Did you recently take on (or consider) a loan of 84 months or longer on a car purchase?
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Dealer's Tricks - bait & switch, etc.
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Anyway, that's a good point, it's hard to determine what the 'buy' rate is. I am looking for a car right now, as I am selling mine, and one of my next steps is to go have a meeting with a credit union, and at least one other source to determine what rate I can get. At least that way, I will have another option if the dealer starts talkin smack.
In reference to that other site you guys mentioned, Bill pointed out the 'revenue links', I would also not recommend having anyone other than yourself pull either your credit report or FICO/Beacon score (until the day you're ready to buy something), who the hell knows what they are doing with that or how it will show up on your report. If you pull it yourself, it is account management, and only when you know what your beacon score is and what your report looks like, will you have any idea what rate you can get.
My out of sate F&I friend did show me what one buy rate for my score is (after showing him the one I pulled myself), but I am also open to learn other ways of investigating buy rates without having anyone pull my credit. Feel free to comment...
Karz
There areother factors, this only applies to new cars as a rule and often a down payment is required (Particularly with Bank of America, they generally require 10%+ down for their cheapest rates).
Its' the old deal.. if you have great credit and aren't burying the bank in the car, you're a good risk so ya get a cheap rate.
How reserve is paid would take a huge post... Its not generally that cut and dried.
Oh, as far as old Engines... didn't Jaguar win LeMans on a 9 year old engine design?
Bill
How about these questions:
1. Is the interest rate pad that we're discussing here the same thing as the dealer reserve?
2. Do the captive finance cos limit the amount that their dealerships can add to somebody's buy rate, and if so what is the max generally?
3. Does the salesman get anything based on the dealer reserve/interest rate pad?
Thanks.
The polices of each finance company vary. I use one subprime company, for example, that I love. They do not charge me a fee to book the deal, I cannot earn reserve however but I do get a flat fee of $1,000 if I book 5 deals per month. Most banks give a flat fee of $200-400 (Depending on loan size) if I book at the buy rate.
1) Basically, yes. Its' generally called reserve as many banks pay it as it comes in.
2) Yes. Almost all do limit it. If all else, there's generally a "State Rate" so I can't charge someone 50% APR or something outrageous like that (not that I would but I can imagine some would if they could). Generally its' 3 points or so. Again, like anything else, it varies. Ford Credit generally does not cap rate, otoh, I have seen them approve people who should be at subprime rates at insane buy rates. I.E. Once we had 3 callbacks on a deal. Americredit at 21%, Household at 23% and Ford at 10.9%. Customer was pre-approved through the net at 16.9%. Was very tempting to offer to match the net rate on a 2-year-old Town Car. We contracted at 14.9%. Customer couldnt beat the rate anywhere, and, frankly, with a 565 beacon got a better rate than he should have!
3) Almost never. Finance guy does. I don't pay salespeople on reserve but I very rarely have huge reserve deals to speak of (The above was an example, we contracted at 14.9%). Sometimes a salesperson will be paid on an extended warranty if THEY sell it. That's how I pay my salespeople. You sell it, you get paid.
Makes sense I think...
Bill
Bill w/Brentwood Volvo, I surely appreciate your input on the finance reserve subject. I worked for three dealer groups that were outstanding places to be: Fremont Motors, Lander, Wyoming; Lithia Automotive Group, Medford, Oregon; and Don Davis Auto Group, Lake Jackson, Texas. My recent employment with the Rosado Group in Milford, Pennsylvania was extremely disheartening as was my contact with Goldsboro Chrysler, Goldsboro, North Carolina. I was very spoiled as to how the "good guys" did business and very naive to think all dealers practiced good business ethics.
Sort of like "Colour" vs "Color"
Actually I no longer work for Brentwood Volvo, I just kept the name as I guess people know me by it. I own a franchise now and an independent lot.
I have worked for some that were excellent: Brentwood in St Louis, Montclair Jaguar/Volvo/L-M inJersey (Most any DCH store is a safe bet). Some that had horrible owners but a great sales dept: Lexus of Orlando (Cant say that the sales dept is any good any longer tho.. they fired everybody there who's decent save one in Management and there's like 2 decent salespeople left).
