SANTA MONICA, Calif. – A new study done by TrueCar Inc. has determined that consumers prefer knowing the true price paid by others purchasing the same type of car in the last 30 days. Conducted in October 2010, the study also revealed that people are mostly unaware of what dealers actually make on the sale of a new or used vehicle.
“The goal of this study was to find out more about consumers’ mindset when it comes to buying a car,” said Scott Painter, founder and CEO of TrueCar. “What we’ve learned is consumers really want to feel they can trust the dealer to be fair. And the only way to achieve that is through transparency and upfront pricing.”
TrueCar’s Online Automotive Buying Behavior Report, which was conducted by Synovate and polled 1,000 adult consumers on a number of topics related to new- and used-car buying behavior and perceptions, determined transparency in the buying process is the consumer’s top priority. It also showed that the largest disparity between reality and consumer belief was how much profit consumers believe a dealer makes and deserves on the sale of a new car.
When asked, “How much do you think a dealer makes as profit on the sale of a $40,000 vehicle?” 55 percent of respondents answered $4,000 or greater (a profit of 10 percent or more). In response to how much they think is fair, 53 percent said between $1,000 and $3,000, with the average being $1,800 (4.5 percent profit). In reality, a dealer makes between one and three percent profit on each new car sold.
Some key survey points learned by TrueCar are:
∎ 85 percent of new-car shoppers believe that knowing what someone else paid for the same car within the last 30 days would be helpful in their buying process.
∎ When choosing a dealership to purchase a new car, the two most important factors are price (78 percent) and trust (70 percent). At the bottom of that list is the dealer’s professional staff (9 percent).
∎ 52 percent of shoppers would drive 30 minutes to an hour to achieve a guaranteed savings of $2,300.
∎ More than 90 percent of in-market new-car buyers believe it would be valuable to require a dealer to provide a no-haggle upfront selling price.
∎ 82 percent of car shoppers believe that they will not receive a fair price for their trade-in OR the dealer will make up for the loss through other services (financing, extended warranties, etc.).
∎ 80 percent of respondents would likely use a car buying service from a trusted organization to save time and money.
According to Painter, “We believe this study, which we plan to conduct annually, illuminates the way in which the market is headed and how cars must be sold in the future. We hope others in the automotive industry will see this data and understand what consumers’ desire and adjust business practices accordingly.”