The Car Dealership Sales Process - How To Use It To Your Advantage And Control It

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Not as if I haven't already provided you with $1000's of dollars worth of inside information at NO cost to you, but I am going even further! I am exposing the car business and all their tricks because of the overwhelming lack of integrity as it relates to car dealers and their endless greed. After nearly 20 years in the business being taken advantage of, used, and manipulated by greedy dealers, I am giving you the information that scares them to death.

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Most companies that peddle services or wares have a process in place to sell their products. Car dealerships are organizations that typically attempt to use a sales process to their distinct advantage when it comes to selling you a new vehicle. Naturally, sales processes come in all shapes and sizes, but are only as good as the trainer who teaches them and the level of talent a person possesses to implement its use.

I have taught a structured sales process to scores of sales consultants, service advisors, and managers over the years internally or as a consultant. Sales processes do work and are designed to keep an individual organized and on track to lead you (the buyer) to a successful sale. In fairness to the process, itself, the best salespeople use one, and it makes for much happier customers. However, given the predatory nature of car dealers and their sales staff, it is vital for you to know how to understand the process and how you can ultimately control it.

Let's break down the actual sales process that I have used and taught:

1) Customer Welcome

2) Customer Needs Assessment

3) Vehicle Selection

    a) report to manager for guidance

    b) evaluate inventory and gross profit potential

4) Feature/Benefit Presentation

5) Demonstration Drive

    a) trial close

6) Trade Evaluation (if applicable)

    a) history discussion

    b) silent appraisal

    c) devaluation

    d) trial close

7) Transition To Write-up

    a) credit application

    b) down payment inquiry

8) Purchase Proposal Presentation

    a) payment or difference

    b) overcome objections

9) Close Sale

    a) F&I preparation

    b) business manager turn

10) Vehicle Delivery

Sales processes sometimes have a couple of more steps or possibly a couple less. Notwithstanding, as an expert in the business, this is the one that I have taught and the one that was very successful for me, personally.

As I always advise, don't try to over-analyze it or try to outsmart it. Many consumers have tried and failed miserably. However, if you pay close attention to how I dissect the (10) steps for you, there is no doubt, whatsoever, that you will have a MUCH better understanding of how you are being led and manipulated into ultimately saying 'yes' to a purchase.

So, let's get right to it and break this process down step-by-step while taking time to give its purpose and the psychology behind it:

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STEP (1) - A professional salesperson is comparable to a shark in many respects; it needs to feed. You are the source of food that the shark circles and preys upon. If he/she is top-notch, every question and statement will have a purpose and be very calculated. You can be certain that a pro is mentally notating every, single thing that you say to use to their advantage as they move you through the process.

Conversely, keep in mind that many salespeople are not professional at all. This is why we don't take any delight in car shopping, right? But, the good ones are very personable, well-dressed, articulate, and very accommodating. In either case, there is no question that both the smooth professional and the Dirt-Lot-Dan can readily take advantage of you and make a very handsome commission at your expense. The low-lifes also know how to play the car game as well. They just do it with less scruples with seemingly no regard for ethics or legal ramifications.

The goal of ALL salespeople is to draw you in, build rapport, gain your trust, and strike.

INSIDER TIP - Be polite, be aware, be guarded, and think before you speak. It will not pay to be an ass, believe me. The dealer staff will make it their mission to take as much of your money as possible. You are selling yourself, so to speak, and building rapport just like the salesperson. Intelligence and preparedness will pay off for you as well as an amiable attitude. The goal is to will not be combative.

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STEP (2) - As I always tell all of my trainees, the needs assessment is far and away the most important step in the process. Why? Because this is where they are going to ask some very pointed questions that will 'paint a picture' for their manager. Loaded with this essential information, they methodically choose the right vehicle to their advantage, sell out of existing inventory to their advantage, preliminarily structure a financing strategy, and maximize their profit potential.

Do keep in mind that not many managers and sales consultants are terribly sharp. They don't follow directions well, love to short-cut the process, seem to always think they know best, and simply appear untrustworthy to customers. But, they are still equipped to play the game and do damage to your wallet. Honestly, most salespeople either skip this step in the process or minimize its effectiveness by skimming through it. Furthermore, most managers didn't perform this step well as a salesman and don't often get off their ass behind the desk to ask you themselves.

What I have taught my trainees is to use a very simple needs assessment form to ask prepared questions painting me a clear picture of who you are, where you live, your demographic, vehicle needs, financial information, credit standing, former lenders, and trade status. As an expert, I can make very determinant decisions very quickly while keeping your focus forward and guiding you ahead as a means to my desired end.

INSIDER TIP - Most of these questions are actually fairly harmless. What do you currently drive? Your current payment? What payment range are you seeking? What features do you need in a new vehicle? Will you be trading a vehicle?

Answer only the basics and defer away from pay-offs, payment ranges, whether you will or will not trade, if you will be financing with the dealer, etc. Again, be polite! Don't give them any more reason to plot against you than already exists. Simply let them know that you are just trying to find the right vehicle within your budget.

They will ask what your budget is! LOL! You should already know your number. If it is $20,000, just tell them 'under $20,000' and leave it at that. The most important aspect here is that YOU know the answers to these questions for yourself.

A smart dealer like myself insists that his staff qualifies you thoroughly. Without that information, customers become lost and confused as well as frustrated costing me gross profit.

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STEP (3) - After a salesperson has compiled all of the necessary information from you during their needs assessment, they should have been required to touch the desk as is commonly stated. In my case, I tell salespeople that I want to receive their canvas and confer with them about structuring a strategy based upon the information that YOU provided. It is a direct accountability mechanism.

Most managers only want to deal with units that are in-stock, as selling it will reduce and turn inventory and alleviate floor-plan expense. It also allows the dealer to make more profit because they do not have to pay for extra transport and fuel to bring a vehicle from a competing dealer, as well as being able to make their dealer holdback from the factory.

Dealer holdback is only applicable to the sales of new cars and trucks. It is a set monetary amount notated on the official factory invoice that dealers are paid by the manufacturer.

Dealers seek to maximize profit rather than placate to your needs or desires.

INSIDER TIP - If you choose to buy something, buy what YOU want. If they have to get the vehicle from another dealer, so be it. Maybe the other dealer would be worth the drive for you. The dealer's floorplan expenses are not your concern, nor is their profit. Rebates still apply to dealer transfer vehicles. Expect to pay a bit more for a dealer transferred vehicle. This usually amounts to a few hundred dollars.

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STEP (4) - After choosing the vehicle, the salesperson should conduct a thorough feature presentation, otherwise known in the business as a walk-around. The proper demonstration of vehicle features should take 20-30 minutes dependent upon equipment. Sophisticated models can certainly take more time.

INSIDER TIP - This step in the process is certainly beneficial to you as a purchaser. Keep in mind, however, that because everything is done by design, the salesperson is continuing to attempt to build rapport and trust as well as building value in the product in order to justify asking you for more money. And while more features certainly increases MSRP, you can still negotiate, accordingly.

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STEP (5) - The demo drive as it is commonly known is again for your benefit. NEVER even remotely consider buying a vehicle without driving it - even a brand new one. All vehicles drive differently - even duplicates of the same year, equipment, and model.

INSIDER TIP - Resisting a drive also just brings pressure from the sales staff. Take a drive and make sure you even like the vehicle. If you don't like how it drives, everything else is mute. Also remember that driving gives you negotiating power.

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STEP (6) - The trade evaluation (if applicable) is a highly important part of the process that dealers, managers, and salespeople take very seriously because it directly impacts their profit.

You see, a vehicle with a clear title is the same as cash and otherwise known as trade equity. Sales staff seeth at the prospect of you having a free and clear title with little to no idea as to the value of your trade vehicle.

At some time during the process (usually during the demo drive) they will want to do a trade evaluation of your vehicle. This is completely proper, and I have instructed past trainees to obtain as much info about the trade as possible from you - which is also completely proper. Obviously, they are a buyer as well, so they are entitled to ask the same questions about buying your car.

You may then be asked to accompany the sales consultant to the vehicle, and he will conduct what is referred to as a silent appraisal. In this process, he will touch each and every imperfection from dings to cracked glass to scratches to light tire tread. The silent appraisal is designed to psychologically devalue the vehicle without offering any verbal communication acknowledging that they see the issues and you are fully aware and hoped that they would miss those issues.