And one that was horrible: Dean Team in St Louis. Walked out after a week.
And you're right, its' amazing how when you go to a dealer conference you can pretty much tell who cares about customer service and who cares about being scum.
Bill
Fremont Motor Company
Ford Lincoln Mercury
Lander, Wyoming
(Bought there by the previous owner)
Thanks for all your doing here.
David
The only time I saw my dealer principal in Milford, PA is at the Christmas party and on Halloween. The rest of the time, he was sunning in Cabo. Nuff' said.
The Lexus store was great until the owner and the owner's son recently got involved...
I think that the most important thing, for me as a dealer, is quality people behind the sales desk , in the finance office and behind the service and parts counters.
It'd be tough for me to service 75+ cars a day and sell 300+ cars a month and all
Besides, you do NOT want me working on your engine! haha..
But I have found that if you pay people well, treat them well, you attract the best and in the long run it pays for itself.
Bill
It kills me to see, especially in the rest of the retail world, how little emloyers offer people. I was a regional manager for Super Shops, Inc (high performance auto parts, wheels, tires, etc) and my boss would only allow me to start assistant store managers at $7.00 an hour - in Portland, Oregon where the cost of living is seond highest in the nation (next to San Francisco). And we want this guy to work his tail off and be motivated? He's motivated to work there until he can find another job!!
This is interesting about how compensation works. I think I've always met with the F&I manager after shaking hands with the salesman. That means that the salesman would have sold me not just on the car but on the payment as well (thinking lease here). Why does the F&I manager but not the salesman share in the interest reserve? And why wouldn't the salesman be motivated to quote the same payment with the lowest possible rate and highest possible cap cost to raise his commission?
BTW are F&I managers usually ex-car salesmen/women?
After seeing the car,I felt that there was a great deal of value and began to consider it.We went back a few times drove the car ,looked at a few other makes and decided if a "fair"price was offered we would buy it.
Throughout the whole process the salesman loosened up from quiet desperation to a more relaxed posture.In the meantime I researched the car and the company.I was aware of the risks of buying a car from a bankrupt company.The salesman was not totally up on all the "facts" and specs on the car,but he told me no lies.
The finance guy was a waste.I go in and he types up the contract.It was almost insulting.The interest rate was good(under 7%),but he knew I had a source at that rate .The rest was full of "extras"like undercoating,interior protection package etc -stuff that I had already ruled out with the salesman(who was not in the office).When I questioned each addition he deleted them one at a time.If he made more then $7.00 an hour he was overpaid.I bought the car inspite of him.
The salesman just shook his head when we spoke later.My point is that I will buy another car from this salesman NO MATTER where he goes.He has credibility with me and I don't mind that he makes a living.
The real plus to this story is I have a furniture store and now the salesman is a customer of mine ;as well as a friend.And I didn't sell him fabric protector.
Salesmen, however, especially guys that are new to the business AND in a large city, job hop like they're playing leapfrog. The single guys mostly, because of no ties. At that stage in their career (if they stay in the business) they don't understand or care about customer base. I'll go out on a limb here and say that a "customer base" isn't all its cracked up to be. Most of my customers (and I'm a pretty nice guy) would still shop me until they're exhausted and buy from a guy 300 miles away if it saved them $10, without giving me the opportunity to compare deals and give local service.
As far as the interest reserve, the salesman doesn't usually close the deal in bigger stores. There's a closer, assistant sales manager or sales manager that closes you on payment and in most cases, that person is paid on finance income. The salesman may present an initial payment, but its the closer that does the hard part and makes the difference between profit and loss. Saleman are usually NOT privy to actual deal numbers like invoice cost, rate and term - and a manager doesn't want them to be because they WILL run their mouth and blow the deal.
F&I managers are usually ex-salesmen for three reasons - most dealerships like to promote from within, looking at the sharpest sales people; and you don't want a guy that's just good at math - that person HAS to know the car business. F&I is usually a precursor to sales management position, also.
Salesperson does everything then the finance managers job is only to do paperwork and sell warrenty - lojack - and maintinence packages.
