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The Inside Scoop of Buying a USED car
- Thread starter larryh1108
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OP
larryh1108
Well-Known Member
That's still a big spread.
All I can think of is the NADA stands for the Nation Automobile Dealer's Assoc.
They may have access to all the Sale Prices/trade in allowances of their members thru some kind of interactive program from their dealer members.
So, they collect data from actual dealers rather than auctions.
As we discussed, in making deals, the trade in ACV and trade in allowance can differ greatly.
An area, soon to be discussed here, is how a payoff on your trade in also affects the numbers.
It would explain the difference if KKB uses auction numbers which would make it closer to actual.
However, these are all guesses at this point.
All I can think of is the NADA stands for the Nation Automobile Dealer's Assoc.
They may have access to all the Sale Prices/trade in allowances of their members thru some kind of interactive program from their dealer members.
So, they collect data from actual dealers rather than auctions.
As we discussed, in making deals, the trade in ACV and trade in allowance can differ greatly.
An area, soon to be discussed here, is how a payoff on your trade in also affects the numbers.
It would explain the difference if KKB uses auction numbers which would make it closer to actual.
However, these are all guesses at this point.
Last edited:
OP
larryh1108
Well-Known Member
Thanks!
Knowing I am helping some members here makes it worthwhile for me.
If several members here can save $1000 and several more can now walk into any dealer
and know he won't get jerked around, then this thread will be worth the time it has taken to write it.
However, I have a lot more information to share.
I estimate I am almost 2/3 done so a lot more is to come.
OP
larryh1108
Well-Known Member
I hear you and understand what you are saying.
If you walk into the right dealer (used car dealer, not a new car dealer), you may have a conversation like this.
You: I'm in a hurry. How much do you want for that grey Ford pickup out there?
Dealer: Well, we are asking $16,995 for it. When will you be ready to buy? (A KEY question, BTW).
You: I'm ready today. I'm in a hurry. $15,000 is the most I'll pay.
Dealer: I'll tell you what, it's late and I've had a long day. If you go to $15,500 I'll write it up right now.
You: Whaaaaaat?
It can happen. It has happened. I've been there and done that many times.
The same thing can happen if it's the last day of the month in a New Car store and they are real close to bonus.
It's 8:30 and they close at 9 and it's been a long day, week and month.
Yes, it can happen as long as: #1 You are ready to buy at that moment and #2 your offer isn't stupidly ridiculous.
If it is a reasonable offer, you could very well get their best offer in a counter. It's all about the timing.
Go in at 5pm in the 10th of any month and the showroom is empty, well, I don't think they will be very receptive.
Timing is everything.
OP
larryh1108
Well-Known Member
Back to finding that perfect place to buy your next, used car.
The point I was trying to make previously was that a car is a car is a car. Other than the top tier/top profit dealers out there, any dealer, new or used, sells (basically) the same cars. Same as in they have 4 wheels (generally), were once new and were driven by who knows who and were cared for who knows how well? It's just a car.
Every buyer has his or her own criteria when looking for a used car.
*Some hot buttons for some buyers is mileage. Some say nothing over 35,000 miles. (Factory warranty still in effect, usually)
*Another hot button is nothing over 3 years old. This one is more confusing but it may be a vanity thing. 4 years old with 30,000 miles? No.
3 years old with 60,000 miles. Sure!
*Another hot button is color. Any color as long as it's black.
* Another hot button is options. Back in the day, it HAD to have a CD. No CD, no sale. (seriously, it was huge back then).
Now it's it has to have a factory GPS and bluetooth. (makes sense I guess).
Others insist on a power roof. Others leather, heated seats, etc.
A good salesman finds each buyers hot buttons. This takes the buyer's mind off of price/getting ripped to let's find that car with a power roof!
Again, it's just a car. Every dealer has cars. It's up to you to know what you want, up front, to save the most time and energy.
As mentioned, I am partial to the larger volume, smaller dealers. Most towns have at least one of these guys. How do you know if the guy you drive by is a dealer like this? Well, a few hints. First thing to check is to see how many cars he has in stock. A good dealer turns (sells) half of his inventory every month. This seems to work out for some reason. If the market can support it and you have the space without cramming in cars so tight that you cannot open the doors (these dealers make me crazy!) then if he has 60 nice cars (not counting the beaters in back) then he probably sells 30 cars a month. IMO, this guy is on the border of being that larger, small dealer.
In my opinion, a successful small, local dealer sells a minimum 40 cars a month. Why 40? well it means that he can find nice cars that sells well in his area. Having a bunch of Fiats and VW Beetles in rural America is not the smartest way to sell cars. To me, 40 cars is more than 1 sold per day.
It means he can handle reconditioning and processing at least 40 cars a month on a consistent basis. He has to have good organization and other non-selling skills to achieve this. It means, to me, that he has is act together. He may have that new car process and you may not know that until you actually walk in but I'd bet that if has been there over 2 years and always looks busy that he does it the "right" way.
I've been around a lot of smaller dealers who are great people and who work very hard to do the right thing. However, they just can't consistently get past that 25 sold cars a month line. I don't know why it's 25 but my best guess is that's how many selling days there are in a month. 1 a day.
That is their limit on an average. Yeah, during tax time it's 30 or 40 but that also means in June, July and August (no end of model year sales here!) they sell 12, 15 maybe 18 cars. Chances are, when the New Car stores are booming, the little guys are very slow.
