Reputation- Car Dealers

When Berkshire got into the car selling business I wondered if this sort of situation might come up:

Two Dealerships Accused Of Falsely Advertising Low Prices To Customers. Now They Have To Pay $500,000 In Restitution
https://jalopnik.com/two-dealerships-accused-of-falsely-adve…

The two Phoenix area dealerships, ABC Nissan and Pinnacle Nissan are both owned by Berkshire Hathaway Automotive. The grift: The Arizona attorney general’s office alleges that the dealerships would advertise cars for low prices. Low enough to get customers to come on in. Once there, the dealer would tell the customers they weren’t going to honor the prices they advertised. Instead, the dealers would tell customers they’d have to purchase […] add ons to get the car for that price.

Not a surprise that car dealers would do this. It is a surprise that a Berkshire sub would do this.

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Not a surprise that car dealers would do this. It is a surprise that a Berkshire sub would do this.

The first one probably wins: it’s not a big surprise that a Berkshire sub would do it if the sub is selling cars.

Now just think of the reputational exposure from the real estate brokerages…
Oh well. If you own a material fraction of the US economy, stuff is going to happen even with the best efforts.

Jim

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The two Phoenix area dealerships, ABC Nissan and Pinnacle Nissan are both owned by Berkshire Hathaway Automotive. The grift: The Arizona attorney general’s office alleges that the dealerships would advertise cars for low prices. Low enough to get customers to come on in. Once there, the dealer would tell the customers they weren’t going to honor the prices they advertised. Instead, the dealers would tell customers they’d have to purchase […] add ons to get the car for that price.

Long live TruCoat!

https://www.youtube.com/watch?v=B2LLB9CGfLs

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Very disappointing.

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It seems to me all car dealers have been doing this for as long as I remember. They advertise new car at very good price to attract buyers to the stores and then buyers will find out that car has specific conditions attached to it or has been sold. CarMax has non-negotiable price and that relieves buyers’ anxious.

It seems to me all car dealers have been doing this for as long as I remember.

Oh, I agree. I hoped Berkshire would have stopped it at our dealerships.
Maybe the fixed pricing model is the way to go.

Anyone got that Buffett quote about being ruthless if Berkshire’s reputation suffers?

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I love that practice, when they are honest. I’ve scored when dealers put up just one car at a good price, usually Friday, to bring in the weekend crowd. I’ve done well by showing up Friday morning, cash in hand, ignoring all the admonitions to purchase extras and holding them to the sale price.

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I hoped Berkshire would have stopped it at our dealerships

This is not surprising and nothing to be serious worried. However, this is what I say as “there is no such thing as Berkshire culture”. Berkshire doesn’t provide management, they don’t provide any other goals. The only thing Berkshire does is gathering capital and HQ doing capital allocation decisions, including for the sub’s how much maintenance cap-ex and growth cap-ex they want.

HQ doesn’t get into operations. If my recollection is correct, they don’t even sent auditors from HQ. I believe some of the sub’s have their own auditors.

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I love that practice, when they are honest. I’ve scored when dealers put up just one car at a good price, usually Friday, to bring in the weekend crowd. I’ve done well by showing up Friday morning, cash in hand, ignoring all the admonitions to purchase extras and holding them to the sale price.

Aren’t these lowball deals usually for the less desirable vehicles? Examples I have in mind include:

  • Black interior and no air conditioning (especially in places infamous for triple-digit heat or Amazon-like humidity)
  • Lime green seats that nobody wants
  • A manual transmission in a type of vehicle that doesn’t attract stick shift enthusiasts, such as some of the first minivans
  • One of the last vehicles lacking a radio
  • One of the last vehicles lacking antilock brakes or air bags
  • One of the last vehicles equipped with those awful motorized seat belts
  • Equipped with the base underpowered engine that nobody wants (such as a Mustang, Camaro, or Firebird with a 4-cylinder engine)
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You learn something every day.

I’ve owned Berkshire since 1996 and had no idea we sold cars.

Wheezy

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You learn something every day.
I’ve owned Berkshire since 1996 and had no idea we sold cars.

It’s a big company.