Salesperson gets share of reserve if there is any. We have to pull an invoice and put one with every deal.
I have a good friend in a small town outside Colorado Springs that has two guys working "with" him. They do everything from soup to nuts and have the experience to show for it. That's the guy that taught me "you only get what you ask for" when I had been in the car business two months. I was amazed how that concept worked.
It's good to be without the "liner/closer" mentality - all those places are is "green pea" factories where they guy through new people like cordwood and the only sales guys doing anything real are the two or three "old dogs".
: )
Mackabee
Armtdm, when I was in service, I referred several "catastrophy" customers to sales. Most of the time, the salesmen I worked with would check in with me daily and I would give them updates on big service jobs - I usually arranged for the salesman to be handy & close-by when the customer came in to see me.
It early Saturday morning, 12 guys at a Mazda store are in a small meeting room. Sales Mgr., grinning, holding a large glass jar full of Silver dollars high in the air. He proclaims that the 2 top sales people for Saturday would get to pull as many coin as possible from the jar with one hand. Oh Boy, now that's incentive. Of course the opening to the jar was just large enough to get your hand into it, let alone back out full of those silver coins. But hey it's a Bonus!
Tell us about your company's motivating techniques. I think folks will find this incredibly amusing!
Happy Motoring, Jack
We did similar things with dice rolls, pick a number, etc but only after a qualifying number of vehicles were sold - an often unattainable number of vehicles.
These games, it seems were only sometimes successful for the salesperson and the consumer feels really stupid when they find out by spending $30,000, they qualified their salesman for a $20 spiff.
Oddly enough, that franchise was therafter sold to someone else. Now it's home to J. D. Byrider.
Dave
Everyone, save a couple of guys, showed up EARLY Monday to reapply with bright, shining faces and new attitudes. The GSM didn't clue me in on the joke, so I didn't really know how serious to take it. It sucked to be fired on a Saturday and spend all day Sunday worrying.
Actually out of all the products we purchase,with the possible exception of a home,the automobile brings us the most pleasure.I guess it goes back to horse trading.There was nothing better then to get the better of the trader.I always "think" I get a great deal, but there is aklways that doubt.I think that's why we enjoy the "contest"-for some of us it's the most daring thing we do.
I hope the day never comes when all cars are sold like SATURNS.Give me the guy in the red pants with the cigar anyday.
: )
Mackabee aka "old dog"
: ) \
Mackabee
www.ripoffreport.com
I agree with Saturn in that the marching bands and ticker tape parades, carnivals, etc are an overwhelming car buying experience, but if you get people used to "being sold" versus "given information", people prefer you working to earn their business.
I've just learned now that Zeus can be spelled Zues. I've never seen it that way ever. Thanks.
And we just (I think) bought a car, a '98 Camry XLE V6 w/that tired old Camry engine. But we have plans to buy a gently-used Maxima or a Passat wagon, maybe, in a few years, and my husband who mostly bicycles to work will take this car. Our long-term strategy switched, so no Altima for now. Just *can't* bring myself to buy new
(If you feel like it, I posted what's happening with the transaction on the Camry board--it's a bit long--I'd appreciate any thoughts--and Brentwood, if you're around, I'd love to hear what you think too, since you also offered us so much good advice)
Tactic #1: Pressure customer into buying. Sales person: "so what will it take to buy the car from me today". Me: "I don't have time to get into a real negotiations". So he proceeds to spout out a bunch of numbers, and I keep saying I can't commit at this moment - I really did have a work commitment. He finally says "how bout 17K". I say, hmmm.. well, you've got my attention. So, he proceeds to write down 17,995 (I correct him that he said 17 even). He fixes it and asks me to give him a check or credit card for 100 bucks so he can take to the GM (I tell him I'm not putting money down, he says, well there are a hundred other customers in here and the GM needs to know you're serious). I don't sign, and he gets up to talk to a manager. This leads us to....
Tactic #2: Bring in the Manager. The manager comes in and says so you'll buy for 17K? I say, I really have to get going (I really did as I was risking missing a conference call). On my way out, salesperson yells, "16.9". I say if you give it to me for 16.9, I'll be back at 6:30.