INSIDER TIP: Keep in mind that your sales consultant has absolutely ZERO voice in determining the value of your trade vehicle. If she is a pro, you may believe otherwise. Trust me, their evaluation is for show and a manager will make a determination of the value. Again, they see this as equity/cash.

So, why is it considered cash?

As long as that vehicle is worth more than the current payoff with the existing lender or free and clear of any liens or encumbrances, they are elated and see dollar signs. What will ruin their day and yours, however, is if your payoff is higher than the actual cash value (ACV). Unfortunately, it is too often the case in today's automotive and truck sales market that negative equity usually persists on trade vehicles. This is mainly due to longer finance terms sought by consumers to lower payments, as well as the overwhelming propensity of most consumers to not remit substantial down payments which lower the overall amount financed.

Most important here is their attempt to hold back on your trade.

Pay CLOSE attention here as I will explain something that 99.9% of the purchasing public does not know about automotive sales methodology. This information is worth thousands of dollars to you if you read nothing else, whatsoever:

- Let's say you intend to trade a nice, clean Honda Civic worth $10,000, and you have a clear title in hand. A smart manager will have the salesperson attempt to convince you with their Jedi-mind-game during the negotiation that they will be allowing (trade allowance) $9000 for your trade. All the while, however, they actually value the trade on paper at $10,000.

I know, it sounds confusing, but, in essence, your trade vehicle is truly worth $10,000, but they are going to pay you $9000.

Thus, they just picked up another $1000 in gross profit just like that! The salesperson makes another $250.00 commission and the dealer adds another $1000 to the bottom line for the month at your expense.

STEP (7) - This is the step in the sales process whereby the sales manager wants to directly determine whether they have a bona fide buyer or not.

If the sales consultant did their job properly, please recall that they probably asked you: "Mr. Customer, on a scale of 1 - 5, how would you rate your credit?"

Then, they should have gone on to ask, "With whom was your last vehicle financed?"

Lastly, you were probably informed that, "Banks usually require 20% down on vehicle purchases. How much did you intend on investing in the purchase of your new vehicle?"

If you were asked this battery of questions - which were by design - the sales manager is directing his subordinate to  transition you to the purchase proposal. In doing so, this is the point where the typical salesperson tries to slide a credit application in front of you and nonchalantly asks you to complete it so they can "see if you qualify..."

INSIDER TIP: Before you EVER go into a dealership, you need to know what you qualify to do as a buyer. You should have researched your credit score, down payment capability, payment threshold (if you must finance), your debt to income ratio, etc. Don't leave it to the car dealer to determine your future. If you do, chances are great that you will pay the maximum profit possible in doing so.

Ironically, most dealers and salesmen will tell you that the people who pay the most are the happiest. No need to be unpleasant at all, but if you feel a little too peachy, back up and reevaluate.

STEP (8) - The purchase proposal step is where people are under the illusion that they are the most effective.

Folks, I cannot stress enough: car dealers negotiate every, single day. You don't... Please be prepared before you ever get to that stage of the game.

In a more professional dealership, it is usually the sales manager who is actually going to be presenting you with purchase figures. Many dealers have taken this out of the hands of most salespeople because the sales consultant does not know the margin of room to negotiate, age concerns, etc. Moreover, most salespeople that I have supervised are frankly not that capable when it comes to negotiating.

Notwithstanding, if the sales manager was sharp, he/she introduced themselves to you very early in the sales process by design knowing that he/she would be swooping in as the voice of reason and authority after the salesperson set you up to be closed.

INSIDER TIP: Chances are that the sales manager or general sales manager are the dealership's better or best closers - at least they believe so. If, in fact, they are, then you need to be prepared that no matter what objection that you provide, they are going to flip that objection back on you likely in the form of a question.

In other words, if they put a proposal in front of you and ask if you are agreeable to purchase the vehicle, you will either agree or not agree, right? If you do not agree on first pencil, you will probably be faced with an "if I could, would you..." scenario.

While some people love the thrill of the negotiation, I cannot stress enough that while I have seen a few customers 'win' (which is relative) nearly everyone who truly believed that they overwhelmed you and had you begging for the sale just paid a $3500.00 front-end profit before you ever made it to the F&I office.

The answer is to be researched and prepared to make a reasonable, fair offer that satisfies both you and the dealer without all the back and worth exercise. Also try to keep in mind (as I indicated previously) that coming into a dealership half-cocked never tends to work out positively for you. The dealer does have a right and obligation to make a fair profit, and you have the right to a fair deal. It is at its essence a compromise.

STEP (9) - Well, at this point in the game, either you have said yes or negotiated a yes or just said no. For purposes of discussion, let's assume you said "yes".

Continuing to stress our 'by design' theme in the sales process, the dealer is going to move you along and begin to prepare you for a visit to the finance office. At this point, it would pay great dividends to read or revisit our prior article, http://carbusinessinsider.blogspot.com/2015/11/beware-dealership-finance-office.html. This article will provide extremely intuitive insight as to the inner workings of a dealership finance office. This office is and can be a dealership's prime profit center.

INSIDER TIP: In short, I always suggest bringing a check to the dealership from your local credit union. Doing this alleviates you from what can be a costly decision or worse, a costly series of decisions that can realistically translate into thousands of dollars spent on your part.

Although it seems to be somewhat uncommon, I have always taught and instructed finance managers that before a customer ever reaches their office that they are to conduct a casual, non-intrusive interview with you. In this way, you are less guarded, more apt to answer new questions because you have already agreed to purchase, and more susceptible to cooperate. Thus, pay more profit.

Self-arranged pre-approval for financing (if you must) is by far the best money-saving option. This should be done when you have researched which vehicle you are most likely to purchase and usually before you ever put yourself into a position of having to even negotiate a car deal. It is best to have this done as a preemptive step.

Lastly, do keep in mind that one of the functions of the F&I manager is to complete your official paperwork to include registration with the DMV, titling, purchase order, affidavits, etc. Make sure you get a copy of EVERY, SINGLE document that you sign, initial, or otherwise! Legal actions against crooked car dealers are frequent - and for good reason. Record, document, and note everything that takes place to protect yourself.

STEP (10) - the good news is if you have done all the right things, you should be taking delivery of your new vehicle. Remember that buying a new car or truck is an emotional experience. We all can agree that getting a new vehicle can be a lot of fun, and most of us have fond memories of our vehicles.

The important thing is to just make sure that having that emotional experience does not negatively skew your better judgement. Vehicle purchases are definitely considered to be big ticket items. Therefore, we should not take those big ticket items lightly.

It is also imperative to realize that automobiles and trucks are depreciating assets . Certainly, the best vehicle that you can ever own is one that has a free and clear title as well as being mechanically sound. Take it from a person who has had some rather large car payments in his life: the best vehicle that you could possibly ever on is the one that is paid for!

END

Copyright 2017, Robert Liotti, The Car Business Insider. All Rights Reserved.

Why You Should NEVER Be A Payment Buyer

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Let's face it, most car buyers are worried about one thing: a payment.

I have sold hundreds and hundreds of cars in my career, and most of the prospective or actual buyers had one thing on their mind, and it involved the payment. It was almost a given. Clearly, it is no wonder why when we consider the fact that most people do not have the liquid cash to buy a vehicle outright.

Of course, it begs me to reflect upon the past, present, and ongoing advise of personal finance guru, Dave Ramsey, the developer of Financial Peace University, that no consumer should buy much of anything at all if he/she cannot pay cash - especially in the case of a depreciating asset like a car or truck. Dave has always been adamant that unless you can pay cash, then you simply cannot afford it. Moreover, when one considers the taste of today's consumer and the inflated present cost of vehicles, people's egos simply will not allow them to make a realistic decision.

In today's car market, it is certainly not unusual to see what appears to be about a $30,000 median price point on vehicles. Say that to yourself: $30,000.... Say it again: $30,000.... How many people do you know that have $30,000 of disposable income to spend on a vehicle? Do you? While some consumers have the ability to purchase big ticket items in cash, it is reality that the average American car buyer does not.

So, how is it that we see the local fast food restaurant manager driving a new $45,000 car equivalent to their base salary backed into a parking space out in left field parked away from all impending ding damage as we pass it each day on our way to work?

PAYMENT!

