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Archive for the 'Car Dealer Confessions' Category
Part 5 of Car Dealer Confessions…By Tug Pullman.
I’ve given you an honest look at the inner-workings of a car dealership and may have painted a slanted picture of the people in the industry. Do they deserve a bad rap? Definitely up for debate. So, I thought in this week’s installment I’d (try to) explain the pressure new & used car salespeople are under. This may remove (a bit) of the culpability for some in the automotive retail industry, but I can’t, in good conscience, defend all of them. Some are just plain old crooks who revel in their ability to deceive car shoppers.
The new & used car salesperson’s’ main pressure point: Financial. After one disappointing month (financially speaking) the General Manager wrote on my pay stub “Work your pay plan!” This was my instruction to work towards the sales and bonuses which paid the best. (Everyone in a dealership has a compensation plan based on commission and bonuses.)
As a rule of thumb, a Salesperson receives 25% of the sales profit, with a bonus for the total sales in a month. “Working my pay plan” means selling cars with the highest profit margins. New car profit margins are limited by law and the market, so the highest profit margins are usually found on used cars and truck. This is why you find the rally cry of “switch them to used” in most new car dealerships.
The shrewd salespeople of the bunch know exactly which used vehicles have the highest margins. These used cars suddenly become the vehicles of choice for their customers. Funny how that works.
In addition to the 25% commission, the dealership gives special bonuses on certain vehicles. Bonuses are paid on the oldest vehicles on the lot. (Aged Vehicles) Dealerships have a “floor plan” - a loan for each vehicle on the lot. They pay interest on each vehicle, so the longer is stays, the more it costs. I’ve seen bonuses as high as $1000 on these older used cars.
If you feel the Salesperson is steering you away from a vehicle you like, this is probably why. For new vehicles, this pressure usually comes from the manufacturer. They constantly throw contests and incentives at the dealerships, and individuals, to increase sales.
This takes me to the industry-favorite: the “Spiff”. No, this isn’t the sharp dressed guy on the floor. The spiff is an extra cash payout if the bonus is hit for a specific time period. Just about every car dealership has a daily spiff on Saturdays. They’ll have a morning “rah-rah” pep rally, and entice the Salespeople with a big wad of cash for even more motivation. Spiffs can be volume based (three sales today earn you $250) or activity based ($10 for every customer you introduce to your manager). I’ve even seen people paid to get their customers to climb into the trunk of a car. (I’ve mentioned this before)
If you want to see what I’m talking about, check out the classic car sales movie Suckers. The writers didn’t make this stuff up…
The bottom line for these new & used car salespeople: If they don’t sell enough cars, or even the right cars, they won’t have a job for long. Where I worked, if you didn’t have enough sales at the half-way point of the month, your days off were cancelled. Twelve hour days, seven days a week is a strong motivator to sell cars at any cost! Unfortunately, when Salespeople are under this kind of pressure, the consumer pays the price.
Add all of this up and you’ll have a plenty of reasons not to shop at commission-based car dealerships. The best interest of the customer doesn’t line up with the best interest of the Salesperson; it’s no wonder most people would rather have a root canal than buy a new car.
Do yourself a favor and shop for your next car at a one-price dealer. Do your homework to ensure it’s a good price. (Unless you live in a cave, you’re probably already familiar with the links within our Friendly Resources.) There’s no reason you can’t get a Salesperson who actually cares about your needs.
Going up against highly motivated and trained professional negotiators, intent upon convincing you which vehicle is right and talking you into paying the highest possible price, is probably not at the top of your list of fun things to do on a Saturday with your family.
Good luck out there, buying a used car doesn’t have to be so tough…
Part 4 of Car Dealer Confessions…By Tug Pullman.
Most new car dealerships have a very similar infrastructure. The Salesperson greets the customers, shows them the vehicles, takes them for a test drive and begins the paperwork. When the time comes to discuss price and payments, the Salesperson must go to the Desk Manager.
The Desk Manager’s sole function is to get as much as possible for the vehicle. Many times it appears as though the Customer and salesperson are combining forces to get a good deal out of the Desk Manager. This is by design; classic “Good cop, Bad cop” rouse.
Unfortunately, for newer Salespeople who don’t know any better, the Desk Manager deceives the Salesperson into thinking it’s the best deal he’s willing to give the customer. They do this to ensure the Salesperson is convincing enough when pitching the deal to the Customer. They call this tactic “loading the Salesperson’s lips.”
To get a price and payment quote from the Desk Manager, at this new car franchise, you needed three things: A properly filled out buyers order with the customer’s information, a written commitment of what the customer will do today, and a deposit.
They teach this from day one in the training. These three things give the saleperson total control over the customer. If the customer says they are not buying today, you still get a written commitment.
As the trainer said, “Any customer will buy today for some price. If it’s a dollar down and a dollar per month, at least that’s a starting point.” The car dealership is just trying to take you out of shopping-mode and into negotiating-mode.
The problem arose for me when a customer saw one of our many “zero-down” commercials. Every one of our ads promised “zero-down.” This customer obviously didn’t want to put any money down - he repeated it several times. I was presented with a conundrum; I had to go to the Desk Manager with a commitment and deposit in order to get a price quote for my customer. How do I ask for a deposit when the customer clearly wants to put zero down as advertised?
I didn’t believe it to be very customer friendly to ask for a cash deposit just to get a price quote. So, I jotted down the customer’s commitment “Customer will take delivery today for zero down and $379 per month”. I trotted back to the Desk Manager with the paperwork and laid it down in front of him.