Tactic #3: Mislead customer. I call the salesperson back at 6:30 and say: so is 16.9 still on the table? He says yes. I say, so I can buy the car from you for 16.9? He says yes. I tell him to get the paperwork started and I'll be in in a few minutes.
Tactic #4: Fresh face. When I arrive, I am informed that the salesperson I originally worked with is 'busy' with another customer, so his "partner" will close the deal with me.
Tactic #5: Get customer attached to the car. I'm encouraged to take the car for another test spin by myself. Which I use to look at it more closely.
Tactic #6: Have to have GM's approval. When I inform the new salesperson that I had agreed to a price, he tells me, well yes, but that is subject to approval from the GM.
Tactic #7: Show the NADA book. Salesperson comes back with NADA book in hand and shows me the car is "worth" 21K and that doesn't even include options. I say, yeah, but 16.9 was what I previously agreed upon. Tactic #7.1: Get the customer to make a counter-offer w/out salesperson first making one. Salesperson asks, well, what would you take it for. I informed him that the offer on the table was 16.9 and inform him that a typical negotiation means: offer, counter-offer (at this point I'm already at a place I don't want to be because 16.9 was not my offer, it was the salesperson's offer, and I'm already negotiating that).
Tactic #8: Bring in yet another manager. He comes in and says "we gotta do this deal". Would you take 17.6? I say, no thanks, my understanding is that I could get the vehicle for 16.9.
Tactic #9. We gotta make a profit. Salesperson returns and says we have to make a profit and at 16.9, they would be taking a loss. We shake hands, and say goodbye.
On the way out, I informed him that I was dissapointed that they would not honor the original salesperson's offer. He says, well, that was not an offer, it was a question: "would you buy the car for $16.9?" I tell him that he was not clear, and while I wouldn't use the word "unethical", it was, at the very least, misleading.
Tactic #10: One last-ditch effort. As I'm walking to my car he says, we'd be willing to let it go for 17.8, and take a small profit cuz we deal on volume (tactic #10.1). I ask him if that is an 'offer' or a question?. Which leads us to the last and final tactic:
Tactic #11: Give the customer a range: well, we're looking at between 17.8 and 18.0. I say, no thanks. Goodbye.
Bottom line: I would have gladly bought the car at 17.6 (maybe even 17.8) with new tires. However, after being "thrown around" to 4 different sales persons, and the misleading "offer" of 16.9, I decided I didn't want to do business with a dealership that purposely misleads its customers. If they never would have thrown out the number of $16.9, I'd be driving home in my new (used) Pathy.
Karz
I've had guys at my stores throw out a ridiculously low number, knowing the customer will not "bite" and then letting them go. They figure they're probably not going to get your business anyway, so we might as well have some fun with you since you've taken our time.
I've known guys that get really pissed when you waste their time and they'll play all kinds of games with you.
I mean no offense, but you stated in your post"I had previously been to a dealer and test drove a similar car and he was asking 18,2. So my intent is to just take this thing for a test drive - I had a work obligation that prevented me from getting down to serious negotiating".
As much as folks dislike car salesmen, it should be a metter of respect that the guy is working to support his family and taking his time with little initial intention of buying from him, while he could be talking to someone he can earn money on, is wrong.
Sorry, I'm off my soapbox now - I personally have had a customer take over 70 hours of my time, then buy somewhere else for $50 less - and we never closed on a price during that 70 hours. Then the guy wants to ask me how I'm doing when I saw him at Safeway in his new car? I TOLD HIM how I was doing!
Good for you, nite, for not rewarding their crappy behavior. I love that line, "He says, well, that was not an offer, it was a question: "would you buy the car for $16.9?""
Well, I have to ask, what about when you are test driving different cars? I had this happen to me recently. I went to one shop where they had 3 different cars I wanted to try out and then I wanted to go elsewhere and find 2 others I was interested in. I explained to the salesman (and sales manager) right off the bat that I was not buying a car today, etc. etc. However, they STILL got pissed at me and played games with me even after I only test drove ONE of those 3 cars. They kept me there for 2 hours, wasting both my time and theirs, trying to get me to buy the one car that I drove (and didn't really care for).
