Penske ends no-haggle pilot

Penske Automotive Group Inc. has backed off a no-haggle pricing experiment. The nation's second-largest dealership group has returned to a traditional sales model and a commission-based pay plan at Toyota of Surprise (Ariz.).

Penske made the switch in the latter half of 2016, finding the no-dicker policy did not deliver the cost savings and sales volume they had hoped, executives said.

"We failed from the standpoint of being able to grow" that business, Penske Chairman Roger Penske told Automotive News.

Since the switch, "volumes have increased, although the sample period is only a few months," Tony Pordon, executive vice president of investor relations and corporate development, wrote in an email. "We are tracking it monthly, so I want to wait for another three to six months before making any further comments about the volume."  

Penske launched the no-haggle pricing pilot at Toyota of Surprise in spring 2014. It applied to new and used vehicles, trade-ins and finance and insurance products.

Penske chose that store to test the program because it had recently launched operations as an open point, so it was suitable for training new employees on no-haggle pricing.

The store paid salespeople a salary rather than a commission, believing that doing so would attract fresh talent. Many of the initial salespeople came from nonautomotive retailers such as Starbucks and Dillard's department store. They attended two months of training to handle the entire transaction from start to finish, including F&I.

Meanwhile, customers were briefed on the store's negotiation-free policy shortly after they were greeted, so they would know there was no dickering over any price, including the offer the store would make for a trade-in vehicle.

But Roger Penske said no-haggle pricing did not "lift" sales. "We didn't see the benefit of lower costs [from] having one person do the whole transaction," he said. "I think maybe our execution was poor. We had a brand-new store and a startup from scratch, so there was turnover of people."

Pordon added that the store was "losing a lot of deals" to competitors who would undercut the no-haggle price.

Penske Automotive Group ranks No. 2 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 233,524 new vehicles in 2015.