Let's begin
as Dave enters the dealer's new-car lot and is quickly spotted by
one of a flock of eagerly waiting salespeople loitering near the
front door of the dealer showroom [the "point"]. One of
the salesman, whose turn has come up, promptly approaches his potential
new customer [an "up"] …
SALESMAN:
(to Dave) Hi there, sir. My name’s Bennie and I would like
to help you if I can. Sales have been slow this month and the dealership
hasn’t met its sales quota yet, so I’m going to be very
anxious to sell you a car today, any way I possibly can. What are
you interested in and are you a serious buyer? If you’re not
going to buy today, I would rather not waste my time on you. We
prefer buyers to shoppers. Shoppers rarely come back. If I don't
get your business today, I may not get it at all.
DAVE:
Hi. My name’s Dave. Nice to meet you. I’m really interested
in one of your new LX models with the V6 engine. I want to see what
colors and features you have available for that model. If I can
find exactly what I want, at the right price, I would buy it from
you – today.
SALESMAN:
Great, Dave. We definitely have a number of the models you’re
interested in. I’m sure we have one that you will like. Even
if we don't have the exact model you're looking for, I'll do my
best to try to convince you to buy another model that we have in
stock. I'm a little short on my sales commission earnings this month
and I need to sell something to somebody. I'm hoping you're that
somebody.
DAVE: I just
want to let you know that I’m a little new to car buying and
don’t quite understand all the ins and outs of the process.
So, if you’ll give me some guidance along the way, I would
appreciate it very much. Since your dealership has a reputation
for customer service, I’ll trust you to give me information
and advice that will be in my best interest. I'm also sure you'll
treat me fairly and give me the best price your dealership can possibly
offer.
SALESMAN: [This
is too good to be true! This is my lucky day!] Great, Dave. I appreciate
you sharing that with me. Honestly, I had already detected that
you were probably a little inexperienced in car buying. After a
while, we learn to spot uninformed buyers from a mile away. It’s
something about your approach, the kinds of questions you ask, and
your lack of confidence. Obviously, we have a better chance of swaying
a deal our way with less knowledgeable customers, so I don’t
want you to get away today. The less experience you have, the better
we like you. You look like a prime candidate.
DAVE: I understand.
I’ll tell you that one of my real concerns is that I not be
cheated, even though I’m not very experienced and am not good
at haggling. I know that every customer that comes in here pays
a different price, one way or the other, for that same car model,
which doesn't seem very fair. I just want the best price you can
give me without a lot of complicated negotiating, which I really
don't like. Just show me respect, treat me fair, and no tricks or
games, please.
SALESMAN:
Well, Dave, it’s true we sell the same cars at different prices
to different customers, depending primarily on their experience,
knowledge, and bargaining skills. Although we sometimes sell at
very low prices, this is balanced by other higher priced sales to
customers who are less knowledgeable or less discerning. It’s
amazing how many people willingly pay at or near full sticker price
["full pop"] without a whimper. Our goal is to make as
much profit on each sale as possible, and make the customer feel
good about the deal, whether it's a good deal or not.
DAVE:
Well, okay, so how much for that cute little beige LX over there
on your lot? I really LOVE that car. My friend has one just like
it and thinks it’s the best car she’s ever had. And
I LOVE that new metallic paint. And the COOL alloy wheels. Wow,
what a NICE car!
Dave:
(reflective pause)
DAVE:
And one more thing you need to know. My old car broke down yesterday
and can’t be fixed. So, I NEED a car today. I MUST HAVE something
to drive to work on Monday.
SALESMAN:
[This just keeps getting better and better!] Okay, Dave. I appreciate
knowing all of that because you've now let me know that you’re
really not in a good position emotionally or practically to try
and bargain a hard deal with me. You LOVE the car and you NEED the
car. That makes my job a lot easier and it also gives me an advantage
in our price negotiations later. I know you're less likely to walk
out when we offer you a deal that's not the best deal I could offer
you. Any attempt that you make to negotiate a better price will
be weak and I'll make it appear that I'm considering it but I will
ultimately reject it.
DAVE: So let
me ask again, how about the price on the LX?
