Sunday, September 8, 2013

Did YOUR Mistake Cost ME the Sale?

Pardon me if this sounds like a rant!  The intention is for it to be helpful and educational.  Now, I can handle losing business to competitors if the customer is making an informed decision and perhaps they like the competitive offering better.  However, occasionally, people make ill-informed decisions based on a friend providing advice that is inaccurate or by getting confused about what a competitor is actually offering.  It's not hard to understand how this can happen.  Perhaps it has happened to you

The truth is that the proliferation of automotive brands, models, and packages and strangely structured incentive programs by car manufacturers adds up to a confusing landscape of choices.  Lots of sales people use this to their advantage in a number of ways.  Frequently, the bewildered car shopper who set out to make an apples-to-apples comparison, is not sure what is a fair deal or whether they are getting screwed.  By the time the shopper reaches me and gets a complete and accurate explanation of the alternatives, they don't know what to believe.  And, here are a few reasons:
  • Low Balling.  In Metropolitan areas where dealerships of the same brand are a short drive away, the temptation to give a customer a "low ball" quote, as they leave the dealership without buying, is very strong.  The consumer visits several other dealerships seeing if anyone will beat the low ball number they have received.  Since no dealer can beat the number, they return to the first dealer only to find that the car was "sold?", was a different trim level than was understood, or it was based on a "cash purchase, not finance".  In short, there are lots of ways the dealer can switch the vehicle because he was never in a position to sell the original car at the low ball quoted price.  It was only offered to insure that the customer would return.
  • Cash versus Finance.  Usually, near the end of the model year, manufacturers provide 0% financing deals for extended terms (often as high as 84 months).  Since it costs marketing dollars to buy down the lending rates to 0%, the manufacturer saves money if the buyer pays cash.  Most of this savings is normally provided in the form of a cash purchase discount.  So the customer has the alternative to finance at 0% OR pay cash and take advantage of a discount for paying cash (which can be several thousand dollars).  It is not difficult to image how an unscrupulous dealer can have the customer thinking that they are financing the vehicle at the cash price.
  • Value of the Trade-in.  This is often an area of confusion because the amount that the dealer tells you he is giving for your trade-in may include a few things such as a discount on the new car (that the dealer would probably have given you anyway, i.e., without a trade), or a rebate or allowance from the manufacturer that the dealer is getting but not disclosing, or including the taxable savings on the trade, i.e., the government sales tax saved by combining the transactions.
  • Over Estimating Dealer Margins.  Most consumers (according to a recent JD Power study) over-estimate how much margin car dealers are making on a vehicle.  This sets up expectations of large potential discounts which cannot be realized.  I have seen customers leave the dealership because they believed the deal in front of them still had a couple thousand dollars available to negotiate when it was only a couple hundred dollars.  If you are determined to squeeze every last dollar out of the deal, you should subscribe to a dealer invoice service and offer to pay a fair amount above the dealer invoice.  The transaction will go smoother and you will get better service from the dealer.  In Canada, the most common services are CarCostCanada and UnHaggle.
  • Model/Trim Switch.  Models, trim levels, and sub-trim levels can be confusing  and each brand configures their packages differently so an apples-to-apples comparison is difficult.  I often meet with customers who have been shopping and are "sure" that a certain model/trim comes with heated seats when I know it does not.  Unfortunately, car sales people frequently misrepresent (knowingly or unknowingly) what equipment is standard and optional on a specific vehicle.  If you are confused, you are easy to switch.
Fortunately, the research is showing that more car shoppers are doing the bulk of their research online and visiting fewer dealerships before they buy.  This means they arrive at the dealership better informed and ready to do business.

Let me know if any of the above scenarios were part of your car buying process.  How did you handle it?