"Berkshire Hathaway Automotive, Inc. (“BHA”) and its affiliates is one of the largest automotive
retailers in the United States, currently operating 105 new vehicle franchises through 82 dealerships
located primarily in major metropolitan markets in the United States

BHA also develops, underwrites and administers various vehicle protection plans as well as life and
accident and health insurance plans sold to consumers through BHA’s dealerships and third-party dealerships."

The operations are highly concentrated in Texas and Arizona.
Since they’re pretty big overall in the US, they must be really big there.

“We also walk dogs”
(for Heinlein geeks)

Jim

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Aren’t these lowball deals usually for the less desirable vehicles?

sounds reasonable, but in my experience, no. I bought a very standard Subaru, just like everyone else in this ski town drives, for several thousand less than they usually pay.

Buying a new car on a website that has no haggling or sales, is the best way to buy, in my experience.

Haggling is annoying, IMHO.

Just saying…

Buying a new car on a website that has no haggling or sales, is the best way to buy, in my experience.

I almost always buy used cars.
Executive summary: save a fortune. The only downside is that you don’t get to pick the colour.

I once bought a used [insert pretentious brand name] that was 10 months old and saved something like a quarter of the price new.
It was white instead of the then-fashionable silver. Then white came into fashion…

Jim

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I almost always buy used cars.
Executive summary: save a fortune.

Same. Haven’t bought a new car yet. I usually aim to buy a car 2-5 years old, great condition, well maintained, no wrecks, and a make/model that has a good reputation for reliability. I pay about 1/3 the cost of new, and the cars seem as good as new to me. Added benefit: taxes and insurance are also cheaper, though of course you can expect to spend more on maintenance, but by buying a reliable model that is minimized. One of my cars is a 2007 Prius we bought in 2013 for ~$12,500 . It had relatively high miles on it, and some minor cosmetic flaws, but it was also loaded with all the options possible.

It’s still running great 9 years later, and the KBB private party value is $5,500. So if we sold it this year for that price, we’d have paid ~$775/year.

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I almost always buy used cars.
Executive summary: save a fortune.

I usually do the same, though in keeping on topic, the last car I bought at the dealer’s come-on price broke the curve. I graphed every car in the area on a price vs miles chart. It gave a remarkably linear trend, projecting from full price and zero miles to a death at about 200k. I looked for cars below the expected price, and the dealer come-on promotion was well below the curve. In Oregon, they have to list the VIN # in the advertising and prove they have (or had) the vehicle. I showed up with cash and they had to sell it.

The most recent purchase was a car for the house in New Mexico. I found a used one which was perfect, except for the color. I thought I could live with a black car with a black interior, even in the desert sun. I may have made a mistake there :).

Nice wheels Jim !

https://www.pond5.com/item/79133955

ciao

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I almost always buy used cars.
Executive summary: save a fortune.

Every time we’ve bought a car we always looked at used cars first. Almost every time, the used car was cheaper by the IRS milage rate – 50 cents per mile. IOW, it wasn’t a bargain, just discounted by the number of miles on it. Not a bargain, just cheaper.

I once bought a used [insert pretentious brand name] that was 10 months old and saved something like a quarter of the price new.

Except for the time we bought a BMW Z4 convertible. It had just come off a 3 year lease in Indiana and had only 13,000 miles on it. (You don’t particularly want to drive a convertible during Indiana winters.) We snagged that one by accident[*] the first day it was on the Toyota dealer’s lot. Half the price of the similar car on the BMW dealer’s lot 75 miles away.

[*] We were looking at Toyota convertibles and didn’t see anything we liked. As we were leaving my wife saw the BMW tucked away in the back of the lot and said, “What about that one?”

I have bought a few of these.

Once we arrived at Huntington beach Ford on a Saturday morning where there was an add car (Ford Explorer). We asked to test drive. They indicated it was out for a test drive. We agreed to buy on the spot b4 the test drive returned (B4 they could react), sight unseen. It was a great deal, I think $5 K off MSRP, back when explorers were the only SUV around.

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Not sure if this link will work. Look for a review by John M. It was the top review last I looked.

https://www.yelp.com/biz/steve-rayman-chevrolet-smyrna

Anyway, your post reminded me of my experience. Posted a inexpensive Leaf on their website, and after I called to confirm said it “must of sold” when I showed up 1 hour later.

John