Buying a car the no-stress way
Many Kiwis prefer not to haggle over price with car dealers – and e-commerce is helping stop it.
Don’t enjoy haggling with car dealers when buying a new vehicle? Relax, because new trends in the industry could see those days increasingly numbered.
One of New Zealand’s major car companies, Honda New Zealand, which cut negotiation over price when its ‘price promise’ was introduced 21 years ago, says the advent of e-commerce platforms appears to be hastening an end to the days of haggling across the industry as a whole.
Honda’s chief operating officer Peter Ashley believes this policy is in tune with what people want: A survey of customers it conducted before the Covid pandemic revealing “that in the main people don’t like haggling and are much more comfortable if they don’t have to go through this awful process.”
His comments come as globally the automotive industry appears to be heading in the same direction. A 2020 report - Vehicle Pricing in the new Automotive Reality - by multinational consultancy firm Accenture says e-commerce and powerful online platforms have increased price transparency in recent years.
“This has led to new price strategies such as ‘fixed price approach’,” the report says. “As companies shift toward dedicated e-commerce there are significant implications on pricing - full price transparency (and) fewer price negotiations since online journeys offer fewer options to negotiate.”
Yet Ashley says the concept doesn’t suit everyone because there are still people who like to negotiate. “Every day people come in (and want to negotiate), it happens all the time. I can’t sit here and say we win everyone over, but most, once they understand we are being upfront on price are comfortable with it (fixed price).”
Ashley says the price promise policy means buyers will pay the same price on new cars no matter who they are, where they live or what time of the month they buy.
He says the concept has served Honda well and, he believes, is one of the reasons why the company has achieved a very high loyalty ratio.
“It has enabled us to build trust with customers over many years,” he says. “It has also reduced the time people wait before changing cars. Traditionally most will do so up to every five years, and while this varies between the regions in Christchurch, for example, this is now around two and a half years.”
Since introducing the policy in 2000, Ashley says many customers have gone through eight life cycles of vehicle ownership, with some who’ve changed Honda vehicles 12 or 13 times.
He says he believes it also helped lift its market share from a low of 3.5 per cent in the early 2000s. Today with the impact of Covid this figures sits at over four per cent, although it has been as high as 7.5 per cent.
“By offering the same price to everyone we help protect a new car buyer’s investment,” Ashley says. “If you buy a Honda the only thing that affects the resale value is the age, mileage and condition.
“It prevents the speed-up of depreciation because special deals, discounts, run-out and end of month sales all lower resale values.
Honda too is giving customers the ability to buy vehicles through an online platform, part of the company’s aim to ensure its business “is fit for the future” and a key aspect of a new three—tiered customer model it launched this month.
Although Ashley says people will still have the option of buying face-to-face and can still go to a dealership to “touch and feel” cars, the online option means the company can cater to a new customer demographic including generations who are comfortable purchasing products online.
Under the new model the existing network of stores have transitioned to Honda stores where customers buy direct from the company, not an independent agent; Honda service stores (which include demonstrator models and an appointed Honda brand ambassador); Honda Service Centres using only genuine Honda parts and accessories and the Honda Online store.