Not getting past 25 sold cars also means he has trouble finding the right cars to sell. He probably does not have the right connection at that Megastore whether it's a New Car store or Used Car store. Also, money is probably tight at that sales volume and he does not have the pocket cash to "spiff" the big store's UCM. He just does not have the cash and connections to get over that 25 car hump. They will struggle in the slow times and try to play catch up when it is busy. Decent place to buy that older car with higher miles but he is not the place I've been talking about. He probably has 35-40 cars on his lot so that means that selling 20 cars is where his inventory puts him. Great people, older cars.
The guy who sells between 25 and 40 cars is either on his way up or just can't get over that hump. It could be location or where his comfort level of what he buys. It could be his credit line isn't big enough to stock the 75-80 cars he needs to sell 40+. It could be his lot only can hold 30 cars which means he turns his inventory 1x a month (a great job, BTW) but he loses sales by not having a better variety. Whatever it is, he is not there yet and if he is good enough, he'll work hard to get there.
All of this means is that it takes a lot of things to go right to get to that 40-50 sold cars a month mark that is the difference between struggling and making enough money to bring home a regular paycheck. So, if you have that 40-50+ sold cars a month dealer that means he is doing a lot of things right and there's a good chance he's the kind of guy you want to buy from.
So, you say, you have a local dealer on the outskirts of town. He's been there 5+ years and has a lot of cars on his lot but the lot looks dirty, there are a lot of beaters in the back, the grassy areas are neglected and the building needs some paint and repairs. Is this the kind of dealer you are talking about? He has all of the markers you mentioned. So, what's up?
Well, being a good place to buy a car is a lot more than having enough inventory to sell a lot of cars. Lot condition is near the top of what to look for when looking for "the right guy" to hand your hard earned money to. If a guy has 100 cars but most of the inventory is S5000 or less and you want a car in the $10,000 to $12,000 price range then he isn't the guy for you. He is the guy for the cash buyer or BHPH buyer. He may be a great guy but he doesn't have what you are looking for.
Yes, the ideal dealer is the one who has a lot of cars in the price range you want to spend. If your budget is $10,000 and you walk on to a lot with $20,000 used cars, you will be wasting your time. Sure, they write down what you are looking for and take your name and number but they are selling what you aren't looking for. So, now what? Your small town has a $5,000 lot and a $20,000 lot but nothing for you. Well, unless you are real rural, try the next town over or do a Google search until you find a dealer within an hour of you. You know, a guy who sells $8,000 to $15,000 cars and trucks, who has an 80-100 car inventory and who's lot is clean, organized and well maintained. If you don't have one within an hour then you may have found the place to open up your own lot because someone is missing the ball.
Ok, you have a couple of guys within a decent distance but know nothing about them. Find them on Facebook and read some reviews. Look for all the bad ones (if there are any) and see if there is a pattern. No bad reviews? ok. Give them a call and ask if they have (insert what you MAY want here). See how they respond to your question. Are they nice and courteous? Do they grill you for information before answering? Do they sound like you are bothering them? Are they professional when they answer like "No sir, but if you give me a more detailed description I can try to locate one and get back to you", then they sound like they may be ok. If they say "No sir but we get new cars in every Thursday so call me back Friday" then that is a signal of laziness or just not being a good salesman. If they pass the phone call test, drive by on a Sunday or before they open. See if the lot is clean and organized. See if the grassy areas are maintained or growing wild. See if the cars are covered in road dust or that yellow, nasty pine pollen.
(Yes, if it just came then cut them some slack, If it's been a week, begin to wonder.). Papers and trash being blown thru the lot? Clean windows?
Paint peeling? Cars with flats sitting on the lot? Believe it or not, lot condition says a lot about the cars he sells. Dirty lot, chances are his cars have not been reconditioned properly... short cuts have been taken. Lazy sales staff or conditions means they do the least they have to to get by. I don't know about you but I'm not interested.
Next, if it passes the sniff test, walk in during the week some time to see for yourself. Go in with one thing in mind, to see how they "feel" to you.
Simply ask them "What are your hours on Saturday?" Simple question. Yes, they are on the door but so what? If someone tries to get you to sit down and asks your name and begins the process all you have to say is you just want the hours for Saturday. If someone gives you a snarky answer like "The hours are posted on the door. 9-5 like it says" then you truly have your answer. If someone answers with "we're open 9-5 on Saturday but it's best to get here early because we get super busy later on" then you know you found your place.
It's not rocket science but finding the right dealer is as important as finding the right car. I'll say it again, a car is a car is a car.
How the dealer treats you tells you a lot about his cars and pricing. Find a place you actually like walking in to and I guarantee you that you will not feel crapped on again.
The point I was trying to make previously was that a car is a car is a car. Other than the top tier/top profit dealers out there, any dealer, new or used, sells (basically) the same cars. Same as in they have 4 wheels (generally), were once new and were driven by who knows who and were cared for who knows how well? It's just a car.
Every buyer has his or her own criteria when looking for a used car.
*Some hot buttons for some buyers is mileage. Some say nothing over 35,000 miles. (Factory warranty still in effect, usually)
*Another hot button is nothing over 3 years old. This one is more confusing but it may be a vanity thing. 4 years old with 30,000 miles? No.
3 years old with 60,000 miles. Sure!
*Another hot button is color. Any color as long as it's black.
* Another hot button is options. Back in the day, it HAD to have a CD. No CD, no sale. (seriously, it was huge back then).
