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Buying a Car During the Credit Crunch
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This is just guessing on my part...no inside knowledge or anything. But I think car salesmen, and dealerships, have a monthly sales goal they try to make, and once they go over that, they'll get a pretty nice per-car bonus. So while the showrooms might be mobbed at the end of the month, they still might be willing to deal, even at ultra-slim margins or even losses, if it helps get that bonus.
So, say your sales goal is 20 cars in a month. That 20th car sold is more important than the 1st-19th cars, while cars #21 and up are pure gravy, because of the bonus.
If you go in on, say, November 1st, and you're the first car buyer, they might not be that concerned about getting you a good deal because their sales goal is really far off. But the closer they get to that goal, the more they might be willing to deal. It's rather short-sighted though, because every car NOT sold early in the month still keeps them one car further from their goal.
FWIW, about 9 years ago, I came close to buying a used 1996 Caprice but backed out, because they wouldn't budge on the price, I didn't trust that they really could get the cigarette smell out, and it was almost out of warranty (although they would've been happy to sell me an expensive, high-deductible aftermarket one). Well, right around the end of October, the salesman called and left me a voicemail saying that they were willing to deal. I didn't even think about the whole end-of-the-month thing until I called them back, which was maybe 2 days later, but at the very beginning of November. I got handed off to the sales manager (another reason I initially backed out of that deal...he struck me as a horse's rear-end), and in a snotty tone, he said that they were willing to deal at the end of the month, but this was a new month. I'm like whatever, and hung up. My attitude was that if you want the car gone bad enough, you'll deal.
I put getting a new car out of my mind, until the following weekend, when I gave my uncle a ride to his dealer to get his truck out of servicing, and before I knew it, I was signing the papers on a new Intrepid! That was November 6, early in the month, but I thought they were still being reasonable. Got the car for invoice, plus I got them to throw in a 12-disc cd changer. I know this isn't a big deal, but the first oil change was free, which I thought was thoughtful. Oh, and 0.9% financing. The only area where they really "got me", I guess, was an extended warranty. $1200 for a 5 year/100K warranty, with a $200 deductible. Factory was a 3/36K bumper to bumper. I hit the 36K in 13 months and wouldn't you know it, not one thing that extended warranty covered broke! Well, there was the thermostat housing, which started leaking, but my mechanic replaced it for about $200, the deductible on my warranty. I'm sure had I not bought that warranty though, the car would've been a complete POS! :P
Spoken like someone who has never sold cars.
Cash deals mean NOTHING to a car dealer. Actually, dealers would prefer you finance since they get a kickback from the bank.
Second, where does it ever make sense to sell 2 of anything if you are losing money to do it? There ain't no such thing as a "volume" discount.
Not unless you are buying directly from the manufacturer.
In times like this, the smart dealers look for ways to minimize expenses and maximize profits. The dumb ones give everything away, lose their shirts and then the doors get padlocked.
"Through all of this I hope we learn one thing. Quit selling incentives and lets go back to selling cars again. We have made our own bed now we are having to lay in it. "
Or as Walt Kelly once wrote, we have met the enemy and he is us. It shall not be as long and onerous as predicted. The early punishment has been extreme. The reality shall pale in comparison with the panic.
So which is it, am I going to get the royal treatment or am I going to be beaten and robbed by the sales staff? :confuse:
2019 Kia Soul+, 2015 Mustang GT, 2013 Ford F-150, 2000 Chrysler Sebring convertible
I think, just like in the good times, it's going to depend on the dealership. The reputable ones will be willing to deal to move the merchandise, but still just to a point. They're not going to sell at a loss. The slimy ones, however, aren't going to change just because of a little credit crunch. They're going to try to bleed you for all you're worth, right up until bankruptcy (yours OR theirs!)
As far as used rates or using all the rebates on new and going with a standard rate they are higher then I have seen in years.
The Feds keep cutting them and the banks keep raising them. Guess they are trying to make up for past mistakes.
Sad, because I know Mr. Eckenhoff and he's a pretty decent guy. He hosted a show for our local Cadillac-LaSalle Club chapter for the last couple of years. I feel kind of bad having bought my new DTS at another dealership seeing the kind of trouble in which this man finds himself. I've always bought parts at this dealership as it's closer to me than the place I bought my car.
2014 Malibu 2LT, 2015 Cruze 2LT,
How does the dealer get a kick back from the bank when the dealer doesn't know the source of my cash?
