Just Cuz I Sell Cars For a Living Doesn't Make Me an Asshole

Well, I’ve been toiling away now for 10 months now. I’ve had a few good months and I’ve had a few crappy months. I’ve met some real nice folks and I’ve met some jerks.

The dealership where I work is in an upscale community in San Diego County. Good credit and good income is the norm. We also get a number of Marines from nearby Camp Pendleton, usually with pretty good credit too. And all that helps. What doesn’t help though is the cynicism, smugness and sense of entitlement that all too many customers bring with them usually because they’ve managed to look something up on the internet.


The internet actually does a lot of disservice in many areas not the least of which is in car sales. Just because it’s on the internet doesn’t make it the gospel. Just because it’s on the internet doesn’t eliminate the need to read all the fine print.

Anyway, this hopefully isn’t going to degenerate into a rant. But let’s see what flows from my brain to my fingertips.

There’s a lot of down time at a dealership. And there’s times when you’re desperate for something to keep you busy. And, it doesn’t help when the dealer filters all but the most basic of websites from its computers. Forget search engines or news sources.

So here’s a couple of things from a car sales guy that might help you a bit the next time you think you want to take the plunge and go shopping for a car:

Narrow your choices of a new car down before venturing out. Have a pretty good idea whether you want a cross-over utility vehicle, sedan or mini-van before venturing out. All major manufacturers have websites where you can screen various models and trim levels and do your basic comparison shopping before leaving home. Remember, if I don’t sell anything, I don’t make anything. I’m patient but not to the point where I’m happy to spend 2 hours with you doing nothing but “kicking tires” on your first foray to a car dealership in 10 years.


Are you thinking of trading your car? That’s fantastic. And if you want to withhold it until the end, that’s fine too. But bear in mind that now isn’t the time to get impatient over time because it’s now going to take 30 or more minutes longer when we have to appraise your vehicle and if a balance is owed we have to contact the lender to secure an accurate 10 day pay-off. (The sum of your remaining payments is not your payoff unless you have a 0% loan).

And, the amount you owe on your trade has absolutely nothing to do with how much it’s worth. A customer a couple of weeks ago was incensed that we couldn’t provide her with a trade value that would pay off her vehicle. She owed $8500 on an 8 year old vehicle that was worth $5000 at wholesale. I finally asked her a direct question: “Miss, if you only owed $1000 on your car would that mean that it’s only worth $1000?” Of course, she answered “No”. To which I responded, “Well, wouldn’t you agree then that the amount you owe on your vehicle has nothing to do with how much it’s worth?” Of course it doesn’t.

If you’ve already ground us down to a below invoice price on your vehicle, you have no expectation of a “retail” value on your trade. We’ll go wholesale to wholesale or retail to retail. The dealer where I work rarely tries to go retail for our car and wholesale for a trade (but we will). It’s lousy business for us to go wholesale on the vehicle we’re selling and retail on the vehicle the customer is trading. We won’t do it and will tell a customer right up front that we can’t and don’t.
Here’s a hint. The sources of trade information online are generally woefully inaccurate. The closest we’ve found is Edmunds.com. The source we try to use most is a source that only dealers have access to. It’s known as Manheim Market Reports and is the commodity based pricing from Manheim Auctions, the largest used vehicle auction company in the nation. The prices we get from there are the amounts that used car managers from dealerships have actually paid for specific vehicles. That’s a commodity price and represents real money paid for a car as close to “just like yours” as we can get.

You know, I’m an old fashioned customer service kind of guy. I’ve never held with the notion that selling cars needs to be a confrontational exercise where it’s all about putting another number up on the board for unit count and maximizing my commission on each sale. And the dealership where I work reflects that approach as well.

But if I don’t sell, I don’t earn. We earn a percentage of the gross profit on each vehicle sold. On new cars the minimum is $200. But there’s less profit than that on most new vehicles. Many have no profit or even a loss. It’s a simple matter of trying to put units over the curb and on the road. The profit center of a car dealership is in its “fixed operations” department (a fancy term for parts and service). And the only way that department gets customers is for us to actually sell a car.
Forget stuff about “holdback”, etc. That is indeed money that the manufacturer provides back to the dealer to help offset expenses—like the light bill or the property taxes or fixed salary expenses or even the interest on the loan the dealer takes to finance the inventory.

Sometimes we will dip into it to close a sale. That’s because increasingly customers demand that we compete against the other dealerships which sell the same brand as we do when it comes to price. We are required by customers to shave prices incrementally with the one most willing to whittle down the price winning. Imagine selling a $30,000 vehicle because you beat the guy selling the identical vehicle 20 miles down the road by $50. It happens all the time and it’s absolutely exasperating.



I earn about 1/3 of what I earned a couple of years ago as an automotive industry consultant. The benefit is that I have reduced my business travel from 150 nights a year in a hotel to 0. That’s worth it.

I love the customers I work with, by and large but the bottom line is that I’m a professional and just because I sell cars for a living doesn’t make me an asshole.

Kapowee! God I Wish it Were That Damn Easy

It’s been a little over a week since I went to work at a car dealership in Carlsbad, CA selling new vehicles. An interesting week.

First, the schedule can be a little bit brutal. Today from 2 to 8:30 I’ll be on my 6th consecutive scheduled day. A 6 ½ hour shift is easy. Tomorrow is what’s known as a “bell day”—from opening bell to closing bell, 12 hours. It’ll mostly be spent hanging out, on my feet. I’ll spend time working on certification for the new car line—product knowledge so I know what I’m talking about. I’ll spend more time working on product presentation skills. Still more time on follow-up of prospects and very little time actually talking to customers out on the lot or demo-ing or doing write-ups.