Now it's it has to have a factory GPS and bluetooth. (makes sense I guess).
Others insist on a power roof. Others leather, heated seats, etc.
A good salesman finds each buyers hot buttons. This takes the buyer's mind off of price/getting ripped to let's find that car with a power roof!
Again, it's just a car. Every dealer has cars. It's up to you to know what you want, up front, to save the most time and energy.
As mentioned, I am partial to the larger volume, smaller dealers. Most towns have at least one of these guys. How do you know if the guy you drive by is a dealer like this? Well, a few hints. First thing to check is to see how many cars he has in stock. A good dealer turns (sells) half of his inventory every month. This seems to work out for some reason. If the market can support it and you have the space without cramming in cars so tight that you cannot open the doors (these dealers make me crazy!) then if he has 60 nice cars (not counting the beaters in back) then he probably sells 30 cars a month. IMO, this guy is on the border of being that larger, small dealer.
In my opinion, a successful small, local dealer sells a minimum 40 cars a month. Why 40? well it means that he can find nice cars that sells well in his area. Having a bunch of Fiats and VW Beetles in rural America is not the smartest way to sell cars. To me, 40 cars is more than 1 sold per day.
It means he can handle reconditioning and processing at least 40 cars a month on a consistent basis. He has to have good organization and other non-selling skills to achieve this. It means, to me, that he has is act together. He may have that new car process and you may not know that until you actually walk in but I'd bet that if has been there over 2 years and always looks busy that he does it the "right" way.
I've been around a lot of smaller dealers who are great people and who work very hard to do the right thing. However, they just can't consistently get past that 25 sold cars a month line. I don't know why it's 25 but my best guess is that's how many selling days there are in a month. 1 a day.
That is their limit on an average. Yeah, during tax time it's 30 or 40 but that also means in June, July and August (no end of model year sales here!) they sell 12, 15 maybe 18 cars. Chances are, when the New Car stores are booming, the little guys are very slow.
Not getting past 25 sold cars also means he has trouble finding the right cars to sell. He probably does not have the right connection at that Megastore whether it's a New Car store or Used Car store. Also, money is probably tight at that sales volume and he does not have the pocket cash to "spiff" the big store's UCM. He just does not have the cash and connections to get over that 25 car hump. They will struggle in the slow times and try to play catch up when it is busy. Decent place to buy that older car with higher miles but he is not the place I've been talking about. He probably has 35-40 cars on his lot so that means that selling 20 cars is where his inventory puts him. Great people, older cars.
The guy who sells between 25 and 40 cars is either on his way up or just can't get over that hump. It could be location or where his comfort level of what he buys. It could be his credit line isn't big enough to stock the 75-80 cars he needs to sell 40+. It could be his lot only can hold 30 cars which means he turns his inventory 1x a month (a great job, BTW) but he loses sales by not having a better variety. Whatever it is, he is not there yet and if he is good enough, he'll work hard to get there.
All of this means is that it takes a lot of things to go right to get to that 40-50 sold cars a month mark that is the difference between struggling and making enough money to bring home a regular paycheck. So, if you have that 40-50+ sold cars a month dealer that means he is doing a lot of things right and there's a good chance he's the kind of guy you want to buy from.
So, you say, you have a local dealer on the outskirts of town. He's been there 5+ years and has a lot of cars on his lot but the lot looks dirty, there are a lot of beaters in the back, the grassy areas are neglected and the building needs some paint and repairs. Is this the kind of dealer you are talking about? He has all of the markers you mentioned. So, what's up?
Well, being a good place to buy a car is a lot more than having enough inventory to sell a lot of cars. Lot condition is near the top of what to look for when looking for "the right guy" to hand your hard earned money to. If a guy has 100 cars but most of the inventory is S5000 or less and you want a car in the $10,000 to $12,000 price range then he isn't the guy for you. He is the guy for the cash buyer or BHPH buyer. He may be a great guy but he doesn't have what you are looking for.
Yes, the ideal dealer is the one who has a lot of cars in the price range you want to spend. If your budget is $10,000 and you walk on to a lot with $20,000 used cars, you will be wasting your time. Sure, they write down what you are looking for and take your name and number but they are selling what you aren't looking for. So, now what? Your small town has a $5,000 lot and a $20,000 lot but nothing for you. Well, unless you are real rural, try the next town over or do a Google search until you find a dealer within an hour of you. You know, a guy who sells $8,000 to $15,000 cars and trucks, who has an 80-100 car inventory and who's lot is clean, organized and well maintained. If you don't have one within an hour then you may have found the place to open up your own lot because someone is missing the ball.
Ok, you have a couple of guys within a decent distance but know nothing about them. Find them on Facebook and read some reviews. Look for all the bad ones (if there are any) and see if there is a pattern. No bad reviews? ok. Give them a call and ask if they have (insert what you MAY want here). See how they respond to your question. Are they nice and courteous? Do they grill you for information before answering? Do they sound like you are bothering them? Are they professional when they answer like "No sir, but if you give me a more detailed description I can try to locate one and get back to you", then they sound like they may be ok. If they say "No sir but we get new cars in every Thursday so call me back Friday" then that is a signal of laziness or just not being a good salesman. If they pass the phone call test, drive by on a Sunday or before they open. See if the lot is clean and organized. See if the grassy areas are maintained or growing wild. See if the cars are covered in road dust or that yellow, nasty pine pollen.
