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CURRENTLY, a Honda retailer in Australia would buy vehicle stock at a wholesale price to which margins for the dealer to cover costs would be added.

The salespeople then negotiate a transaction price with a customer.

Since 2000, Honda NZ’s Price Promise states that new-car buyers get the same price on a new Honda no matter who they are, where they live, and what day of the month they purchase.

Honda NZ said that special offers, run-out deals, discounts and end-of-the-month sales all lowered resale values, which in turn affects a vehicle’s depreciation rate.

The price of a new Honda was also different around the country based on the individual dealer and the customer.

The company said that if one buyer received a five per cent discount and another a 15 per cent discount, the first buyer’s car would have depreciated by an extra 10 per cent.

The NZ Price Promise changed that, so the only factors affecting the resale value of a Honda are vehicle age, mileage and condition. This is designed to make Honda’s vehicles depreciate slower than those of rival brands.

For the dealer, it means lower operating costs. If they carry a wide array of models, some may not sell as well as others, leaving the dealer to cover the costs of holding the poor-selling variants.

If dealers hold only a small number of models, customers may also feel they are not being serviced properly with Honda products.

The agency system means dealers can sell any vehicle on order nationally, not just the ones allocated to them, with access to the full Honda range without incurring floorplan costs.

Honda NZ owns all demonstration stock at the dealerships and all the new-car stock. The vehicles are held at a national distribution centre in Nelson, and sales are made directly to the customer.

Dealers get paid a fee for the sale, ranging from four per cent to seven per cent depending on meeting sales targets and customer satisfaction scores. Only two dealers can achieve seven per cent.

By Neil Dowling

Dealer Solutions