After a week and a half, I have yet to sell a car. That means that so far my income is a big fat goose-egg.

I haven’t worked in car sales in nearly 7 years. I spent 6 of those years training people how to sell cars and consulting with managers and dealers on how to optimize their operations. It ain’t easy putting the “skills” back into practice.

There’s product knowledge but more fundamental is the technique by which the product knowledge becomes useful to a customer—especially since many customers come to a dealership with a tremendous amount of information. The sales guy’s job is to make it relevant and valuable. Plus, customers know a lot about pricing—too much, in fact, to the extent that often they’re dangerous in their misinformation and perception. A new $25,000 car might have $1500-2000 in available profit which the customer wants to have discounted. And, the salesperson might make $200 on it if he or she is lucky. It ain’t no picnic.

And then there’s the Neanderthal way most sales floors are managed. We use a software system called “Advent”. Advent does not provide any sort of tutorial so you’re on your own. This is what is used to input a customer’s information on which follow-up is based or on which a credit report will be generated. So you fumble through it.

It’s kind of interesting when you have a customer in front of you and you’re trying to be professional all while you’re mucking through an unfamiliar piece of software. It doesn’t inspire any confidence that you know what you’re doing and are trying to work together with a customer.

So you do your best, port it to the “desk” (the manager) who tells you that you’ve done it wrong and that you’re a nincompoop. The “desk” generates a “proposal” (that’s my term because I hate using terms like “first pencil”) and then sends in someone else to work the customer and try to close her. Without knowing what her “agenda” is and without really caring. This proposal is “packed”. “Full pop” on price. “Back packed” with a warranty. Reserve on the interest rate and a term that’s longer than standard. But all structured so that the payment the customer wants is achieved.

And she walked. Why? Because she was smarter than that and we didn’t spend the time to work with her, justify the value of our product and create a situation where we were making money but she was also getting a reasonable deal.

So, I’ve got to adjust my style. I have to figure out how to “work the desk” and get proposals I can work with. It’s like gathering intelligence. I’ve done it hundreds of times and just need to get into the right patterns of questions to the customer and how I present the information to the desk (my manager only wants the briefest of bullet points—anything more and you get chewed).

This management style of providing only cursory guidance and then ripping into you when you don’t get it right is both “old school” and incredibly inefficient. I spent years trying to work with dealerships to embrace different approaches—and was paid quite well to do it. But that’s no longer my role.

It’s nearly 11. I have to be at work at 2. My legs feel OK today but my hips are still a bit achy. The good news is that I’ve got Friday, Saturday and Sunday off. That’s an every other week thing. But I’ll probably work Saturday to get more prospects and have something to work on the following week for follow-up. The way the retail side of this business is structured, you really don’t get every other weekend off. You need to work at least one day on either Saturday or Sunday. Especially since, as the new guy, I won’t really be seeing any “spoonies” (easy deals given by the manager) for a while.

I’m a grown-up. The older I get the more I resent when management treats anybody with condescension or disrespect. Especially when you have to approach customers with confidence and just the right amount of enthusiasm to be successful. But those are things you have to do by yourself with some occasional help from your co-workers who are also suffering from the same insecurities and frustrations.

But, I'm working. Doing something productive. It's something honorable if done with integrity. And that's what I bring to it. I can't do it any other way. It's not an easy job. Few jobs are.

(Now check out the Muppets doing a Jim Croce classic).

Nothing Good Happens After Midnight

There’s a reason why the Fairy Godmother told Cinderella to be back by midnight. Remember? She was late. The coach turned back into a pumpkin, the footmen back into mice and Cinderella from a gorgeous princess back into a waifish stepdaughter.

What’s the reason? It’s simple. Nothing good happens after midnight.

Five 17 year olds partied on Saturday night here in the San Diego area. They were good kids. They were affluent kids. They were drunk. They were driving too fast. Now one is dead. One is in critical condition with blunt head trauma. Two had minor injuries and one is in jail. He’s charged with felony driving under the influence and gross vehicular manslaughter. Five young lives that will never be the same.

The accident happened at 1:45 in the morning. Nothing good happens after midnight. Especially to kids. Especially to parents.

What went wrong? The classic “perfect storm” for immature drivers (hell, for any driver). Too much speed. Alcohol. And five 17year-olds partying; distracted, showing-off. Only 2 were wearing seat belts. The 1 year-old car was full of air-bags but they won’t protect properly if the people in the car aren’t buckled up.

What’s the lesson here? Well, for one, parents try to do their best and are absolutely aghast, horrified and devastated when a tragedy such as this happens—especially to them.

There were too many kids in the car. Five 17-year olds, drinking, yields just too much testosterone for safety.

They thought, as do all teens, that they are immortal. They’re not. Sheet metal can’t win when there’s too much speed and immoveable objects in the way. And once the sheet metal goes, the living tissue inside is going to get hurt.

Alcohol was involved with kids 4 years too young to legally drink and never old enough to drive drunk.

Speed. Speed plus booze plus distracted equals only one thing. Disaster.

Odds are they could do the same thing 100 times and make it home OK. But, that one time when they don’t results in catastrophe.

Parents, teach your children. Monitor them. Have inviolable rules in place. Enforce them. Even when it makes them and you uncomfortable. That’s the way to love them.

Because nothing good happens after midnight.

The Last Word (Hopefully) On Cash For Clunkers

Cash for Clunkers (C4C) ended this week. With the exception of a cumbersome online “paper work” process for dealers the program has to be classified as a success with over 690,000 new vehicles sold.