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Car dealers have many advantages over consumers, as we have attempted to diligently point out at The Car Business Insider. And, the one thing that every dealer preys upon (besides naivte) is the fact that you want a vehicle SO badly that you will absorb a payment that you cannot handle to satisfy your automotive ego. Sadly, this is where dealers really excel. They play upon your emotions with tricks in psychological projection causing you to envision yourself in a position that you are not, and you buy right in.

There are two ways to buy a vehicle and two ways only: cash or finance (including leases). Period.

For the astute dealer, they want everyone to finance. Why? As we discussed in my previous article, "BEWARE: The Dealership Finance Office", there is an individual laying in wait, ready to exploit every possible commissionable income stream on you! They practice every, single day and they are praying that every customer that walks in is a payment candidate.

So, you are asking why the dealership wants you to finance so badly?

Let's review: you open up multiple income streams for the dealer, including service contracts, points on interest reserve, GAP insurance proceeds, profits from protection packages, and so on.

Let me provide some examples:

EXAMPLE 1) Les has seen a car online and has pretty much decided that he wants the pre-owned sport sedan that is the color he likes and it has all the equipment that he needs. The car is also within his budget at $18,990. He has already had communication with a sales consultant and has an appointment to drive the vehicle. The sedan has been determined to be mechanically sound and all looks great. Now, Les just has to agree to a final price. They negotiate a figure of $17,695 with all fees and taxes included, and both the dealer and buyer are satisfied with a fair deal. Les has brought his checkbook and informed the sales manager that he will forego any further products and will stroke a check for the total. Deal done. Dealer made a $1570.00 front-end profit.

EXAMPLE 2) Michelle, on the other hand, does not have enough cash-on-hand for the SUV she saw online. She knows it is the right vehicle with respect to equipment and appearance, but only has $1500.00 cash-on-hand to remit as a down payment. For the sake of discussion, her prospective unit is also priced at $18,990. She, too, has made an appointment, but was asked to 'complete an online credit application' on the dealer's website so that the F&I manager could get a 'pre-approval ready' for her. She visits the dealership upon appointment, is satisfied with the soundness of the vehicle, and decides that this is the SUV she really wants.

So it begins...

Michelle has been 'approved', according to her sales consultant, who also informs her that 'the F&I manager called in some favors and got her done'. Not sure if Michelle has ever been to a Turkish prison, but she is about to be violated.

First, Michelle pays an identical profit of $1570.00 on the front end derived from the vehicle sale. Second, Michelle will pay a three-point interest rate reserve mark-up over the next (72) months amounting to another $3250.00 after all (72) payments have been remitted. Third, Mr. F&I has convinced Michelle that she definitely needs the wheel and tire protection and service contract deriving a combined $1500.00 profit between the two. Fourth, she sees real value in the GAP insurance only increasing her payment by $11 per month just in case she totals the vehicle during the life of the loan. Another $400.00 commissionable profit.

Do you see the stark contrast? Les paid a $1570.00 profit and Michelle paid $6720.00!

Chances are, Michelle is happy as a clam; she feels fully protected and got the payment she could afford at $385/mo. Oh, don't forget that she also handed the dealer $1500.00 cash.

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Good salespeople are trained to sell payments if at all possible for the stated aforementioned reasons. If they are effective, profits soar. In most cases these days, dealers have taken all negotiating authority away from salespeople and given it solely to a manager to maximize the possibility of profit - and that profit adds up quickly when you are willing to submit to a payment.

Let's take a look at our INSIDER TIPS to see how we can save ourselves from ourselves:

1) Pay cash for your vehicle!

If you can only save $9000.00 for a new vehicle, then some like Dave Ramsey would say that that is the price you can afford. I happen to agree.

2) Don't let your vehicle purchase be driven by ego!

We all love that new car smell, the new tires, the awesome dashboard, and the feeling of success, but how successful will you feel if you lose your current job already making a stretched payment that makes paying the rent five days late as it is?

3) Vehicle purchases can be financially ruinous!

It may seem repetitive to restate, but one irresponsible vehicle purchase can negatively affect your life for the next ten years. You may lose your residence, damage your credit, and be unable to provide utilities ALL because you over-estimated your buying power.

4) People view financing vehicles as a short-term proposition!

They aren't... The average finance term for a vehicle is likely 60 months - that is (5) years. That equals (60) payments. Think long and hard about your stability level before making that commitment.

5) If you must finance (which is again not advisable) visit your credit union or personal bank.

While they are in the business of making money loaning money, it is very likely that you will pay far less profit in a lender-direct financing arrangement.

6) The bigger the down payment, the better!

Again, if you must finance, the more money you put down on your purchase, the less the amount financed. This means less interest costs to you and a much quicker payoff to get that vehicle title in your hands. But, do this at the bank. Once dealers and salespeople know you have a substantial down payment, they see you as much easier prey and see commissions.

7) Keep financing arrangements aloof!

Simple. When asked by the sales consultant and then by the sales manager if you will be financing with the dealership, simply state that 'you have already arranged financing' and will be bringing certified funds upon delivery.

8) If you have to finance, only do it short term!

In today's job market, the average tenure of an employee is (24) months. As unfortunate as that may be, it is reality. You can lose your job and your income just like that. Unemployment offices are full of educated people who made great salaries and they can not longer support their lifestyle. Do not be that person because of a car. What is most common is finding out after the fact that you cannot afford the vehicle and will have to come up with $6000.00 out of your pocket to sell it due to negative equity.

Finally, remember that buying a car for the average consumer like yourself is trying in an of itself. Your prime objective is to negotiate the best price possible for the dealer's vehicle and the best selling price possible for your trade vehicle if applicable. A sales proposal should only be based upon a price or a difference price NOT a payment. The best advice (as always) is not to over-step your own expertise and stick to the basics. You will save yourself thousands of dollars in the process and a lot of unnecessary heartache.

Always remember what one of my business mentors, Bruce Williams, used to say ad nauseum in his renowned radio talk show:

'Don't ever love something that doesn't love you back...'



Copyright 2015. All Rights Reserved

BEWARE: The Dealership Finance Office

When I started in the car business some years ago, I very quickly came to realize that there was a sacred office in the dealership called the "F&I office" - the Finance and Insurance office.

Inside this office sat a person who rarely came out of the confines of what was often referred to as "the fishbowl". It was called "the fishbowl", because it was usually covered on at least three sides by large windows offering no privacy to its inhabitant. This captive confine was typically the backdrop for an individual who was often seen rifling through stacks of paper, pecking away endlessly at their computer keyboard, and randomly paging the unsuspecting sales consultant to his or her office to berate them about their failure to "clean up their deal."

Nearly every sales consultant that I ever knew while I was working in a subordinate position was scared to death to get on the bad side of the finance and insurance manager. This was the person who ultimately had control over that sales consultant's closed sale. It wasn't just enough to get the customer to say yes to buying a new vehicle, because that person ultimately had to qualify to purchase the vehicle and had to sign contracts before they left the dealership. Thus, the highly revered finance manager was usually the last person to speak to that customer before they left the premises and the last office in which that customer had to agree to the terms and conditions set forth in purchasing a new vehicle that you sold.

I have seen all types of finance managers through the years: males, females, all ethnicities, all shapes, all sizes, of numerous intelligence levels, and of many different personalities. And, I have watched more riff raff, more criminal activity, more fraud, more theft, and more legal violations transpire from this office over and above any other office in a car dealership. Unfortunately, they have the ability not only to rip off customers, but also to rip off other employees and the dealer. Much temptation rests in their hands, and all too often, they succumb to that temptation and others pay the price.

So, if you believe that your sales consultant and his/her sales manager are a challenge to deal with, think again. The finance and insurance manager has more capability to cost you more money than any other department in the dealership.

First, let's examine the finance and insurance position and its function at an automotive dealership:

1) F&I managers are usually specially trained for the job position.

Most banks and manufacturers offer ongoing training for F&I managers who contract deals through their lending institutions and are all too happy to make certain that that manager is as successful as possible. Not only does the dealership profit from your finance business, but also the bank with whom you were contracted; they are the beneficiary of your business. The F&I manager is simply acting as an agent on behalf of the lender and dealership to secure your business and contractual obligation.

