Confessions of a car salesman

by Caleb Reading

http://www.edmunds.com/advice/buying/articles/42962/article.html

The article spans eleven pages, so I’ll post the highlights:

 The first few questions were innocent enough, something like: “I enjoy relaxing and listening to music: yes or no?” But soon I noticed a trend developing. Question 7 was, “I enjoy going to bars: yes or no?” A few more innocent questions followed, then, “After going to a bar I feel good about myself: yes or no?” Questions about bars continued throughout.

Then, at about number 73, was this loaded question: “I like guns: yes or no?” I wondered how they would react if I crossed out the word “like” and put in “love.” Better yet, I considered inserting the word “automatic” in front of “guns.”

[…] The thing about car dealers is they seem to like to keep you waiting. Later, I would find out how important it is for the salespeople to feel they are controlling the customer. If you are waiting for them they must be controlling you. This obsession with control extended to job applicants too.

[…] Commissions were based on the “payable gross” to the dealership and were applied in three tiers. If the payable gross was from $0 to $749, our commission was 20 percent of the profit, from $750 to $1249 the commission was 25 percent of the profit. Above $1250 the commission was 30 percent of the profit. In other words, the higher the profit for the dealership, the higher the commission I would earn. Obviously, this motivated salespeople to build profit into the deal so they could hit that magic mark and get into the 30 percent bracket.

[…] The next step in my training involved the use of the “4-square work sheet.” Michael told me the 4-square was my friend, it was the salesman’s tool for getting “maximum gross profit.” As the name implies, the sheet is divided into four sections. When you have a prospect “in the box” (in the sales cubicle) you pull out a 4-square and go to work.

[…] The process begins by asking the customer how much they want for a monthly payment. Usually, they say, about $300. “Then, you just say, ‘$300… up to?’ And they’ll say, ‘Well, $350.’ Now they’ve just bumped themselves $50 a month. That’s huge.” You then fill in $350 under the monthly payment box.

Michael said you could use the “up to” trick with the down payment too. “If Mr. Customer says he wants to put down $2000, you say, “Up to?” And he’ll probably bump himself up to $2500.” Michael then wrote $2,500 in the down payment box of the 4-square worksheet.

I later found out this little phrase “Up to?” was a joke around the dealership. When salesmen or women passed each other in the hallways, they would say, “Up to?” and break out laughing.

The final box on the 4-square was for the trade-in. This was where the most profit could be made. Buyers are so eager to get out of their old car and into a new one, they overlook the true value of the trade-in. The dealership is well aware of this weakness and exploits it.

[…] This reminded Michael of something and he laughed. “Here’s another thing. Never give the customer even numbers. Then it looks like you just made them up. So don’t say their monthly payment is going to be $400. Say it will be $427. Or, if you want to have some fun, say it will be $427.33.”

[…] At times Michael became very excited as he thought of new things to teach me. At one point he said, “Oh! This is a good one! This is how you steal the trade-in.” He looked around quickly to make sure no one overheard him. “When you’re getting the numbers from the desk, they’ll ask if the customer has a trade-in. Say it’s a ’95 Ford Taurus. And say you took it to the used car manager and he evaluated it and said he would pay four grand for it. If you can get the trade for only three, that’s a grand extra in profit.

“So what you do is this,” Michael pretended to pick up the phone again, “you ask the desk, ‘What did we get for the last three Tauruses at auction?’ Then they’ll give you some figures — they’ll say, $1,923, $2,197 and $1,309. You don’t have to say anything to the customer. But he sees you writing this down! And he’s going, ‘Holy crap! I thought my trade was worth $6,000.’ Now it’s easy to get it for $3,000. That’s a grand extra in profit. And it’s front-end money too!” (I later learned that front-end money was what our commissions were based on. Back-end money was made on interest, holdbacks and other elements of the deal.)

[…] Personally, I think leasing can be a good way to go. For one thing, leasing allows people to drive more expensive cars. But you have to be careful. Some dealers base leases on 110 percent of the vehicle’s sticker price. This is called a “full pop lease” and it’s what most dealerships aim for. Also, it’s easy to disguise the interest rate in a lease because it is expressed as a decimal multiplier instead of a more recognizable percentage rate. For example, a 9 percent interest rate becomes .00375.

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