Beware: High Pressure Lines
Sydney Morning Herald
Thursday July 11, 1996
"Main event" car sales promotions may be traps for unwary invitees, but organisers say they are a boon to both buyers and dealers. Check the figures, advises David Berthon.
A flyer in the mail, addressed personally, invites you to a special liquidation sale of new cars. It can take the form of an urgent telegram marked "private invitation only" and it probably includes the words "liquidation sale" or "not open to the general public".
It more than likely offers you "a free gift worth $50 just for attending".
You have received an invitation to what the car trade terms a "main event" - a special direct mail marketing campaign which seems to offer the works.
It includes claims of "genuine savings on over $7,000,000 of new and used cars" or "we have decided to liquidate $20 million dollars worth of inventory prior to the Treasurer's budget statement". Bold statements indeed and very hard to substantiate.
Your invitation could include classic lines like "one day only - held regardless of the weather". Even better is "bring your trade-in with you, your registration papers and chequebook".
Then there's "don't forget to clean out your glovebox".
And the line that tops the lot: "There will be no public notice of this sale because of the economic impact on the local market with so many vehicles being offered at such low prices." Really!
The lure that gets a lot of potential buyers is the offer of a free gift - a $60 service voucher or a free umbrella simply for having your trade-in valued. The invitation usually reads "as a recipient of this invitation you are eligible for immediate credit".
At the dealership the first thing you notice is the fence draped in hessian - which of course creates an element of intrigue but effectively makes a $2 million investment look like a junkyard. On arrival you may even be met by a security guard. The blood really starts to flow at this point - this sale must be something really special. Ushered to the registration desk, you are introduced to your friendly salesperson who takes you on a guided tour of the 200 or so new, used and demonstrator vehicles "specially price reduced" for the day with "Was and Is" prices.
Many show large reductions but in reality they are no different to the bargains detailed in Drive's Marketplace page over the past few months. The difference with the "main event sale" is the suggestion you should buy there and then. The exercise is designed to create an atmosphere of immediacy, to persuade you to sign on the day.
This is reflected by the percentage of buyers who cancel the next day after further consideration. But remember, where there is no finance contract involved, it's very difficult to opt out of a signed contract with a dealer.
As to the "free gift" - expect to join a queue to talk to the finance man - whose job it is to convince you that you can definitely afford a new car - before he presents you with the gift.
Thenumber of events being staged indicates how successful they are in drawing buyers into showrooms. Yet consumers gain no more than they can with shrewd evaluation and negotiation in a pressure-free environment.
Car dealers are mixed on the effectiveness of main events, which cost from $25,000 to stage.
One Newcastle dealer sold 110 vehicles in a weekend with a Main Event sale and a Wollongong dealer sold 57. A Toyota dealer describes them as "a great marketing tool" and a Ford dealer knows of "no better way of increasing volume and bottom line".
Yet Tony Purnell, of Purnell Bros Nissan, said that car buyers in 1996 are too smart for Main Events and too cynical to respond to such urgings.
A major Parramatta Road dealer tried one and said he'd never do it again - the problem was that four others were held on the same weekend.
According to Mark Walsh, sales director of Australian Sales Masters, which stages between 70 and 100 such sales annually for dealerships around Australia, customers received a genuine benefit by attending.
"Dealers are geared up for a lot of volume," he said. "They have wholesalers on hand to take trade-ins and finance suppliers to write contracts on the spot. Buyers can get legitimate savings. It's a win-win situation."
Tough trading conditions over the past three months have sparked some very sharp deals. Drive-away pricing has seen many dealers absorb their $995 delivery fee, effectively giving away most of their trading margin and leaving little room to move. With the present glut of used cars, your trade-in could be worth $2,000-$3,000 less than it was in March.
As a guide, always evaluate the difference between the price offered on the new car and the value offered for your trade-in - in other words the changeover figure - rather than treating either price in isolation.
© 1996 Sydney Morning Herald