Car Sales 101- Everything you ever wanted to know....

Discussion in 'Dealership Experiences' started by clevrname, Apr 25, 2012.

  1. clevrname

    clevrname Well-Known Member

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    Being that this is a relatively new site, with a completely new generation of Civic, everyone is out shopping for their new Civic, or other vehicles, I figured I would throw in my two cents, for what it's worth, when it comes down to the car buying experience, some dos, some don'ts, and just some facts that most people do not know about.

    I figured I will do this process from start to finish. I am going to attempt to just show everyone what goes on behind the scenes....

    Now, you start. You're going out to the dealership today to "look" at cars. You pull up on the lot and notice the small flock of hawks just eyeballing you like prey as you park your current vehicle. First, if your vehicle is cleaned extremely well, the salesman is going to automatically assume that you're a good customer. You've cleaned your vehicle, possibly to get a good trade value. The number one pet peeve to all salesmen when they come to greet you and welcome you to their dealership, is the standard reflex objective of "i'm just looking". Please do not do this to your salesman. We understand that you're looking, but remember it is their job to make sure you are given the perfect presentation of their product and answer any questions possible. If you don't want to be hounded as soon as you pull up, then go look when the dealership is not open. Most salesmen are bored 80% of their day with nothing to do, when they see a customer pull on to the lot, it is similar to dangling a steak in front of a dog that hasn't eaten in 48 hours.

    The next step goes back to things most are taught as a child, a little kindness and respect, will get you a long way. Remember, if you do decide to check out the "numbers" on this vehicle, your salesman is going to bat for you with the manager. If you are rude to your salesman, you will pay the price, and if they are good at their job, you will never know. So you take the vehicle out for a drive, some people prefer to go alone. I, personally, do not let my salesman put customers on a test drive by themselves. The number one reason being you do not know this car, nor do you know the person. It's like letting some random guy in the walmart parking lot, you just met, take your car for a quick spin, around the block alone, just to see how he likes it. Also, you may have some questions while on the drive, let the salesman go with you, makes everyone's life easier. Again, it is the salesman's job to make sure you are 100% satisfied with your visit to our dealership, therefore, if you think the car is making a crazy noise, or not accelerating properly, he/she can address your concerns while on the test drive.

    Ok, so you decide you like the car and you want to buy it. You decide to enter the dark land, aka the showroom. I want to start with a few things that people think get them ahead, but really it throws them behind:
    • "What's your best cash price?"
      • Dealerships make money on referrals for financing. Most big dealerships sell all of their loans to their manufacturer, Bank of America, Wells Fargo, etc. The second you mention "cash price", they are automatically looking at no money in the back-end (finance/warranty/aftermarket department). This HURTS you. Most managers think, I need to hold all gross possible so I can make decent money off this car.
    • "I want your best price so I can shop around"
      • This is downright rude. If you're unhappy with your salesman, then this is the best thing to say to them. This automatically leads a salesman to believe they have not done a good enough job presenting themselves to you. It's a great confidence killer. They now know they have wasted 2, 3, or even 6 hours of their time demonstrating the car to you and you don't even like them. If you did, you wouldn't be shopping around.
    • "So and so dealership offers oil changes, state inspections, etc. for the life of the car"
      • That is wonderful, why didn't you go to them first? There is obviously a reason. Whether you didn't like the service you received at that dealership, or just haven't made it around to that dealer, this does nothing but make the manager think you will battle them on price with that dealer, and depending on the market in your area, kill all of your credibility.
    Now, I know everyone hates dealerships mostly because of price negotiation. All I ask is one thing, remember that salesman are at work to make a paycheck to pay bills. If they are not making at least a LITTLE bit of money, they will not eat. Most car sales jobs are 100% commission. Meaning they get a draw of say 1000 on the first of the month. If the previous month, they made 1300 in commissions, then on the 15th they only get a $300 paycheck, because they have to pay back that draw.

    Understand this, the vehicle wouldn't have that price on the window if the manufacturer didn't think it was worth that in the current market. Remember, the more you haggle the price on the dealer is ultimately hurting you in the long run. Dealership data is often fetched, as far as new car sale prices, to determine trade in values, and things of that nature. If you decide to beat the dealership up, you are only devaluing your own vehicle down the line. Also remember, any kind of rebates are also devaluing your car. If you're looking at a vehicle with a crap ton of rebate, the manufacturer has issues them do to increased supply, to attempt to move units.