(Yes, if it just came then cut them some slack, If it's been a week, begin to wonder.). Papers and trash being blown thru the lot? Clean windows?
Paint peeling? Cars with flats sitting on the lot? Believe it or not, lot condition says a lot about the cars he sells. Dirty lot, chances are his cars have not been reconditioned properly... short cuts have been taken. Lazy sales staff or conditions means they do the least they have to to get by. I don't know about you but I'm not interested.
Next, if it passes the sniff test, walk in during the week some time to see for yourself. Go in with one thing in mind, to see how they "feel" to you.
Simply ask them "What are your hours on Saturday?" Simple question. Yes, they are on the door but so what? If someone tries to get you to sit down and asks your name and begins the process all you have to say is you just want the hours for Saturday. If someone gives you a snarky answer like "The hours are posted on the door. 9-5 like it says" then you truly have your answer. If someone answers with "we're open 9-5 on Saturday but it's best to get here early because we get super busy later on" then you know you found your place.
It's not rocket science but finding the right dealer is as important as finding the right car. I'll say it again, a car is a car is a car.
How the dealer treats you tells you a lot about his cars and pricing. Find a place you actually like walking in to and I guarantee you that you will not feel crapped on again.
OP
larryh1108
Well-Known Member
Finding that right dealer; recap.
Nothing I wrote here is absolute.
It is a guideline to finding a dealer that works for your needs.
There are small car lots that sell 15 cars a month that carry that $8,000-$15000 retail cars.
They do it the right way. They are a 1 man shop with a helper for errands, running and watching the phone when he is busy with a customer. His overhead is so low that he has 15 cars on his lot and sells 20 cars a month.
That means he works his ass off to make his money but he still has the golden touch in selling his cars.
He is the perfect guy to buy from and if you know him you will be a happy guy.
There are also New Car dealers who just know how to treat the customer right. There are some processes in place (there has to be at the larger volumes) but he instills and insists in honesty in his management staff and sales staff. If that 25 car sales guy got a lot of complaints, he's gone. They don't want that kind of business. Yes, they may charge a bit more (maybe even $800 more) but they offer the factory ESC and will make you feel special. They usually have a larger inventory to choose from.
They are out there and many of you guys (probably the ones who stopped reading this thread) already are happy with their dealer.
To sum it up, you don't know for sure if the dealer you are considering is the right one for you. I have given a lot of easy ways to find out.
The best way is to walk in and to not feel bad if you don't get a good vibe and/or you get a bad vibe right off the bat. Walk away.
Get a "text" on your phone (it is on vibrate only, you know) and say you have a family emergency and have to leave NOW if you are not comfortable telling them they are not right for you. Remember, you are the customer. They need you. You don't need them.
Nothing I wrote here is absolute.
It is a guideline to finding a dealer that works for your needs.
There are small car lots that sell 15 cars a month that carry that $8,000-$15000 retail cars.
They do it the right way. They are a 1 man shop with a helper for errands, running and watching the phone when he is busy with a customer. His overhead is so low that he has 15 cars on his lot and sells 20 cars a month.
That means he works his ass off to make his money but he still has the golden touch in selling his cars.
He is the perfect guy to buy from and if you know him you will be a happy guy.
There are also New Car dealers who just know how to treat the customer right. There are some processes in place (there has to be at the larger volumes) but he instills and insists in honesty in his management staff and sales staff. If that 25 car sales guy got a lot of complaints, he's gone. They don't want that kind of business. Yes, they may charge a bit more (maybe even $800 more) but they offer the factory ESC and will make you feel special. They usually have a larger inventory to choose from.
They are out there and many of you guys (probably the ones who stopped reading this thread) already are happy with their dealer.
To sum it up, you don't know for sure if the dealer you are considering is the right one for you. I have given a lot of easy ways to find out.
The best way is to walk in and to not feel bad if you don't get a good vibe and/or you get a bad vibe right off the bat. Walk away.
Get a "text" on your phone (it is on vibrate only, you know) and say you have a family emergency and have to leave NOW if you are not comfortable telling them they are not right for you. Remember, you are the customer. They need you. You don't need them.
Oh, that's easy (for me, anyway):
Which provided the customer with the best time on investment?
I remember talking with a shipmate once several years ago, the subject being oil changes. He was going to take his car out after his duty day was over and have the oil changed.
I told him I do my oil changes myself...oil, filter, trip to the hobby shop for 20 minutes, done!
Then he brought up a good point...how much is his time worth to him? (or your time to you)
Because it takes time to run out to Walmart and buy the oil and filter. It takes time to run over to the hobby shop and change the oil...even to do the job in your own driveway. If you do it at home, it takes time to run the used oil to a local parts stor for disposal.
All of which is fine, especially if you budget your time properly (say, buy your oil/filter at Walmart when you're already there for other reasons).
OR...he can schedule an appointment at Jiffy Lube, have his oil changed for $20 (at the time), and be done with it.
IN YOUR EXAMPLE...
If I've done my research ahead of time, likely I already know what I consider to be a fair market value for the vehicle I'm looking for. I'll have already lined up any loan required with my credit union beforehand. So the question to me is "how much time am I willing to put into wheeling-and-dealing to get to a price I'm happy with?"
The BEST deal for me, therefore, is the one that gets me to my buying price sooner.
OP
larryh1108
Well-Known Member
THAT, Chief, is 100% the answer I had in mind.
