Toyota Woes Could be Boon for Buyers

By Bill Briggs
|  Wednesday, Feb 10, 2010  |  Updated 6:45 PM CDT
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Toyota Woes Could be Boon for Buyers

Along with that new car smell, potential auto buyers may smell something else when they walk in the showroom these days: fear in the air.

With Toyota reeling from a series of recalls and other brands desperate to gain market share after a disastrous year for sales, savvy shoppers could discover new bargaining power.

A.J. Perisho sensed the desperation recently as he trolled lots for a new ride near his home in Davenport, Iowa.

Perisho ultimately got what he called "a really good deal" on a 2009 Hummer H3 but said he was was stunned by the ultra-pushy tactics he encountered in the process.

One Iowa dealer tried to squeeze Perisho by claiming, “We need to have this done before noon,” while another lugged out the ancient pitch: “If I show you a way, will you buy this car today?”

“It is just brutal,” said Perisho, who said his job as head of a sales management training firm makes him aware of sales games and gimmicks. Auto retailers, he concluded, “are trying to shove stuff down our throats even faster, and they care less about the consumer.”

Aute salesmen have always been known as a pushy bunch, but industry analysts agree there is a sense of blood in the water after a month that has seen Toyota halt sales of many of its most popular models, shifting market share to General Motors and Ford, among others.

“We definitely concur with that sense of desperation,” said James Bell, executive market analyst for Kelley Blue Book, the Irvine-Calif. vehicle valuation company. “But I see it in a positive way [for consumers]. I hate to pick on Toyota because they’re caught in a one-two punch of the market being down and having to rebuild their brand. But all the brands are having to act more responsibly in catering to consumer needs.

 

“When [customers] tell dealers, ‘Well, I guess this isn’t going to work out’ and start to stand up, there is now more resistance [from dealers] to their leaving,” Bell added. “Salespeople are saying, ‘What can we do? What can we do?’ Whereas when you used to press them hard for a deal, they’d let you walk because they figured somebody else was strolling right in behind you.”

Toyota’s problems grew this week the world's biggest carmaker announced a global recall of 437,000 hybrid vehicles — including its flagship Prius model — to fix braking problems. A brand once identified with dependable cars, trucks and SUVs now has recalled more than 8.5 million defective vehicles since October. Providing yet another opening for U.S. makers, Toyota's Japanese rival Honda recalled 950,000 vehicles this week for airbag problems.

Many Toyota lots are stuck with a glut of stock as the value of their vehicles drops. According to Kelley Blue Book, bargain hunters seeking a 2010 Prius can now negotiate down to near the dealer invoice price, about $1,500 less than the suggested retail price. Used Toyotas could depreciate 4 to 5 percent on average by the time the recall issue subsides, Kelley projects.

 

Meanwhile, if you’re looking to trade in a model that competes directly with one of Toyota’s recalled brands — like the Honda Accord or Chevrolet Malibu vs. the Toyota Camry, or the Honda Civic or Chevy Cobalt vs. the Toyota Corolla — your vehicle has likely gained value, Kelley projects.

Toyota’s troubles have, in effect, revved the bargaining power of many car buyers, Bell contends.

“My sense is that the situation has emboldened non-Toyota dealers to make deals that support and benefit their own brands. In the case of Ford and GM dealers, that also means additional incentive funding to help conquest current Toyota owners,” Bell said. “I think the balance of power has shifted.”

 

The generally soft market is also helping consumers.

Richmond, Va., attorney Ian Titley said he found Honda salespeople in his area to be “very interested in negotiating price” when, in late December, he helped his mother swap her used Honda CR-V for a 2010 version.

“She stopped by the Honda dealer ... and they gave her an offer on her car which she felt was too low, so she exchanged phone numbers and left,” Titley said. The dealer called her back the next day and offered $1,000 more for her car to close the deal.

“I’ve bought a few Hondas in the past,” he added, “and I have never found Honda dealers [willing to haggle]. So this was new.”

Still, the tough market conditions also have spurred high employee turnover rates at many dealerships, further ruffling the consumer experience, some buyers have noticed.

Just north of Washington, D.C., Ali Allage recently scoured several car lots for an Audi A4 Avant — a station wagon for his wife. When he and his wife stepped onto a car lot in Silver Spring, Md., they were greeted by a salesman whom they immediately sized up as a novice.

“Basically, this guy was acting out a chapter from the how-to-be-the-cheesiest-car-salesperson handbook,” Allage said. “He would compliment my wife and me on a consistent basis on how good we looked in the car. He did the ‘good cop, bad cop’ routine when it came to dealing on the price. ... Also he exaggerated on certain specifications,” like saying the car got more than 30 miles per gallon when the Allages knew the number was really 26.

“After the sales manager saw what he was doing, he actually stepped in to take over the deal and was very apologetic about it," Allage said.

At Kelley Blue Book, Bell agreed that auto sales staffs have been stripped by hard times.

“A good salesperson is a bit like a hired assassin,” Bell said. “They just go brand to brand, to whoever has the hot product or the hot program. ... So you can’t trust getting that full docket of (buying) opportunities when you deal with a salesperson because, chances are, he’s only been working there a week and a half.”

 

Though car analysts like Bell have long preached that consumers do their homework before entering a car lot, he added that such online research is vital “more so now.” He cited three pieces of information with which all auto buyers should arm themselves: their credit score, what kind of financing plans are available via their lender, and the various incentive programs being offered by car makers.

And the one number no consumer ever should tell a car salesperson? The monthly car payment they can afford.

“That’s the worst thing you can say. That’s just what the dealer wants to hear,” Bell said. “Because they go off and build a [computer] program that magically gets you to that monthly payment over six years with a $2,000 down payment but at an interest rate which is higher than you’re qualified for. They get you to feel like you’ve done a great job. Meanwhile, they’ve boxed you into an interest rate which can be bested if you go to your bank or credit union.”

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