(Disclosure: My deceased father-in-law used to sell used cars.)
Reading this story changed some of my opinions of car salesmen:
Q: How much money do you make on a car deal?
A: Everyone thinks the salesman is always pulling a fast one on them. People in other sales jobs are especially suspicious….I’ve had deals in which I earned $100 on a car after negotiating with a customer for 4 hours. Buyers just won’t accept that on many deals, margins are slim for the salespeople. Honestly, used cars are really where the money is made. I earned more on a used car with 95,000 miles than I did on many brand-new ones.
My FIL sold a lot of used cars, in a small town area not far from Houston. It seems the internet is squeezing these salesmen a bit:
Q: How much profit is in each car?
A: On certain cars there’s a vast gap between dealer invoice and MSRP. A $100,000 car could have $7000 of profit. On many lower-priced cars, that gap is very small—like $400. Buyers can look up all this information on the Internet these days, so we never hesitate to show the dealer invoice to the customer.
You have a much different buyer than you did 20 years ago. The Internet has really made buyers experts on the cars they want to buy… And there’s a larger portion of the buyers today than ever before that actually know more about the car than the salesman does.
Still, many times it doesn’t seem to be about the actual sale price of the car—it’s about the buyer’s perception of the deal. If they feel like they are catching a break, they leave happy.
And how do you walk away without leaving money on the table?
Q: What’s the best way to get a good deal?
A: Don’t bother dangling that “all cash” offer to a salesman…We make less money on cash deals. We make more money on the financing and get the money from the bank within the same time-frame.
But no matter what the deal looks like, it’s the hardcore hagglers that get the best prices…I’ve seen some customers win by being the nice guy. They let you know how much they can afford, and you actually want to work with them.
The best deals are really situational…The larger dealers move a ton of inventory each month, so they can afford to sell a few cars…$100 to $200 under invoice. Outrageous deals, like thousands under invoice, are very rare but can happen. Sometimes the manufacturer will have bonuses tied to sales. If the dealer earns a bonus for selling 200 cars, and you happen to be the 199th customer, you might get a really good deal.
Who are the better customers?
Q: Do you treat customers differently based on appearance?
A: Don’t judge a book by its cover. I’ve heard so many stories from salespeople about potential customers they ignored because they were dressed extremely raggedy—and another salesperson eventually talked to the client and got the sale.
I know one salesman in Arizona who said he once saw a guy stroll into his store in shredded jean shorts and straggly hair and sunglasses, looking like a punk. My buddy ignored him. Well, it ended up that punk was rocker Alice Cooper and he bought six cars. These days, you can’t tell who has money and who doesn’t.
I remember how my father-in-law used to say he looked for the scraggly bearded men in overalls. They were usually local farmers who had saved up money to buy a new car, and were easy sales.
Nope, can’t judge a book by its cover. Even clean, articulate, black men can deceive you. But then, some peoples’ opinions of used car salesmen and politicians are not that far apart.