This is a very unusual scenario. Most people would not come back to a dealership and buy another car exactly the same model within a couple of months.

And the answer is...I would negotiate the second one as low as I could, just like I did the first one. What that amount winds up being depends on the market at that time, the quotes that I have gotten from various dealers at that time, and what various sites are showing as average transaction prices and guaranteed sale prices for that model at that time. That price several months later might be $41,500, or it might be $42,000 or it might be $42,500. It depends. It could also be that the best price is what you find on TrueCar, edmunds, etc. That was the case with my Kia Sedona. After talking to a few dealers it was clear the TrueCar price was excellent, so I used that and bought it.

You're gathering data from several different sources and using that data to show you what a great price is for the car at that time in that market, no one source is more important than the others. What people are posting on CL or other forums is one source, what sites like TrueCar, Edmunds, etc are showing is another source, what opening offers are from several area dealers is a third source.

If you hate that process and want to just pay whatever a dealer offers the car to you for in the first round, thats perfectly fine. You will pay more than you have to by doing that though, which may or may not be of concern to you. My point about the LexusPlus pricing is, that right now buyers like me lower that average transaction price, and the lower prices we pay effect that LexusPlus price because they adjust it to be competitive. If you make it so everybody pays the same price, that gives them total control over the pricing, which means the average sales price goes up and we are all going to pay more than we are paying now. Even now, that low price they throw out there when you email one dealership is effected because they don't know if you're somebody who will just bite on the first offer or if they have to go deeper to keep you interested. If you do away with their need to potentially go deeper you're going to pay more.

 

I get the jist of what your saying, but eventually the sale price would have to hit the bottom end of what vehicle can be sold at based off an individual dealer.

For instance if the GS (numbers are not real but lets just take them)
MSRP: 50K
Invoice: 48K
Wholesale rate is $40K
Incentive Package to Customer after 6 months: 2K
Backend Rebate to Big Dealer 6 months: 4K (lets say 6K if I can move 10 units more then my goal)
Backedn Rebate to Small dealer 6 months: 2k (lets say 4K if I do the same thing)

At vehicle launch, 50K is the going rate. Everyone on those carbuying websites report that due to lack of data

6 Months in couple of transactions have occurred, vehicle fair price set at 46K
Total Profit at Big Dealer: 8K
Total Profit at smaller dealer: 10K

Now as the Floor boss of the big dealership though, I have a decision, should I keep making 10K for to reach my goal or surpass it by 10 and get the extra a couple $$.

More times then, not Big dealer comes in, get that better price and manages to move those 10 extra units. Small dealer suffers not getting that extra cash and so do the retailer.

Now to prevent this, Lexus Plus could be a plus for those small dealers. Everyone has their bottom end flattened out, and so no single dealership is at an advantage, but the people who were able to score those better deals from the bigger dealership just got screwed. Plus I wonder if dealerships would pull there ad dollars from car buying services, since having the data for a particular car would no longer be of importance to buyers.


Again scenarioes are a plenty.

 

You got it!
It appears Lexus is trying to solve an internal problem disregarding the impact on customer and especially cross shopping.

 

In other words...this is about improving the process for them...not for us...which is what I said 14 posts ago.

 

They want to be like a parent who is fair to all the children. It is a classic MBA study scenario which Lexus IS trying to solve like an emotional yer fair parent.

 

They want to make more money lol They're trying to sell us on an experience to hide the fact that they want more profit.

 

The only upside I see to this, would be resale.

 

I don't know how this will work out. If Lexus just decides to give a 5% discount, wouldnt that just be the price anyways? Secondly, you can only have that level of pricing power if you are in a monopoly or monopolistic position where you will sell everything or almost everything regardless of price (within reason). Lexus is far from being in a position to demand a certain price for their products. They are not Ferrari, Lambo or RR and etc. They play in the mainstream luxury market with Audi, BMW and MB and they will bury Lexus with pricing and incentives. Of course there always those that will just phone in the car they want and pick it up when available regardless of price, but how often do you get those? Certainly not tens of thousands a month and certain not to Lexus. This can be a PR and sales disaster!