So, do you think I kept them away from someone who might have made a deal? Should I feel guilty? Do you really think that everyone knows exactly the car that they want and should only go to the one dealer that they plan on buying from?
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
I enjoyed it when a customer would be honest with me about their purchase plans.
I also knew that if I let them go with ANY figure instead of closing them on a car deal, there was a 99% chance I'd never see them again - happens every time!
I can't blame a customer for getting me to give them a "shopping figure". You can beat any price, anywhere by 10 bucks and that's enough to "jump ship" over for most people.
Don't blame a guy for trying - do blame a guy for playing games. It's a tough business, and I'm glad I'm on a different (not the other) side of the fence now.
The funny thing to do when the salesman would have asked me "Would you buy the car at $16,900?" would be to yell "SOLD" and get out your pen. (If you wanted the vehicle) His reaction, and his boss's, would be priceless.
Years ago I had a trade in, the dealer simply would not return my keys from the test drive by their used car manager. Kept wanting a deal!
Finally went to the reception desk and asked the secretary to call the police. Keys showed up and I left.
zues - well, I should have been more specific. I meant to say that I was shopping for different makes and models. Cars that I had never driven before. I didn't even want a price, I just wanted to try the different models and figure out which one I was then going to try to buy. Why is that so tough for dealers to understand? "no. I don't want to buy your Audi right now because I might like the BMW better." Its really not a tough concept.
'11 GMC Sierra 1500; '98 Alfa 156 2.0TS; '08 Maser QP; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '11 Mini Cooper S
I hadn't heard the trick with the keys in a while. They used to throw your trade's keys on the roof of the dealership, or at least I'm told the legend goes.
Back to my previous point - if you leave without buying their car, they won't see you again. I'm not justifying the "shell game", just understanding it.
The prospective customer did not note all the options or packages - and you know omitting a package can cost between $50 and $1500, depending on what it is - and they simply showed MY price to another dealer on a SIMILAR, but not exact vehicle. That other dealer, with a smile, beat my price and delivered the car, all the while explaining what a jerk I was to try and take advantage of the customer.
Funny scenario. That's why, when I would steal a deal from a salesman at a competing dealer, I would usually send them a gift certificate for lunch or something like that. All is fair in love and war, but it's worse when we don't make the rules - the customer does and he doesn't play fair!
I missed the point on "the keys in the oil can" - can you explain.
With regards to making 'offers' to the customer "would you buy right now for $16.9?" - if you are wearing the dealership name tag and shirt, you a representative of the dealer, and if you aren't in the authority to make deals, you better not be making me offers. Why would I waste MY time talking to someone who isn't authorized to make a deal? I wonder if I would have offered him 100 bucks lower than they were asking, if he would have needed the "approval".
I bet 9 out of 10 deals really don't need to go to the GM, and that this is a tactic, rather than a method to ensure profitability for the dealership. I love it when the salesperson says "Well, I took your offer into the GM, and boy did he give it to me. But I really battled and worked for you....". Not one time in talking with the sales person has this not happened - do they not know that everyone knows this is a patented tactic?
I don't have anything against the sales people I dealt with, personally. I realize they are under pressure from the dealer to sell cars, and pressure themselves cuz they got the kid going to college. I do, however, have an issue with a dealer who trains their folks to purposely mislead the customer. And this is why I won't do business with this dealer ever again, or recommend this dealer to even my worst enemies. If they wouldn't have played 'games' with me and told me I could buy the car for $16.9 only to have the GM not honor the deal, they would have had a sale, made a decent profit, and turned a car -- with a good reference to boot. Instead, they play games, mislead, and they get nothing.
Maybe I'm just a 'difficult' or 'bad' customer, well I say, "so be it".
Another great leap of assumption, everytime I enter a car to SHOP, another "easy sell" walks it, cant find help, and leaves.
Customers determine the level of effort required to make a purchase, RESPECT THAT. Some test drive a year before they intend on purchasing. Either way, a purchase will be made sometime, and that is simple truth.