    Back to the price. Of course it is every salesman's dream to sell a car at full MSRP, for you to finance with them, buy aftermarket product, and extend your factory warranty. However, we all know this is not the case with most customers. We as Americans, in my opinion, have been somewhat brainwashed into getting the last word. The satisfaction of knowing you got that car for $2000 off the sticker price is just overwhelming to a lot of buyers. It gives you the sense of accomplishment and a great deal. If you've been rude to your salesman, you best believe he is telling his/her manager "This guy is a complete *******, he will probably kill me in a survey. I'm completely fine with not discounting the car at all." Hopefully, if this is the case, you wouldn't have even come inside because at this point, you're really both wasting each others time.

    My advice, ALWAYS save your trade for last. If you're going to be trading in a vehicle, then dealers look to make their money here. Most will want to see the trade first, so they can figure out how much they can either under/over allow for the trade, to in turn offer you a killer discount on the new vehicle, to entice you to buy. If you plan on beating your dealer up, then save the trade for the end. When your salesman comes back with your buyers order and your crazy low price, just mention that maybe you will go ahead and trade the vehicle in to save you the time and hassle. However, you CANNOT let them know this before hand. If you have beat them up on the price, best believe that they are going to try and steal your trade from you. Have a decent knowledge of the market and what you believe your vehicle is worth. Remember with KBB, a good price on a trade for dealers is fair trade in, 85% of the vehicle i trade in are normally about 1000-2000 below this value due to reconditioning costs.

    After your trade is appraised, then you can drop the i've decided to go ahead and pay cash deal. That is really going to set them off, but now you have locked in figures and your good to go. If you are financing, make sure you check with your personal bank/credit union PRIOR to going in. Most people feel 3% for 60 months is a good rate now a days for people with great credit. I will let you know I currently have some lenders offering .9% financing on new cars. Dealerships make a lot of their money here. We sell you the loan at 2.9%, then a bank buys it from us for .9%, and we make 2 points in rate. If you let the dealership know from the get go that you've already got financing, they will do their best to match or beat your banks rate, that is the truth. They are paid also for referrals, which they get for most loans they sell, so being able to secure financing helps dealership profit.

    My last thing I must say is Surveys. If you honestly did not even want to breath the same oxygen as your salesman, then please don't even complete the survey. If you beat them up on price, then were pissed with how long it took, that is no ones fault, but your own. Please do not survey the dealership bad if you got a killer price and it just took a little while. Most sales surveys are read in weekly meetings aloud to the staff. If your salesman got a bad survey, they are humiliated on a public scale. I am not saying this is how all dealerships work, but majority, from what I have seen, believe in making you look bad, so that you will hopefully do better.

    So this is the end of my endless rant about car dealerships. I know a little bit of everything and I really don't' think I could ever hit all of what I do know in one sitting. If you have any questions, please feel free to ask in here and I will do my best to answer your questions. Anything else you may want to know, ask away...... Now that i've attempted to tell you the basics, I'll try and run this class of Car Sales 101....
     
  2. webby
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    I've never heard that one before... quite interesting. Nice read, thank you
     
  3. webby
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    webby Administrator

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    also, moved this to the dealership experiences forum. May help some new buyers out. :thumb:

    how does your dealership feel about truecar?
     
  4. clevrname

    clevrname Well-Known Member

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    Thanks, Webby. Maybe it's just my evil Hitler current manager, but he will downright degrade a salesman in front of the whole staff. He thinks the whole "public humiliation and embarrassment" is an effective form of punishment. He believes that if he does this, you will not want it to happen again, therefore, you will do better. Like I said, I personally, wouldn't do this to my sales team because they are ultimately the people I need to produce to make me more money. He is just a nut job who hasn't had a dose of reality, little to no respect for anyone under him, basically on a 24-7 power trip. I added that because I have a few other friends who say their past GMs have done this as well.
     
  5. clevrname

    clevrname Well-Known Member

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    TrueCar was actually shut down in Virginia due to pay plan discrepancies, or something of that nature of an illegal pay scale. We have the exact printout from Virginia DMV posted on our dealership door saying we do not honor their pricing due to their unethical compliance with the virginia DMV.

    We do participate with the Costco buying program, Navy Federal Auto Buying Program, all of which are pretty loser deals, due to contract. But being that we get quite a few referrals out of them a month, the unit count outweighs the slight loss.
     