2) Dealership F&I managers mainly deal with soft money as opposed to the sales department that deals with hard money. Soft money can be defined as profits made from loan contracting, service contracts, aftermarket treatments, gap insurance, and certain protection policies. The reason that this money is referred to as "soft" is because customers can affect the return by cancelling certain products and policies or satisfying a contractual agreement early which can result in a charge- back to the dealer. Profits made in the F&I office are also known as back-end products, while profit made through the sale of a vehicle and a trade in are considered front-end profit.

Front-end profits are less variable in nature than back-end profits as they are fixed based upon the profit margin you paid over-and-above the actual cost of the vehicle purchased plus or minus any equity or lack thereof in your trade.

3) F&I managers are usually individuals who have been promoted from the position of sales consultant and who are aspiring to ultimately be a sales manager. On the hierarchy chart, F&I managers are sometimes supervised by an F&I Director and ultimately by the sales manager.

4) Responsibilities of the F&I manager include but are not limited to: placing consumer loans with applicable lending institutions, submitting consumer loan criteria for approval to lending institutions (to include prime and sub prime lenders), selling insurance products, selling vehicle service contracts, selling wheel and tire protection packages, selling vehicle interior and exterior protection packages, and other available backend products commensurate with the individual dealership or dealership group's product offerings.

5) F&I managers are usually paid a percentage of the profit that they create through the sales of back-end products and can also be paid a graduating higher percentage based upon their penetration percentage. Their penetration percentage is simply based upon the percentage of back-end products sold in totality divided by the total number of sales contracted.

If you are a consumer who intends to pay cash or bring a check to the dealer from your credit union, this is the situation that the F&I manager dislikes most. When this situation occurs, it is his/her job to convert you to financing with them and one of their banks. It also gives them a much better opportunity to sell you back-end products when they can easily package all the products together for one easy payment.

6) A good F&I manager in a high volume dealership can make $150,000+ per year with no formal education.

7) Dealer benchmarks for F&I managers are typically $1500-2000 per copy (per vehicle sold). So, if an F&I manager contracts 100 car deals and hits the benchmark of $2000 per copy, he/she may be paid 12% of the gross profit, not including any spiffs of products, and make about $22,000 that month.

I have personally known F&I managers who were making $15,000 - $20,000 per month! Someone funds that lifestyle, and it is you.

Oh, I know! You had NO idea that these people made that kind of money, right? Yes, and even the not so great ones make far more money than they should just due to the circumstances surrounding them.

Now that you know a bit more about what these people do, how they are paid, and what they make, it probably makes it a little easier to figure out that they are there to take your money. So, I am going to give you some very sound advice on how to avoid paying one penny more than necessary.

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INSIDER TIPS:

1)  Never finance your vehicle purchase with the dealership.

When I was sitting in a finance office contracting customers, a wonderful interest rate for a prime customer was about 5 3/4%. In today's marketplace, a prime interest rate can be as low as 1 1/2% with your local credit union or banking institution.

As I described, when you agree to finance your automobile or truck directly with the dealership, you are opening up a Pandora's Box for yourself.

The F&I manager has a distinct advantage over you; they know what their buy-rate is for a conventional auto loan and you don't. The buy-rate is the rate that the lender gives the dealer to contact you. The dealer is entitled to hold points i.e. the buy rate with your credit rating is 2.50% and the dealer contracts you at 5.25% holding 2.75% (or points). Furthermore, they know their cost as it relates to backend products, and you don't.

Lastly, as we discussed, it is very easy for them to convince you to package all of your products right in with your automobile purchase for one easy payment. It is highly likely that you will be the loser in this situation. You are simply not set up to win.

2) You will be asked early on in your purchase process how you plan to pay for your new vehicle. Do yourself a huge favor, and tell them that you plan to arrange third-party financing. This may be cash from your personal account or financing arranged with your local credit union. In either case, I cannot stress enough how important it is to save yourself the possibility of aggravation and losing a considerable amount of money dealing with the dealership finance department. These folks can get very good at reciting their canned presentation and some can be very convincing.

3) Manufacturers come up with many slick schemes to convince you to finance with your dealer.

For example, if you are buying a Ford vehicle, you will have the option to finance with Ford Credit. While I can tell you that Ford Credit definitely does not offer the best interest rates, they and other manufacturers will sometimes offer special interest rates such as 0% financing. This special (or subvened) rate sounds attractive, but I suggest passing 99% of the time.

First, while 0% sounds attractive, you typically give up all rebates and customer cash that might otherwise be available to you if purchasing a new vehicle (which I don't particularly suggest anyway). Customer cash and rebates reduces the overall cost of the vehicle providing for a lesser balance financed, and while I could help you to maximize a transaction using special techniques with subvened rates, it is just advisable to avoid the trap altogether.

Second, while the F&I manager loves to hold points on a loan, the manufacturer (captive lender) will usually pay the dealer a flat amount to write the contract using the special rate. If he/she is smart, they are trying to "package" a deal to sell you their products and use the flat to arrive at their commissionable gross profit on the back-end. Remember, that's how they are paid.

4) F&I managers (also sometimes referred to as Business Managers) use what are known as menu presentations in order to sell you products and payments.

Menu presentations can come in the form of a simple 11" X 14" paper form, a computer generated digital menu that is presented on a computer monitor, or can be as technically savvy as a touch screen pad. In any case, the presentation is all the same; it is designed to present you with payment options that package products and interest rate into a payment. In addition, to make it more palatable, the options are often categorized into classes such as: platinum, gold, silver, and bronze.

It doesn't matter how you dress it up, folks. The F&I manager is seeking to get you to submit to his best option to make him money. Even if you don't fall for the illustrious "platinum" package, he will still assuredly make money!

_____________________________________________________________


Best Decision:

As I believe is pretty clear, your best bet as an informed consumer to win this important part of the battle with the dealership is to simply avoid the confrontation altogether. As I often say when advising consumers, as good as you think you are, and as sharp as you may be, you will not easily win. Avoid it...

Do keep in mind, however, that you will have to visit the finance office irrespective of whether you provide your own funds for your transaction. And, that's okay. The business manager is responsible for making sure you sign all documents relative to your purchase and for verifying titling and registration information.

I would also plan on hearing his/her presentation on aftermarket products, special rates, protection packages, and financing. They are only doing their job, and it is harmless to politely listen to their presentation. However, you are going to politely decline their offerings until you are well-versed in the value, reasonable pricing, and validity of additional products that we will address in another article.

Copyright 2015. All Rights Reserved.

The Beginner's Guide to Negotiating a Car Deal

 

 

https://twitter.com/car_insider

 

 

I feel like I might be going somewhat in a reverse order, but more people than you can imagine are constantly asking, "how do I negotiate the best car deal?" In other words, there are steps to a purchase that are very important i.e. online self-evaluation, initial fact-finding, online research, tentative product selection, dealer selection, feature demonstration, trade evaluation, and a demonstration drive to name a few.

So, due to popular demand, we can fast-forward a bit right to a beginner's guide of car deal negotiation to help save you from impending self-destruction!

Remember, car dealers are set up to win. They conduct automotive sales transactions on a daily basis; their whole business life depends upon it. To them, you are very much an amateur when it comes to negotiation of a car deal, as you probably buy or lease a vehicle every 3-6 years with a 5-6 year trade-cycle being the rolling average in today's marketplace. Sales consultants and managers often undergo light to intensive sales procedure education - dependent upon the dealer's dedication to training - that may occur daily, weekly, or monthly. Managers typically hold weekly if not daily sales meetings, and good managers will constantly reiterate sales principles with their staff to ensure maximum return and performance. Effective car business managers know that keeping their staff sharp and on point increases their chances of selling you an automobile, truck, or SUV.

It is extremely important that you first realize that you are an amateur at this, as much as it may dent your pride. No, most sales consultants and managers simply aren't that sharp, and the consumer knows that they are being fed a line of bull. However, there are sales consultants and managers who use a number of effective techniques to actually form your reaction and are expecting how to take you right to the next step in their process. They are smooth, and they are seasoned. So, do yourself a great service and leave your ego at the door while embracing how to learn the basic steps to making a "good" deal, and keep in mind that a "good" deal is most certainly subject to being relative.

Once you have erased all of your pre-conceived notions about your own ability to negotiate a car deal, here are a few basic steps that will put the ball at least past the opposing 50-yard line and in your favor:

1) Before you ever step foot in a car dealership to consider a purchase, narrow your vehicle search down to 2-3 vehicles at the most. Ideally, you have narrowed it down to one specific model. How it is equipped is another matter, but the more ambiguous you are about your number of choices, the more likely you are to pay a bigger profit to a dealer.

