TIME Magazine

February 19, 1996 Volume 147, No. 8

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NO NEED TO KICK THE TIRES

AND SAY GOODBYE TO HAGGLING. FIXED-PRICE SUPERSTORES ARE TAKING OVER THE
USED-CAR BUSINESS

SHOPPING FOR A USED CAR CAN MAKE the shopper feel as used as the car. The
stereotypical sojourn involves a persistent salesman on commission (loud
checked sport jacket optional), high-pressure haggling and a persistent anxiety
that the buyer was talked into something he or she didn't quite want.
Naturally, the heap falls apart in a few weeks, creating a desire for
auto-da-fe.

Now, the lemon business promises to become lemonade. In Dearborn, Michigan,
last week, nine of the nation's biggest and most powerful automobile dealership
owners (annual sales: about $4 billion) announced plans to invest $100 million
in a chain of 10 Driver's Mart superstores, manned not by commission agents but
by salaried "sales consultants" offering "pre-owned," "nearly new" and
"off-lease" autos at nonnegotiable, uniform prices. Driver's Mart plans to sell
the reconditioned cars complete with warranties and 30-day return policies.
"When you think of shopping for a car," urges Driver's Mart president Thomas
Eggleston, "think Home Depot, Nordstrom. That's a switch, isn't it?"

That switch has already happened on a smaller scale at Circuit City Stores of
Richmond, Virginia, the national appliance and consumer-electronics retailer,
which launched its haggle-free CarMax division in 1993 and now successfully
operates four superstores in North Carolina and Georgia, as well as Virginia.
And soon, H. Wayne Huizenga, founder of the Blockbuster video group, will forge
a similar no-dickering used-auto chain, called AutoNation USA, based in Fort
Lauderdale, Florida.

What is driving Driver's Mart and the others is in part a desire to Simonize a
business stained by imputations of high-pressure tactics and low-rent ethics.
The bigger reason is profits. The used-car trade is now the fastest-growing
segment of the automobile market, largely because of consumer resistance to
rising new-car prices and the brisk turnover in the booming car-leasing
business, which accounts for 32% of all new-vehicle transactions. About six of
every 10 cars and trucks sold nowadays are secondhand, and given the deep
discounting of automakers on pristine models, a dealer stands to make about
$300 to $500 on a used car, and only $100 or less on a new one. By switching to
fixed-ticket sales--and fixed-salary sales staff--the new superdealers hope to
lock in those margins. Driver's Mart figures on revenues of about $5.5 billion
with annual sales in 100 locations of 400,000 used cars.

What remains to be sorted out is how all this will affect the automobile
business as a whole. Dealers in both new and used cars will probably flourish
alongside the superstores, while independent operators who sell only secondhand
cars will find the new entries deadly competition. Automakers, meanwhile,
profess to see rosy possibilities in the change. Says Yale Gieszel, executive
vice president of Toyota Motor Sales U.S.A: "I don't think you'll see a decline
in the number of Toyota dealers in the next five years." Still, it is
comforting to believe someone could actually want to buy a used car from one of
those guys.

--By Jesse Birnbaum. Reported by Joseph R. Szczesny/Chicago and Lisa H.
Towle/Raleigh

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