Auto discounts a boon to buyers

The new employee discount sales from the Big Three U.S. automakers may be among the best things for consumers since air conditioning became a standard feature. Or at least the best thing since Internet pricing.

Since Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group announced they were following the lead of General Motors Corp. with the new discounts, dealerships have been flooded with shoppers hungry for the best sale most people have ever experienced.

There are many upsides to these offers. But consumers still need to be aware of some issues to make sure they’re getting a good deal.

Under the programs, all shoppers are offered the same big discounts traditionally enjoyed only by the companies’ employees and families.

Consumers are still eligible for the manufacturers’ incentive financing, the big $1,000 to $3,000 rebates and any other discounts (such as for AARP members). The new discounts are available on both purchases and leases, but only for 2005 models, most of which are already on the lots. Each of the manufacturers has a few ultra-popular models that aren’t eligible.

The result is that consumers across the board can get prices that are thousands of dollars below invoice and, in most cases, hundreds or thousands less than what even shoppers with good negotiating skills could expect to pay.

And it’s all with no haggling, no shopping from dealership to dealership and no worry that the price will be different tomorrow.

“The greatest benefit to the consumer is it’s basically one-price shopping,” said Philip Reed, consumer advice editor at California-based Edmunds, the renowned publisher of car-buying guides for nearly 40 years.

“The savvy shopper could have gotten these deals before, but a lot of people don’t know how to shop for a car,” Reed said. This levels the playing field to create “a better deal for the average consumer, for everyone no matter whether they know much about car prices.”

Normally, people can get the best prices by shopping on the Internet, Reed said. But that can be time-consuming and daunting for some. Now “people are getting an Internet experience without going through the Internet shopping department.”

The negotiation-free, stress-free shopping is drawing people in to dealerships.

One of the best parts for consumers is that the bottom-line price is posted on the windshield of every car, said Lou Kaltenstein, a partner of Norris Auto Group in Middleburg Heights, Ohio. Consumers can browse the dealership’s lots at their leisure — even when it’s not open — and see what they will pay.

For all three manufacturers, that price will be the same on every vehicle that’s the same model and style with the same options. “If you go anywhere in Ohio, an identically equipped GM vehicle is going to be the same price,” Kaltenstein said.

“The thing that people don’t like about car-buying is the haggling,” he said. “Now, it’s a lot of fun.”

Kaltenstein, who has four northeastern Ohio dealerships, said his sales are booming.

“People are calling and saying, ‘Is this real?’ Yes, it’s real.”

There are, however, plenty of issues the consumer still has to negotiate and navigate, said Stuart Rossman, director of litigation for the National Consumer Law Center in Boston.

The discounts don’t affect a consumer’s need to negotiate a trade-in, add-on options and financing, said Rossman, whose nonprofit organization has battled the auto industry over various practices.

Rossman cautioned consumers on a fact that the auto industry doesn’t dispute: There’s plenty of profit to be made without regard to the vehicle sale price.

The explosion of the Internet and the widespread availability of actual invoice pricing has led most dealers to shift some of their profit centers to the “back end” of the transaction, meaning the add-ons, warranty and financing, Rossman said.

While dealers should make a profit, he said, consumers must be “diligent” to make sure the front-end savings aren’t being negated by back-end mark-ups.

Reed, of Edmunds, who praises the new employee pricing, agreed. “Dealers don’t make money by selling new cars,” he said. Half of profit comes from parts and service, and the other half comes from trade-ins, used cars, extended warranties, after-market add-ons and financing.

“They don’t care where they make it, as long as they make it somewhere,” he said. But overall, the deals are definitely better than they were earlier this summer, Reed said.

Big sales and incentives won’t disappear soon, at least on 2005 models, said Reed. The employee discounts are scheduled to end Aug. 1, but GM’s already was extended once, and all three could continue for a while. Reed noted that no-interest or low-interest financing started in 2001 and is still around on most models.

“People shouldn’t think this is a once-in-a-lifetime offer,” he said.

The manufacturers might see that consumers love the no-haggling approach so much that they have to keep it, Reed said. “They may have almost boxed themselves into a corner to one-price shopping.”