesco own label beans (based on consumer value perception), but Heine can't set a common price for their beans across Tesco/JS/Morrisons/ASDA/Co-op/every point of sale their product is available in across the country, 100% of the time. That is uncompetitive and illegal
What's being implemented by Mercedes now, and other manufacturers across the next 1-2 years is fundamentally uncompetitive.
Looks like a cartel to me ………..
What is a business cartel?
A business cartel exists when rival businesses agree to act together instead of competing with each other. This kind of arrangement is a form of cheating that’s designed to benefit cartel members while maintaining the illusion of competition.
Cartels can be local, national or international, and specific examples of cartel activity include price fixing, market sharing and bid rigging.
Watch our short videos about cartel activities, why they’re illegal and why you need to avoid them.
Price Fixing
is when rival businesses agree what prices they’re going to charge.
What is a business cartel?
A business cartel exists when rival businesses agree to act together instead of competing with each other. This kind of arrangement is a form of cheating that’s designed to benefit cartel members while maintaining the illusion of competition.
Cartels can be local, national or international, and specific examples of cartel activity include price fixing, market sharing and bid rigging.
Watch our short videos about cartel activities, why they’re illegal and why you need to avoid them.
Price Fixing
is when rival businesses agree what prices they’re going to charge.
MikeDB1 said:
Sheepshanks said:
Well, yeah but - it's not the dealer making the sale.
So who would you take to court if the car turns out to be a Friday afternoon special and they won't replace it - dealer or MB head office ?(Though in fact when the Mazda dealer wouldn't fix something even though they could charge back to Mazda, I had to threaten to sue whereupon Mazda head office intervened and did pick up the cost. But never ever buying a Mazda again - appalling dealers)
But in any case the dealer is getting his cheque from MB so I want a percentage of it as I'd get with any cashback deal.
PurpleTurtle said:
What you are talking about there is the used market, yes? That will remain the same. Dealers will be able to buy in their used stock and 'deal' on it as today. Hagglers will be able to haggle.
The agency model applies to new and very nearly new (e.g. very low mileage demo cars etc)
Oh. The agency model applies to new and very nearly new (e.g. very low mileage demo cars etc)
I would still haggle on a new / nearly new car
I did.
Saved 1500.
I give them until May.
Everyone wants a deal.
Chris C2 said:
Sounds a bit like Resale Price Maintenance - somewhat illegal. EU may frown on it even if UK government too scared to rock the boat with anti-competition legislation.
This will work until supply exceeds demand so manufacturers start to encourage pre-registration, selling through car supermarkets, really cheap deals to car hire companies and direct to fleet users, etc. We start to see grey imports again, eg from Ireland. New manufacturers, eg Asian EV's, come into the market since margins appear to be more attractive.
Be interesting to see if MB do this in other markets and for other products where competition is different, eg commercial vehicles.
What ‘resale’?This will work until supply exceeds demand so manufacturers start to encourage pre-registration, selling through car supermarkets, really cheap deals to car hire companies and direct to fleet users, etc. We start to see grey imports again, eg from Ireland. New manufacturers, eg Asian EV's, come into the market since margins appear to be more attractive.
Be interesting to see if MB do this in other markets and for other products where competition is different, eg commercial vehicles.
MikeDB1 said:
Sheepshanks said:
Well, yeah but - it's not the dealer making the sale.
So who would you take to court if the car turns out to be a Friday afternoon special and they won't replace it - dealer or MB head office ?(Though in fact when the Mazda dealer wouldn't fix something even though they could charge back to Mazda, I had to threaten to sue whereupon Mazda head office intervened and did pick up the cost. But never ever buying a Mazda again - appalling dealers)
But in any case the dealer is getting his cheque from MB so I want a percentage of it as I'd get with any cashback deal.
There isn’t a dealer. No dealer.
Dealer: none.
CSLM3CSL said:
Surely the next stage is the customers ordering their cars online and the dealer gets bypassed.
Buy a Tesla, exactly this. Buy online, picked it up from the NEC. Other manufacturers following suit no doubt. Surprised dealers still exist, scrap them and turn them into great service centres. Sheepshanks said:
Well, yeah but - it's not the dealer making the sale.
The way the email I got from MB is worded you'd think all the dealer salespeople actually worked for Mercedes (as some people already believe).
Be interesting to see how it all works out.
Some of the dealers are actually owned by Mercedes as is the same with some other manufacturers so they do technically work for them.The way the email I got from MB is worded you'd think all the dealer salespeople actually worked for Mercedes (as some people already believe).
Be interesting to see how it all works out.
SpeckledJim said:
MB. There isn’t a dealer. Have you read any of the thread?
There isn’t a dealer. No dealer.
Dealer: none.
Okay, whatever you want to call the representative who I actually meet in a showroom to show me the car. I agree dealer might not be the correct term if the contract is with MB. But if I buy a financial product from say Aviva, I pay Aviva for the product but always get a cashback from the financial salesman who I actually met out of the cheque Aviva send him for his services. Same with insurance where I always get cashback from the broker.There isn’t a dealer. No dealer.
Dealer: none.
I don't see any difference with cars ... or washing machines or any other product in fact. There's always a deal to be had.
Gassing Station | Car Buying | Top of Page | What's New | My Stuff