  6. webby
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    I knew there were issues in a few states, but I thought I saw a thing stating that they revamped the way they were billing essentially, and it was all back in order like a month ago or something?

    list of honda dealers in virginia from their site
    http://dealer.truecar.com/va/honda/

    dealer list by brand
    http://dealer.truecar.com/va/
     
  7. KennyGS

    KennyGS How may I help?

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    When a buyer is eligible for a supplier discount (from their workplace), does that still leave room for bargaining? How does this affect the amount the dealer is making? Who is unltimately eating that discount?
     
  8. clevrname

    clevrname Well-Known Member

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    Most of the time, with the contracts on discounting, the dealership has gone under their cost of the vehicle to earn your company's business. And we know dealerships are in the business to make money. There are a few hidden things, such as hold back, and wholesale financial reserve that most people do not know about, so even though the dealer may be under invoice, they are still making money. Also, some dealers get dealer cash from the manufacturer so they can give great prices,and still turn a profit. The person ultimately eating the discount is the dealership, I wouldn't encourage extra negotiating because everyone else has to make a paycheck too, and with these programs they aren't making much, so it's sort of win win for everyone.
     
  9. bootyluvr
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    bootyluvr Supporting Member

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  10. clevrname

    clevrname Well-Known Member

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  11. RaskyR1

    RaskyR1 Well-Known Member

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    I understand why most dealers use software (vAuto) for determining the value of a trade in, but I still think it's ridiculous that they give you a price without even looking at the car.There are always exceptions to the rule....

    Prime example:

    I was in the market for a new TSX and was willing to trading in my '08 TSX for my payoff amount of $15500, simply for the sake of not dealing with retailing it. The dealer said the best he could do was $13500!!! I LOL'd for a several minutes because they had the same car on their lot for $17k (not CPO) with more miles, less options, and no where near the condition on my car. There was also another one with less miles, but less options, and it was no where near as nice for $19k. I was actually insulted by the number and was surprised that they'd let the potential profit go out the door like that. I decided to retail the car for a quick turn around by pricing below book at $16999. It sold in less than 2 weeks for $16500! Best part about it is that the people that bought my car went and looked at the other ones the dealer had on there lot after mine! The flat out said the CPO one was no where near as nice as mine! My car was literally spotless with not a scratch on it, all maintenance done, new tires and brakes, and ZERO prep needed. It was front row ready and could have been put on the lot for $19k all day long. All they had to do was LOOK at the car and see that it was on of those rare cars with an OCD owner who kept it in immaculate condition. They literally let $1000+ profit walk out the door....:oops:

    Pics of the car as sold.
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    My other beef is about loyalty! The dealer I speak of above is the same dealer I leased and bought the above TSX from and it's also where I service my wife's RL. They were completely unwilling to come down on the price of a new TSX for me. I wasn't asking for some outrageous deal, in fact I was only looking for $200 over invoice (keeping in mind Acura had $500 dealer cash incentive at the time). I gave them one last chance to make a better offer but they refused and they even said they didn't think I'd find another dealer willing to do that price either. With the help of Webby I found another dealer who had the car I wanted in stock a couple states away. I shot them a quick email asking for their best price on the car. Within minutes they came back with a price that was $650 under invoice! No haggling, just a great price up front and I couldn't ask for a better experience with a dealer. To top it off they even got me $1000 loyalty cash from American Honda.
     
  12. clevrname

    clevrname Well-Known Member

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    Trade- I hear this all day long. Everyone needs to understand, that you car is worth way more to you andon paper than it is to a dealership. With trading in a car, a dealership is assuming risk. Most used car managers are good at knowing what sells and what doesn't on their lot. Prime example, I work for Toyota, I keep as LITTLE Tundra's on my preowned lot as possible, because for some reason they just do not sell very well in my market. First, they are going to more than likely hit you with a ridiculous number initially. However, the salesman is in control of this. The manager may have offered him 15,000 for the trade and he told you 13,500, because he was looking to hold that extra 1500 in his commissions, since you wants 200 over invoice pricing. I hear the 200 over invoice constantly. Lots of people want that, but in a sense it's frustrating to a dealer. Know what i mean? It's like you owning your house for 170k, but you're asking 215k for it, and you get an offer for $175 from someone. I know they're two completely different markets but what it all boils down to is some dealerships are volume dealers, meaning they concentrate on selling as much inventory as possible to get more from the manufacturer, or they are a gross dealer. Gross dealers do not get as much action as far as units every month, so they concentrate on holding gross in what they do get.

