Hazard. Kevin Hazard.

Last week, my lovely fiancee experienced a bit of bad luck. The 2001 Honda Civic she’s been cruising in for the past 9+ years fell on some hard times. The decision she was faced with: Pay $1,700 to put the pep back in the step of her old friend or move along and put the old car out to pasture. Given the KBB estimate for a car in her car’s condition if it were to be repaired, we would have expected to get around $3,000, so we were blown away by Carmax’s offer to buy it from her for $2,500. Needless to say, we accepted that offer on the spot, and we started the accelerated process of looking for a car.

Given her fantastic experience with her Honda Civic, there was no question in her mind what her next car would be: A “Honda Certified” 2010+ Civic. Easy, right?

Yes … until it’s time to work with a car dealer.

As we tried to navigate through the ridicularity of buying a new car, one experience was particularly representative of our overall experience, and I couldn’t help but share it:

I purchased a 2010 Honda Accord from a certain Houston-area dealer that you’ll likely be able to pinpoint with the context clues in my story and some simple Google-fu. My goal in writing this post is not to call out this specific dealer directly but to use them as an example of why people absolutely loathe the process of buying a car. From my experience, every dealership has its own way of eking out profit where they can, and this example is just one I found particularly noteworthy.

Let’s call the dealership, “XYZ Honda.” XYZ Honda is in the Houston area along with a half dozen other Honda dealerships. XYZ Honda probably saw the success of the Carmax “No Haggle” pricing and thought, “We can do better than that!” XYZ Honda opted to go with a “Best Offer Over” pricing structure.

If you’re not familiar with the “Best Offer Over” pricing structure, you’re not alone … The salesperson who met us at our car when we visited the lot had a tough time either understanding it or explaining it. In either case, it wasn’t communicated well to us. As I’ve come to understand it after speaking with XYZ Honda’s Pre-Owned Sales Director, the “Best Offer Above” price factors in what the dealer paid for the car on trade-in along with the costs incurred in preparing the vehicle for sale, including the inspection to have the car “Certified.”

Let’s look at a “theoretical” example to break this down: You’re looking at a Certified 2010 Honda Civic EX with about 35,000 miles on it. The “Best Offer Over” price is shown to be $17,808. For simplicity’s sake, let’s use Kelley Blue Book to value the car when it came to the dealer … If it were in “Excellent” condition (the top 3% of cars) the owner would theoretically get $15,060 in value from the deal. I’m not sure if any dealer has ever paid the KBB list price of an “Excellent” trade-in in the history of car sales, but for the sake of argument, let’s say they do.

If a car is in “Excellent” condition, it probably doesn’t need much work to get into salable condition, right? If there are mechanical or visible imperfections, the car wouldn’t be in “Excellent” condition. To prepare that “Excellent” vehicle for sale as a Certified Pre-Owned automobile, it goes through a detailed check to verify that it’s in like-new condition, and because the dealer paid for an “Excellent”-rated car (and those ratings are not handed out like candy), nothing needed to be done to fix it. If the car was in “Very Good” or “Good” condition, they might spend the difference in trade-in value to essentially bring what they’re “in” the car to about the same level. The certification check requires work, and there’s a warranty that comes with certification, so those costs are going to be factored into the minimum price the dealer will take for the car.

In our “theoretical” example, after everything is said and done, if you walked into the dealership with a check for $17,808 and handled TT&L yourself, you’d have a car, right?

Well, not exactly.

The $2,748 difference between the “Excellent” trade-in value and the $17,808 “Best Offer Over” price apparently does not include any dealer profit.

Why would someone say they’d will accept your “Best Offer Over” a price that doesn’t provide any profit? The cost of initiating the warranty and running the fine-toothed comb through the car was apparently exactly $2,748, and they didn’t include any profit margin … I understand the desire to be transparent in how much the dealer is making, but I don’t understand how they aren’t already making a profit at the “Best Offer Over” price.

I think if you’re going to have a “Best Offer Over” price, you should probably be willing to accept that price and still make money on it. If that means the prices of all of your pre-owned vehicles on the lot have to increase by $x or y%, so be it … If you choose not to accept an offer at the base price you list, you’re ruining your customer’s experience with what seems like a gimmicky structure that provides transparency only to a certain point. After that point, “Do not pay any attention to the man behind the curtain.”

As you probably surmised, the example above is not exactly “theoretical.” To XYZ Honda’s credit, the salespeople we’ve talked to have all tried to explain the pricing similarly. The problem they all seem to run into is that the pricing structure doesn’t make sense to a buyer.

Maybe we should just buy a horse.