How much is your time worth?
If you are going to spend $20,000 on a used truck, who will get you to that price the fastest with the
least amount of drama?
How much is your time worth?
If you are going to spend $20,000 on a used truck, who will get you to that price the fastest with the
least amount of drama?
@larryh1108 I worked at two dealers in the late 1970's, one large domestic and one pretty small foreign. A few things have changed over the years, but even back then Black Book was catching on as the real reference by the good ( successful) dealers. Your description of the way trades were handled and the whole pecking order was spot on. We had one independent used car lot guy who bought the wholesale cars - bottom feeder- who took only the doggiest of dogs. Left a slime trail worthy of Jabba the Hut. Thing is, just like you wrote, he played a role in the car ecosystem and even if we secretly despised him and his business ethics for the cars he sold on his own lot- to the owner of the dealership, he was a customer. But I used to say about him that dealing with him was like trying to hold a beach ball far underwater, sooner or later hes going to pop up and usually somplace where you didn't want him.
In those days, at the foreign dealer new car markups were only a few hundred bucks, our own used cars ranged up to $2k. I'll have to read your new car posts ( or here) to see if you mentioned dealer Floor Plan- if they still call it that- and how that affects their and your financing. Why a dealer may or may not want to handle your warranty work. Might want to touch on another factor in reconditioning costs: parts markup vs retail.
Thanks for writing this stuff up.
In those days, at the foreign dealer new car markups were only a few hundred bucks, our own used cars ranged up to $2k. I'll have to read your new car posts ( or here) to see if you mentioned dealer Floor Plan- if they still call it that- and how that affects their and your financing. Why a dealer may or may not want to handle your warranty work. Might want to touch on another factor in reconditioning costs: parts markup vs retail.
Thanks for writing this stuff up.
OP
larryh1108
Well-Known Member
Alfred, you are correct. The wholesalers who bought the turds were usually turds themselves. Not always, but usually.
Like I just mentioned, you can generally get a feeling for a dealer by his lot appearance and his own appearance (usually the same).
Believe it or not, cheap, used American owned cars command a good fee overseas (for some makes and models). I know for fact that a lot of the $500-$2000 cars are purchased from dealer trade ins, reconditioned enough to start and drive and then ship them overseas, usually an Arab country. I don't know why they don't get the cars driven in Europe (unless they cost a lot more there) but it is a real thing.
Also, I did touch on the "floor plan" that dealers use (and pay for) in discussing the true costs of a new car. (Floor plan = credit line). I also plan to go in depth on discussing it later on when I get to learning about watching how the money flows.
Like I just mentioned, you can generally get a feeling for a dealer by his lot appearance and his own appearance (usually the same).
Believe it or not, cheap, used American owned cars command a good fee overseas (for some makes and models). I know for fact that a lot of the $500-$2000 cars are purchased from dealer trade ins, reconditioned enough to start and drive and then ship them overseas, usually an Arab country. I don't know why they don't get the cars driven in Europe (unless they cost a lot more there) but it is a real thing.
Also, I did touch on the "floor plan" that dealers use (and pay for) in discussing the true costs of a new car. (Floor plan = credit line). I also plan to go in depth on discussing it later on when I get to learning about watching how the money flows.
OP
larryh1108
Well-Known Member
OK, moving forward.
You now know (or should know) where to look for that used car.
Let's go back to buying that used car only now we have a trade in AND it has a payoff.
This is a more complicated process than buying a new car with a trade. In a new car, there is a very
specific MSRP and a very specific invoice price. What's in the middle is up for negotiation (bumping a trade is negotiation).
Now, you want to buy a late model truck with 40,000 miles on it and want to trade your 6 year old car you bought 3 years ago and still owe 2 more years on. We'll get to some numbers but this is an involved process.
You may not realize it but there are several "processes" involved in buying a car. Each process is very different yet it ties in with the next process.
Most of the time you cannot skip a process unless you are just buying an advertised car, for cash, and most of the work is done up front.
Of course, how lengthy or how much drama is determined by the dealer's selling philosophy and, at times, the time of the month and year.
This is covered in detail previously.
Buying the car you want (new or used) is one sale. It is obvious. It has it's process
Trading in your car is another sale (you are selling your car to the dealer). It also has it's process.
Trading in your car with a trade involves working 2 separate deals at the same time, which is desirable to the dealer because the buyer usually focuses on one specific part (usually the trade because it is more personal) and that's how the deal gets done.
As just mentioned, the New Car deal is more cut and dried. MSRP (on the car, by law).
Invoice (number is close by and usually available on the net or via the manager.
All that's left is the trade value. You want (near) retail and the dealer wants it as cheap as possible.
We discussed, at length, how it goes down and how a value is come to whether the buyer likes it or not.
The buyer always has the option to pull the trade and sell it himself, or keep it. However, if he owes money on it and does not want or cannot afford another car payment, he is kind of stuck.
I'm going to guess that the trade in is now 6 years old and has 88,000 miles on it (just under 15k miles a year which is now average though publications say 12,000 miles a year is average. It was 12,000 miles a year in the 70s for goodness' sake!
So, the trade in has to go because it will need (or already needs) some expensive work that just comes with a car aging naturally.
To top it off, you still owe 2 year's payments at $350/month. You estimate, in your head, as $8400 (36 x $350) less interest so about $8,000.
You look up the trade in value at KBB and it says and average trade in with average miles is $6250.