The most popular vehicles sold? Civics, Corollas and Focuses—all smaller, fuel efficient vehicles. And, the most popular "clunker" traded in was the Ford Explorer. Hopefully the American public is figuring out that it doesn’t need large, inefficient, body-on-frame vehicles to get around and the trends of the last decade and a half will change (unfortunately too late for the “old” GM and Chrysler).

Now, part of the reason for this post is that in the last week there have been rumors floating around stating that buyers of vehicles under C4C will have the $3500 or $4500 received from the program taxed as income by the IRS. It ain’t true. First, the money goes to the dealer not the buyer. That means the dealer has to show it as income.

IRS Advisory to Dealers Not Consumers
Here’s what the most respected publication in the auto industry, Automotive News, had to say about it on August 6:
“The cash-for-clunkers measure…exempts consumers who take advantage of the program from paying taxes on the rebate. But it does not exempt car dealers.”
And,
“It’s akin to a receivable that a dealership might get from a financial institution,” according to IRS motor vehicle specialist Terri Harris who wrote an advisory to dealerships. “Dealers are still getting taxed on the gross receipts. What’s changed is the source of the gross receipts.”

Plus the government's CARS website has an FAQ question on this topic: "Is the credit subject to being taxed as income to consumers that participate in the program?" In bold capital letters the answer is "NO" and then elaborates with: "The CARS Act expressly provides that the credit is not income for the consumer.

Manufacturers Gearing Up
The other really good piece of news is that with nearly 700K units sold, auto manufacturers are having to gear up their production to replace dwindled inventories. That, of course, means more job security for autoworkers (All 3 have manufacturing facilities in the U.S. although the Corolla production facility in Fremont, CA is at risk of closing).

Other auto publications have reported recently that at least some buyers were replacing “3rd cars” their old beaters that were only occasionally driven. The new car “bumps” the buyer’s previous primary car to 2nd car status. The impact of this is that for these buyers, the ultimate fuel savings will be less because there isn’t as great a difference in fuel economy between their most frequently driven vehicles.

Buyers Pulled Forward?
Automakers have reported that many of their buyers were “pulled forward”. In other words these would have been good credit buyers who would have been prospective customers 2 or 3 or even 4 months from now which will not be on the market. This is a situation which dealers experience every time they pull out huge incentives and have become a major part of the “merry go round” that is auto retailing.

I haven’t seen any data but I would imagine that soon we’ll see reports from the automotive media that per unit incentive costs from manufacturer’s declined significantly during “Cash for Clunkers” which should be a further boost to their bottom line.

Buyer’s Remorse Spikes
This week’s issue of “Used Car Manager Weekly” contained a story quoting CNW Research (a leading trend researcher in the automotive industry) as saying that 17% of CARS buyers participating in a recent survey indicated “some or serious doubts” about whether they should have bought a new vehicle.

The major reason? According to the publication, “now they have a $275 to $350 car payment to make each month, a new household expense that wasn’t there prior to their CARS purchase.

"That amount, they say, could negatively impact the total family budget more than expected prior to buying the new vehicle," explained Art Spinella, president of CNW Research. "Typically, in a non-C4C (Cash for Clunkers) environment, buyers' remorse hits roughly 6 to 8 percent of new-vehicle buyers within a month, according to CNW Purchase Path research," he added.

A lot of C4C buyers didn’t have vehicle payments. And now they do. Hopefully this won’t be problematic in the months to come. However, it’s important to remember that many buyers are paying up to $100 a month LESS than they would have otherwise thanks to C4C.

All in all, this has been a successful program providing a real benefit to nearly 700,000 consumers and their families as well as to auto dealerships and auto manufacturers.

This still sounds to me like a better deal than the American taxpayer got from bailing out the likes of AIG, Bear Stearn and other investment banks.

Cash for Clunkers--A Penny Well Spent

Late last week, the Cash for Clunkers (Car Allowance Rebate System) was at risk of running out of money. So many people had used it, there were so many “pending deals”, and the website dealers use to request reimbursement is so cumbersome that there was a great concern that there would be more buyers wanting to take advantage of the program than there were funds available.

So, on Friday the House of Representatives quickly passed and sent on to the Senate a bill which would triple the Cash for Clunkers program from $1 to $3 billion (or from 250,000 vehicles to 750,000).

Some have questioned the program as throwing good money after bad and being another government bail-out boondoggle. I happen to think that it’s a pretty good thing.

Let’s try to put Cash for Clunkers in context: Take 3, $100 bills and put them on a table. Put a penny next to them.

The $300 represents the amount of money allocated by the government for the Troubled Asset Relief Program (if memory serves it was somewhere around $900 billion). The penny represents the $3 billion proposed for the Car Allowance Rebate System (Cash for Clunkers).

Over most of the last year we have had a succession of bad economic news. Trillions have been spent on bail-outs. All of this is money that Americans perceive as coming out of their pockets with little, if any, benefit.

Most people are like me. They see banks and other mega-financial firms being bailed-out to the tune of billions if not trillions of dollars with absolutely no benefit to individuals other than the fat-cat bankers who continue to get their million dollar bonuses. We see banks being rewarded for participating in the fraud that convinced many to take out mortgages that they shouldn’t have resulting in the “meltdown” which has had disastrous consequences.

And many see the bailouts of GM and Chrysler and think that they we get to pay for companies who through their own bad management went down the tubes and let the government bail them out.