 

I like the idea of a company making healthy profit. The haggling -game and rebates do indeed hurt future resale values and undermine the brand

Land Rover territorial restrictions concept that prevents cross-shopping and virtually eliminates unhealthy haggling comes to mind as well.

I foresee Lexus hopefully moving to the European model of everyone paying the same fair price....focusing on transparency, value-building and buying/service experience,

 

I am sure Lexus / toyota corporation makes money even now. This change is aimed to ensure that all dealers big or small get the same profit margins per car, thus taking out the big or small out of the equation.

Toyota/Lexus = Parent
Big Dealer = High performing and smart child.
Small Dealer = Average yet promising child.

As a parent, Toyota (Lexus) is trying to even out the market so that big dealers do not ****** sales away from smaller dealers by way of large negotiating and capability to absorb losses on sales every now and then.

 

Another model that comes to mind is the Retail clothing company that had dated tags on the clothes.
When the piece of clothing is placed on the rack, it has a date on it. Also on the tag is the amount of discount the customer gets depending upon the time (30,60,90,180+ days) it is still on the rack.

 

I work at Lexus of Omaha in Omaha, NE. We are one of the 12 pilot stores for this Lexus Plus program. We had our soft launch for this on May 15th, so only have 12 days of experience to speak of. The program seems to be going very very well so far. Our discounts off the sticker price on most of our new cars are WAY!!!! more than you would have ever gotten off using the old system. For example. 2016 GS350,F-Sport, Nav, Levinson, AWD, Sticker is $60,358. We were selling those all day with MAYBE a $2,500 discount, and that is a last day of the month at 10:00pm when we need 4 more deals to hit our objective. Our Lexus Plus price on that car is $52,680. That is blowing peoples minds. We are also doing the same thing with trade in numbers, and offering to cut them a check for the car whether they buy a car from us or not. Of the people who we have let walk because they insisted that we must negotiate on our car or theirs, I bet 50% have come back in within 2 days and said "yeah I shopped around and that is a good deal, I'll take it."

 

Thanks for the insight
Question if you dont mind, being that Nebraska has 2 Lexus dealerships in the entire state (correct me if I`m wrong) does the other dealership participate in the same pilot program, and if not are their sell rates/selling price better or worse then your LP rates.

 

Yes. We are both owned by the Baxter Automotive group. It is our sister store Lexus of Lincoln and it's only 40 miles away. Our owner has been sitting in these "fireside chats" with some top guys from Lexus, and has been pushing them for 2 years to get this pilot program underway so we could test the waters for them using both of his stores. We share inventory with this other store quite a bit, so they have it figured out where we also share the Lexus Plus price for the same vehicles.

I should also mention that a big part of our transition to Lexus Plus is going to a "single point of contact." The salesman sells the car, does the financial paperwork and does the delivery. It seems like it is building a lot of credibility with the customers. We went through a very extensive amount of training oriented toward putting the customer first. We let them know we are a Lexus Plus dealership and how the new system works with no negotiation. Then, instead of trying to push the customer through our set in place process, we simply ask them "where would you like to start?" Customer wants to get his trade looked at before looking at a new car, we do it. The guys who come in and try to play hardball with us get caught so off guard trying to do the "hide your trade till the end" tactics. They are left without any ammo for objections, and seriously just roll over and take the deal. We are basically killing them with kindness. They want to walk, we let them. They are so confused when you aren't chasing them to the door trying to offer another $500 for their trade. For us, we are so confident on the prices that we can honestly let them walk and not worry about our nearest competition (Kansas City, Des Moines, and Quad Cities) beating our deal.

 

....Wait a minute now....

What about the bargain-hunters and professional hagglers who ended up paying more than the Lexus Plus price?