SALESMAN:
(pause, thinking)
SALESMAN:
Tell you what, follow me and we’ll go into my office where
it’s cooler and I’ll see what I can work out. I’m
sure you realize that, in my office, you’ll feel that I am
more in charge of the deal than you -- I sit behind the desk and
you sit in front. It’s important that I always have control.
And I noticed that you followed behind me when I asked you to. This
also means I’m in control. They taught us all this in sales
training. Pretty slick, huh?
SALESMAN
and DAVE: (sitting in salesman's office)
SALESMAN: Okay,
Dave, it looks like I can get you into that beige LX for $520 a
month. That’s our starting offer for someone like you who
probably doesn’t know what’s a good price and what isn’t.
It’s also better to discuss monthly payments than price because
it’s easier for most people to make decisions on – and
it allows us a lot of flexibility in how we juggle price and loan
terms to maximize our profit. I won't tell you the price unless
you ask me again.
The
monthly payment figure I’m offering you is based on a high
selling price that is actually near full sticker price, but you
can’t possibly know that if we only discuss monthly payments.
We would actually be willing to go much lower on price and payment
if we need to, but I certainly wouldn't offer that to you as we
start our negotiations. Of course, if you don't ask, I won't offer
you a better deal. I would prefer you think that this is the best
deal you are going to get.
DAVE:
I don’t know. I honestly don’t think I can afford the
car at $520 a month. It's more than I planned to spend. Can you
do better?
SALESMAN:
How much CAN you afford per month? Since you seem to be a "payment
buyer" I want to keep talking about monthly payments and avoid
talking about actual price.
DAVE: With all
my other bills and expenses, I can afford to pay only about $400
a month for a new car.
SALESMAN:
That’s fine Dave. I'm sure we can work something out. Most
people can actually pay more than they think, even though it might
create some minor hardship and suffering. So, I’ll interpret
this to mean that you can afford at least $450 a month. Obviously,
if you spend more than you can afford, that won't be our problem
once you've signed the contract and driven away in your new car.
DAVE:
Seems like a reasonable offer. Okay, I’ll take the LX for
$450 a month. I need the car now and I am willing to try to stretch
my finances as you suggested.
SALESMAN:
(concerned pause)
SALESMAN:
I can check with my sales manager but there’s no way we can
sell that LX for $450 a month. It would mean we lose more profit
than we’re willing to easily give up, although we could do
it if we absolutely had to. We just don’t like going with
this kind of low-profit deal when there might be other alternatives
that would allow us higher profit. So, I’m going to downgrade
you to a less expensive car (that you may not want) that we can
make more profit on. I hope I can convince you that this is a better
deal for you because it is certainly a better deal for us.
DAVE: What can
you do for me then? What other car? What better deal?
SALESMAN:
Well Dave, I can get you into the SX model for $475 a month. It’s
basically the same as the LX but without the V6 engine, which will
make a big difference in the car’s performance, but you want
a car today and this a way to do it. I know it’s not the car
you actually wanted, and the offer is $75 more than you said you
could afford ($25 more than I think you could afford), but you might
be willing to go for it if we discuss it for a while. Besides, if
I sell you the SX at $475, or even $400, I’ll make considerably
more profit than selling you the higher priced LX at a price you
can afford. Maximum profit and commission are my primary objectives
here, not your financial well being.
DAVE:
You’re right, the SX is not quite what I wanted but I’ll
probably learn to like it – maybe. Besides, I'm pretty sure
I can just bring it back if I'm unhappy with it [wrong, Dave!].
But $475 is still a little high for my budget. I’ll make you
a counter-offer of $400 even though you’ve tried to convince
me I could afford more. I would have offered less than $400 but
you would probably try to intimidate me into thinking that my offer
was ridiculously low. Besides, I really have no idea of what a reasonable
payment would be since you haven't told me the selling price and
interest rate, and I don't know how to do the math anyway. So, I'll
stick with my $400 offer even though I don't know what I'm doing.
SALESMAN:
Well Dave, it’s good to know that your lowest offer is $400.
We could actually sell you the car for less than $400, but you’ve
committed yourself now to that bargaining price. So our new price
offer to you is $460 -- not much of a concession on our part, and
not even close to your offer, which we're pretty much ignoring.