Oh boy, you are about $2,000 upside down.....
Oh well, we have to get rid of it. $2,000 isn't so bad.
You now know (or should know) where to look for that used car.
Let's go back to buying that used car only now we have a trade in AND it has a payoff.
This is a more complicated process than buying a new car with a trade. In a new car, there is a very
specific MSRP and a very specific invoice price. What's in the middle is up for negotiation (bumping a trade is negotiation).
Now, you want to buy a late model truck with 40,000 miles on it and want to trade your 6 year old car you bought 3 years ago and still owe 2 more years on. We'll get to some numbers but this is an involved process.
You may not realize it but there are several "processes" involved in buying a car. Each process is very different yet it ties in with the next process.
Most of the time you cannot skip a process unless you are just buying an advertised car, for cash, and most of the work is done up front.
Of course, how lengthy or how much drama is determined by the dealer's selling philosophy and, at times, the time of the month and year.
This is covered in detail previously.
Buying the car you want (new or used) is one sale. It is obvious. It has it's process
Trading in your car is another sale (you are selling your car to the dealer). It also has it's process.
Trading in your car with a trade involves working 2 separate deals at the same time, which is desirable to the dealer because the buyer usually focuses on one specific part (usually the trade because it is more personal) and that's how the deal gets done.
As just mentioned, the New Car deal is more cut and dried. MSRP (on the car, by law).
Invoice (number is close by and usually available on the net or via the manager.
All that's left is the trade value. You want (near) retail and the dealer wants it as cheap as possible.
We discussed, at length, how it goes down and how a value is come to whether the buyer likes it or not.
The buyer always has the option to pull the trade and sell it himself, or keep it. However, if he owes money on it and does not want or cannot afford another car payment, he is kind of stuck.
I'm going to guess that the trade in is now 6 years old and has 88,000 miles on it (just under 15k miles a year which is now average though publications say 12,000 miles a year is average. It was 12,000 miles a year in the 70s for goodness' sake!
So, the trade in has to go because it will need (or already needs) some expensive work that just comes with a car aging naturally.
To top it off, you still owe 2 year's payments at $350/month. You estimate, in your head, as $8400 (36 x $350) less interest so about $8,000.
You look up the trade in value at KBB and it says and average trade in with average miles is $6250.
Oh boy, you are about $2,000 upside down.....
Oh well, we have to get rid of it. $2,000 isn't so bad.
So theres been a lot of chatter about Carfax- but exactly how reliable is that info ? The company markets their product as some sort of mega- shield against buying a lemon, but isn't it true there are things that won't ever show up as " unusual" to the casual reader ? There's some skill involved in reading those reports and inferring what has happened to a car. There's also AutoCheck, which reflects some different info - really using both is a good idea as cheap insurance, particularly in regards to fleet, lease or program cars, as well as repos.
A dealer ( new , used or auction house) has things that happen in the course of doing business- an employee runs a truck into a used car while its sitting on a lot. It gets repaired in-house by the team and body shop of the dealer. No police report gets filed. Does any accident show up on the report ? Likely not.
I damage my own car backing into a tree, drive home and fix it in my garage. Not reportable, no CarFax info.
People have to realize its not a panacea, its additional clues as to where the car has been but is not an absolute guarantee of purity.
A dealer ( new , used or auction house) has things that happen in the course of doing business- an employee runs a truck into a used car while its sitting on a lot. It gets repaired in-house by the team and body shop of the dealer. No police report gets filed. Does any accident show up on the report ? Likely not.
I damage my own car backing into a tree, drive home and fix it in my garage. Not reportable, no CarFax info.
People have to realize its not a panacea, its additional clues as to where the car has been but is not an absolute guarantee of purity.
OP
larryh1108
Well-Known Member
I don't know how many people know but (up until a few years ago) IL had no legislation that said anything has to be sent to Carfax or where ever. Other states require it by law. I don't know if this has changed.
The big insurance companies report it because it also protects their own interests but if you have a local guy do a back yard body restoration, no one else needs to know.
Also, you'd be surprised (well, maybe not you) but lot damage is very real and a lot more common than you think. And yes, the dealer has it fixed on the down low and (depending on the dealer) the lot damage is charged to the ACV of the car or it has a separate account for lot damage and other misc repairs which is a general charge off on the expense report and not charged to the car.
The big insurance companies report it because it also protects their own interests but if you have a local guy do a back yard body restoration, no one else needs to know.
Also, you'd be surprised (well, maybe not you) but lot damage is very real and a lot more common than you think. And yes, the dealer has it fixed on the down low and (depending on the dealer) the lot damage is charged to the ACV of the car or it has a separate account for lot damage and other misc repairs which is a general charge off on the expense report and not charged to the car.
OP
larryh1108
Well-Known Member
We have to admit, though, that before Carfax none of us had a clue about anything about the car. If a body shop did a great job or, basically, repainted the whole car, the average buyer would have no idea that it was in a major wreck. Also, many Carfax reports show when service was performed and the mileage, etc. Also, every time a car changed owners and got new registration, it shows. If a car was 6 years old and had 5 owners, it was a red flag to me. I agree that there are holes in what it reports but it is a useful tool. But, like you said, it is not the end all, be all in reference to knowing everything that has happened to it. A buyer still has to be vigilant.
OP
larryh1108
Well-Known Member
Payoff on a trade in, what happens?
So, we are working a deal on a late model used truck with 40k miles on it.