    As far as internet pricing, I am the king of that. I know exactly what you speak of. If I get someone looking for my best price, I will automatically shoot them a $500 under invoice offer, that they have to claim with a deposit within 48 hours. I do this mostly because there are about 7 other Toyota dealerships in my area, I know they are shopping them, so I need to get them locked in from the get go and not have to worry about losing the business. It's a great stradegy, and it does work frequently. With most of my previous customers, I automatically give them 200 over cost, if they are financing with me, and 700 over cost if they are paying cash. I offer any rebates and incentives to still be used as well, just hoping I can keep their business, so i really do understand your frustration with that. If someone is willing to repeadely use me to buy cars if I give them 200 over cost, I will do it. Mostly because, I have good faith in knowing I have taken care of them and will hopefully get some referrals.
     
  13. MrsJrotax101
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    I am VERY impressed with this thread. Thank you, clevrname!
     
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  14. clevrname

    clevrname Well-Known Member

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    :cheerleader:

    Thank you. Until I started working in a car dealership, I thought I knew everything about them and how they operated. However, after working here for a while, I realize how niave I was to the whole process and figure I can try and educate people as much as possible so they are not taken complete advantage of.
     
    MrsJrotax101 likes this.
  15. RaskyR1

    RaskyR1 Well-Known Member

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    I do understand the trading in thing (cars worth gold when you own it but not when trying to buy it). I've been detailing cars for 22 years and have worked hand and hand with several new and used car dealers. My soon to be brother in law is also high up at vAuto, so I also understand how that system works too. My point is that an exceptionally well maintained car is worth more than your everyday trade in for the exact same make and model, maybe not on paper, but when a potential customer is looking at them side by side it sure is. I was willing to let them take my car on trade for right around what KBB is listing for trade in, very fair IMO. KBB is listing the car over $19k as retail price and there was clearly plenty of room for profit at $15500. I'm sure I could have listed it for more and waited for the right buyer but I priced it to sell fast as I needed it gone to buy a new one. I walked away with the $1000+ profit the dealer turned down with less than two weeks of the car being on Craigs List.


    I do agree this is a great thread and wanted to say thanks for the info too! :thumbsup:
     
  16. KennyGS

    KennyGS How may I help?

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    Thanks. Great thread!
     
  17. Nix

    Nix Jötunn Moderator

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    Thanks dudes! Very informative. The last car we bought from the dealer we paid sticker cause the sales guy was so nice. No hassle and just said "we'll take it." Got some extras so it was worth it.

    I primarily deal with auction/used, (ya know that corner "dealership"), cause i know a couple guys and im a cheapskate. Also got a family member whos a Honda tech so service and check-it-out-lemme-know-before-i-buy-its are easy.

    What do you know of the basic 4 square selling technique? I've seen this a few times up this way. The sales guy will divide up a sheet into 4 sections and they write down price of the car, financing, down payment, and trade in on each part. Then they try to talk down payment, trade, and financing and never mention the price of the car. I almost went for it until I realized the price of the car was 5k over the sticker with $600 in "add-ons." They were pretty good at distracting you with the finance/trade numbers until you forgot to ask about what you were paying for the car.
     
  18. clevrname

    clevrname Well-Known Member

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    You would be correct, sir. The object of 4 Square is to get off the price of the car. Thet put the other things such as financing, downpayment and trade, and play with those numbers to get you where you want to be budget wise. And like you said, if you never pay attention to the price on the car and what they wrote down in this box, then you potentially could have paid over sticker. We have 4Square in our system, but rarely use it.
     
  19. Nix

    Nix Jötunn Moderator

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    Do you guys go by vAuto only or do you consider Manheim black book values at all? Everyone this way seems to be all about Manheims. I threw out some numbers at a place and there were like "where do you get your numbers from?" I said Adessa but the response was that they only used Manheim.
     
  20. clevrname

    clevrname Well-Known Member

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    Manheim is what we use. We use this because if we cannot get rid of the car, we are going to send it there, and of course we want to turn a little profit on an auction car. We use blackbook for finance advance as far as showing a customer what a bank is willing to loan someone for this type of vehicle and that is how we determine trade value because we need to make money and generally can't go over this finance advance. Used cars is where the money is at in my dealership.
     

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