Car Buying HQ

I am amazed everytime a person looks at a $20,000 car, with no money down, and can’t believe it does not work out to $200 a month.  If I had a dollar for everytime……. 

My sales person does a great job.  He does an outstanding presentation.  The customer is drooling.  Then we present numbers and the customer says they will take it for $200 a month.  Maybe my salesperson didn’t do such a great job.  He should have had that information, making sure he is on the right car.  The customer isn’t going to step down to a different model, losing face.  They will only leave with their new found information and buy somewhere else.

I teach my salespeople, if they do quote a payment, figure $20 to $25 per every thousand financed for a 60 month term.  Now my salesperson needs to be smart enough to know what cars will qualify for what term.   To make it easy for you when you are looking at cars here are “money factors” for 4 different terms all at 7.9% .

• 36 months          .0313
• 48 months         .0234
• 60 months        .0202 (here is where I get the $20 per thousand financed)
• 72 months        .0175

For example let’s assume you are financing $15,000

• 36 months – $15,000 x .0313 equals a payment of $469
• 48 months – $15,000 x .0234 equals a payment of $365
• 60 months – $15,000 x .0202 equals a payment of $303
• 72 months – $15,000 x .0175 equals a payment of $262

Not only does this information help you decide which vehicle fits in your budget, but also you will be able to see if the dealer is being honest with you in his computation of the payments.  I always believe having an informed buyer makes the sale easier.  They trust me more.  They are realistic.

Remember when you get to this point it is only math.

These are funny, if you never have seen these watch them.  Have a great night

Martin still wants to know where the win-win is at.  Here is how it goes. 

At this point in time the only 16% of car buyers leave the dealership with a new or used car.  Yes, 84% leave without buying a car.  Why do they leave?

• Miss information
• Unreasonable expectations
• Terrible impression of the dealerhip or salesperson
• Pre-conceived ideas
• Not the right vehicle

Just to name a few.

I believe if the consumer has the correct information the closing percent will increase.  This means happier customers, happier salespeople, happier managers and happier owners.  Here are two different scenarios to look at.

First, my dealership sells 100 cars at an average of $1500 gross profit per car sale.  This gross profit is the total of the sale of the car and the finance products sold.  Total Gross of $150,000.

Second, my dealership sells 50 cars at  an average of $3000 gross profit per car sale.  We have the same total Gross Profit $150,000.

Which dealership do I want?  The first one.  I have twice the customers: more referrals; more service work; more parts sales; more word of mouth advertising.  My internal service and parts gross also increases because of the increased inventory that is needed to satisfy the sales demand.   

If I can get my service department to generate enough gross to cover all the expenses of the store, known as 100% absorption, then seventy cents of every dollar of gross from the sales department goes directly to the bottom line.  The other thirty cents pays for selling expense.

So in a nutshell.  I want people to have a great experience, knowing they are getting a great deal at a fair profit.  In return I will sell more cars, building my dealerships service business.  If people know what to expect they should approach car buying differently than what they do now.

This upsets me!  The reason that dealers were suppose to be closed was there were too many dealers.  This doesn’t fit into negotiation, but it does fit with Rob Northrup’s Buggin In post today.  Come on America, it is time we let the three legislative branches do what they are intended to do; do not give one branch to much power.

The negotiation process of car buying is more complicated than what is commonly thought.  Why is that?  And the process of buying used cars is different than buying new cars.

We recently interviewed a potential salesperson at he store I work at, and his answer to my quesions set me back in my chair.  First, me interview process starts with asking the interviewee what he thinks the car business is, and how it works.  This way I know upfront what kind of deproggraming that needs to be if I hire the person.

A simple question was asked.  “How is a car deal worked once you have found the perfect car for the customer, meaning what it the negotiation process?”  His answer went something like this, “It’s easy you go out and show the car then when the customer says no, you drop $2000, and when he says no again, you just keep dropping until he says yes. Once he says yes you sold a car.”

Not a shocking answer. That is what most people think, and I can’t blame them.  Their only experience might have bee that, or they learned so old school tips from Dad.

I followed up with, “two thousand dollars, and then you drop more, how much mark-up to you think a dealer has in one of his used cars?” Quickly he answered, “you go out and buy most of your cars at auction for around $2500, bring them back and sell them for whatever you can get the customer to yes to.”

Are you serious, does the general public really think this way, or did I just fall upon a wierd situation?  I think this is where the negotiation process breaks down.  Lack of knowledge.  Is it his fault?   No.  Should I expect a different answer to my question?  Probably not.  After years of asking the same question, I get somewhat of a same answer.  I think it is all common sense, because I deal with it every day.  Sometimes you need to sit back, and realize why would they know anything about my business, I don’t know anything about theirs.

If you don’t have the correct knowledge, you do not know where to start in a negotiation, and that isn’t only for cars.  How do you find the correct information?  Ask the right person, someone you trust to guide you down the right path.