So what are we getting for our “penny”? Trade in a gas guzzler and get up to $4500. Pretty simple. The dealer and the government will take care of the paperwork. Just as long as the vehicle being traded gets an EPA computed 18 miles per gallon or less in combined city/highway mileage and the new vehicle being purchased gets at least 4 mpg better than that. It’s a bit more complicated but that’s the gist of the program.

So, what are the benefits? Quite a few, actually.

A benefit for the “average” person. The person driving an older vehicle can get a government rebate which can be 2 or 3 or 4 times the trade value. It’s not a million dollar bonus like if you’re a fund manager at Bear Stearns but it’s not bad.

It gets less fuel efficient vehicles off the road. This is ostensibly what Pres. Obama proposed to do in the first place. Even the “minimum” fuel economy improvement (from 18 to 22 mpg) represents a bit over 20% improvement in fuel economy. So let’s assume you’re currently driving 300 miles per week (about average for most people), and you pay $2.70 per gallon. At 18 mpg, you’re spending nearly $45 and at 22 mpg you’re spending almost $37. The savings come out to $468 per year in fuel costs. And that’s just for a 4 mpg savings.

$4500 is a bunch of money! If your “clunker” is paid off, the $4500 you save can amount to nearly $100 per month in lower car payments depending on your credit (it might be less and it could even be more). But, let’s use $100—that would be someone with B- to C+ credit. Over the course of a 60 month loan, that’s $6000. That’s real money that hasn’t come out of the buyer’s pocket. That’s the insurance premium for many people. Or, for others, it’s a couple of week’s groceries per month. And it can get even better if the leverage from the $4500 makes the debt to equity equation more favorable to a buyer and results in a lower interest rate.

Dealers are benefiting! Reports coming out last week said that new car dealers were seeing the best traffic that they’ve experienced all year. That’s good news when industry estimates have been showing the projected volume of new cars to be about 10 million this year—down from about 14 million 2 or 3 years ago. Dealers are selling more of their new car inventory. That means that they’ll get out from under some of the interest payments they’ve been making on aged inventory (“floor-plan”—the cost of maintaining inventory). That means that sales people will be earning a bit more—and auto salespeople don’t make a whole lot of money to begin with. That means more potential business in the parts and service department. That means more people keep their jobs at auto dealerships.

Lenders are benefiting! Auto finance companies like Ford Motor Credit and GMAC will be doing more business. Credit Unions will be writing more loans.

Auto Salvage Companies will benefit. All those clunkers have to be destroyed (even vehicles that are in good enough shape to be resold). Their drive trains cannot be salvaged and must be rendered inoperable by the dealer. But salvage companies will generate income from the program.
A lot of those SUVs sold in the 90’s and the first 4 or 5 years of this decade will be coming off the road. Some to be replaced by “cross-overs”. Others by hybrids. Still others by sedans. That’s a good thing too. Hopefully people are getting it figured out that vehicles are not lifestyle or status statements. They’re a means of transportation.

Many of these vehicles will be paid for. Others won’t (such as those purchased used in the last 4 or 5 years). But the amount of the CARS rebate will mean that many of those owners of financed clunkers will be able to pay of the amount that they’re “upside down” (to use an industry term—another term for it is “buried”) and be able to successfully finance a new car.

Cash for Clunkers is just for new cars. There has been some speculation that it may also be extended to used vehicles but there has been no change on the website. There is a crucial difficulty with extending a program like this to used vehicles. That difficulty is the condition of the vehicle.

The condition of a new vehicle is known. It’s new. The condition (and the reconditioning) of a used vehicle is an unknown with one exception and that is manufacturer’s Certified Pre-Owned vehicles. Manufacturer’s programs only deal with their own brands and have rigorous standards which the vehicle must meet and which must be disclosed to the buyer—typically along with an enhanced warranty from the manufacturer. Perhaps this may happen in the future with the CPOV.

So, again as far as I’m concerned, this is a good program. It’s about time that with all the bail-outs that the average person has something which can directly benefit him or her. This program does that. Out of all the hundreds of billions that have been spent on toxic assets, etc. this “penny” is one which has the potential to generate a return and is a “penny” which is being well-spent. To the U.S. Senate: Approve the additional $2 billion!

CAR BUYING 101: Going to the Dealer or "Hello Herb Tarlek"

You remember Herb Tarlek don’t you? You might if you’re over 40. He was the advertising salesguy on the TV show “WKRP Cincinnati” back in the 70’s. An obnoxious wheeler-dealer who epitomized “over-promise/under-deliver”.

That’s the kind of guy everyone assumes they’re going to encounter as a salesperson when they go to a car dealership. And all too often it’s true in one shape, form or fashion. You know, the guy who smells vaguely of bad cologne, breath-mints and cigarette smoke. He’s approaching you with an overbroad smile, hand outstretched and a standard greeting, “Hi there, welcome to ABC Motors, my name’s Herb and you are? Are you here for our big sale?”

Do you know why car salespeople greet customers like that? Well, there’s 2 main reasons. One, they don’t know any other way to do it. And two, their managers train them to do it that way because it’s the “best way” to “make friends with the customer and take control of them.” Horsecrap!

And dealers wonder why, even though customers are looking forward to buying a bright, shiny new car they dread having to go to a dealership.

Look, in order to buy that new car you’re going to have to go to a dealership to get it. It’s that simple. You can’t get it on Amazon and have it delivered. There are definitely some things you can do to help yourself and the salesperson. First and foremost is to realize that you’re going to have to collaborate with a salesperson in order to find the car you want and to get it for the price and “deal structure” that you want.

