Double D

Thinking of buying a car or just want to know some of tricks of the car dealing trade? It's all here.

http://makeashorterlink.com/?D291621B5

Here's the Introduction:

Confessions of a Car Salesman

What really goes on in the back rooms of car dealerships across America?

What does the car salesman do when he leaves you sitting in a sales office and goes to talk with his boss?

What are the tricks salespeople use to increase their profit and how can consumers protect themselves from overpaying?

These were the questions we, the editors at Edmunds.com, wanted to answer for our readers. But how could they really know that our information was accurate and up-to-date? Finally, we came up with the idea of hiring an investigative reporter to work in the industry and experience, firsthand, the life of a car salesman.

We hired Chandler Phillips, a veteran journalist, to go undercover by working at two new car dealerships in the Los Angeles area. First, he would work at a high-volume, high-pressure dealership selling Japanese cars. Then, he'd change over to a smaller car lot that sold domestic cars at "no haggle" prices.

We invite you to read the following account of Phillips' day-to-day experience on the car lots. Doing so will broaden your understanding of the dealership sales process. It will also cast a new light on the role of the car salesman. And, finally, it will help you get a better deal — and avoid hidden charges — the next time you go to buy or lease a new car.

Read, learn and enjoy.

Mill

A friend set me up for an interview for a sales position at a Mercedes dealership. I quickly discovered being a car enthusiast doesn't matter, being a crook does.

Redlemon

The short lesson of the article (which is a great read): internet purchasing is your friend.

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wakelagger

A while back, I read that entire thing. I had a few mixed emotions as to my opinion of a car sales rep.
On one hand, most salespeople do their best to make you pay as much as possible and use every tactic they can to accomplish it.
On the other hand, most of these people work in a high pressure environment to put as many cars off the lot as possible or they'll go home without any money.

aintyoboyfriend

Working at a car dealership I can tell you that this is the way that 50% of the dealerships are.

It took me a little while but I found an honest, straightforward place to work, and I really like it.

However, I found that a lot of the terms he used either were wrong, or don't exist where I am.

TM875

This is something that was posted in another forum, but I found it incredibly interesting. Follows the same lines, but this was written by someone who actually was in the industry:

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Selling cars in the U.S. - the inside scoop

By el_guapo
Mon Aug 4th, 2003 at 09:15:17 PM EST

OK, a quick foreword. I am a dyed in the wool tech weenie. Hardcore Cisco jockey. I got whacked from a classic tech company back in January, and I was faced with the very real prospect of being unemployed for a Very Long Time(c). So I thought: "what the hey, I'll sell cars until I can be a professional propeller head again". Boy oh boy, was THAT an experience. Details below.... (Note, I'm detailing 2 very different markets, Arizona and Texas - abbreviated T, A, or T&A

I'm going to answer the most obvious question first: Are car salesmen as slimy as their reputation suggests? Yes. And no. In my short 4-month exposure, I learned that car salesmen represent a very real cross section of humanity. Are there complete dirtbags that will lie and cheat and do whatever they can to get every last penny out of you? Yup. Are there some really decent folks who just want to help you pick out the car that is best for you, and hope they can come out of the transaction earning a little money? Yup. There's probably 10 of the former for every single of the latter.
Part One: Dealership Organization (aka: just how much can these guys make?) From 1.a(top) to 9.z(bottom)

Top down: General Sales Manager - 1 (T&A) - HMFIC. Theoretically in charge of everything, however, like any super-senior manager, this guy can take a VERY hands off approach, or not. Depends on the individual. Also, note that he's in charge of the dealership operations, NOT the business. There is usually an owner, owner's kids, a comptroller, and the usual U.S. corporate B.S. above this guy. GSM's can make from $15,000 to $50,000 per month, and they get a cut from each and every deal the dealership does.