INSIDER TIP: Dealers know their inventory, their vehicle costs, their age of inventory that needs to move, special factory incentives available to the dealer, amount of existing carrying charges, profit margins, supply and demand issues, invoice cost, marketability of your trade vehicle, and calendar-based manufacturer issues. You know about none of these, and even if you had the information (which you will not) you wouldn't be able to effectively determine it's relevance to your purchase.

By you not having specific focus, a slick sales consultant can change your entire direction through persuasive sales psychology and lead you in a direction that is most beneficial for him/her and the dealer. There may be special sales spiffs specifically attached to certain vehicles with which only the staff is familiar. There may be a sales contest running at the dealership. There may be a model that the dealer overstocked that are running up their carrying charges. There are any number of factors with which you are unaware that will ultimately lead you in an undesirable direction, and you will never know it happened.

Being more decisive and maintaining a more narrow focus will start to level the field in your favor and leave less room to be misled by an unscrupulous dealer staff who are out to fulfill their own needs and not the needs of the consumer.

2) Understand that you are being engaged in a process.

You may not know it or feel anything special, but informed dealers have captured you and are engaging you in the "Pied Piper Process", as I like to call it. Smooth salespeople are very calculated at enticing you into their sandbox and setting all the parameters to control your thought processes. This is what these folks do for a living, and many of them are good at it. They will ask pointed, canned questions designed to give them all the information necessary to load their guns and empty your pockets. So you have to set a pace and the parameters of the negotiation that are more in your favor.

INSIDER TIP: Before you ever take a serious physical look at a vehicle or take a demonstration drive, schedule a meeting with a sales consultant. This is a meeting and a meeting only. This meeting is designed to set the process up on your terms and at your own desired pace, and the only way you can achieve an advantage for yourself is to disrupt the sales consultant's rhythm. Do keep in mind, though, that these folks are used to disruptions and will move quickly (and sometimes effortlessly) to pull you back in. Most aren't that talented, but always assume that you are dealing with a pro.

Sales consultants are taught that if they get you into a vehicle for a "test drive" that you are 50% more likely to purchase. So, when you come in strictly for a consultation, the sales manager is telling the sales consultant to "take them for a drive", "get them to drive the car", "they won't buy it if they don't drive it", etc. This is why I am encouraging you to simply go to the dealership and have a sit-down conversation with a sales consultant to discuss a potential purchase. Your simple, but polite refusal to drive that day initiates a psychological advantage over the dealership from the outset. Yes, they are going to say that, "you wouldn't buy a pair of shoes without trying them on would you?" Stay focused.

You initial meeting is set forth to discuss the product that you are seeking and the features that you need/desire. In fairness, they know the vehicles better than you (or should) and you should give them an opportunity to show you options. Keep your discussion professional and at a desk and be honest about features you need. Get to know your prospective sales consultant a bit, and have him/her show you the facility and keep it light. This is not the time to answer questions about financing, aftermarket products, "money down", credit scores, trade values, etc. Believe me, they will ask. Just politely say that you are undecided and going about "information gathering" at this point.

3) The next step in the process of negotiation is to get organized. Now that you have started a relationship and started to gain control, realize that knowledge is power. Just keep in mind not to get over-confident as these basic tools are not an advanced skill set.

Part of your organization process is to begin your online research and to put your feelers out for bargains and a second opinion. If looking at a used vehicle, it is always advisable to have a look at Autotrader and eBay to view private party listing. I personally prefer this type of purchase any day of the week as the owner typically knows all the history, keeps records, and can provide pertinent information. Obviously, you need to have your financing in place for a private party sale as well, but having your own financing in place for a dealer transaction is also highly preferable and can/will save you literally thousands of dollars.

I also always suggest looking at a 2+-year-old vehicle, as you really do save thousands of dollars and still have the ability to purchase factory quality warranty coverage protection. New vehicles just depreciate very quickly and tend to not stabilize until about the 30-month mark.

INSIDER TIP: I don't want to convolute the equation at this point, as financing is an advanced aspect of the purchase process. Dealers can make huge profits from you financing with them. At this juncture, I would simply suggest talking with your credit union or personal bank to arrange pre-approval for financing. We will save financing for a more advanced article.

4) Once you have got a feel for the market and what is available within your geographic area, decide whether purchasing privately or from the dealership is a better option. Remember that no two cars are alike - even new ones. It is very important to set yourself up for a demonstration drive and mechanical evaluation at this point in the process.

If you are negotiating with a dealership, be sure to request a copy of the vehicle inspection checklist and repair order. The reason you request both is because a checklist is a "mandatory" list for the mechanic to check as set forth by individual dealer protocol. However, that does NOT mean that an issue was repaired once noted on the vehicle inspection checklist. An actual repair order (R.O.) would be in the record as it will show parts applied to the repair and labor times. This indicates that an actual repair was done.

The best way to ensure mechanical reliability is to have an independent technician do a pre-purchase evaluation of the potential vehicle at your expense.

INSIDER TIP: Dealers are often quick to say, "no problem, take it to your mechanic for an inspection." The reality for most dealers is that they are not excited for you to do that. They see it is a loss of control. Good.

Some dealers do a very good job of doing a total inspection, maintaining a thorough inspection record, and even posting the repair order on their website along with the vehicle info and pictures, but honestly this is rare. What is typical is "get the car through the shop" with as little expense as possible so they can turn a bigger margin. You usually have a used car manager whining about "the shop is trying to go up in me" rather than properly reconditioning the vehicle to save money. Sure, four new tires cost $480 to replace, but it makes the car safe and consumers should notice bald tires making the dealer appear lackluster.

This portion of the negotiation will certainly gain you more control in the process, and you are leaving little room at all for the dealer to wiggle.

At this point in the game, you have made clear what features you are seeking, verified what product is available in your area, compared prices both privately and at dealerships, spoken to your financial institution about financing, and have narrowed your available choices - and all on your terms!

Great job!

5) The last item on the basic negotiation list is to make an actual offer on the vehicle of your choice. I'm not going to delve into the advanced techniques of an actual negotiation at this time in order to keep with our basics premise. Honestly, you can get yourself in a heap of trouble trying to work outside of your capabilities as I previously described.

By consulting with online pricing guides like Kelley Blue Book, Edmunds, and NADA, you should have a basic idea of fair pricing. I might also suggest that since you spoke to your local credit union, it is advisable to ask them for a fair assessment of what you should expect to pay for the vehicle you are seeking. Naturally, many factors contribute to a price, but you should definitely be in the ball park.

INSIDER TIP: Timing has everything to do with a "good deal".

Don't get in a huge hurry to buy, but also remember time can be of the essence. I know, it seem like a conflicting statement, but finding what you want at the right price with the right features from the right person at the right value means that it's ok to pull the trigger and buy. By the same token, factors such as being the end of the month for a dealer, an item that has sat for 30+ days in inventory, or an obscure color that you like but is not hugely popular are all factors that affect price and a dealer's willingness to cut profits to "move a unit". Don't be the person who believes that it takes 6 months or longer to buy a vehicle. At that point, you are over-analyzing the process and your strategy likely backfires.

If you follow this basic, bare bones program of negotiation, you have more than likely done much better than you would have done otherwise in saving some money towards the purchase of your new vehicle. This short program is designed to put the ball in your court and take some control away from the dealer by strongly reducing your exposure more than anything else.

A very good friend of mine and a great sales consultant says to me regularly that, "the person who speaks first loses..." He is right.

By reducing your exposure of being exploited by a lack of knowledge and experience in negotiation of car deals shuts the door on being led or unduly influenced in a way that causes you to lose. So, the less you say and do, the better for you and your wallet.

Copyright 2015. All Rights Reserved.

Why The 'Best Dealership Awards' Are Phony

 

 

Well, this story definitely hits close to home... In fact, it hits so close to home that I actually participated real time in exposing an apparently corrupted system of honoring some dealers as "Best Dealerships To Work For 2015".

Let me set the stage for you as this occurred somewhat by happenstance.

