Question of the Day: How can a carsalesman survive?
Question: I am 62, been a salesman for over thirty years with the same Dodge store. I use your site for many purposes, especially getting value of used cars and ratings, and find you to be the most fair of the sites. That is why i chose you to ask this question. One thing I would like to know before i retire. Why does the media publish the invoice, hold back, etc...
of automobiles? We are the only business this is done with. People are actually instructed how NOT TO PAY ANY PROFIT AT ALL. We get 25% of the profit and put in long hours. But what is 25% of nothing? It was not like that when i started and you could earn a decent living. But today things are getting worse. Yet the best service is expected even though a customer will actually offer you invoice or below. Where did this come from and what is the reason? I hope this is not a silly question.
Answer: No, you are not asking a silly question. And you are not the only person who is asking this question. The car business has changed quite a lot and much of the change has come because of the internet. The internet has brought disclosure to many areas of business, not just auto sales. Online, customers can get a lot of information and sometimes this leads unrealistic expectations. At Edmunds.com, however, we don't automatically tell consumers to demand to purchase cars at invoice. We have a feature called TMV, True Market Value, and this is the average price cars are being sold for in you area. In many cases, TMV is the sticker price. And you should make a nice profit by selling cars at sticker. In the future, if customers are grinding you on an indemand car, tell them to check Edmunds.com's TMV prices.
- Posted by
- Philip Reed October 20, 2006, 10:09 AM
- Permalink
- Categories:
I think a large part of the problem (from both buyers' and sellers' points of view) is that cars are the only new items (other than houses or land) where it's a given that prices are subject to negotiation. In the bad old days, the consumer was at a disadvantage, but now the internet has led to easily accessible information about invoice prices, holdback, etc.
But dealers seem to be finding "creative" ways to fight back -- in my area (central VA), it's the infamous "processing fee" (a.k.a. "doc fee" in other parts of the US), which is already imprinted on the sales contract to make it appear non-negotiable. Locally, these fees are now up to about $200-$250, and for luxury cars, they can approach $400.
When I bought my two latest Camrys (from the same dealer), there was in fact no budging on this essentially made-up fee. They may as well have put "additional market value" -- remember that? -- on the window sticker.
But when I shopped around a little last summer for my son when he purchased a Prius, the local dealer quickly cut $100 off their fee to match the dealer in the next town (of course, the Prius was selling for full MSRP anyway).
I did get around the fee entirely in 1990 when I bought my new Sable by walking out of the store during negotiations. The salesman was calling me back the instant I stepped inside the door at home (pre-cell phone days), quite willing to drop the $125 fee.
Thanks for sharing the info about doc fees in your area. This is kind of a sneaky way of trying to take back profit. I alway ask about fees early on in the process so I'll know what's coming. That way I can negotiate a little deeper discount to cover any unpleasantness on the back end of the deal.
People aren't accustomed to it, but you can negotiate anything. All you have to do is ask, and often you'll get a better price on that motel room, a home item from Nordstroms and bulk fish at the supermarket.
Those are just some of my things I've gotten a discount on just by asking. Just today I got 6 weeks of meds from my doc's sample closet. Last month I purchased some floor tile and got the store to throw in two gallons of adhesive free. And I didn't haggle either; just asked nicely and let it go at that.
It's not that difficult to figure out what the store is paying for stuff either. National building cost numbers are online so you can figure out the profit your remodel contractor is making. For consumer goods, just look up a rock bottom sale price at Froogle or Fatwallet and figure the retailer is making ten points on top of that. Furniture and jewelry is notoriously marked up 100 to 1000% . Car repairs is another big area that you can get a break on - use your savings to tip the techs in the back. :-)
It seems that some customer’s don’t realize that at their own work, even if they personally are not directly involved in sales, the only reason they have a job is that somewhere in their company someone is selling something; And nobody knows the cost of their products or services. And why should I know how much you paid for your bag of Fritos that you just sold me? I wonder what kind of markup they are asking for on their goods or services. 25%, 50%, 75%, more? Yet, there is so much distain for a car salesman?
Apart from some of the high-line automobiles, the major domestic and foreign vehicles have a relatively small markup between the MSRP and the dealer invoice, on average around what? 10% or less. This is a very fair markup to ask for; unfortunately there a stigma from the ‘old car days’ when there was no bank or government regulations on how much a dealership could charge and a dealership could take advantage of a customer. Today, a customer paying MSRP is not getting a bad deal. You will find that most of your customers are not unrealistic. In most cases, if you apply the manufacture rebate (if applicable) off of the MSRP, you can come to an agreement with your customer.