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Car Insurance is Getting More Expensive
I'm quoting from the April 27, 2003 Toronto Star. 'Car insurance is getting more expensive, so it's more important then ever to negotiate a good price when buying a vehicle.'
Come again' I understand controversial articles sell newspapers; I don't understand why the automotive industry continues to get the bad wrap.
Here are the facts. The cost of car insurance is predicated on the insured's driving record and influenced by the cost of the vehicle. Is this article suggesting that if you are able to pay $ 300 or $ 400 less for your vehicle, you'll be able to afford insurance'
The article goes on to say that 'a new car loses 25 to 30 percent of its value to depreciation once driven off the dealer's lot.' Again, I don't understand this statement. Where do these figures come from'
If I lease a new vehicle from brand X today, the residual values are as follows: 3year lease 59% residual, or depreciation of 13.67% for each of the three years; 4 year lease 53% residual, or depreciation of 11.75% for each of the four years. These are real figures that are part of brand X's lease contracts and are based on driving 20,000 kilometers per year. So where did the figure of 25 or 30 percent come from?
The credibility factor continues to go downhill when information is presented by individuals representing companies that stand to benefit by either providing the consumer with information on cost of cars etc., or by acting as the 'negotiator' on behalf of the inexperienced consumer. Of course, these services are fee-based, but not included in the total transaction price. By listening to some of the rhetoric, car dealers are portrayed as wolves just waiting for the sheep (consumers) to be left unattended. This is nonsense.
Consider that these are the same consumers that go to a new home construction site, not only pay the asking price for the new home of choice but, by the end of the transaction, have paid far more than cost plus 20% for the extras or upgrades to their home.
Why are consumers' advocacy groups not providing information on costs for new homes and inciting consumers to negotiate from a cost base as apposed to accepting the MSRP or sticker price on the home'
I apologize to my friends at the Home Builders Association. I really have no reason to cite the purchasing of a new home as an example, except that second to buying a home; a vehicle purchase is usually the next most expensive for the average individual.
There is no other industry than the auto industry that is as highly regulated to protect the consumer ' and as hated by the consumer. There is no other industry that is the brunt of misconceptions that go beyond logic. When was the last time you needed to buy a new suit or a dress and took a negotiator with you'
I don't believe that consumers of average intelligence need to hire professional negotiators to get a good deal! I do, however, believe that opportunists see this industry as target and therefore perpetuate the need for their services.
I also believe that we, the dealers, allow this to perpetuate by at times dealing with service providers that only detract from the reputation of our industry. These individuals benefit from the dealerships' infrastructure and have no risk, financial or otherwise. The fact is, a consumer could save anywhere from $ 50 to $400 by excluding a third-party in the transaction.
The article did point out some truths: At best, new car dealers are working with a 10 percent profit margin on vehicles. A dealer needs to sell vehicles at a 7 to 8 percent markup.
The average consumer thinks that their vehicle(s) are worth a lot more than it really is. The average consumer bases the desired trade-in value on publications such as Auto Trader etc., (retail prices) and not on the industry valuation guideline, the Canadian Black Book, (wholesale prices).
Refurbishing costs are never factored into the equation.
One last point: ask what's included in the administration fee, when purchasing your next new car. You may be surprised to learn that the fee does provide real value and should not easily be tossed aside as another money grab.
Until next week, please DRIVE SAFELY!
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