Do dealerships make much money off new car sales? My impression is the dealer gets compensation (kickbacks) from the mfg. Also, the drive to sell you other stuff (extended warrantys, paint “sealers”, floor mats, etc.)-this stuff is profit for the dealers.
I think they make much more on used cars.
Interesting, since I’ve heard that line from many car salesmen.
Some of the misconceptions about what goes in during the sales process astound me.
I don’t have time to cover them all, but I’ll do a few.
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The salesman, when he goes to the desk, doesn’t usually do it for psycological. The manager is the boss, he’s in control. He works the numbers on the deal, and he tells the salesman what he can or cannot sell the car for, period.
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Salesman are dumb. They’re trained to be dumb, in most dealerships (in good delaerships they’re trained to be smart, but this are few and far between). They’re trained to not make up their own mind about ANYTHING, because they’re not the boss. The salesman on 99.99% of dealerships cannot accept a deal without managers specific approval.
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The reason it often takes so long for a salesman to get back to you when he goes to the desk is because he’s shooting shit with his manager. A lot of people dont seem to understand that a car dealership is a boys club. It’s a bunch of guys, and sometimes a girl or two, hanging out and shooting shit all day, once and a while doing some work. When there’s a customer they tend to get bored, because they’re not shooting shit. So they’ll hang out at the sales tower for an extra few minutes watching keyboard kitties or something, when they don’t need to. A lot of times, vie heard them use the excuse, “awww, I’m lettin’ 'em sweat,” but they’re not. They’re goofing off.
I sold cars for just over a year, back in my early 20s. It was in Australia, so the car-sales environment might be a little different from the US, but probably not much. It was also before the era of the internet, so things have probably changed a bit.
Still, based on my experience as a salesman, if i were in the market for a new car, this is how i’d go about it:
[ol]
[li]First, before anything else, work out what car you want. If you’re still undecided between a Civic and a Corolla, or between a Suburban and an Explorer, go drive them and decide which one you want to buy. It’s always easier if you have already made your decision about the car itself, and are just shopping on price.[/li][li]Once you’ve decided on the car, sit down and make a list of the options you want. Make sure you’re very specific. If there’s a choice of engine types (V-6 or V-8), wheel types (steel or alloy, 15" or 17") etc., then make sure you are clear what you want. Also include stuff like color (if that’s important to you), manual or auto, sunroof, etc. And include even the smallest, most mundane stuff, like floor mats or headlamp protectors. You need to know exactly what you want from the beginning, so there are no surprises later.[/li][li]Organize your financing beforehand. I don’t know enough about car financing in America to know whether you can get a good deal through the dealer or not, but i know that, when i sold cars, most people who financed through our dealer paid more for their money than if they had gone to the bank. I guess if the dealer has some sort of 0% offer, it might be worth taking, but read the fine print.[/li][li]If you have a car to trade, take it with you. In my experience, you could always get more for your old car by selling it yourself, but some people don’t want the hassle.[/li][li]Find three dealers (or more; three is a minimum) close to where you live who sell the type of car you want. If it’s a Corolla, find the three nearest Toyota dealers. Go to each of those dealers, present them with a piece of paper listing exactly what you want in a car, and tell them that you would like a quote on this car and this car only. Tell them the quote should include all options and extras listed, as well as all dealer charges and taxes, and that you want to take delivery by [insert date here]. If you have a trade-in, ask them to look at it, and tell them that the quote should tell you the changeover price, i.e., how much money you will have to pay out of your own pocket to move from your old car into your new car.[/li][li]It’s important to let them know (a) that you won’t be buying today, (b) that they will be competing with other dealers for your business, and © that there will be no second chances. The dealer who offers the best price first time around gets the deal. Make absolutely clear that you are willing to turn and walk away if they don’t give you a price for the exact car you want. [/li][/ol]
A strategy like this has some important advantages, i think.
It makes things easier for people who aren’t very good at negotiating, because there is no negotiating. It even makes life easier for the salesperson, because he or she knows exactly what they need to do to get your business. While someone like you might force them to make a fairly low-profit sale, it will also be a low-stress, low-time-consumption sale.
Telling them that there will be no second chances heads off the nickel-and-dime price reductions that some salespeople try. Often, they will give you a number, you say it looks too high, so they go and knock another $100 off. And this just continues until you agree. If they know that they need to give you their best deal up front or lose your business, there’s a better chance that they will go “balls and all” (as my old sales manager called it) on the first go.
The key to all this is to be very clear up front that you will walk and not come back if they try any bullshit. If you ask for a quote on a blue V6 auto, they better not come back with a quote for a white 4-cylinder manual.
It’s also worth being clear that you are a serious person who is, in fact, going to buy a car. While a lot of customers get annoyed when the salesperson asks if they’re going to buy a car today, the fact is that the car business sees a lot of “tire kickers,” people who, for some unknown reason, love to spend hours in car yards getting prices and information without any intention of buying a car. It’s only reasonable that the salespeople are interested in working out whether you might actually buy a car, or whether you’re just wasting time, and therefore costing money.