In early 2015, I had recently left a position as a General Sales Manager at a domestic dealership about an hour away from home. I commuted each day and had the pleasure of picking up my Sales Team Leader everyday on the way and discussing the day's plan. But like so many other dealers prompting me to publish this definitive blog, the dealership was wrought with integrity issues that I was trying to root out. Unfortunately, the dealer (with whom I had a very clear initial understanding of my refusal to engage in any illicit activity in the interest of operating his dealership) decided that the "old way" of doing business was the method of choice for him and his cronies. Needless to say, the relationship did not last long, and that may be the subject of another informative article.

After my fortunate separation with my former employer, I ran into a former employee of mine at a local luxury car dealership in my picturesque hometown. It is also a big car town for dealers with respect to dealers per capita. All the "car guys" know each other or know of each other, and you seemingly cannot sneeze without the news making its way through all the city's dealerships within 24 hours. I never liked that aspect of the business, whatsoever, and did all I could to avoid it. But, I digress.

So, I find myself in a lull looking for yet another position on the Car Business Merry-Go-Round, when I happen to run into my friend who is working as a sales consultant a local luxury dealership. He's a great guy and is actually a trustworthy, ethical person to whom I would refer most customers. During our conversation, I enquired as to whether any positions might be open at the newly renovated dealership complex. He explained that he believed that there may be a position available in fixed operations and that he would check for some information and get back to me. He did just that.

Within a few days of communicating, I was advised that the dealership was seeking out a service advisor for the luxury dealership. After spending eight years of my career with Lincoln Mercury, I was a sure fit for the clientele, and I was certain that I probably knew some of the customers. And while this subordinate position was many levels beneath my last position on the hierarchy depth-chart, my first job in the business was as a service advisor at a Nissan dealership. It was well-within my skill set, and I am not above taking the position. By the way, it is important to note that the car business is pretty unique in that you will see a guy working as an executive general manager overseeing four brand plates one month, and three months later, he is a salesman at some independent buy here/pay here operation. Not a positive for the business to say the least.

I soon began communicating with the Parts and Service Director at the dealership regarding a position. Numerous emails, some phone messages, and a few personal visits finally got me in front of my potentially new supervisor and seated with a formal job application and resume submission. This gentleman was apparently a former employee of the group and was brought back to the newly renovated facility in a capacity that he was not really qualified to fill. Again, it is noteworthy to mention that another unique characteristic of the car business is that you will see an employee terminated sometimes for a serious breach, but they somehow manage to weasel their way back into that same dealership a year or two later like they had gone through some miraculous change in character. Yet, another aspect of the business that never ceases to amaze me.

After weaving through the protocol of resume, application, driving record, drug screen, interviews, and cake recipes (like I was going to work at the Pentagon) I finally received an offer to discuss terms of employment. While the terms were certainly not ideal at all, given the lowest compensation percentage I was ever offered, I took the high road thinking I would quickly prove myself and move up the ladder expeditiously. I mean, someone had to subsidize the dealer principle's lavish tastes of custom tailored suits, a yacht, aircraft, a few limousines, and the obvious driver. And, he LOVES to read about himself in the paper.

One with my experience and tenure in the business should also be compelled to mention that the normal carrots of "advancement" and "more money" and blah, blah, blah were reeled surreptitiously before my face to induce my acceptance of a rather pathetic and inequitable pay plan. But, the good news was that it was an honor for me to be accepted into the organization and that it was a privilege to work there. Hey, they had a gym and a couple tables with real umbrellas out back, too! LOL!

I promise you that this story will start moving much more quickly at this point, but I think it is important to give you the background and tone.

So, I receive my start date and prepare myself to begin my new fulltime position as a service advisor.

As is the case in nearly every dealership with whom I have been employed, this dealership was not only filled with the usual drama that you find in all dealerships (and in fairness most businesses) but this place had a much elevated dramatic climate. In fact, within about a week's time, due to the fact that most people had found out about my background, I was being inundated with complaints from many co-workers who were confiding in me their dissatisfaction with management and ownership.

Naturally, I have listened to many of these types of complaints in the past while coaching and counseling employees, but I don't think I have ever heard this many negative complaints about a dealer group who purports to be a "Best Dealership to Work For". That is when my ears perked up, and I began to see a real conflict between employee satisfaction and a supposed "award winning" dealership.

Fast-forward a month-and-a-half or so.

I am not only still hearing complaints, but I am hearing more of them. Furthermore, I am seeing turnover ensue and threats of resignation from both fixed and variable operations employees. My co-workers look pressured, in a state of unrest, frazzled in many cases, and sometimes just miserable. But, how could this be? There is a gym upstairs! It's a beautiful facility!

Lesson 1 - a pretty working environment doesn't necessarily make for happy employees.

Before you know it after about 45 days, I am called on the carpet about a matter with which I am unaware. As I alluded to, I agreed to certain things when I accepted the position and was promised certain things. Welcome to the car business where seemingly all promises are a delusion of granduer not to be beholden by the intelligent.

You got it! Next thing you know, I am already being asked to "step up to the pump" and asked to report for duty to our non-luxury domestic line dealership in the complex the next morning as they had yet another incident of turnover. Nope, this is not what I agreed to! In fact, I had just become acclimated to the luxury line protocol, warranties, policies, etc. and, frankly, I was by far the most experienced employee in the department, as well as the most ideally suited for the clientele in my professional judgment. And, don't get me wrong, I liked my coworkers, but facts are facts.

For me, personally, this is when things started to fall apart, but now I was in a logistical environment where I could physically see why and where all the negativity, turnover, drama, and turmoil stemmed.

As in most cases, the problems started from and persisted from the top. Remember, Trickle Up Stupidity. In this case, it was very simple to find the root cause. This was a company who loved titles! Director of this. Vice President of that. Oh yeah, really big on these ego-boosting meaningless vanity titles, but it says a lot about substance or lack thereof of those who thrive upon titles rather than actual performance.

So, I began to examine the guy at the top - at least within our complex. He was a guy who worked as a sales consultant within the dealer group and was not very successful. He is a fairly young guy who simply lacks people skills. He is not a person with a positive aura and not the motivator that you would expect to hold a VP of Operations title. In fact, he was quite rude to employees (including myself) on a number of occasions during my short four month stay. I was not impressed, nor were any of my co-workers apparently.

Wow, I can see that you are pretty perceptive. You noticed right way that this guy was a sales consultant and then all of a sudden a VP of Operations? Is that right? Yes, you are correct. The dealer principle supposedly took a liking to this young man and decided to fund some graduate scholastic work while promising this wonderful VP position upon completion.

Now, one may say, "hey, that was a nice thing for the dealer to do." And, yes, I would agree I suppose. Notwithstanding, however, this young man is in no way, whatsoever, prepared nor qualified to undertake the supervisory nature of overseeing two car dealerships. That is most certain. But, here is yet another amazing aspect of the car business: whether a result of nepotism, favoritism, or sheer ignorance, I have seen umpteen dealers take someone with zero experience or qualifications in the business and baptize them with a position and the responsibility to which I allude. It is disastrous every time.

So, there is the guy at the top, but don't forget that he answers to bosses as well. Of course he does as he meets almost on a nightly basis at a ridiculously priced restaurant downtown where the dealer principle regularly holds court with puckered lips reaching for his backside trying to posture and keep their jobs.

Lesson 2 - The car business is overwrought with ridiculous egos maintained by guys who some way, some how fell into making money in the business, but who typically surround themselves with the usual ass-kissing sycophants.

As you can deduce, these management types are going to do the expected and surround themselves with other managers who are not a threat to their job security and who fall in line as corporate soldiers goose-stepping to the Kool-aid line. I would also point out that this current VP of Operations is just one more guy to become a former employee like so many before him. By all means, take a guy who was not even a good salesman and let him oversee two dealerships. What are these people thinking?

Well, as time moves forward, I honestly start to get tired. I am up at 6:15 am every day, in the service lane at 7:30 am, rarely if ever take a lunch, and leave at about 6:10 pm for home. Now, I have worked 12-hour days, but this position brings with it constant stimulation. So, at the end of my day, I am exhausted and in bed by 7:30 pm. To me, that is really no way to live, and the fact that I am that exhausted given my physical prowess is troubling. I work to live, not live to work.

What is wrong with this picture is that I agreed to a 5-day work week! "Stepping up to the pump" meant that I (and my coworkers) were subjected to 11-day bi-weekly work schedules. In other words, we had a weekend one week and only Sunday the next.