Our sales manager wants me to convince you that this is our best
and last offer, and that we’re giving up all our profit to
make you a happy customer. He told me to tell you that we would
go out of business if we sold every car at this price, which is
a lie. Of course, with sales being slow this month, if you were
to get up and start to walk out the door, we might make you a better
deal – and still make a profit.
DAVE:
I feel that you’re not listening to me and that you’re
just playing games. I’ll meet you halfway (even though I know
you set your offer high just in case this happened) and I’ll
offer you $430 for the downgraded car. I’m really getting
tired and stressed out by all this. I feel that I’m not in
a good position to negotiate any further. I just want to get it
over with and get out of here with some kind of deal on some kind
of car. I MUST have a car by Monday. I’m not thinking clearly
anymore and I know you could take advantage of me if you wanted
to. I’m also getting a little irritable.
DAVE:
(tired pause)
DAVE:
And by the way, I wish you would please stop calling my name at
the beginning of everything you say to me. I know you think it makes
me like you – that we are like buddies – and that it’s
supposed to help me feel better about doing business with you –
but it’s more than a little annoying. So stop it.
SALESMAN: Thanks
for being honest with me. It's just a little sales technique that's
supposed to make our relationship more "personal." I’ll
check with my sales manager on your offer.
(Long
delay as the salesman checks the deal with the sales manager ["boss"]
and informs him that he thinks they should try to get more money
["bump"] from the deal, and that there will be no need
for help from a "closer" because this customer is a "lay
down.")
(Salesman
returns after long period in back of office drinking coffee and
reading newspaper)
SALESMAN:
Okay, Dave…oops…I mean, okay. We can accept your deal
for $430 on the SX. Of course we’ll have to do a credit check
and get some detailed information from you before we close the deal.
I hope you don't have bad credit [a "roach"] because you've
just wasted a lot of my time. I just want you to know that at $430
a month, you’re paying only a little less than full sticker
price [almost "full pop"]. But you have no way of knowing
that since we only discussed monthly payments. If you had negotiated
on price rather than on monthly payment, we could have sold you
the car for just a little more than our invoice cost, a great deal
less than what you paid. Your payments would have been about $360.
DAVE: It’s
getting late and I’m very tired. I really don’t trust
my judgment when I’m this tired. Therefore, I want to come
back tomorrow to sign the papers.
SALESMAN: [Oh
no!] I must tell you how disappointed I am, Dave, that we can’t
close this deal tonight [car salespeople hate "be-backs"].
Before you go I have to try in every way that I can to either close
the deal tonight or make sure you’re locked into it for tomorrow.
I have to tell you that the car will probably not be here tomorrow;
that if someone else comes along and wants YOUR car, we’ll
have to sell it to them, or that the price will be higher tomorrow.
Now, you may not know that this is not likely to happen but if I
tell you this, you’ll hopefully be more anxious to close the
deal tonight. I just can't lose you on this great deal (for me).
DAVE: I’ll
take my chances and come back tomorrow.
SALESMAN:
I’ll have to ask for a deposit for us to hold the car for
you – even though this is not really necessary. If you give
us a deposit, you’ll feel locked into the deal and will come
back tomorrow. More importantly, you won't be shopping at other
dealers. Even if you want out tomorrow, we can stall and complicate
the return of your deposit ["we lost your check" or "our
office manager is out sick"] to further discourage you from
exiting the deal. We love deposits. We don’t like credit card
deposits because they can be disputed and it spoils our plan.
DAVE:
I'll decline to make the deposit. Don’t worry. I’ll
be back.
SALESMAN: Would
you like to drive the car home and keep it overnight? If you do,
you’ll be less likely to back out of the deal because you’ll
hopefully become attached to the car after driving it for a day.
In my sales training, this was called a “puppy dog”
sale. And besides, if you put miles on the car we may even try to
convince you that it can’t be returned because it’s
now a “used” car, which isn't really true of course.
And it means that you have to come back to see us. So even if you
tell us tomorrow that you don't want the car, we've got another
shot at you.
DAVE: No thanks.
I'll leave the car here. See you tomorrow.
(Dave leaves
the dealership and returns the next day)
DAVE:
Bennie, let's sign the paperwork for my car. I'll take the $430
deal.