And only do all this once you know you are ready to buy. You not only should be ready to walk away from the ones who play games, you should be willing to put your money down with the dealer who gives you the best deal.
That’s how i would buy a new car, anyway.
Unfortunately, if you’re buying a used car, this doesn’t really apply. The thing that makes buying a new car easier is that all new cars are (in theory at least) identical. A new blue V6 Camry with a sunroof and five-spoke wheels should be the same no matter which dealer you buy it from. Used cars, however, are all unique. They have different mileage, different levels of wear, different options, etc., etc. This makes them less amenable to the bidding-war strategy outlines above.
I second that. In fact, 6 out of the 7 dealerships I went looking for prices on various models said almost that exact sentence word for word to me. Mostly, they stopped trying when i indicated that I was only interested in research and browsing. The last one, far from a paragon of virtue, just never sent anyone out to talk to me, cementing my decision to go elsewhere.
I get the same thing sometimes, but only when I’ve come close to reaching a final decision.
For me on new cars, there’s no negotiation – period – and so the only thing of any possible interest to the salesman is whether he can close a sale today, tomorrow, or not at all because maybe the exact configuration I want is at another dealer. In my case, they’re also not allowed to throw in freebies, and in my state, they’re also not allowed to waive doc fees (although by contract, they must wave them in states that don’t prohibit waiving them). That leaves them with trying to sell me dealer-adds, which I already make clear I won’t take, and warranties (ditto), or their offer of financing. Many times, the dealer does find better financing than I bring with me, and other times not. In the end, his question is pointless, because there’s not really anything he can do to get me to buy today. Well… maybe next time I’ll ask to have it put in line first for pre-delivery so I don’t have to come back the next day (I’ve never gotten a new car the same day as I’ve bought it. Never!)
It used to be the same for used cars, as long as I bought them directly from my company, but they stopped that program 
Now for used cars, I’ve gotten that question, and I think it has a lot to do with being a cash shopper (which includes having one’s own financing). They realize at that point that the only bargaining power they have is out-the-door price (at least in my case where I won’t buy extras like warranties). That means, the only real question for them left is, “what do I have to do to get you in that car today?”
Yep, I’ve heard it too, and I immediately ask to talk to another saleman. If I hear it a second time, I go to the sales manager and ask him if his dealership is actually interested in selling me a car. I didn’t say it doesn’t happen, just that salesmen who are locked into that mode don’t do very well. I never used that stupid line and I grossed $20K in the three months I worked at that place. The guys using tired lines and outdated sales methods struggled to make ends meet.
Which represents an important advantage that the dealership has over the customer: Anything that the salesman offers can be repudiated by the sales manager; anything that the customer offers is (pretty much) binding.
Disagree. You are under no obligation for anything until you sign the contract. If you offer $20K and the salesman comes back with $25K, nothing prevents you from dropping your offer to $18K.
What Chefguy said. You make it sound like the customer is under some sort of obligation to take what’s on offer, but the fact is that, until you both agree to a deal, put it on paper, and sign it, there’s nothing binding at all about the discussion.
I’d like to add a couple more observations, based on my own experience as a car salesman.
First, the stereotype of the pushy, dishonest salesperson had plenty of basis in reality.
Most people in the profession are much more interested in making one sale today than they are in making sure you come back to them when you need your next car. My sales manager was notorious as someone who “burned” people; that is, he would do everything possible to get every cent out of them and give them as little as possible in return, and didn’t care if they ended up hating him as long as they drove away in a new car. He was, i think, one of the main reasons that i absolutely hated the job, and why i gave it up after about a year, despite the fact that i was just starting to make some good money.
Second, there are almost as many dishonest customers as there are dishonest salespeople.
I lost count of the number of times a customer would say to me something like, “How can you offer me $6,000 for my car? The dealer down the road offered me $11,000 the other day.” In cases like that, i knew with absolute certainty that no-one was going to pay $11,000 for that car, so i would say, “Well, that sounds like an incredible deal. I can’t compete with that, so you should go back to that other dealer and tell him you’ll do business with him.” I’d shake their hand, and turn to go back to my office.
Usually, either they were outright bullshitting me, in which case they’d follow me back and tell me to “Give me your best price, anyway, just in case,” or they would go back to the other dealer and find that his offer of $11,000 was based on them paying full ticket price for the new car (basically, he had inflated the price of their trade-in by using some off the leeway on the price of the new car).
Of course there’s no legal obligation for the customer to honor their offer, but in practice it will be much more uncomfortable for the customer to back out since they don’t have the convenient excuse of being overruled by their manager.
uncomfortable, it’s sales. If you honestly think that salesmen don’t get uncomfortable (or surpress that discomfort) during the sales process, you’re blissfully ignorant.