You are trading a 6 year old car with 88k miles on it and an ~$8,000 payoff on it.
Where do we go from here?
Well, let's be honest about buying any used vehicle, car or truck.
With a new car, you have to start at MSRP because who would pay over MSRP (with limited exceptions, of course)?
Well, no one that I know.
So who determines what the asking price of any used vehicle is and how is that price determined?
Well, before the internet was so easily accessible, the Used Car Manager (UCM) would determine what the asking price was, as the unit sat on the lot.
Usually, unless there was a blowout sale going on (like the new car blowouts for model year and year end mega sales), a used vehicle that was in stock less than 30 days was not advertised. It sat out there to get the best price it could (read: unlimited profit).
Since every used vehicle is different in some way, you can usually justify why your asking price is higher than the one advertised on the net for less than you were asking for yours. back a few years, you didn't have the net at your fingers as you sat at the salesman's desk while you waited for the UCM to come up with the asking price. Now, while you wait, that same UCM is checking the net to see what is out there just like you are.
He will print out as many comparable units that he can find with high asking prices to show he isn't out of line. You write down prices that are the cheapest prices for a similar unit. It is almost a game. Pre internet we would add $4,000 to the cost and then round it up to the $995 numbers at the end.
(e,g, we have 8500 in a trade, after recon. Our asking price would be (not advertised) $12,995. It sounds ok to you and me. If the buyer says something along the lines of "you're crazy! I've seen them a lot cheaper almost every else" and begins to get skiddish. The good salesman tells him to not worry since the UCM prices them high so he can take a lot off to make a deal. "No one pays retail here", he says. The buyer calms down. Makes sense.
It is a game as everyone knows, he says to himself. So, pre internet, the UCM asked, basically, whatever sounded good with a $4000+ markup. Most lots did it as it was the common thing to do and everyone was trained that way. Now, this was back 10-15 years ago when new car prices were around $15,000 and new trucks were $20,000 or so. Today those figures have doubled so I do think that the cars are still priced this way but the trucks are marked up $6,000 to $8,000+. There is no way of knowing how much a truck is marked up if you have no way of knowing what the dealer has in it. As I stated before, every trade in is figured different and every UCM sees the same truck differently. There, simply, is no set standard.
There is no MSRP or invoice on a used vehicle. Both numbers are what someone says they are, not what it printed on official documents
(The MSRP Maroney Label is federally regulated and the invoice comes from the factory that built the car. Both numbers are pretty much set in stone and common knowlege. All dealers pay the same figure for the same car and other than periodic stair step money, the cost is the cost.
So, a Ford dealer may take in a Ford truck for $15,000 because it is his product and he knows it's a desirable package and/or color and sells every one he gets.
That same truck at the Chevy store will (usually) start out $500 less due to the off brand and the Chevy guy does not know these trucks are in high demand because he sells Chevy trucks. So, this same truck may get an appraisal of $13,000 at Chevy.
So, now, what is this truck worth if 2 dealers put a number on it that is $2,000 apart? Let's assume the Ford guy knows he can get $19,995 for it all day and
the Chevy guy sees it as a $17, 500 truck. Perception. I'll bet that the Ford guy will get his $19,000+ and the Chevy guy will struggle to get his $17,000 because his market is not a Ford truck market. So, what is this truck really worth retail?
So, we are working a deal on a late model used truck with 40k miles on it.
You are trading a 6 year old car with 88k miles on it and an ~$8,000 payoff on it.
Where do we go from here?
Well, let's be honest about buying any used vehicle, car or truck.
With a new car, you have to start at MSRP because who would pay over MSRP (with limited exceptions, of course)?
Well, no one that I know.
So who determines what the asking price of any used vehicle is and how is that price determined?
Well, before the internet was so easily accessible, the Used Car Manager (UCM) would determine what the asking price was, as the unit sat on the lot.
Usually, unless there was a blowout sale going on (like the new car blowouts for model year and year end mega sales), a used vehicle that was in stock less than 30 days was not advertised. It sat out there to get the best price it could (read: unlimited profit).
Since every used vehicle is different in some way, you can usually justify why your asking price is higher than the one advertised on the net for less than you were asking for yours. back a few years, you didn't have the net at your fingers as you sat at the salesman's desk while you waited for the UCM to come up with the asking price. Now, while you wait, that same UCM is checking the net to see what is out there just like you are.
He will print out as many comparable units that he can find with high asking prices to show he isn't out of line. You write down prices that are the cheapest prices for a similar unit. It is almost a game. Pre internet we would add $4,000 to the cost and then round it up to the $995 numbers at the end.
(e,g, we have 8500 in a trade, after recon. Our asking price would be (not advertised) $12,995. It sounds ok to you and me. If the buyer says something along the lines of "you're crazy! I've seen them a lot cheaper almost every else" and begins to get skiddish. The good salesman tells him to not worry since the UCM prices them high so he can take a lot off to make a deal. "No one pays retail here", he says. The buyer calms down. Makes sense.
It is a game as everyone knows, he says to himself. So, pre internet, the UCM asked, basically, whatever sounded good with a $4000+ markup. Most lots did it as it was the common thing to do and everyone was trained that way. Now, this was back 10-15 years ago when new car prices were around $15,000 and new trucks were $20,000 or so. Today those figures have doubled so I do think that the cars are still priced this way but the trucks are marked up $6,000 to $8,000+. There is no way of knowing how much a truck is marked up if you have no way of knowing what the dealer has in it. As I stated before, every trade in is figured different and every UCM sees the same truck differently. There, simply, is no set standard.
