Car salesmen are…
Scum. Crooks. Liars. At least that’s what an autocompleted Google search would have you believe.
As Unhaggle’s former Director of Business Development, I spoke with more than 1,600 dealerships across Canada over 19 months. And my observations of new car dealerships are vastly different than I would have expected on my first day.
Here are a few carefully selected myths I would like to deconstruct based on my own observations and experiences:
Myth #1 – Dealerships can always do better on price
It’s one of the first rules of negotiating – never let your opponent know your best offer. If you are buying, do not let the seller know the maximum you are willing to pay. If you are selling, do not let the buyer know how low you can drop your price.
In a world where automotive manufacturers love to advertise the dealer may sell for less, most new car buyers just want to get right to the point: “What’s your best price?”
A study conducted earlier this year by J.D. Power found that more than 36 per cent of new car buyers erroneously assumed that dealerships profited $3,000 or more on new car sales. In actual fact, the average profit per new car sold is $1,161. This equates to approximately four per cent margin, which is exceptionally low compared against most retailers of any other type.
Combine this with rampant competition for most brands, total transparency through the internet, and you now have a car salesperson questioning just what his or her “best price” ought to be. Dealers want to give you a fair price, but they are mindful of fixed operating expenses and their bottom line. After all, no business wants to lose money per transaction.
A dealership may be able to give you a better price, but it’s unlikely to be below dealer cost. Nor will you get a dealership to waive mandatory fees already paid to the manufacturer.
Myth #2 – Dealerships hide fees
I once heard a critic of the automotive industry refer to buying a new car as playing the shell game with your money. Sure, you can get a discount, but you’ll get less for your trade-in. Yes, they can give you a deal on accessories, but you’ll have to pay a higher administration fee in the business office. You get the idea.
Negotiating a price can be very time-consuming, and depending upon your method of payment, a few hundred dollars knocked off the original price might only amount to a dollar or two in savings on your monthly payment. And let’s face it – you don’t need to be a math major to be a car dealer. Most automotive sales professionals would prefer to explore features and benefits than crunch numbers with you.
Generally speaking, you and the dealer both want to arrive at an all-inclusive drive away price. How the individual fees are labelled doesn’t matter. So long as you got a fair price and the dealership made a profit, everybody wins.
Myth #3 – “Make me an offer” is a sales trick used to close me!
It certainly is. And it’s designed to do it quickly and painlessly.
But I’d go so far as to say that no reasonable offer will ever be refused. A good guideline when calculating an offer to the dealer is three to seven per cent over invoice price, depending upon the make, market and demand for the vehicle. Use a Dealer Cost Report to calculate a fair drive away price, and then present that to the dealership for consideration. If you get a no, simply walk out and present that offer again elsewhere. If no dealership is willing to accept your offer, perhaps you need to adjust it or consider a different brand.
There are very few dealerships representing even fewer makes and models across Canada who would refuse an offer of, say, three or four per cent front-end margin.
Reasonable offers are generally accepted. Attempting to grind a dealership down to the break-even point is usually not very successful. The less time and effort the dealer needs to put into making the sale, the better the price you will usually get.
Myth #4 – Internet customers terrify car dealers
It is said that the average consumer will now do 16 hours of research online before entering a dealership. Dealers know that new car buyers are better educated than ever. Still, the common perception is that well-informed consumers are intimidating to dealerships.
Internet shoppers are generally closer to a purchase decision and cost less to acquire. Dinosaurs will die, and before long, you will be hard-pressed to find a dealership that doesn’t see the benefit to a comprehensive digital marketing strategy.
Myth #5 – I’m just a number to the car salesperson
This year, my wife and I purchased our first house. It is understandably the largest purchase we have ever made. And I’m counting on my house to last longer than the six to 10 years most consumers hang on to a new car.
While the agent we worked with was great, I have only heard from her once since closing – and that’s because she sent us a Hallmark card in the mail to say congratulations.
Contrast that with the last car I bought. I hear from the dealership regularly. The salesperson I worked with emails me from time-to-time to ask how things are going. I receive calendars and key chains in the mail, and I get a Christmas card regularly. It isn’t much, but it shows some level of care.
In fact, dealerships tend to be more actively involved in our communities than many local businesses. From sponsoring sports teams to charity car washes, I would have difficulty identifying any industry that works harder to care for its local customers and community.
Working with Unhaggle has given me valuable insights into the nature of most dealerships and their teams of sales professionals. Now a freelancer, I carry that lesson with me when I approach any new client – never judge a book by its cover.
I’m not defending all dealerships. Certainly there are less scrupulous dealers across Canada that earn their negative reputation. But to paint all dealers with the same brush just isn’t a fair depiction of reality.
Dealers, for the most part, are not scum, crooks or liars. Dealers simply want to earn your business. Keep an open mind, and you just might be surprised.