Not to take what’s on offer, but to stand behind what he has offered.
Not legally binding. But only a small percentage of customers will offer $XXX and when the dealership says “Great, we’ve got a deal!” will then try to weasel out of their offer.
Shmendrik has said it rather well: few customers are comfortable backing out of what they offer. Whereas the dealership has things set up such that they can do this routinely.
It’s a reasonable presumption that a successful salesman has developed skill in suppressing such discomfort - almost certainly to a greater extent than the typical customer…
I’m not arguing that the dealership hasn’t given itself a sort of an out. If the deal the salesman offers is, in fact, not approved by the manager, then he can back out of it. But the fact is that NO deal that you talk about, no matter how good or how bad, is binding until it’s on paper and signed.
Also, on the customer’s side, if you don’t think you have the fortitude to back out, then maybe you shouldn’t make an offer unless you’re actually willing to buy at that price. In fact when i was selling, this is how they taught us to deal with the situation when the customer tells you want price he wants:
Customer: $18,000? That’s more than i wanted to spend. I was thinking that this would only cost me $16,500.
Salesperson: I’ll tell you what, if i can get you this car for $16,500, will you buy it from me?
Customer then has the option to say yes or no.
If the customer says yes, and then backs out later, there is nothing that the dealership can do about it. Furthermore, for the customer to do that is no more or less dishonest than what the dealership is doing. If you say, “I will do X if you get me Y” and then the other person gets you Y, and you back out, then you’ve been dishonest.
I should also add that, while we did have to get the Sales Manager’s approval for the deals we made, we were also well aware of what sort of deal a sales Manager would approve. Every time i went to the Sales Manager to confirm a deal, i already knew that the deal would be approved. I don’t think i ever once said “I can do this deal” and then had my deal shot down by the Sales Manager. And because of this, i never backed out of a deal that i offered a client. This isn’t because i or my Sales Manager were necessarily ore honest than anyone else—i’ve already said that i think he was an asshole—but simply because offering someone a deal that i knew wouldn’t be approved was a waste of my time.
I can’t believe i’m defending the sales staff here. As i said, the prime reason i quite sales is because the whole process, at least where i worked, seemed so slimy and fraught with ethically-dubious situations. But the fact is that lying and dishonesty are not just wrong when carried out by sales people.
If you as a customer, are not comfortable with backing out of your offer, then don’t make an offer that you’re not willing to honor.
I’m looking to buy a new car in about 6 weeks to replace an 8+ year old vehicle. I’m wondering if going directly to the internet manager or someone who is not on straight commission and dealing directly with that person can help me get a better out-the-door price than dealing with a salesperson because if I buy going through a salesperson the dealership has to give a good chunk of their profits from my purchase to the salesperson. Am I missing something here?
Managers are payed on commission too.
You don’t have to pay a lot of profits, just do your research as advocated in a million threads.
You guys think there’d be a demand for a legitimate ‘ask a car guy’ thread, to dispel all of these misconceptions about the car business? There’s a lot of them, but do people really want to know the truth, or are you guys happy knowing what you know?
As noted - if you mean legally binding, no argument. But many (probably most) customers will feel morally bound to stand behind an offer they make verbally - and it will be easy for a salesman to encourage them to do so.
By contrast, the dealership has a means (used often by some and no doubt rarely by others) to back out of any verbal offer made by a salesman: “Well I tried to get it for that price, but the Sales Manager said he couldn’t do it - we’d be actually losing money on the deal. (In fact, he gave me a pretty hard time - I guess I’m supposed to be able to stand up to hard-nosed customers a bit better than I’m doing today.) But I think if you were able to see your way clear to $XXX, he’d go for it.”
Car dealers have another popular tactic not available to the customer: adjusting the price after the deal is agreed to. There are a host of things they can claim are “standard” additional charges (taxes, insurance, transport fees, preparation fees, legal fees, paperwork fees, license fees, etc.). But the buyer never has the option to pay less that the agreed-on amount.
Well, i’ve never sold cars in the US, but in Australia this was literally not possible, unless the salesperson or the dealer was willing to actually commit fraud by altering a legal document after it had been signed.
Where i worked, the contract you signed when you agreed to a particular deal included the price of the car, all taxes, all dealer delivery fees, and all licensing and registration fees. There was literally nothing added between signing and delivery of the vehicle.
What “tactic”? These are standard fees that everyone pays. “Claim” has nothing to do with it. You are liable for all taxes, licensing fees, etc. No dealer in the U.S. will pay that for you, and the fees are exactly what you would pay if you went to the DMV yourself. You might be able to get them to waive any processing fees, but it’s doubtful. When you agree to a purchase price, that is the price of the vehicle minus tax, license, registration, etc. Why would you think that this is underhanded in some fashion? If it’s burdensome, then don’t sign the contract.