Selling A Car : The Common Techniques Used by Dealers
Many dealers train their sales staff to sell through a specific process when selling a car. Over the years the types of adversrial negotiating systems have varied from their original formats, but seem to have remained relatives of these five most basic and common types when dealers are selling a car. Adversarial selling techniques all, in one way or another, follow the same principle; The salesperson is your friend and wants you to save as much as possible and it's the nasty hard nosed managers/bosses that are the ones who want you to spend more.
The Four Square Technique
This technique has many variations, all which follow a common trait. The sales person draws two perpendicular lines on their work sheet creating a cross or four sections. They will list them as "Selling Price", "Trade", "Downpayment" and "Monthly Payment". They will then ask if you had to pick one section that was most important to you, which one would it be.
You answer "Trade Value and Monthly" I want to know what my trade is worth and what my payments will be. Remember though your trade, downpayment, monthly payment and selling price are all related. The more you get for your trade the more you are actually putting down which will affect both your monthly payment or your total purchase price.
It really doesn't make a difference for them when selling a car which box you choose to work on, as the main goal is to make you think you are working a great deal but really you are being set for the trap.
They write in the details to the four squares. "As we figured earlier this car would have a monthly figure of between $350-$480 per month, depending on financing terms and type. To achieve this payment you would need to put down approximately $2500-$3500. Did you allocate any money from your savings or did you just want to use your trade? No just your trade, great." They put a zero in the downpayment section. You are happy because the payments are still being shown as 350-480 and you know your car is only worth $800.00. "Now with an allowance of $2500-$3500 for your trade your payments should still remain the same." You feel like you are really pulling the wool over their eyes so you say "no I'm sorry Mr.Sales I don't want to pay anymore then $300 per month." "No problem" says Mr.Sales, as he scratches through the normal amounts. They are selling a car to you and you are actually winning, right? Wrong. After they get all of your information down they say "now if I can have this approved by my manager how do you want to leave your deposit?"
A couple of different things can happen next. They will either change the numbers to reflect the truth. Your car was appraised at $800.00 and your payments went up to $540.00. Or, they come back and say your numbers have been approved.
Either way, you are being set up. If the numbers have changed, what they haven't told you is that they could have approved a payment of $390 over sixty months as opposed to the $540.00 over forty-two months they quoted. You didn't need more money down and they didn't even need to discount when selling a car. It is all shock value. You state you can't afford that and they say "what can you afford?" "As I stated earlier I wanted to pay $300.00.""That would require more money down, each $25 in payment requires $1000.00. So that would require....."."Okay" you say"if you can get me to $400.00 per month we have a deal". As the saying goes "boom goes the dynamite", you just paid $600 more than MSRP and thought you got a great deal.
In Canada this is illegal for new cars. When selling a car you cannot sell above MSRP, but there are always ways to make it up. Increasing this fee or that, bumping your APR, changing the term of the loan etc. So even if it is against the law don't get too comfortable, it can still happen.
If on the other hand, the numbers stay the same. They show you an allowance of $2500.00 for your trade and a payment of $300.00. What can happen is they have increased your term to 84 months, put you in a lease or even worse an
open ended lease
, or possibly changed your APR and put the payments bi-weekly. *Bi-weekly payments of $150.00 equals $300.00, right? Nope, $150.00 is actually $325.00 per month.
That is the basic way of selling a car with the four square technique. Some are a little more shady while some use it to keep things "on paper" so nobody gets confused and that you cannot deny anything later. Selling a car with this technique is quite popular, but if you have done your own research first you will have nothing to worry about.
The Turnover Technique
This is also a very popular technique for dealers when selling a car. It has been around for decades and its purpose is to create confusion and exhaustion. Just remember that the "hunter" doesn't always catch the "prey", if the"prey" knows whats coming.
The way this system works is to walk you through the entire process of selling a car; Greeting, qualifying, test drive, trade appraisal etc. Many times this could take 2-4 hours. You are happy with the monthly payment they have presented to you with your trade in being used as money down and although you don't know the exact figures are, just monthly payment, you are feeling good about the transaction thus far.
Sure you are tired and a little confused, but now here comes the Financing Counsellor to show you why this deal is so good with the numbers being shown with this variable and that. You aren't really sure what all the math equates to because they seem to speak in a foreign language, "Cap Cost Reduction" "Residual" etc., but of course you don't want to seem ignorant of the deal so you say nothing. The glazed eyes or the fidgeting are tell tale signs they are wearing you down.
You say you really need to grab some lunch or give another reason to leave. The sales person and the financing person agree, but the sales manager/ owner wanted to say thank you just before you go. The "boss" comes in shakes your hand and introduces themself and sits down. "I understand you need to go and .........., but let me make sure we have given you everything you need.".They rework the numbers and here is the "grind", you are there for another hour with the boss. You're more exhausted and the numbers are more confusing but seem to be better, and the "boss" seems nice enough. You sign on the dotted line and give your deposit not really being sure what happened but excited to have bought a car and to be out of there.
You have just been part of the turnover technique for selling a car. There isn't any specific criteria to watch for from the sales person. It all is in the new faces that keep coming in, explaining the deal in their own way and wearing you down. If you feel confused, tired or hungry make sure you leave to recharge. There is nothing good that comes from staying there. Try not to be rude, but don't be afraid to be insistant on what you are comfortable with. This is your deal, you are the one paying them, you don't have to do it all their way.