Sales Manager - 2.a (T&A) - aka: "Desk Manager", these are the guys your salesman goes to when he says "Let me ask my manager". And, contrary to popular belief, they do NOT walk up there and shoot the breeze pretending to wait for an answer. I have no clue how this rumor started, but think about it: how does wasting your time help anybody? It is in that dealership's best interest (including the salesman) to get your transaction concluded as quickly as possible, so they can get back to the business of selling the next guy a car as quickly as possible. Desk Managers can earn from $10,000 to $20,000 per month, and get a cut from each deal they themselves write.

Finance and Insurance - 2.b (T&A) - The guys in the back that actually sign all the real forms (all of the ones you've signed up until now were complete bullshit). These guys have the best job of all, IMHO. Every one of their "customers" has already been completely dealt with, the bad credit folks have already been filtered out (dealerships spend TONS of effort selling cars to people that ultimately turn out to not be able to buy a car), etc. If a customer sits down with an F&I guy, statistically, there's about a 99% chance that they're leaving his office with a new car. F&I guys can make $10,000 to $20,000 per month, and get a cut from each deal they themselves write. Wanna piss off an F&I guy? Pay cash for the car (or finance with your own bank or credit union, the same thing to him) - he will literally get $0 for that deal, effectively working for free.

Assistant Sales Managers - 3.a (A) - aka: Team Lead. Dealerships break their salesmen up into "Teams", which is actually a joke as there is NO teamwork involved. "Teams" are actually a concept created by the dealership for the sole purpose of making scheduling time easier. Turnover is so high that keeping the work schedule up to date with who actually works there would be a monumental task. So they just schedule the teams, and let HR keep the teams staffed. ASM's can earn from $4,000 to $10,000 per month, and get a cut from all of the deals that their team writes. In Arizona, ASM is one of a couple of "first steps" that the dealership can use to promote high producing salesmen after they've "done their time".

Fleet Sales - 3.b(T&A) - Another carrot, after a person has proved themselves "on the floor" (i.e. regular salesmen), they can be moved to fleet sales. The nice thing about fleet sales is that the sales here are almost always done deals. You don't have to work the customer, fact find, select a vehicle, or any of the other onerous things that a salesman taking a cold call has to do. In all probability, it's a repeat customer, they know what they paid for the last vehicle so you don't have to haggle with them, etc etc etc. You're a glorified "form filler-outer". Fleet Sales, like ASM's, can make between $4,000 to $10,000 per month, and get a cut from each deal they write. Fleet guys survive from volume, volume, volume. A really good floor salesman might sell 15 cars a month, a really good fleet guy will move 30.

Internet Sales - 3.c(T&A) - Positionally identical to Fleet Sales and ASM, another "first step" for promoting a good salesman. Another cushy job, too. Again, you have to expend exactly zero effort to find your customers, your website snagged them all. Also, internet customers are usually cut and dried. They know what they want, they know what you paid for it, and they know what they'll pay for it. These deals start out being finished, as it were. Internet Sales can make from $4,000 to $10,000 per month, and get a cut from each deal they write. Like fleet, volume is everything.

Floor Salesman - 4(T&A) - This one is hard to typify. If he's been there a while (say >5 years), this job is cushy in the extreme, as all of your business is repeat. If not (and most aren't), you're as low as low can be at that dealership. A typical new hire new car salesman is going to work from 50 to 90 hours per week, earning 25% of commissionable gross, with a guaranteed minimum of $100.00 per vehicle sold. The vast majority are going to sell between 5 and 15 cars a month, earning between $2,000 and $7,000 per month.

OK, realize those number are averages, I know of a salesman in Texas that sells >20 cars each and every month, and makes something like $180,000.00 per year. Of course, he's at a huge dealership, and he's been there like 12 years. Basically, 20% of the people in a dealership make 80% of the money.