SALESMAN: Okay,
let's go see the Finance and Insurance (F&I) guy, Jake. He's
sometimes called the Business Manager.
DAVE: What does
he do? Why do we need him?
SALESMAN: He
takes care of all the paperwork and he will have you on the road
in short order.
Just
so that you know, the F&I guy is responsible for making sure
our dealership makes as much profit on your deal as possible. He
may offer you extended warranties, credit insurance, disability
insurance, life insurance, rust proofing, paint sealant, window
etchings, security systems, and will tack on various fees. Some
of these fees are official and some are simply for-profit fees with
official names. It would be good if you knew which is which so that
you could argue them.
Be aware that
most of the options, such as paint protectant and window etching,
that are offered to you are not worth the cost. They only add to
my dealer's overall profit, and the F&I guy's commission. You
should also know that the F&I guy selects the finance company
and loan/lease terms that will give the dealer the best deal, which
leaves you with no choice. Frankly, you’re often better to
arrange your own financing with a bank or credit union before you
come to us. However, we don’t like it because we lose the
commission and the boosted interest rate ["reserve"] that
we would receive from using our own loan/lease companies.
Also be aware
that most "mistakes" in calculating your monthly payment
occur right here in the F&I Manager's office.
DAVE:
Okay, let’s do it. Let's get on with the deal. Where do I
sign? I just want my car.
F&I
GUY: Hello Dave. Nice shirt. Nice watch. Got kids? [blah,blah,blah,blah]
I have your contract drawn up and ready for you to sign. Here are
the important figures…here, here, and here…initial here
and then sign here, here, and here. I've already added an extended
warranty and credit insurance, which we recommend to all our smart
customers, even when they don't ask for it. Hopefully, you won't
really notice it and ask me to remove it. If you argue, I'll try
to explain why it's important to you. If it were me, I would read
the entire contract and make sure I understood and agreed with everything
in it, especially that the monthly payments have been calculated
correctly -- but that's not my job.
However, since
I have other customers waiting and really don’t want to have
to explain a lot of details, I certainly won’t encourage you
to read it. Just be aware that, once you sign, you can’t change
your mind later. Many people think there’s a 3-day right-of-rescission
law for automobile purchases, but there isn’t. It's a common
misconception that frequently causes people to make bad decisions
that they think they can get out of.
DAVE: Okay,
but what’s this “bailment” agreement you're asking
me to sign?
F&I GUY:
Oh, that’s just a little something that says if we can’t
get a finance company to take your loan, you have to bring the car
back. This could take days or weeks. Customers are usually irate
when we have to call them later and tell them to either make higher
payments or return the car. Buying or leasing this way is risky
if your credit history is seriously flawed [you're a "roach"].
Honestly, if
you suspect that you have problems with your credit, it would be
better to leave the car here until we can get your loan approved.
However, we actually would prefer you take the car because you'll
feel obligated to keep it and make the higher payments if credit
problems come up later. We just don't want to lose this deal for
any reason.
DAVE:
I don’t think this is going to be a problem with me because
I’ve recently checked my credit rating with all three credit
major reporting companies and my FICO
credit score
is 780, which qualifies me for prime loan rates for anything I buy.
F&I GUY:
Fine. Here’s your copy of the contract and the keys to your
new car. Congratulations. I hope you’ve felt comfortable and
well treated while you were here because you’ll soon be sent
a Customer Satisfaction survey from the manufacturer. We would appreciate
it if you would mark everything as Excellent. This is how the manufacturer
grades us. We'll do just about anything to get a good report from
you, including offering you incentives. We sometimes tell customers
that the salesman’s commission is based on the survey, to
get a good report, but it isn’t. We may even call you on the
phone a few days from now, and if you can't promise an excellent
report, you might not receive the form.
SALESMAN: You’re
all set to go. Here’s the keys to your car. I’m glad
you bought your car from me because I made a higher commission than
normal, based on the extra profit ["bump" or "pack"]
that I was able to work out in the deal with you. My wife and I
are having another baby and I really need the money just now. I
hope you feel like you got a good deal, even though it really wasn't
very good at all.
The
dealership and I appreciate customers like you [!!!]
DAVE: Goodbye.
Thanks for the great deal. [???]
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