It is difficult to generate sympathy for the local dealer today when you remember how they took advantage of us in good times.
Welcome to the credit crisis!
LOL. Is that the "good cop" "bad cop" sales technique?
2019 Kia Soul+, 2015 Mustang GT, 2013 Ford F-150, 2000 Chrysler Sebring convertible
No, it's the "good cup" "bad cup" technique.
This is sales 101. If you can't sell to the customer, then they aren't a customer. Hurt them.
Now as regards to USED vehicles Cash is Still King as many in the business will understand.
This unusual situation can come up many times during a month at any store in any city around the country. Two buyers come in from opposite doors. One has just filed bankruptcy and it's been discharged. That buyer NEEDS a good solid car just to get to work. He or she arrives skittish and uncertain about how they'll be treated, whether they'll be kicked out of the store or whether anyone will take them seriously.
The other buyer arrives thumping his chest walks straight up to the first sales person and says 'I know what car I want, it's this one, I'm paying cash and I don't want any crap. Here's my offer, take it or leave it.'
First both sales are equal on the books...they are both one unit. So all the chest thumping is for naught.
Second the buyer needing more assistance may actually have the sales person, special finance manager, Sales Mgr and even the Gen'l Mgr all working to get the sale finalized. THAT sale is special for a number of reasons.
The dealer was not one of the bankruptcy victims of the customer.
The sales person has a history of bankruptcy,
The special finance person has a history of bankruptcy
The sales manager has a history of bankruptcy and
The general manager has a history of bankruptcy.
Enables them to have empathy with the guy because they've been through it too.
Meanwhile it it apparent nobody gives a care for the victims of bankruptcy, all the creditors who trusted the customer, but were dissed. Where is the noble honor of business in your example? :P
None of the above. The reason pure and simple is that the dealership makes more money from a 'recovering' buyer than it makes of a cash-only buyer. The dealership will generally bend over backward to get that ex-BK buyer into a new vehicle calling in all kinds of favors if necessary to get the deal bought.
For the cash buyer on a mini deal, eh, it's another unit. Thank you for your business, sir. But this deal is nothing special, in fact it's a relative loser in the larger scheme. But it is another unit out the door and for that the buyer should be thanked.
But in this economy, is that ex-BK buyer still as lucrative? Are there still as many favors that can be called in?
There has to be a few that are willing to assume things will get better and can afford to commit themselves to a credit buy in this economy. I for one have used this time to learn to live credit free. If things get worse I will do fine and if they get better I will be less likely to get caught up in the spend frenzy that so many will go into.
The manufacturers didn't listen to the customer in the good times and proceeded to pick the consumers pocket. Yes this pill of an economy is a hard one to swallow but if we learn from it and try not to fall back into the lie that we "need" a new car every three years maybe it will have been worth it.
It is not like there are 4 people hovered over a desk all worried about getting this one deal approved.
Once it is turned over to the business office there is 1 person working on it. At any given time I am working on 5-15 deals at a time. Most Special Finance deals take a couple days because I verify all my stips before I deliver.
On many occasions I have made more on a cash customer in then the average
finance deal. Anyone who says you can't make money on the back end on a cash customer is just making excuses. I sell Service Contract, Lojack, and Maintanence plans, all the time to people not financing with us.
I look at it like this if you can afford to pay cash for a car then you can also afford anything I got to offer.
It's expensive to be poor..
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Same vehicle/same price obviously as cars value doesn't change from one customer to another.
A few extra bucks on finance kickback and the cash buyer gets the cold shoulder while the previously bankrupt individual gets folks stepping and fetching. Why? Is there some sort of special satisfaction derived getting a previous financial catastrophe financed once again? Heck, I'll buy a car and never pay for it if that's all it takes to be the showroom buzz on the next visit.
2013 Mustang GT, 2001 GMC Yukon Denali
A few extra bucks on finance kickback and the cash buyer gets the cold shoulder while the previously bankrupt individual gets folks stepping and fetching. Why?
Actually neither statement is accurate. So why would it be so advantageous for a store to bend over backward to assist a recovering buyer as opposed to a wealthy buyer who comes in plunks down $19000 and says 'Take it or leave it.'
On the sales charts both sales are the same: one unit.
Cash buyers are nt as likely to be a repeat. They are not with you long enough to start a relationship. They are a wham, bam, thank you Mam sale.
White House wants institutions to stop hoarding billions.
