LONDON, Ontario –
Getting rid of negotiation is an idea that many dealerships are experimenting with.
After all, negotiation has always been a top pain point for used-car buyers, and in today’s online listing environment, you need to provide enticing prices up front — there is barely any room left for negotiation anyways.
Some dealerships have already moved to a “no-haggle” approach; is it time for you to do the same?
No-haggle is still a niche opportunity
When used-car buyers had to choose where they would prefer to get their next vehicle, either a no-haggle dealership or a dealership that allows for negotiation, only 27% of used-car buyers picked the no-haggle dealership.
While that is still a decent slice of the market, it’s far from the majority. Despite negotiation being a huge paint point, 73% of used-car buyers still would like to negotiate the price of their car.
So, while there is opportunity to take a no-haggle approach, the majority of used-car buyers are going to pick a dealership that allows for negotiation over one that doesn’t.
Why do customers still want to negotiate?
Negotiation is consistently rated by used-car buyers as one of the worst parts of the vehicle purchase process, yet three out of four of them don’t want to get rid of it.
Why is that?
The contradiction comes down to the fact that customers feel like they won’t get a good deal unless they negotiate. 63% of used-car buyers believe they have to haggle to get the best price, 77% believe that there is always room to negotiate (even if the price is listed as no-haggle) and only 29% trust a dealership when they say they’ll give the buyer the best price right away.
How to reduce negotiation tension
For a customer to trust your initial price, you need to justify it. Specifically, used-car buyers told us they want you to show them how your car measures up to comparable vehicles online and explain anything you’ve done in-house that may have changed the price of the vehicle.
It’s also important to use sources of information that customers recognize and trust, because they could easily write-off information from an unfamiliar tool as being biased towards dealers.
The key is changing the conversation from negotiating the price of vehicle to justifying your pricing using tools the customer can trust. These principals can reduce the need for painful negotiation at any dealership.
By Drew Harden is manager of research & insights at CARFAX Canada. Driving Insights is an information series designed to help used-car dealers better understand the motives and behaviours of Canadian used-car buyers. The research, designed by CARFAX Canada and executed by Dynata, is based on the most pressing questions of dealership management and staff across Canada, answered through a national survey of 1,000 Canadians who recently bought a used car from a dealership. If there’s a question you’d like us to address, email firstname.lastname@example.org and we’ll get you some answers!