First, select the dealership you think you want to do business with. They have to carry the make you’d like obviously. Use whatever criteria you want. One of the best is if you know someone who had a good experience there. I have a prejudice against dealers who get on the tube and “yell and scream” about how great their deals are—especially if you’ve got “bad credit, no credit, bankruptcy, divorce or military”. As I said earlier—horsecrap! The dealer which focuses on “subprime credit” or “spi-fi” (special finance) tends to drive away good credit customers.

I remember the “spi-fi” director at one of the first dealerships where I worked telling a customer, “Sir, divorce doesn’t cause bad credit. Not paying your bills causes bad credit!” And also telling a customer, “There are 2nd chance banks. There are no 3rd chance banks!”

So, like every other aspect of this process, be prepared. The best thing would be if you have a friend or relative who had a great experience and provides you with that person’s name. Then you can contact him or her and set up an appointment (assuming that they sell the make/model that you’re most interested in).

Or do this: Call a dealership you think you want to do business with. Talk to the receptionist. Tell him or her “I’m interested in buying a car but don’t know anything about your dealership. If you were buying a car at your store, who would you trust the most to take care of you best?”

The receptionist will give you a name and then ask to speak to that person and set up an appointment to get together if your conversation convinces you that this is a person you’d like to do business with (i.e. one you can trust to work with you).

Remember something else when you get there and start working with the salesperson. He or she works for commission and, especially on new cars, there is precious little commission. You may buy a $20 to $40 thousand car and this person might make $100 for his efforts. Seriously! This guy is a “working stiff” trying his best 50 to 60 hours a week to make a living in a challenging environment where he is often verbally abused by managers equally desperate to “sell a car”. Most car sales people make $30,000-40,000 a year and spend a lot of their time with a sinking feeling in the pit of their stomach about how they’re going to sell a car and pay their rent or mortgage this month.

So, bearing in mind that your best bet is to show up with an appointment with a specific person, make sure and ask for that person when you get there by name and say you have an appointment. That way whoever just “upped” you when you got out of your vehicle will find or summon the person with whom you have an appointment. If he tries to tell you that the person isn’t there, ask (insist) to be taken to the sales manager. It’s your call. If the person blew you off, you may just want to leave and try another dealer. Or if the guy who “upped” you is trying to “skate” the person with whom you have an appointment (skating is trying to cheat someone out of a deal by falsely claiming they are unavailable) that’s why you go to the manager.

When you’re with your salesperson, he or she will try to source or qualify you as to what you need or want. You should have already covered some of this in your initial phone conversation. Now is a good time to reiterate it. If the salesperson does not offer to go inside and talk, suggest it to him. Then you can go through your specifications as to model, equipment, options, etc. And, have a couple of different colors in mind not just one! When I sold cars I asked my customers “are there any colors which are totally objectionable to you”.

If you do it this way, you’re communicating clearly with the salesperson. You’re making their job easier.

So, let’s go back to how salespeople are trained—which at the vast majority of dealers is little more than a joke. At most dealers, managers tell sales people repeatedly to “make friends with the customer” and “take control of the sale”. Most managers don’t have any more of an idea of what these 2 things mean than their sales staff does and that’s why the training at so many dealerships is lacking.

I always trained sales staff that making friends is not as important as being friendly (and they’re 2 different things). You’re not going to go out to a sportsbar for a beer with the salesperson after work—in other words odds are you’re not going to be friends. The most important thing is trust—that the customer trust the salesperson. If I don’t trust a salesperson I’m not spending $20,000 to $30,000 on a car with them!

As far as “controlling the sale” is concerned, most managers and sales staff construe this to mean that the salesperson is in charge. You can’t earn trust that way! You can’t get someone to part with their money that way either. Most dealerships have anywhere from an 8 to 12 step sales process (it’s all pretty much the same). This includes: meet & greet, sell yourself & the dealership, needs assessment, land the customer on a car, demo the car, write-up, negotiation, closing, delivery and follow-up. What I always trained is that the salesperson has to be so intimately familiar with the process that he/she is leading and guiding the customer through the steps—up to and including taking some “out of order” to facilitate the smooth flow of the process.

Understand that. Don’t allow yourself to be manipulated by it. And, don’t allow yourself to be rushed through it. Bottom line: It’s YOUR money! YOU earned it! YOU’RE the customer.


And, when it doubt—leave. “Be Backs” are great although most managers try to tell sales staff that “the “be-back” bus don’t run”. Yes it does—somewhere! And you can make it run back to that dealer or you can go someplace else.

Bear these things in mind when you’re going to the dealership. It is a process—both for you and for the sales staff. You DON’T have to “buy and drive today”. Start with that premise and if necessary remind the salesperson AND his/her manager of it. But you are serious about buying a new car either today or tomorrow or as soon as you get the “deal” that you want.

Chrysler to Iacocca--Return Your Demo! Can Detroit Come Back?

This morning, Reuters is reporting that former Chrysler CEO and icon Lee Iacocca will be losing both his pension and lifetime company vehicle as Chrysler proceeds through bankruptcy.

Now, I don’t think that Iacocca losing his company car is any huge deal to him. He can probably afford to buy any vehicle he wants. But, the article did remind us that it was Iacocca who became a visible spokesperson for Chrysler appearing in numerous commercials proclaiming “If you can find a better car—buy it.”

This was back in the early 80’s and had more to do with the resurgence of Chrysler Corporation than did Ricardo Montalban’s pitch for the Chrysler Cordoba with its’ “fine Corinthian leather” in his inimitable accent.

Montalban, like Billy Mays, was a paid pitchman. It was entertaining though. But when Iacocca extolled the virtues of his products, we believed him. He was Lee Iacocca—the CEO, a giant in the auto industry. He was just talking to us on the TV and being honest and upfront (at least in our perceptions). Iacocca was talking about the value of the vehicles made by his company. And that’s where I’m heading with this.