Folks, as an automotive expert, I can tell you in no uncertain terms that this type of schedule is ruinous to productivity and morale. What's worse is that upon mentioning it to my supervisor, he acted like I had a horn growing out of my forehead. In other words, he lied about the schedule.

Now, I am about three months into this position. I am producing good numbers, and I do like my co-workers - which is the sad part of leaving. They respect me for my knowledge, but I am getting very testy about scheduling issues, watching technicians drop like flies, lack of training, co-workers who are clearly having to medicate themselves to make it through work, poor and demanding attitudes from uncaring supervisors, and no care or concern for this scheduling issue to which all of these poor folks are falling victim. To make matters worse, I just don't have the personality that allows me to deal with incompetence for too long.

What I am wondering is how in the world is this group allegedly voted a "Best Place To Work" when (according to other employees) everything within my professional judgment tells me that this is one of the worst places I have seen to work?

Now, I remember!

Almost right after I began my employment with the company, I had an Employee Satisfaction Index Survey (ESI Survey) shoved in front of me with my supervisor advising me that I "needed to fill this out" and that "everything needs to be answered completely satisfied" or "I would be fired..." I heard similar warnings articulated to a couple of other co-workers making it very clear that this survey was fixed. At the time, I was not advised as to the impending or intended use of the results, and I was simply busy with other issues within the dealership.

In hindsight, while I had taken these surveys before, they were always issued for internal and corporate group results. In this case, the results were apparently very important to the dealer as he was vying to be named a "Best Dealership To Work For" which is then published in the national trade publication, Auto News. Thus, it became obvious why my department head was so emphatic about having skewed positive results returned by subordinate employees. Obviously, his supervisor in charge of fixed operations and his supervisor, the VP of Operations and so forth, were all insisting upon positive results no doubt for the self-aggrandizing dealer. Sickening...

Very recently, some three months removed from my resignation from the organization, I happen to see a proud sponsored posting on Facebook touting a local dealer who had been awarded this illustrious title. And the truth is that this type of title can actually be very valuable from a marketing and advertising standpoint, but also from a talent acquisition standpoint. A winning dealer can fly this flag of being a "Best of" while reaping the financial return that hopefully comes along with the award.

But, is this type of coerced ESI survey fair to another dealer who insists upon doing things quite the ethical way, assuming that those dealer exist? Obviously not.

Upon hearing about this "award", I began a bit of research and contacted the organization who provides the surveys, evaluates the results, and bestows the titles. Needless to say, I showed a great deal of concern about the results of these surveys and advised this company that I had directly participated in the ESI survey process at my former place of employment. Furthermore, I advised their representative that I and other employees were coerced to answer the questions in a positive manner for fear of retaliation at work.

The results of my complaint are these:

1) Companies pay entry fees of a few hundred dollars to be evaluated for these titles.

2) According to the representative, they take allegations of "cheating" very seriously and will disqualify an applicant if necessary.

3) My particular dealership was NOT one of the "rooftops" awarded. (*** The dealership is under a group umbrella and supposedly EACH franchise must be entered separately for consideration of these awards. However, the company named to the awards would indicate the entire organization.)

4) I was advised by this company that due to "privacy" concerns they could only communicate so much information, but acknowledged that they could not confirm, but would not deny that "a company" could be disqualified in the process, but they could not divulge it.

Hmmmm.....

My take on these type of awards is that the results may be well-intended, but like anything political or any contest requiring money be exchanged, there is a likelihood that results are not completely indicative of actual performance.

The company with whom I spoke were cooperative in their communications, especially when I indicated that the story may be communicated in an upcoming article. I don't blame them.

My analysis, while partly opinion, is that this company attempts to the best of their ability to categorize and rank these "Best of" car dealerships. Yes, they do require fees, but in fairness, they are providing a service and have to process results which is an expense. More importantly, it is definitely possible that companies can coerce employees to answer cooperatively in order that results be positive for their company. Obviously, that is unethical and more commonly known as cheating.

In my case, I was asked to complete my survey positively while having passive-aggressive threats of termination hurled at me. I also witnessed my fellow employees enduring the same threats. Given the climate at the dealership, I am not surprised. But, this is indicative of yet more ethical concerns we should have about car dealerships.

So, the next time you hear about your local "award winning" dealer, just be aware that the "award" may or may not be deserved.

Copyright 2015, All Rights Reserved.

The Trade-in - Why You Lose and How To Win

 

 

 

 

 

One aspect of an automobile purchase that is omnipresent the vast majority of the time is the "trade-in" vehicle. The problem is that with the illusive "trade-in allowance", you usually lose the battle, and here's why.

I have bought hundreds upon hundreds of automobiles and trucks from many different sources: auctions, private individuals, wholesale dealers, rental car companies, and through trade vehicles presented at time of purchase. Whereas, the typical American car consumer buys one new or pre-owned vehicle about once every 5-6 years.

I have alluded in the past to the fact that while some of you may be smooth operators and decent negotiators to include automobile purchases (as far as you know) believe me when I tell you that you are in no way, shape, form, or regard going to win the trade-in battle a very high percentage of the time. The reason is because you lack the experience, expertise, and tools with which to arm yourself in order to be effective against a seasoned dealer and buyer. Dealers are armed with integral tools, such as: auction software, wholesale buyers a phone call away, lists of customers looking for specific makes and models, appraisers who can spot prior damage and mechanical issues, Carfax reports, and the resources to negotiate with you. This list can be a definite advantage and intimidating.Like anything else, however, if you are armed with the "insider" information, you stand to make a much more fiscally responsible deal for yourself.

So, I am going to give you some tools and advice that is worth thousands of dollars just for taking the time to read this article!

Allow me to bullet point some very useful tools and fact for your war chest as it makes it much easier to digest:

1) Accept the premise that your trade is worth far more to you than a dealer. Most people have an emotional affinity for their trade vehicle, and that affection can cost you money! Cars and trucks are metal - nothing more - and they are a depreciating asset, which means that they are worth less money tomorrow than they are worth today. Dealers have a nearly endless supply of vehicles at their disposal, so you have to make yours stand out.

2) Trading a vehicle is a business transaction part and parcel separate to purchasing your new car or truck from a dealer. Treat it as such. Car deals become convoluted when you treat the sale of your vehicle as a one-in-the-same purchase of their vehicle, and that is when you begin to lose money.

You are selling your vehicle, and the dealer is the prospective purchaser. Handle this transaction first!

Believe me, the dealer will want to lump both transactions together in a nice little "convenient" package. The manager is going to make it "much easier" for you. Buyer beware! Two transactions and two separate agreements will ensure that you optimize your money.

3) Like any other "dealer", prepare for your vehicle sale in order to maximize your return. Vehicles do not sell for two reasons and two reasons only: price and reconditioning. In the case of selling your vehicle to a dealer, it is highly important to come in with a clean vehicle - not only a clean vehicle, but one that smells pleasant as well. Nothing will devalue a vehicle more than a bad smell. Furthermore, service records pertaining to your vehicle make you money, as do safe tires, operator's manual, an operational inflated spare tire, and a clean engine with clean oil and air filter. In other words, you have become the dealer here, and you are peddling your wares just as the car dealer. It is important to build value in your vehicle for its good merits. This maximizes your profit from your sale.

4) It is important to realize that the market dictates much about your trade-in vehicle. As a used vehicle buyer, I have always classified my inventory into discernable groups. In my case, I classified vehicles simply as A, B, C, and D units. These classifications are based upon a vehicle's retailability, propensity to age in inventory, and condition. As you can readily imagine, the A and B units are going to drive the highest purchase price and return by default.

Let me provide an example: let's say that one of your family members became elderly and had no use for their 2007 BMW 535 because their sight was not keen enough to drive anymore. They leave the car in the garage, it's a desirable color called Alpine White, all equipment works perfectly, all inspections have been performed, and it has incredibly low mileage right at 18,000 miles.

How would you classify this unit?

If you answered, "A", you would be correct! It is in pristine condition, even though it is almost nine model years old, the mileage is fantastic, and it has been garage-kept. Doesn't get much better than that!

For the dealer, he/she sees a unique, one-of-a-kind piece that will turn (sell) quickly and will not likely accrue any carrying fees of note, as well as being a vehicle that is very desirable to their client base. In fact, while the buyer is walking around your vehicle, it is very likely, if not probable, that all of the sales consultants are seething at the mouth and starting to call customers looking for just such a prized unit.

