Recently, I bought a new car. In the process, I came across the very common sales strategy called "bait and switch." From the view of an economist, this strategy is very interesting. Below you will find some excerpts from a series of e-mails exchanged between an Internet Honda salesman and myself.
I had requested an Internet quote on a 2008 vivid blue base model automatic Honda Fit, with window tint and keyless entry. The salesman quoted me an “Internet ‘no hassle’ price” of $14,750. Thinking that this was low, I told him that I would test-drive the vehicle the following Saturday and was prepared to pay exactly $14,750 as quoted. He corrected his original quote with a list of required add-ons, which increased the price of the vehicle to $16,105.60. I informed him that I would not be coming for a test drive because he had lied to me originally. He then denied that he had ever lied.
The last few exchanges were most interesting and are quoted below. The names of the salesman and the dealership have been changed out of respect. Most of the initial e-mails are skipped for brevity.
Me:
Sir, the American Heritage Dictionary defines a price as "the cost at which something is obtained." I cannot obtain a vivid blue 2008 Honda Fit with tint and keyless entry for $14,750 from [Car Dealership]. Therefore, that is not the selling price. Lying is defined by the previously referenced source as "to convey a false image or impression." Therefore, someone who describes the selling price of a 2008 Honda Fit with tint and keyless entry from [Car Dealership] as being $14,750 is lying.
Paul
Larry:
Paul, I appreciate the info and I'm sorry you feel that way. If I was in your shoes I would feel the same way, but unfortunately the market and our competitors have caused us to send price quotes that does not contain the destination charge or dealer adds. You are not the first to call me a liar and want be the last. Unfortunately, this the way the market has gone and I'm sure you have experienced this with other dealers. I would love to sell you a vehicle, but it seems to me I can't change the first impression. I wish you well in your search for a vehicle and I hope you get the vehicle you want.
Thanks,
Larry Fakelastname
Me:
Hi Larry, I didn't mean to question your character. I just idiosyncratically prefer the technical definition of words. This subject makes me curious. How much of a market advantage would you say a dealership gains by using this sort of “bait and switch” strategy? The genuine reluctance you expressed in your previous e-mail seems to indicate that “bait and switch” must work so well that choosing a different strategy would significantly decrease sales relative to competing dealerships. This is fascinating to me because it indicates that a large number of customers who travel to a dealership expecting one price only to be presented with a different, higher price are still willing to buy at the higher price. From your personal experience, what would you say is the reason for this? I have heard that many consumers are more concerned with their monthly payment amount than with the total cost of a car. Is this true and would this help explain why so many customers would react so mildly to a $1,355.60 change in the actual price of a car?
Thanks,
Paul
Larry:
Again, the market is largely responsible for this strategy. In the past consumers use to be concerned with payments, but now price is more of a conversation. Hence, you have KBB, Edmunds, and Consumer reports that has all the dealer info readily available. As for the adds, must consumers find value in the adds and must actually use them.
thanks,
Larry Fakelastname