“Where’s your deposit, Head?” The Desk Manager called everybody Head; this was not a reference to my particular anatomy. “He wants to do the deal on TV, no money down”, I replied. “Still need a deposit to work a deal”, he said gruffly. So I returned to the customer. We had a fairly positive relationship up to his point, but me asking for a cash deposit to get a price quote didn’t go over well. Besides, he didn’t have any cash on him.
I returned to the “tower” (the raised platform in the showroom where the Desk Managers sit). “He doesn’t have any cash, and just wants a payment quote with no money down”. The Desk Manager looked at me for a second, and immediately paged my Manager.
Once my Manager arrived, he said, “This weak sister can’t get me a deposit, will you take a turn and show him how it’s done?” He was half-joking, but obviously trying to make a point.
The floor Manager’s role is what they call, in the car business, a “closer”. They go to the customer to get the deal done. They are trained negotiators and practice this skill constantly. What happened next was one of the most shocking things I witnessed in my short tenure.
The closer came out of the office with my customer’s watch. He actually took his watch as a deposit!
When I asked how he did that, he casually replied he always gets something. Cell phones, wedding rings, even shoes! He entered the tower like a conquering hero as he presented the watch and revised commitment.
They looked at me and said “Now that’s how it’s done, Head!”
I thought to myself…Not in my world it isn’t.
Part 3 of Car Dealer Confessions…by Tug Pullman.
Saturdays are the big days at a new or used car dealership. This is the day which makes or breaks your entire week. It’s not uncommon for a car salesperson to sell three or four cars on a Saturday.
At this particular dealership, they had a lovely invention entitled “Midnight Madness” every Saturday. As you may have guessed, this means the car dealership is open until midnight on Saturday all throughout the summer months.
Midnight Madness rules were simple: Sell a car and you get to go home at your regularly scheduled time. This was either 6pm or 9pm. If you didn’t sell a car, you were subjected to not only working the midnight shift, but also the shame and ridicule of your peers.
And, if you have ever worked outside, on black-top, during the summer months in North Carolina…you know that a 16 hour shift is no prize.
As you can imagine; fifty car sales people with type “A” personality aggressively pursuing a limited number of customers, in the hot summer sun, does not make for the best of customer experiences. Haven’t you ever noticed that you felt like prey when you pull into a car dealership?
So, with this enourmous threat looming over our heads, we sit in the Saturday morning sales meeting. In this particular meeting they review the newspaper ad for this week. The sales manager went into specific detail about the vehicles advertised for the super low prices. He said they were ordered special for the advertisements (car dealership lingo for price leaders), and customers will not want them.
These vehicles are the ultimate base units available; without the options most of us would consider standard. One was a Ford Explorer without power windows, door locks, or air conditioning. The sales manager said these vehicles usually only sell to fleet companies, so whatever we do: “Don’t sell them because they are hard to get!”
I didn’t have the nerve to speak up in the sales meetings - afterwards I asked my manager: “So what do we do if someone wants to buy the Ford Explorer in the newspaper?” To which he responded: “Switch them to something else.” I inquired, “Isn’t that bait and switch?”
His profound retort: “Yeah, but everyone does it.” I asked myself again “What have I gotten myself into?”
Part 2 of Car Dealer Confessions…by Tug Pullman.
When my intensive car dealership training commenced (about 2 days), I was paired with a veteran used car sales person whom they introduced as my “Mentor”.
This gentleman enjoyed two hobbies: chewing tobacco and collecting the business cards of Sales People who either quit or were fired. His first action as my professional mentor: Showing me his “Wall of Shame”. Under his desk was a cork board, upon which he tacked the business cards of departed Sales People.
He went on to tell me most people don’t make it past the first month in this business. He also showed me the spot reserved for my business card.
Competition can be fierce in the automotive sales field. I didn’t know it then; this was the first overt attempt to “get into my head” by a veteran sales person. They like to keep the ranks thinned out so there were more sales for them. A young intelligent new sales person represented the biggest threat to their sales pipeline and comfortable work life.
Most of these demoralizing head games took place on the “point”. The point is outside of the dealership, closest to the entrance where customers pull in. If you have ever pulled into a dealership and had the feeling that you were raw steak being lowered into the lion cage, then you have visited the point.
For traditional Sales People, this represents their “turf” and the best chance they have to sell a vehicle. The more aggressive they are, the better their chances of landing a customer.
My first trip out to the point began harmlessly enough. Not too long after staking my claim near the front entrance, I was approached by one of the top Sales People. He was an ex-professional pool player and quite slick in a “country” type of way.
He began the conversation normally enough, commenting on the weather and such. Not long into it, he began his spiel about how terrible business was, and how he heard they would be letting several Sales People go at the end of the month. His technique became quite transparent as he continued talking; eventually he walked past me to grab the customer who just parked in the point..
I filed that little maneuver under the title “Chat and Swoop”, a technique he obviously perfected. I was starting to catch on…rather quickly.
Want to know what goes on behind the scenes in a car dealership? What if you knew their tactics?
What if you were one step ahead and took them out of their game? Traditional car dealership salespeople are trained to follow a specific route. If you know their route - now you’re in control.
Discover traditional car dealership tactics in our new section: Car Dealer Confessions. I had the opportunity to sit down and pick the brains of a successful ex-new & used car dealership salesman - Tug Pullman.
I knew right away, when I heard his stories, this is the type of info people needed to know.
Check it out. Share your own stories too…
