Car dealers stake out haggle-free zones

By BusinessWeek

It's one of the enduring oddities of American retailing: car dealers haggling over price with their customers.

There's history here, of course. People bargained over horses. And since the proud beasts gave way to the horseless carriage, hardball negotiating between buyer and seller has continued on the car lot. The practice allowed salesmen (and most of them were men) to bamboozle naive buyers with a blizzard of negotiating tactics and generate outsize commissions.

But dealers paid a price: The car salesman became one of the least trusted people in town.

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Now, some dealers are beginning to dump haggling. Lithia Automotive Group (LAD, news, msgs), the eighth-largest dealer chain in the U.S., said last month that it will turn all 108 stores into haggle-free zones over the next three years.

Like GM's Saturn, Toyota's Scion youth brand has had a negotiation-free policy since it launched four years ago, prompting some dealers who sell mass-market Toyota cars to roll out the one-price strategy.

And across the country, independent dealers that carry several brands, foreign and domestic, are retraining their sales forces to sell cars and trucks the way the rest of the retail world does: with a price tag and winning smile.

There's no telling how far this will spread because most dealers still consider fixed prices heresy. But in the coming years, more and more will experiment.

They know that anyone can look up the base price of a car online and that consumers are fast losing their patience with the status quo.

Besides, when you think about it, haggling is un-American.

"Negotiating price isn't in our culture," says Mark Rikess, whose consultancy is helping Lithia develop a no-haggle sales program. "Some dealers are slowly coming around to the fact that one-price is a better way to do it."

A shift in the marketplace

Dealers experimented with this during the 1990s, only to be deluged with complaints from traditionalists who felt they weren't getting a good deal unless they had the satisfaction of seeing a salesman cut the price right before their eyes.

Now dealers are responding to a shift in the marketplace. For starters, more women are buying cars these days; they bought half the vehicles sold in the United States last year and influenced an additional 20% of purchases.

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Consumer psychology is changing, too. According to auto-price experts at Kelley Blue Book, 65% of car buyers say they'd rather not haggle. As for women, 72% feel that way. One is Michele Goltz, a 39-year-old college researcher from Richmond, Ky., who just bought a 2007 Yukon Denali SUV. She looked up prices on Edmunds.com and e-mailed her offer to several dealers. When one got close, she cut the deal with the lowest bidder.

"I don't have enough time to go dealer to dealer and negotiate," she says. "I have a four-year-old that I don't want to bring in tow."

Also, studies show that women prefer to buy cars from other women. So dealerships have two reasons to move to fixed prices: making female customers comfortable and recruiting women who might want to sell to them.

Continued: A more loyal customer

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