The Detroit 3 are all in trouble. The only one which seems to be steadily working its way out of it is Ford. As we all know both GM and Chrysler are in bankruptcy. Very simplistically the way they’re going to survive and emerge from bankruptcy is through careful re-organization and a commitment to doing things right. A commitment which, quite frankly, just hasn’t been there for a while.

Let’s get back to that value idea for a bit. As an automotive sales trainer, the absolute foundation of sales is this from Zig Ziglar: “Buying occurs when value exceeds price.” It’s that simple. Except that too many sales staff, sales managers, dealerships and manufacturers have bastardized their approach to getting value to exceed price by discounting and rebating first and building value either not at all or as a secondary strategy (i.e. “lookit all you’re getting for a dirt cheap price”).

Back in the day, someone at Chrysler (or their advertising agency) knew this and enlisted Iacocca’s active participation. He was the first of the CEO’s to pitch his own product and no one did it better than him until Chrysler tried to reprise the approach in 2006 with “Dr. Z”—Dieter Zetsche, the Chairman of DaimlerChrysler.

Domestic manufacturers have to first engineer and build value into the products that they’re going to offer to the public. This basic rule is one which hasn’t been done well enough or often enough over the course of the last 3 decades or more by the Detroit 3. Even then it will be hard to get customers to return to their products.

“We build value when we talk to customers about what’s relevant to them,” is the next maxim that I work to impress upon sales staff as a trainer. And, the only way to find out what is relevant is to ask questions. The manufacturers are going to have to ask potential customers some questions about the products they want to own and drive and then work like hell to engineer it, make it and market it.

And finally (bear in mind that this is all in the 1st 10 or 15 minutes of the basic sales training class) as I trainer I cover the ways in which value is built with customers: “We build value when we talk to the customer in terms of what we do more of, better than and differently than anyone else when it comes to ourselves, our dealership and our product.”

Here’s my point. Most organizations don’t train their staff to approach sales in this way and yet it’s the optimal way to do it. Most organizations put the emphasis on sales at the end of the line—after the product is made and delivered to the retailer (remember that’s when the sale is counted by the manufacturer).

Chrysler and GM have an onerous task ahead when it comes to the financial and legal ramifications of their bankruptcy filings. But when all is said and done they are companies which design, build and market vehicles. Ultimately they have to do that and do it well.

What if the Detroit 3 reversed the process? Take a page out of Tom Peters. Put the focus on determining what is relevant to customers about the vehicles they wish to own and drive. Be “more, better and different” than any of the competing automakers when it comes to focusing on and responding to the needs and wants of consumers. And then deliver it to the dealer-body ready to be sold to the American consumer.

As these companies work to emerge from bankruptcy, they are going to have to do things to re-instill faith and confidence from the buying public. Maybe this is the way to go about doing it. And then maybe Lee Iacocca can get his car back.

Car Buying 101: What to do with a Trade-In

Note: See my post from April 20 "Is Now a Good Time to Buy a Car" for the 1st 2 Rules of car buying. http://just-walt.blogspot.com/2009/04/is-now-good-time-to-buy-car.html Rule #1 Start your shopping at home and Rule #2 Shop for your money before you go to a dealership. This post starts with Rule #3.

In car sales, over 80% of transactions involve a trade. Chances are that you’re already driving a car when you want to buy a different one and you’re thinking of “trading it in”.

As a profitability and sales training consultant in the auto industry I have encountered various ways this is handled at hundreds of dealerships. And, in a lot of them it’s not handled very well. The vast majority of customers don’t know how to handle it either.

Rule Number 3: Be realistic about your trade
A few simple steps will help you as you’re getting ready to buy a new vehicle and trade your old vehicle.

Step 1— know the pay-off amount if you still owe a loan balance on your trade-in. This is easy to do either online or by phone. Most loans now have a website where you can access the pay-off amount. You can usually find it by looking at your loan documents. And most lenders have a phone number where you can find out the pay-off. It’s usually automated and all you typically need is either your loan number or your social security number or both.

Know the pay-off amount! It will be critical in finding out whether or not you owe more than the vehicle is worth. And the pay-off is NOT the same as the sum of the remaining payments.

Step 2—get an idea of how much your trade is worth. This is easy enough to do as well and you need to go back to Rule #3—be realistic about your trade. The simplest way is to go online to KBB.com (that’s Kelly Blue Book). This site will open and 2 boxes will be on you screen, one for new cars and one for used cars. Click “go” in the used car box and it will walk you through the process. You’re going to ask for Trade value not for “sell it yourself” or “retail”.

You want to get an idea of what you might expect a dealer to offer you for the vehicle and this will get you reasonably close. If you look up “sell it yourself” or “retail” the difference between the results you get and what a dealer tells you will send you through the roof. Now, whatever the trade-value shows on KBB.com, subtract about $1000 from that amount. This should get you reasonably close to what a dealer will offer you. Why the discrepancy? Here’s why:

“Trade-in Value is what consumers can expect to receive from a dealer for a trade-in vehicle assuming an accurate appraisal of condition. This value will likely be less than the Private Party Value because the reselling dealer incurs the cost of safety inspections, reconditioning and other costs of doing business.”

That’s right off the KBB.com website. Look at the bold phrase. That’s why you will be offered less than what the KBB amount shows. I can’t think of anyone who has ever had their vehicle inspected and reconditioned prior to taking it to a dealer for trade-in. It’s things like 4 matching tires each with a minimum of 40% of their tread or 50% of brake pad remaining. That’s just for starters.

