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No-Haggle Pricing and the Trust Problem

Look. Some of our best friends are car dealers, but many people just don’t trust them. Whether customers have had bad experiences or just succumb to an unfair stereotype, it takes a lot to establish a reputation for being trustworthy in the car business.  

This problem was highlighted recently when our VP, Steve Bleh, had the opportunity to shadow salespeople and customer service representatives at one of our Honda dealer clients. The dealer has a “no haggle” policy in effect for used cars. Using third-party software similar to what CarMax and Carvana use, they compare vehicles on their lot to others with similar equipment, mileage and condition in order to ascertain the fair-market price, and that’s what they sell the car for. They really will not negotiate, which can be a relief to car buyers who get stressed out about the battle of wills that haggling can be—or a disappointment for those who relish “the game.” 

Steve witnessed the no-haggle policy in action as he listened in on a phone call between a customer service representative and a caller who was looking for a low-mileage CR-V. The employee had literally just taken receipt of a 2011 CR-V with a miraculously low 27,000 miles on it. What’s more, the CR-V’s previous owner had used the dealer's maintenance program, so every oil change, tire rotation and service had been religiously recorded. This car was truly a unicorn. The keys were still in her hand—the car hadn’t even hit the lot yet.

After doing the above-mentioned comparisons and calculating taxes and other fees, the total cost of the vehicle came to about $17,900. “I’m paying cash, and I can only pay $17,500,” said the caller. 

“Sir, we don’t haggle. $17,900 is the only price I can sell it for.” 

“I’ve never heard of a car dealer losing a sale over $400.” 

And on the conversation went, each side friendly and reasonable, with the customer service rep trying to explain that they just. do. not. haggle—and the customer convinced that the two of them were engaging in some elaborate dance. 

And who could blame him? As car buyers, we're taught to approach a car salesperson as if we were PSYOP experts outwitting a wily enemy. That makes it hard to connect person-to-person. 

The rep double-checked with the GM to see if she could make an exception. Absolutely not. 

She offered to backdate the customer's check until payday. He wasn't interested. 

She even offered to send someone to pick him up and bring him to the dealership, since the man indicated that he was in the process of selling his own car. Thanks, but no thanks. 

In the end, the dealership didn’t get the sale—and that was fine with the general manager. Why? In a word, trust. Lowering the price on even one car, even by just a few hundred dollars, would have undermined their no-haggle promise—and could have done serious damage to their hard-won reputation for trustworthiness. If that particular customer ever returns to that dealer, he’ll be able to take the rep’s word about pricing. He may even spread the word about this dealership where they actually mean what they say.  

How Dealerships Create Trust

According to the automotive research firm, Polk, the average American will own 9.4 cars in his or her lifetime. That doesn’t give car dealers many opportunities to impress buyers during the purchasing process, so how else can dealers build up trust equity?

One way is through maintenance programs like the one the CR-V's previous owner had used. Someone who has a trusting relationship with their mechanic is likely to trust the dealer that employs said mechanic. Incentives to maintain a car on a regular basis, and to get all service work done in your service department, can help a customer feel connected to you. That also gives you the opportunity to stay in touch and offer trade-in deals

Word-of-mouth is an essential marketing tool for any dealership, so stay on top of online reviews and follow our advice on other ways of cleaning up your dealership's online reputation

Community engagement is a great way to burnish your reputation while simultaneously making your world better. Sponsor T-ball teams, hold fundraisers. Be a good neighbor. 

Finally, make sure you're active on social media. Visibility is key. The American Psychological Association found that repeated messages are viewed as being more reliable—reinforcing the old marketing adage that familiarity breeds trust. 

Building trust takes time—and can be lost incredibly quickly. Ben Franklin said, "It takes many good deeds to build a good reputation, and only one bad one to lose it." Guard your reputation carefully and put your money where your mouth is to make sure customers trust that you mean what you say.