"I really battled for you" or "I'm working for you" can be translated as "I'm working for us". Sure, the guy wants you to buy the car and he wants to make as big a hit on you as he can - he a weakling, otherwise - but the manager won't let him do it the easy way.
I had an old manager that had two rules and they both make sense: (1) if you don't go on a test drive WITH your customer (if the test drive happens), when the customer comes back and gets in their car, you can get in the back seat and have them give you a ride home. (2) if you let a customer walk without turning him or her to your manager, same rule applies.
I've found that if you're really upfront with people, that everyone is generally happy. Some people however feel that if they pull the old games that they can win the occasional tremendous deal. Why do they do it? It works. I met a guy recently who bragged that he had someone out there paying $400 a month on a 60 month lease. On a Dodge Neon! To me that's basically criminal.
But the point is, if they start jerking you around... use your legs. Walk out.
As far as throwing numbers out, he was trying to see if you would commit to the car. Nothing wrong with that per se, but I dont like the way that he did it. I personally used to do a somewhat similar thing:
Customer: How much is that 97 Lincoln Continental?
Me: I have that car listed at $20,995
Customer: I'm not gonna pay THAT!
Me: OK, that's understandable. Did you have a number in mind?
Customer: I want to pay about $18,500
Me: OK, I will be happy to present your offer. So we're clear here, at $18,500 would I correctly assume that we have an agreement?
Customer: Yup. I'll buy the car for that.
Me: Great. That helps me quite a lot! I'll see what we can do and see if we cant keep this to a minimum. Give me a few minutes to review this with the sales manager and we'll see if we can't have you as a customer.
So what did that do?
1) I have a customer who has comitted to buy the car.
2) I have a customer who is now closing himself and is not being pressured.
Really, nothing that terribly different happened here that what happened with the above Nissan Pathfinder.
God I could go on for hours.. but point is, when you get treated like this... WALK!
Bill
You wouldn't happen to be located in Missouri would you? If so, and if you get a Pathfinder in, lets talk. (you can email me at dfieselman@hotmail.com)
The scenario you mentioned is fine with me. You were clear in saying that this was an offer from the customer and that you would review with your manager. I specifically asked this salesperson on the phone: "so I can buy the Pathfinder for $16.9? He said yes. Fortunately for me, I could hear it in his voice he wasn't being sincere, and was mentally prepared to walk out despite the fact that this was by far the favorite vehicle I had driven.
Since you're a dealer, I'd like your opinion on something. If I called the dealer and asked to speak to the GM, and told him that his sales person purposely mislead me, and verbally told me on the phone I could buy the vehicle for the offer HE mentioned, would he honor it, or hold the company line?
Thanks for the help!
Negotiating over the hood of a car, acting whimpy and running back and forth 3 or 4 times or simply lying to the customer are all unacceptable.
What's the problem with a $400 payment on a Neon?
Especially if it's a base model with no air that you can get $17,000 carried on to cover the negative equity on the 120,000 mile Hyundai they were previously buried in. Dig 'em up and re-bury 'em, right?
I F&I'd a deal in Oregon (in '99) that ended with a $502 payment on a 13,995 Suzuki Swift Sportwagon // I can't remember the name of the California-based lender, but they carried the guy for 84 months! The customer insisted on the deal, because it was similar to the last Suzuki payment he had! Doh!!
Well, that manager may make sense, but he would cull his potential customers by at least one - me - with that approach. The first I accept as a usually unavoidable fact of life - the salesman is going to come with me, and intrude on my considration of the car. I can't complain about wanting to make sure I don't trash their $25k+ property. However, whenever that rare salesman tosses me the keys and says have fun, I start to have a very positive feeling toward the store.
However, under the second rule I would, as it is stated, get the salesman fired. If I stop in a dealership to shop a car, and I tell the salesman I am not ready to buy today, but want to look at a car and get a brochure, I don't want to be confronted with the sales manager. I don't want to be turned over. I don't want much of a sales pitch at all - just give me what I asked for, and it will take up less of our valuable time. BTW, I generally don't test drive until I am ready to talk price.