Yes, if the dealership keeps your trade and re-sells it at retail, they will be marking it up several thousand dollars. They may have to spend $1000 or so for it to be ready for retail. But that’s how dealerships make money.

Plus, the dealership has to pay for its facility, advertising, etc. This is part of being realistic about the value of your trade. If the number you come up with is unsatisfactory to you, be prepared to sell your vehicle on your own—and you can put however much or little money into reconditioning and merchandising it as you want. But if you do that, be patient and it’ll be up to you whether you want to wait to buy your new car until after you’ve sold your “trade” or not.

So, if you’re going to proceed with trying to trade your vehicle, have these 2 key pieces of information (pay-off and estimated value) with you. Hold these 2 cards close to your vest because they’ll come in handy later in the process.

We’ll jump ahead just a bit in the process here. Let’s assume that you’ve selected a vehicle to buy and that now you’re going to go inside the dealership with the sales person. You’ve established that you’re interested in trading.

Let me put it slightly differently. In sales training, I would suggest to sales staff that they introduce the “trade” with this “wordtrack”: “Sir/ma’am were you going to continue to drive your current vehicle or were you thinking of selling it to us?” Think about those words. When you’re trading a vehicle you ARE SELLING it to the dealer. They’re not “trading” with you; they’re buying it from you.

One of the things I have trained sales staff to do is to do a silent walkaround of your trade-in, with you present. It’s a technique to “de-value” your vehicle and to get you more realistic about its value. If you’ve done your homework (pay-off and estimated value) you’ll already be realistic. At that point they will need to see your vehicle registration which is also a good time for you to provide your insurance slip as well.

Step 3—Expect disclosure. Once you’re inside with the sales person, at some point he or she will take a bunch of papers to “the desk” or to the manager. Ideally the manager will get up and go outside and “put his hands on” the car, even drive it. Then he will come back in to do some “mumbo jumbo” which will yield a “trade value” or “allowance”. The “mumbo jumbo” involves going to KBB.com or another source to “book” the vehicle. Sometimes if you’re trading another manufacturer’s car it will involve a phone call to a used vehicle manager at a dealership that sells that make to get a value.

Then the manager will come up with a “book” value from which he/she will subtract reconditioning and other costs which should then yield what is known as ACV or “actual cash value”. Quite frankly, this is the true trade value of your vehicle. A scrupulous dealer will show you how they arrived at that figure.

What the dealer of course wants to do is to provide you with one figure (usually a monthly payment amount) for a proposal to buy the car. Often they will also include the “trade allowance”. If that isn’t provided, send the sales person back to the “desk” to get it. If it’s at great variance with what you came up with, ask for the “form” or documentation on HOW they arrived at that figure. You can also request an MMR or Manheim Market Report.

This is a document available to subscribing dealers which shows how much automobile wholesalers have recently actually paid for vehicles similar to yours in your market area. It is arguably the most accurate source for the value of a trade in vehicle because it shows the “real” money that wholesale buyers have paid for vehicles that they intend to recondition and retail.

Quite frankly, if a dealership is unwilling to share with you HOW they arrived at the ACV/trade valuation or to provide an MMR what you might wish to do is leave. There are hundreds of dealerships out there with thousands of vehicles for you to buy. Expect and require disclosure. And, odds are that the dealership will disclose the information once you are insistent that the whole “deal” depends on it.

This doesn’t happen very often anymore, but when the trade appraisal is provided to you, make sure that your keys are returned. Yeah, some dealers still play the game of “hi-jacking” your keys so just make sure that you get them back now. This will also send the message that you are still not committed to “buying and driving today” which is fine. If that question comes up, your answer is simple: “If I buy this car and trade you mine, you’ll get the keys. But let’s concentrate on this other stuff first.” And then just leave your keys sitting conspicuously on the table or desk top.

You want to be satisfied with your trade value, and you also want to be satisfied that if you owe more than what it’s worth that the difference will be accommodated in whatever final deal is negotiated. We’ll talk about that in a future post.

And lastly for today, a little information can be a dangerous thing. It’s as counterproductive for you to take this information to a dealership and act like a know-it-all butthead as it is for dealership personnel to act the part of fast talking, bs’ing, conniving jerks. However, one of my consistent messages to dealer sales personnel has always been that their success depends on the “Golden Rule”: “Them with the gold, make the rules.” The customer has the gold and dealership staff are trying to earn the privilege of getting you—the customer—to part with some of it.

Car Buying 101: The First 2 Rules--Shop at Home 1st & Shop for Your Money

A story in the paper this morning suggested that this is a terrific time to buy a car and get a better price than at this time last year. And I agree with that. The person interviewed was from Edmonds.com and said that buyers can save anywhere from $350 to $2500 by smart shopping. Now $350 isn’t much on a purchase that in all likelihood will exceed $15000 but $2500 is real money.

I spent years selling new and used vehicles and additional years training and consulting with dealerships on how to do a better job of selling vehicles. Now, lest you think of me as a fast talking, “no-good-nik” car salesman let me assure me that I constantly the “e” word and the “t” word when it comes to vehicle sales—ethics and trust.

But, it’s always a terrific time to get a great deal on a vehicle. If you follow just a few really simple rules.

Rule 1—Start your shopping at home. Go online. Research the types of vehicles you’re interested in at sources like Edmonds.com or AutoTrader.com or Kelly Blue Book or even Triple A. Look at manufacturers’ websites to get specific information on the make and model you’re interested in.