Part Two: Anatomy of a Car Deal (T&A) - Car deals are broken down into two basic parts: The Front End The front end is basically what you paid for the car minus what the dealer paid for the car plus "pack". You can go to www.edmunds.com or www.kbb.com and usually find out exactly what the dealership paid for his new cars. That cost is basically invoice price minus holdback. Invoice is the theoretical dealer cost, and holdback was supposed to be a secret amount that let them sell it at invoice and still make money. Supposedly in the old days, holdback was how that dealership paid it's fair share of national advertising campaigns and whatnot. This isn't the old days anymore, and now that folks have learned about holdback, it's simply a "secret" mark-up now. OK, so WTF is that "Pack"? Pack is a theoretical number that represents what it costs that dealership to sell you a car. If it's a snazzy new dealership, on really expensive land, with a huge advertising budget, it's going to have a large pack. Say $750 per car. Small dealerships may have a Pack more like $250 per car. So, let's analyze that thing that doesn't exist, the typical car deal:

MSRP: $21,000.00 - FYI only, not relevant in this calculation

Price you paid: 20,000.00 minus

Invoice: 18,500.00 minus

Hold Back: $500.00 plus

Pack: $500.00 equals

Front End Commissionable Gross: $1,500.00 times

Commission rate 25% equals

Salesman Commission $375.00

Some quick math reveals that if a salesman moves 15 of these deals a month he makes $5,625.00 per month. Noting that most don't sell 15 per month, and that the above referenced deal would be a wet dream to most car salesmen. IE: almost none make that kind of money. Perhaps you can now see that despite the fact that the car salesman is easily the hardest working guy on the lot, he is also generally the least well paid. What would the salesman make if you weren't a pushover and only paid him $18,500? Well, he earns what is known in the business as a "mini": the smallest commission that dealership will pay. This is usually $100.00, but can vary somewhat. Why would a dealership sell you a car for what that dealership paid for said car? Now we get to one of the last nasty little secrets of the business:

Part Three: The Back End

The Back End is money the dealership makes that most people don't know about; and IMHO is literally theft on their part. Huh? How so? First, think about this, if you and I can go into any bank and get a loan with an interest rate of, say, 5.9% for a new car - and we generate a total of maybe 1 loan every 2-3 years; think about what kind of rate a dealership that generates 300 loans a month can get. If you can get 5.95, then that dealership can realistically get 1.9%, and then sell that loan to you for 5.9%, and they keep every penny of the difference. How is this theft, you say? Well, you are literally the one getting approved at that 1.9% rate. They are literally lying to your face when they tell you that you were approved at 5.9%. Ever wonder why you have to wait 2 entire forevers from the time you agree to buy the car to the time you're actually sitting down in back signing the real papers? I mean, it can't take that long to enter all the information into the computer, right? It's because he's literally pouring over your credit and financials to see what kind of rate he thinks he can stick you with. God help you if your credit was just high enough to get approved. Your "buy" rate (as it's called) will likely be something like 12%-15%, and they're going to tell you that your loan was approved for 22%. No shit.

Oh, and for you smarty-pants that go to your credit union/bank and get preapproved, then go in brandishing the approval form saying "I'll only finance with you if you can match this rate". Hoo boy, they love you!! They only look perturbed (they want you to think you're the shit, after all), but inside they're dancing with joy. They now know the exact amount they can jack you over on the interest rate. For the people who don't bring in an interest rate, well, the F&I guy just kind of has to feel you out. This is actually kind of dangerous, because if he quotes you a rate that you know is too high, what excuse can he pull out of his ass to justify lowering that rate? "Uhhh, the computer printed the wrong rate"? He certainly can't tell you the truth! "Ha Ha, you got me, I was actually trying to defraud you out of some extra money! Silly me!". The sad thing about this fraud, and I do consider it fraud, is that the banks are part and parcel to it. Screwing you over on the interest rate is one of many ways the F&I guy makes tons of money off of you. He also gets a huge cut of: Credit Life, GAP Insurance, Extended Warranties and those completely bullshit "security stickers" and window etching.