I disagree. I am what you would call a cash buyer, at least as far as the dealer is concerned, and I am building a relationship with my dealer. If things go as I hope they can look forward to my business for the rest of my life. That means making a small, but adequate, profit on each sale and getting all my service and repair business. So far so good.
Pertains to finance customers who go thru the dealer.
It is difficult to generate sympathy for the local dealer today when you remember how they took advantage of us in good times.
No one is asking for your sympathy.
Dealers do not "take advantage" of people.
They aren't standing on street corners selling illicit substances.
YOU the consumer go to them and pay for one of their vehicles.
They are going to ask as much as they can, that's business.
Then there's CSI, another oft-ignored detail. Another not-well-known fact outside the industry is that the buyer that beats you up and finally wins when the store gives in to move a piece of inventory at no profit or even a loss is the buyer that will often kill you in the CSI survey. One for whom you went out of your way to help will give you top marks on the CSI survey.
Dealers do not "take advantage" of people.
They aren't standing on street corners selling illicit substances.
YOU the consumer go to them and pay for one of their vehicles.
They are going to ask as much as they can, that's business.
And no sales person has ever lied to a customer attempting to make more money have they? I have no problem if it's just the asking price they try to make the most on, but when I'm surprised by their $699 dealer fee in the F&I office, "See it's pre-printed on the invoice", as well as the $2K extended warranty that accidentally got added in, "Oh, sorry, how'd that get in there?". It works both ways.
I'm seeing lots of temporary tags on cars with expiration dates that show recent sales. Some fancy rigs, some plain janes, and some very very obviously used.
Of course, I have no idea what the credit status of the buyers might be or how good a deal the buyer might or might not have gotten.
The one thing that I do seem to notice but am not sure about yet, is that there don't seem to be as many screamer ads on the radio for cars lately.
There are Toyota and Madza ad that I've noticed, both claiming to have plenty of money to finance cars with....
Anybody have an informed opinion as to whether or not car advertising has been curtailed, and if so, what impact on sales that might be having?
And that is true 100% of the time? :P
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SUVs and Smart Shopper
Absolutely immaterial. The buyer can always walk away.
If the buyer chooses not to, that's their own fault and no one elses.
As I was mentioning to a customer today, if you have A or A+ credit,banks will lend you money. If you are marginal, or want to borrow in excess of a cars value you are gonna have issues.
Dallas is an affluent city, so I would imagine that the slowdown isn't affecting tham as much as it is other areas.
Anybody have an informed opinion as to whether or not car advertising has been curtailed, and if so, what impact on sales that might be having?
In talking to people that we advertise with, they all acknowledge that less money is being spent on advertising.
What is interesting is that there is a lot of jumping around with the advertising that is being utilized. Dealers are canceling long standing accounts and moving to new advertisers with the goal of "trying something different" so, there is a lot of musical chairs being played in dealer advertising right now.
If the buyer chooses not to, that's their own fault and no one elses.
A sales person lieing to a customer is immaterial? Hmmm, up until you made that statement I felt you were one of the more respectful folks in the biz here. Where I come from folks who tell lies to their customer just to get them in the show room or to simply make more on the deal aren't very well respected.
One thing to keep in mind is that some times the credit challenged customer has a loan origination fee associated with there contract the average buyer does not. It can sometimes equal 10% of the selling price which comes out of dealer profits. So if you and a credit challenged customer were buying the same car your rock bottom price might be $20K where theres is $22K for the same car. Dealer is still only getting $20k with the extra $2K going to SLNB (Shady Loans National Bank).
First of all, it is very very rare that a salesperson lies to a customer anymore.
There are simply too many ways to get caught.
All you end up doing is re-inforcing a stereotype.
You are lumping 99% of the car business w/ less than 1% of offenders.
So, unless you have proof that the majority of car salespeople do in fact lie to their customers I would retire that tired old cliche.
As for Doc fees, or anything else, if you as the consumer don't like them, walk away.
Remember that the bottomline is the only thing that matters. If dealer A has a $300 Doc fee, and Dealer B doesn't, but dealer B's bottom line is $100 more than dealer A, then pay the fee and save the $100.
old and long.
the other thing, dealerships know that every customer thinks its hard to get financed so they play games with customers to make it seem hard, than out of nowhere they somehow got you approved with a little higher interest rate and that was the best they can do, also, in order to finance you, the bank wants to see that your protected so they throw in the extended 2300 dollar warranty.
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