Rule 2—Shop for money before you go to a dealership. OK, so now you’ve started shopping for a vehicle. Remember, money is a commodity. Find out from your bank or, better yet, your credit union how much the money is likely to cost you (interest rate) and the terms. Plus, secure a copy of your credit report. Before you ever go out and about to dealerships you really need to have a good idea of how much your money will cost (i.e. the interest rate and terms of the loan). This is known as pre-qualifying and it’s better if you do it yourself with the lenders you choose prior to going to a dealership and relying on them. This will let you manage the process and compare and ultimately make a better decision.

Take notes. Use your computer’s printer. Have as much information in writing as you can. Remember, this is a decision making process you’re engaged in. Especially since you’re probably looking to spend anywhere from $15,000 and up on a new or used vehicle.

So, also ask yourself, “How long am I going to drive this car?” If you’re like most people and only plan on keeping it 3 ½ years or so, then you typically don’t want to finance it for more than 60 months (in fact less is better). There are a lot of dealers who will try to get you to a longer term in order to get your payment lower. But, look at 72 or 84 months only if you’re certain that you’ll be driving that vehicle at least 90% of the term of the loan.

Many dealers take a mistaken approach that buyers are only interested in payment and so they will manipulate the term to fit what you tell them is your monthly payment budget. You are far better off “stepping down” in terms of the vehicle you’d like to something that is less expensive than to go for a 6 to 7 year payment contract. You’re generally not likely to get enough discount to reduce the payments to the amount you’ve budgeted. So be realistic.

Remember one thing—it’s a car. It’s not a lifestyle or a personal statement. It’s transportation. And, rather than let things get a bit terse at a dealer, go home. Think on it. Do a bit more homework. Come back another day. The dealer is typically going to try to get you “buy and drive today”. But, unless you just drove your car into the bay or it caught fire, you don’t have to do anything today.

That’s just a couple of thoughts for now. I’ll come back with a few more “rules” in a day or so. But, keep these in mind. They’ll help you do 2 things—pay less for a vehicle (price and payment) and keep the process from getting aggravating.

Bottom line. Yeah, now is a good time to buy a car. If you can afford it and if you go into it with your eyes open. Then it can be a good time to buy and you can have a good time buying a car.

A Little Car Talk

Pretty much everyone who knows me knows that I spent the last dozen years working in the car industry—selling them, training people how to sell them, consulting with dealers on how to be more efficient and profitable. So, I thought I’d spew forth some thoughts on the industry, its ailments and what would help.

We know that GM and Chrysler are on the brink. Ford is shaky. Toyota lost money last year. If Honda made money, it wasn’t much. VW is now making noises that it wants to grow to become the top auto manufacturer in the world. Lots of turmoil and changes.

Even when things were going pretty well, people had quit buying vehicles from American manufacturers. The reason was pretty simple, for too long the Detroit 3 didn’t make very good vehicles, put its priority on SUVs even when gas got to $4 a gallon and in general didn’t do a very good job. Then the economy went down the toilet and people just quit buying. It crippled an already wounded Detroit 3 and hamstrung the major Asian manufacturers. But that’s only part of the problem.

Bailouts from the taxpayer may keep the manufacturers afloat—or not. But that doesn’t have a whole lot to do with the process of actually buying and selling vehicles. That’s done at the franchise or dealership level. And at the dealership level is where the car industry gets it deserved bad name. Let’s be crystal clear, there are a lot of dealers out there that are ethical (the last place where I sold cars epitomizes how to do it with integrity). But, there are also a lot of dealers, irrespective of their nameplate, who seem to revel in perpetuating the image of the double dealing, lying, screw the customer car dealership.

Here’s the bottom line—if there’s something going on in a sales negotiation with a customer that you won’t, can’t or don’t disclose then you damn well shouldn’t do it. Things such as “stealing trades”—which is intentionally undervaluing a vehicle trade appraisal to boost profit. Things like claiming that a customer’s credit isn’t as good as it really is in order to boost the interest rate of a naïve or unsuspecting customer. Things like high-balling a proposal (“pencil” in the jargon of car sales) in order to “launch” the customer and then get them “under control” and more reasonable during the remainder of the negotiation.

Things like failing to disclose “back-end” (warranty, GAP insurance, etc.) during the negotiation and close, which isn’t supposed to be done, but still routinely happens. And after underallowing on a trade, financing a customer for 84 months (7 years) knowing that the customer will want to replace the vehicle in less than 4 years and will have thousands and thousands of negative equity (talk about shooting yourself in the foot).

These are just some of the things which alienate customers. There is an even longer litany which can be listed. However, these types of behaviors put the retail side of the industry in a bad light and even worse, are indicative of a mind-set which is concerned only with “today’s sale” rather than on building loyalty and repeat business. I know of a dealer in the L.A. area who brags about the $2 million sign he has soaring over the dealership paid for by the profits from the over-priced after-market service contracts he sells with proceeds going into off-shore accounts. His profit margin is so high because he revels in making it exceedingly difficult for customers to get pay-outs on the service-contracts for repairs.

And, there are still far too many sales managers and sales staff who think it is perfectly all right to lie to customers. All this combines to imperil the auto industry in a totally different way than the poor decisions and management of some manufacturers. No brand of car is immune from dealers who operate in this fashion. It’s not confined to the Detroit 3. You’ll find Lexus and Honda and Mercedes and Kia dealers who do the same kinds of things. By the same token you’ll find Infiniti and Toyota and BMW and Suzuki dealers who are totally ethical.

Caveat emptor has long been the watchword of the retail side of the auto industry. Until this changes, the industry will continue to be in peril—at the expense of the consumer.