5) Reality check! Speaking of classifications, there are a lot of "C" vehicles on the road, and you may own one. Hey, that's ok! "C" cars are typically what all of the police departments, rental car companies, and transportation services utilize. That means you own a vehicle high on the dependability scale, but the downside is that the supply of these vehicles are through the roof. Thus, a clean "C" vehicle with average miles and no damage brings very average money.

In other words, you (as a consumer and seller) need to be realistic when it comes to your monetary expectations regarding the marketability of the car you are selling. This has everything to do with what will drive your "trade allowance", aside from all of the other aforementioned variables.

6) Try a private party sale first, folks!

If you are going to become "the dealer", even if just for a short time, doesn't it make sense to maximize your return and reduce your overall expenditure?

Autotrader is a wonderful source that will bring a serious buyer, and I recommend it strongly. Facebook and Craigslist are also viable tools. And don't forget a nice "For Sale" sign in a strategic and legal parking spot can bring a ton of activity. Another great option before you say 'oh, that's a pain', is to consider paying a competent friend or relative a selling fee to handle most of the transaction for you. It's worth the effort and eliminates the whole process of you trying to outwit a car dealer who has their sights set on getting your car for the least amount of money while selling their to you for the most amount of money.

7) Speaking of the third-party automotive sites, a little time spent in front of your computer can also translate into making additional hundreds and possibly thousands of dollars selling your vehicle.
Doing your due diligence of research is integral to a positive outcome in this whole process.

First, look for your make and year vehicle out there within a reasonable geographic area. Try using a 100-mile radius and look for the comparable model with comparable miles and equipment. It's kind of like shopping for real estate when you hear a home appraiser mention "comps". In our case, you are seeking out comps to justify what you will settle upon as far as price. You are looking to see what the market dictates on your unit.

Remember, price is a tricky thing.

Having that innate, emotional attachment to that vehicle can skew your pricing judgment. Buyers typically first react to price. Naturally, you know how well your car runs and how good it smells and its history, but buyers - even you - tend to look first at price. Use good judgment. If you find out that your car is a "C" car and there are three full pages of comps pretty much just like yours, you had better excite someone with a very competitive price to garner activity. If not, that car will continue to sit. No lookers, no drivers, no sale.

Conversely, if you legitimately have a one-of-a-kind piece and can justify the value, it is completely fair to ask for a premium price. Keep in mind, dealers are buying and selling the same way, but on a more industrial scale.

Also have a look at Kelley Blue Book for pricing guidelines as it can be of great help and it is an objective third-party source that people generally trust and respect. While not perfect, it can get you into the ballpark.

8) Whether you are selling your vehicle to a private party or to a bona fide car dealer, you or your representative needs to be prepared to present the vehicle to the buyer in an effective manner. This step is very important and can make a definitive difference in your financial return. In other words, you become a salesman.

Let me clue you in to the typical trade-in process: after having a look at the vehicle and maybe taking a drive, the salesperson enquires about "your trade". You advise him that you do have a trade and most salespeople then retort that they "will have their used car manager put a number on it" for you. This seems to be the typical and remedial course of action for most dealerships. It is ill-advised, nut normal.

I can tell you with a great deal of certainty that their "manager" does not want to talk to you or have you present when they appraise the car or truck. Too bad...

Here's how to take control of your destiny and how to proceed with some very simple but effective word tracks:

a) "Yes, I do have a vehicle that I am interested in selling to your dealership. The vehicle is a (year, make, and model) with xxxxx miles, and I have brought the VIN number for you."

At this point, you look like a well-informed consumer and appear armed to take control. If the sales consultant is seasoned, he/she will likely tell you how much they "like an educated customer". If they do, they are being passive-aggressive. They don't want an informed customer that is going to control the situation. They see their commission dwindling.

b) "May I speak wtth your used vehicle buyer to tell him about the vehicle I am selling?"

Now, you look like  a real pro because you have politely taken the subjective sales consultant out of the mix and have gone directly to the source with the money and authority to buy. Sales consultants have virtually no decision-making authority, whatsoever, in the car-selling process unless they are a top performer with some autonomy, and that is rare. At this juncture, you have definitely turned the tide in your direction as the sales manager and sales consultant know you intend to negotiate in an educated fashion.

c) "Hi Mr. Manager, I wanted to speak with you about the vehicle I am selling."

O.K., here is where it can get tricky.

You have done a great job surpassing the non-decision makers, but now you are in front of someone that truly does not want to talk with you.

In a perfect world (for the dealership) the used car manager wants the sales manager to toss him the keys to your vehicle so he can discreetly ask him "what vehicle you they trying to buy, how much does he want for the trade, do they owe anything on the vehicle, who's the salesman, and how does the wife look?" All of these variables are irrelevant. In fact, the less they know, the better. It will influence their decision and be detrimental to you.

Don't allow this to happen! You are now the salesman. Once you meet the appraiser, have a seat and tell him a bit about the vehicle. Mention the year, miles, service records, previous owner(s), dependability, upkeep, repairs, etc. Then, invite him/her to accompany you to the vehicle. When you arrive, walk around the vehicle and point out the pluses and obvious minuses. Being overtly honest tends to make most people feel obligated to fairness.

Next, invite him/her to drive the vehicle and volunteer the keys. If they invite you along, great. If not, allow them the space to evaluate and appraise the vehicle. This is fair. (As a side note, if you are attempting to sell the vehicle to a private party, always accompany them on a test drive. Letting a dealership manager drive is fine. They are insured.)

d) "So, how did you like the vehicle? Is it everything that I described? Do you have any further questions about it that I can answer?"

At this point, the used vehicle manager has already looked at his auction software, knows his inventory needs and wants, has possibly spoken to a vehicle wholesaler, and has run a Carfax to see a history. In other words, he has arrived at a figure that is referred to as ACV (Actual Cash Value), and he is trying to make a beeline back to not being bothered. However, on his way, he will stop by the sales manager's office and give him that ACV figure in order that he be prepared to work his/her car deal. Also be advised that as confident as your sales consultant may be about the great "allowance" they are giving you, an informed manager will not allow the salesperson to know the ACV. The manager's first goal is profit and subsequent goal of moving a unit.

An allowance and ACV are two entirely different measures. The allowance figure, especially when you convolute the two transactions, is the amount of money that the dealer is allowing for your vehicle and should be the trade figure recorded on your buyer's order or purchase agreement. In other words, the dealer may be allowing $15,000 for your trade, but the ACV is actually $12,000.

I know, I know! You are saying, "how can they do that?" We will address that later in another article, but just know that the number you seek is the ACV - how much they are paying for your vehicle in real dollars. Discounts, rebates, dealer cash, participation, trunk money, blah, blah are immaterial for our purposes right now.

9) I am not a fan of clichés, but this is absolutely true in the marketplace: a vehicle is only worth what someone is willing to pay. What you perceive to be the vehicle's worth is somewhat immaterial. Prices are subjective. While all sources say that your vehicle is worth $15,000, maybe you live in a depressed area and the demographic market will only bear $13,000 real money. Remember, there is no sale until you have cash in hand.

THIS is why it is so incredibly advantageous for an amateur car buyer (which you are) to separate their transactions as it were. In fact, were I you, I might suggest this approach when you decide on your next probable vehicle: give the dealership a call or introduce yourself to a personable sales consultant of your choice. Once you have a contact person, let them know that before you can proceed, you need to sell your existing vehicle.

In this process, do yourself a favor and do not volunteer any more information than possible. Knowledge is power, and when you give a slick salesperson information, they can readily use it in their favor. You are not sure of your payoff amount; you are not sure exactly which model you are considering. Your only goal is taking the first step in the process, and that is to get the best offer on your vehicle as possible, and the dealership is not the only shopper out there.

In conclusion, keep in mind that time is on your side. I have always told my customers that they will achieve the best deal possible if they are not in a hurry and certainly not unprepared. When time is short and you are desperate, your chances of a preferred outcome reduce exponentially.

Thus, make an appointment with a local dealer and do as I described. You should walk away with an offer on your existing vehicle that will likely be good for 30 days. If you have not already, take that opportunity to get the best offer possible from all your sources. It may literally pay you an extra $2000 to do so, and that is substantial considering the nominal fees required to advertise.

You don't have to be an expert to play in the dealer's sandbox, but being armed with the insider information certainly helps when put into practice.

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