Part Four: Various Sundry Other Ways They Rip You Off

Paint Sealant, fabric protection and under body coating: These are usually bundled together in a "Value Package" (HA!), and the only one that gains value is the dealer. This little gimmick is jacked up no matter how you look at it. If they're (pseudo)honest, and it's actually all there you've got a glorified wax job, a $6.00 can of Wal-Mart brand fabric sealer applied by an illegal immigrant making $5.00 and hour, and an under body coating that actually increases the odds that your car will rust. Total value: $25.00, your price? Usually something like $995.00. Never pay for this stuff, not even the $25.00 dealer cost. A)It's not worth it, and B)it's almost NEVER actually there. <Gasp> Yes, they will lie to your face and tell you that stuff is on there when it isn't.

Window etching: this is sometimes rolled into the package above. Never pay for this either. Their cost: $8.00, your cost: usually like $149.00. Why not pay for it, if it's actually on the car? A)It's as worthless as the above package - how many thieves do you know that are going to give the slightest shit that a partial VIN is on the windows? B)You can get a kit yourself for a whopping $19.95. There's probably lower prices than that out there, I'm lazy :P

Accessories: Man oh man oh man. Accessories are easy to figure out. Want to know the dealer cost on an accessory? Divide the price in half. That $499.00 Honda cassette deck you want installed cost that dealer $249.00. If you just have to have a factory cassette (or whatever), negotiate the price. They're going to show you an official looking MSRP sheet, and innocently act like the factory set that price. Bullshit. Offer them a reasonable price, and they'll take it. You're not going to get accessories for less than cost though. From his standpoint, why would he pay you to take an accessory?

FYI: a typical car deal might be: Front End = $500.00 profit, Back End = $3,000.00 profit. See why it sucks to be that floor salesman??

Now, for the part that can actually save you some real dinero - "How do I get the best deal on my new car"? Very simple. Find the web sites of the 2 closest dealerships selling the car you want. Get an online quote (include the interest rate in your request!!) from one of them, then take the email offer he sent you, and forward it to the other. Lather rinse repeat until they've obviously cut every last dime out of the deal. Do this towards the end of the month, but not the last day, since if you have to walk on the deal to make a point you'll have to wait another 30 days for them to be that price aggressive again. Give yourself 2-3 days, that should be close enough that they're hungry to make their 30 day numbers, and leave you enough time to walk and be able to come back the next day.

aintyoboyfriend

that sounds pretty close to right, though here in dc, no one makes that kind of money selling cars. I might need to move to Arizona or Texas...

Double D

Wish I had you along when I bought my Mustang GT convertible last April. I got screwed on the sealant, but at least I didn't go for the window etching. That just made no sense.

Thanks for the info!

KeyserSoze

TM875,

The pack is not what the dealer charges the customer, it is charged to the salesperson to lower the amount of PROFIT the dealer has to pay commission on.

Example:

A $1000.00 gross profit deal after a normal pack of $250.00 just robbed the salesman out of $50.00.

At my dealership we have a $750.00 pack, but our average gross profit on the front is $4500.00

The holdback is to help the dealer with flooring charges, and if you mention the holdback as part of the discount that you want most dealers will tell you have a nice day.

The thing most people don't seem to understand is EDMUNDS and all the other sites DON'T SELL CARS...these are just guides to buying a car. Most of the crap they tell you can actually hurt you sometimes.

If you want a good deal on a car and it's a HOT SELLER you won't get much of a discount.

The best way to buy a car is to first figure out which one you want negotiate the selling price and then see what finance rate they will give you, then ask for an option contract. An option contract still lets you take the car but now you take the contract to your bank or credit union(nobody beats a CU rate) and see if they can beat the rate. If they do they will cut you a check within 48 hours and you take that into the dealership.

The thing a dealer wants more then anything and this is why they will sell cars with little or no profit is a good survey. This survey you get when you buy a new car from the manufacturer dictates an awful lot nowadays in the car business.

