10 Automotive Retail Heresies

Scott Painter, 38, has been on the modern car-selling scene since 1999 when he founded CarsDirect.com.

Now CEO of Zag Inc., an Internet firm that connects buyers to dealers, Painter has some unconventional views of the industry.

He lists 10 of them under the heading “auto retail heresies.” Here they are:

1. New cars are commodities. Even with a $50,000 price tag, a Lexus is a commodity product — and dealers are in a commodity business. Given the same make, model, trim and option level from the factory, meaningful variations in quality and reliability simply do not exist.
2. As a job category, the “commissioned new-car sales force” is obsolete and archaic. The best thing a new car dealership can do to make money is to give its commissioned sales people their walking papers — and, in its place, adopt the mindset of a concierge service.
3. Dealers could actually make more money if they worked on tips. A Zag survey indicates consumers believe auto dealers deserve more profit on the sale of a new car than dealers actually make. Way more.
4. There's no reason why two people each buying identically equipped cars should pay different prices for the same car, whether they're in Peoria or Pittsburgh — or at the same dealership.
5. Online lead generation is as big a disaster for dealers as it is for consumers. The only winners are the automotive lead gen websites.
6. Haggling over the price of a new car costs dealers as much, if not more, than it costs consumers.
7. Dealers who cling to the practice of squeezing the greatest amount of profit per new car will be among the first to go broke.
8. As new car margins shrink to near-nothingness, the only way to bring profitability back to new car sales — paradoxically — is to offer incredibly aggressive upfront prices.
9. Pricing transparency for new car sales — where the buyer knows the bottom line price in advance — is very, very good business for dealers.
10. It's time for the auto industry to finally function as a free market. Dealers might find that change addictive.