How To Prevent Your Own And Your Salesman's Frustration
A car pulled up in front of my dealership the other day, and an older gentleman got out and introduced himself as Dr. Faraz. I asked him how I could help him, and he told me he wanted to look at a new Zorch Aventa sedan. He had seen our national ad, the one advertising $199 a month, and wanted to talk about that after he looked at a car. Thinking I had a good chance of making a sale, I walked Dr. Faraz to a row of Aventa sedans, quizzing him about the features he wanted in his new car. After a few minutes we picked out a car that had everything the doctor wanted: leather seats, navigation, blind-spot monitoring, and backup sensors. The sticker price was around $31,000. "Would you like me to work up some numbers for you?" I asked Dr. Faraz, and he said yes. Ten minutes later I returned to my office and went through my presentation, asking Dr. Faraz for his OK at the bottom of the paper. The doctor's eyebrows furrowed. "I don't understand why this is so high," he said. "The ad I saw said you could get a new Aventa for $199 a month. This is more than twice that." After a little questioning, I discovered that Dr. Faraz didn't know that the ad he had seen was for a lease. He thought it was for regular five year financing. So I had to explain the differences between leasing and financing to him. He grasped that but still couldn't understand why the payments were so much higher. I pointed out that the car in the ad was a base model with an MSRP of $23,725. But the car he picked out for himself was roughly $7,000 more. I asked him if he could do without the leather, the navigation, and all the safety features, but he was unwilling to part with any of those things. Dr. Faraz was polite and listened to everything I said, but I got the feeling he still thought he was being tricked in some way. In the end he left without buying a car, promising to "think about it" over the weekend. This kind of thing happens every day in dealerships all across America, and it's very, very frustrating for the typical salesperson. The problem has two causes. First, most people don't know how to read car ads. Second, most salespeople, myself included, don't know how to head off objections that can arise when customers come in on an advertised lease special. Just so we all know what I'm talking about, here's an example of the typical ad: $199/month
don't have sales people. Toasters are sold by retailers whose very goal is to sell them as inexpensively as possible. There is no negotiating a price of a toaster, because the manufacturing costs are what they are and the manufacturer and retailer can adjust the price as needed to move as many toasters as they need to.
Cars are just bigger toasters with more variation. The fact that the car sales industry currently has "toaster facilitators" does not mean that suddenly there should be obfuscation on pricing.
Look: Walmart sells the toaster at the same price to everyone. Everyone knows this. The car dealership on the other hand. is motivated to sell each individual toaster for the absolute most money humanly possible. With that dynamic at play, people will always despise and mistrust car salesmen, as they rightfully should.
The only way around this, if you're bringing in commission-based toaster facilitators is to disclose to the public what the dealership is going to make on every deal. That's not unreasonable.
@ RESgw Well you wrote on the wrong blog, but we can continue here if you please. You failed to answer any of my questions from before. Just so everyone that is reading this is aware, you think that car dealerships should tell everyone how much profit they make on each car deal. I said you have lost your mind. I asked you to please tell me any other retail operation that reveals their profit on the product they sell. Of course you didn't answer this. I asked you what profession you work in. Of course you didn't answer this. I asked you to reveal how much profit is made on each toaster sold. You couldn't answer this.
You have zero idea on economics in the real world. A toaster isn't sold by retailers whose very goal is to sell them as inexpensive as possible. That alone proves you know zero about economics. A toaster is sold at the most that the market will pay for it. That is how products are sold in real life.
Don't want to negotiate on a car. Then Don't. Each new car sold in America has an MSRP. Pay the MSRP and be on your way. Why do you care what someone else paid for the same product. How do I know you didn't have a coupon for your toaster, therefor you paid less than I did. Who Cares!
If the public actually knew what was made on a car deal, they wouldn't believe it anyways. I can hear it now, "There is no way you're losing $ to sell a new car."
Waiting for answers to my questions.