I really truly hate lowballers…
I don’t hate the act of lowballing, I hate the condition it brings on.
The condition I hate…
Assholitis…
The problem is, most people get this…
So where does that leave me? Hating most of society?
Let’s Back Step…
Years ago I went into the car sales business when I took a break from the loan business… I sold Hummers in San Diego… It was a really great learning experience.
Right before the H2 was launched I was flown out to go to Hummer school in South Bend, Indiana to take Hummers and H2s through their off-road course. If you ever have the chance to do it, don’t hesitate… It’s rad..
I was there when the H2 was launched, it was crazy… Every Tom, Dick and Harry who had an extra $60-100K laying around was there buying them up like it was the cool thing to do… because to them, it was. We had people putting deposits down 3 months before they hit the lot.
The first H2 I sold was bright yellow, tricked out with TVs, a PlayStation, $15,000 24″ chrome wheels, chrome everything actually and every bell and whistle you could think of… The thing was hideous, like when a hot chick wears way too much makeup… (Kind of like the H2 in the picture, but worse.)
When the guy came to pick his H2 up, he was wearing a bright yellow shirt to match it, so go figure.
I made upwards of $2,000 on the sale of that one H2. And I got an extra $1,200 cash at our end of the week sales meeting from our guy who did all of the customization work… Not bad for about 5 hours of work.
But after the shine wore off, the dealership marked them down with $4,500 – $6,500 discounts to match the discounts on all the other brands sold at that store.
How Car Salesmen Get Paid…
Car salesmen get an average 25-30% commission on the profit of a sale, or a minimum commission ranging from $100-$200 (whichever is greater)… And they get cash spiffs for upselling the warranty, rustproofing, fabric guard, chrome wheels and so on.
During this time at a higher-end dealership, where the majority of vehicles were over $40,000, the average salesman was selling an average of 12-15 cars per month. (The car business is hurting right now, so I don’t know how many a month they averaging.)
The average car transaction takes about 4-6 hours. The goal is to sell one car a day… two cars a day is outstanding… three cars a day comes once in a while, and that’s referred to as a “hat-trick.”
How Is The Profit of a Vehicle Determined?
There are 3 price points to take into consideration when thinking of the profit on a car…
- Retail – What’s on the sticker.
- Invoice – What the dealership “pays” for the vehicle, about 8-10% of the sticker… The higher the value, the larger the %.
- Hold back – The money the manufacturer “holds back” from giving the dealership until after the car is purchased. That can be as much as 4-5% of the sticker.
Some dealerships pay their sales people to Invoice… The better dealerships pay their salespeople to hold back. I worked for 3 dealerships in my career as a car salesman.
The first dealership I worked at for a week and quit because they were all scumbags… The 2nd dealership had good people, but there were too many salespeople for the amount of traffic, so no one sold a ton of vehicles… but they paid to holdback with a $100 minimum. The Hummer dealership I worked for only paid to Invoice, but their minimum was $200.
The Process…
Buying a car is a long drawn out process. I don’t know why, but it is. Figure 1-2 hours picking out and test driving the vehicle… 1-2 hours negotiating the price, then a minimum of 2 hours for the financing department.
The Condition...
Typically when people walk onto car lots they start of as standoffish while they’re in the “I’m just looking” mode.
Then they tend to warm up and get friendly through the test drive…
But when it comes time to talk about buying the car, at least 90% of the people I dealt with turned into flaming assholes.
They obviously never heard the saying, “You can catch more flies with honey than vinegar.”
People would demand to see the invoice… and I’d show it to them. I didn’t have anything to hide. The dealership would typically sell vehicles for $500 over invoice. When they ran those promotions (every weekend starting on Thursday and ending Sunday night), I knew no matter what I sold I would only get $200 for it.
If people were nice to me, I’d try to get them something extra thrown in like paint sealant or fabric guard. Why? Because I felt they should be rewarded for being nice to me…
People would demand to buy the vehicle for $1,000 under invoice… They would demand free this, or free that… Demand, demand, demand…
The Outcome…
I had a manager who was one of my favorite bosses of all time… His name was John, he was balding, had light hair… he was a pasty white, mid-50s, super funny fat guy who always wore his big red dealership polo shirt.
After dealing with a flaming asshole for upwards of 4 hours (we test drove 5-6 H2s) and bringing back our final offer of $500 over invoice, he made the demand that he wants an additional $1,000 off.
I told him, “We’ve given all we can give, the dealership would go into the red with this…” He cut me off and said, “I don’t care if the dealership doesn’t make a dime… I don’t care if you don’t make a penny… Go back and tell that to your manager…”
I was heated when I left my office… The guy is lucky I didn’t punch him in the face.
John said… “Go tell him I may be big, fat and wearing a red shirt, but my name isn’t Santa Claus… Tell him to buy it or get the fuck out of here…”
So I went back and relayed the message… verbatim. I got yelled at for telling him to “get the fuck out of here…” But it was a great feeling of satisfaction.
If he would have been nice to me… I probably could have gotten another $1,000 off for him and some free paint sealant and fabric guard too…
The shitty part is that this guy was a little worse than normal, but most people were right up there playing in the same ballpark as him.
I ended up leaving the car business after almost a year and a half to go back to the loan industry… I was going to lose my mind around those car buyers.
The Point…
It’s okay to lowball. If the other person agrees, it’s a win/win situation. But being an asshole about it doesn’t make you a better negotiator… It makes you an asshole.
If you want something for less than it’s offered, ask nicely… You might be surprised at the answer you receive.
If it’s an answer you don’t like… Being an asshole about it isn’t going to make the other person be more apt to give you an answer you will like.
There’s this saying that goes “Do unto others as you would have them do unto you.” It really works.
This doesn’t only apply to the car business, it applies to every business and every life situation you’ll ever be in.