The Tower Technique
This technique for selling a car is easy to spot. The tower, which is normally an actual tower where the "boss" sits , is used as an intimidation factor. This system was used by the television show Deal or No Deal with Howie Mandel. The banker was hidden behind a screen and never interacted directly with the contestant. The phone call would come telling Howie what was going to happen and he would pass that information along.
dealership selling a car
with this technique, use it to keep an eye on the entire sales operation with a birds eye view and sometimes surveillance cameras. Selling a car in the new millenium. They watch each customer from the time the enter the dealerships property and keep an eye on salespeople. They can dispatch a salesperson to your location on their lot or a "runner" to keep you there until a salesperson makes it to you. This system is most commonly used by very large "superstores", with large properties and a large sales staff.
As a customer you should really be aware of this technique of selling a car. The stores that implement this system are very often extrmely agressive and not for the customer who is not very agressive themselves.
Spot Delivery Technique
This technique is not so much for selling a car but for the financing. Not all spot deliveries are dealer tricks but you should still be aware of the potential pitfalls of this system.
Spot deliveries are buying the car and driving it home on the same day. Many dealers use this as a service to their customers, but they have the option of making larger profits with it as well. You have picked the shiney black Honda Accord on the dealers lot, you have negotiated a great price of $380.00 below invoice after all of the incentives and you like the monthly payments. You drive the car home and show it off to all your freinds, family and neighbours and they are all really impressed, you're feeling really good.
Two weeks and 2500 miles later you get a call for Mr.Sales at the dealership. He states that there has been a problem with your financing and you have not been approved for the "captive" finance rate. You are shocked and unsure of what will happen. "Don't worry we were able to get you approved at Fat Johnny's Financing, and your payment will only go up by $35.00 a month or $1.15 a day. Less then a cup of coffee". You agree to the new loan and are relieved you get to keep the car and don't have to face the embarassment of having to tell evryone you have "credit problems".
Two weeks later you get the same call. You aren't approved unless you come up with $4500.00 as a downpayment this afternoon. "I don't have that kind of money" you say. "We'll have to come and get the car and charge you a depreciation fee, then. Unless, let me see here, you know what I can maybe do for you. I can get you another loan to pay the downpayment". You agree to take the additional loan at 19% to save your embarassment again. You were just double dipped.
Either of these scenerios happen on a daily basis across North America, and the dealers who use this scam make out like bandits. Extra profits can be in the thousands of dollars. That is why in most sections I have said to check your credit score and be approved for a loan outside of the dealership. If you are prepared for the unexpected, it may cost you a little more but it could also save you thousands in extra expenses.
The Note Technique
Selling a car with the note technique is a system of "Masks". The note system was designed to seem nice on one hand while picking your pockets with the other. You have gone through the entire process and are optimistic about the negotiations, since everyone seems so nice.
You present your opening offer of $29435.00 or $3590.00 off of the MSRP. You know this agressive but like this site taught you its easier going up then down. You are starting at the invoice price. The sales person says they will gladly take it to their manager. You wait and write notes of what your next move is, just in case they are listening, you can never be too careful.
Mr.Sales returns with a personalised note for you from the manager. It reads "Mr.and Mrs. Yourname. Thank you very much for your offer. Unfortunately selling a car like this at $29435.00 is not possible. If you would be able to come up $1000.00 and we met somewhere in the middle, would this be acceptable."
You agree, since they were so nice about it. Mr.Sales returns to the manager and then come s back to you momments later with another note. It reads"Mr and Mrs Yourname. We are very close but the person we had for your trade in won't take it because it is green. If yyou could help us out with another $400.00 I'm sure we can put this together for you" You agree that green isn't the greatest colour and pay an extra $300.00 instead of $400.00. You aren't going to be that easy no matter how nice they are.
Mr.Sales takes the increase to his boss. He comes back in a few minutes with another note. It reads "Dear Firstnames. We are only dollars away from being able to put this together. I'm sure if we showed the owner another $11.54 on your bi-weekly payment we could put this together for you and have you driving that new black Honda Accord later today. Thank you so much Manager Dan" You figure its less then a dollar a day you are still getting a great deal.
Selling a car with this technique is picking your pocket with "sincerity and kindness". Remember to stick to your origiinal plan no matter how nice everyone seems. Buying a car at invoice isn't always possible, but Mr. and Mrs. Yourname just ended up paying nearly MSRP. You can still be nice to one another (you and the sales staff) but don't ever forget you are on opposite sides of the money spectrum when you are
Be careful, do your homework. If you do some research ahead of time and carfully read the fine print of your deal you will be alright. Check out the
average trade value
then shop with that figure as well as your
you have worked out yourself. If you are prepared for all of the scenerios before you enter the dealership you will be able to keep more money in your pocket and have less buyer's remorse. To dealerships selling a car is a daily routine, so they will be able to flawlessly approach the selling process with any of these common techniques with smiles on their faces. The main goal for them is profits and the main goal for you is a great deal, by following my advice I am hoping you will be much closer to that great deal.