This is a bargaining chip that most don't realize they have.

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THERE IS NO KEYSER SOZE!!

wherearemypants

I also work in the business, and have to pretty much agree with TM875. The numbers are a bit high, but other than that, he's pretty much right on. What you might note is that with his 10:1 ratio of bad to good salesmen, a dealership with good people will have mostly good people. It's just a question of finding where that is.

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And Shepherds we shall be, for Thee, my Lord, for Thee, power hath descended forth from Thy hand, that our feet may swiftly carry out Thy command. So we shall flow a river forth to Thee, and teeming with souls shall it ever be. In Nomine Patri et Fili Spiritu Sancte.
-Boondock Saints

Peryn

Yeah, my mother just bought a new van. Of course i went with her, for she knows little more than the engine is what makes the car go... It was a great dealership,and i have always had good experiences every time i've been there, even if tis just looking around or test driving a vehicle. Everyone there was good...no pressure and little BS. I often knew more about the vehicle than they did, so they were honest with me. I knew what the price should be and what a good deal would be. Good dealerships usually have a very good and honest staff. There have been other lots i have been to were they were downright rude and snide toward me. Once they realized i wasn't gonna buy, they basically told me to shut up and leave em alone and quit wasting their time. They were full of BS on the cars and their capabilities. If you find one of these lots... walk away. ALmost all of their salespeople will be like this and they dont even begin to care about YOU.


One little trick i found can take the BS and attitude right outta them. It even makes them a little unconfortable. Its kinda funt o watch those rude little people squirm. Simply know what you are talking about. Call them on every little thing. They HATE it when you know more than them, because they cant lie and trick you into it. Also be blunt with them. Tell them no, and that there is nothing they can do to change your mind. With most of the bad ones, they will get kind of angry and walk away. You will not see another face until you leave the dealership. The good ones will usually keep their distance, following you around, opening cars, supplying some info and answering questions, but with no pressure. They will stand back and keep mostly to themselves. Plus, once they know you are informed, wont take BS offers, and know what you want, they wont even try to stick ya with the window etching, fabric protection, extra amenities that you dont want, etc. If you know what you want, and will make the purchase then if you get it, they seem to bend over backward to make the sale usually.

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Dont cry kid, It's not your fault you suck.

laconic1

I used to work at a dealer and one of the things we would do to "add value" to the car was add a starter interrupt circuit. The purpose of it being that if you didn't have the magic key that went in it the car wouldn't start. $210 we charged for that. Of course we didn't tell the customer that a paperclip would bypass the interrupt just fine.

macmanmike6100

wow that's genius! thanks for the help!

rockogre

I read the entire article you quoted from and found it a very interesting and informative read.

We just bought a new Suburban the other day. My wife works in our Credit Union and had all the info on costs and such. She also took several of her books and worksheets into the dealership. She walked in, of course a salesmen was right on us, and she told him a price she would pay and trade in her present suburban. We got all the usual tricks including the "what would you want your payment to be" crap.

The salesman kept trying to talk to me but I wouldn't bite, it was her deal. I swear, before it was over I thought the guy was going to cry. She's buying all our cars from now on. She went up one side and down the other on that poor guy and wouldn't budge an inch.

When we got home and she did her final price computations she told me that we had gotten it for less than the original invoice price. (It is a 2003 that had been on the lot for a while).

The main thing that she did was to find out all of the costs of the base truck and each option. She knew pretty well how much each thing cost and what the dealer showed for a cost. It really helps if you do your homework. I think it also helped that she had books and worksheets with the actual prices of things.

Oh, and she also got them to throw in a reciever hitch and the wiring AFTER she agreed to a price.

She also said that all Credit Unions and Banks have this info, you just have to ask.

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Double D

Your wife is one smart lady, rockogre!
Thanks for this info, and enjoy your new Suburban!