Tom Reardon and his next door neighbor, Rich O’Donnell were carpooling to work one morning when the engine of Tom’s car started to sputter. This started a chain of events that eventually led Tom to decide that he needed a new car.
Since he was a loyal Ford owner, he went down to the local dealership. “The model I really liked had a base price of $28,500 and, by the time I had added the options I wanted, I was looking at a total price of $34,700. Quite amazing. My parents paid $2,200 for their first house… and you don’t even get a garage to go with the car!!”
A month later, the Aldo Company bough thirty Fords of the same model that Tom had investigated fir a total price of a little more than three quarters of a million dollars. “That’s less than $26,000 each or about a third cheaper than they price they offered me.” Rich agreed. That’s the advantage of buying bulk as a company. They get much better price. It is as easy for them to sell thirty cars to Aldo as one to you or me.”
That started Tom thinking. He went back to Ford dealership and asked the manager what price they would give him if he bought thirty cars of the same model. “About 28 grand each,” the manager replied. “Why not the same price as you gave our company?” Tom asked. “Well, that is the ninth if not tenth time they have bought from us in the last couple of years…so they receive an additional corporate discount.”
Even at an average price of $28,000, buying as a group would offer Aldo employees a substantial saving. So, with management’s approval, Tom circulated a flyer to all employees describing the situation and inviting them to join him in purchasing a car as a member of the Aldo Buying Club. Of the 4,800 employees of Aldo Company, only 53 expressed an interest in learning more about the deal.
Question 1: Why do dealerships in general give better prices to large scale buyer? Aren’t they just losing money by selling a car for $26,000 that they could sell to an individual for $34,700?
Question 2: How viable do you think this idea is of a buying club to enable members to purchase automobiles as a group?
Question 3: what problems do you predict when the fifty-three interested individuals get together to discuss the next steps in the purchase plan?