There is no MSRP or invoice on a used vehicle. Both numbers are what someone says they are, not what it printed on official documents
(The MSRP Maroney Label is federally regulated and the invoice comes from the factory that built the car. Both numbers are pretty much set in stone and common knowlege. All dealers pay the same figure for the same car and other than periodic stair step money, the cost is the cost.
So, a Ford dealer may take in a Ford truck for $15,000 because it is his product and he knows it's a desirable package and/or color and sells every one he gets.
That same truck at the Chevy store will (usually) start out $500 less due to the off brand and the Chevy guy does not know these trucks are in high demand because he sells Chevy trucks. So, this same truck may get an appraisal of $13,000 at Chevy.
So, now, what is this truck worth if 2 dealers put a number on it that is $2,000 apart? Let's assume the Ford guy knows he can get $19,995 for it all day and
the Chevy guy sees it as a $17, 500 truck. Perception. I'll bet that the Ford guy will get his $19,000+ and the Chevy guy will struggle to get his $17,000 because his market is not a Ford truck market. So, what is this truck really worth retail?
OP
larryh1108
Well-Known Member
Retired USNChief asked in the New Car thread that I want to answer here:
Thanks for your story. If you read these posts from you guys who have had minimum drama at the dealer, you will see a common statement; you go in to the dealer prepared. You did your research up front. You didn't wait for a salesman to sell you a car, you went there to buy (a huge difference). All I can emphasize (over and over again) is if you walk in fully prepared (knowing what the car you want's retail value is by pricing other similar vehicles by doing a local search), and you have your own financing lined up (and/or know the going rates) then you, the buyer, is said to have control of the deal. It is a proven fact that whoever controls the deal is the "winner". Once a salesman takes control of the deal, he will (generally) get his profit.
If the buyer has control of the deal he should get the best price possible. All I can say, again, is to be fully prepared when you walk in. Know what car or truck you want.
Spend an hour researching it on the net for comparable prices. Write down who has a similar one and their advertised price. The more you know about the car that you want, the more control you will have. It is very possible that you may know more about the car in question than the salesman. That would be a good thing.
The comment about dealing with the salesman (only) without running back and forth to a manager is more luck of the draw than being "firm". If you are looking for a NEW car, as discussed, the salesman is usually a newbie, a guy on probation (90 days) or a guy fresh out of probation who needs to get a year (or two) in before he's even considered for promotion to used car sales. Unless you plan to pay MSRP or full list for that new car, a manager will be nearby making sure the salesman doesn't over-step his boundary. If you called first you may have gotten that old, veteran New Car salesman who does not take walk ins. He does, however, answer the phone and he can tell right away if you are someone who wants to buy soon or is phone shopping. If he gets someone who wants to buy today or tomorrow, you'll have his interest.
If he feels you are shopping or are not a serious buyer, he will pass the call off to a newbie.
This New Car veteran is actually an Asst NCM (New Car Mgr). He does not want the title and he does not want the responsibility that goes with the title. However,
when it's busy (and he is not busy) or to cover days off or auction days for managers, he can, and does, step up to take the role of manager to help the green peas.
Also, this veteran will be used for what we call a T.O. (It means a "Turn Over"). A TO is the term when a salesman has struggled and/or the buyer will not commit to buying today. If the NCM is busy with another (real) buyer or has an ad deadline in an hour for an ad, he'll ask the New Car vet to "TO" the deal. His job is to see if the buyer is truly not ready to buy or if the salesman just messed it up, pissed them off or is just not getting it done. For his help, the Used Car vet will usually get a weekly salary of $200, which is in addition to his pay plan. Hey, everything helps. The point here is that this veteran, who also does TOs, knows how to work a deal, knows what management expects and has the (unwritten) authority to make the deal. He is an Asst manager.
So, for a New Car, luck of the draw will determine if you get what you want, otherwise a manager will be in your process (or the TO from a veteran).
However, I wish to address this further by discussing the Used Car Salesman's job and pay plan and role in all of this. After all, he is the highest paid, non-manager (and many times makes more than many managers). These Used Car salesmen are the stars at the dealer. They can (and do) make or break the dealer.
They are the face of the dealer, whether a franchise dealer or a Used Car lot, this is the guy you remember (or want to forget).
Thanks for your story. If you read these posts from you guys who have had minimum drama at the dealer, you will see a common statement; you go in to the dealer prepared. You did your research up front. You didn't wait for a salesman to sell you a car, you went there to buy (a huge difference). All I can emphasize (over and over again) is if you walk in fully prepared (knowing what the car you want's retail value is by pricing other similar vehicles by doing a local search), and you have your own financing lined up (and/or know the going rates) then you, the buyer, is said to have control of the deal. It is a proven fact that whoever controls the deal is the "winner". Once a salesman takes control of the deal, he will (generally) get his profit.
If the buyer has control of the deal he should get the best price possible. All I can say, again, is to be fully prepared when you walk in. Know what car or truck you want.
Spend an hour researching it on the net for comparable prices. Write down who has a similar one and their advertised price. The more you know about the car that you want, the more control you will have. It is very possible that you may know more about the car in question than the salesman. That would be a good thing.
The comment about dealing with the salesman (only) without running back and forth to a manager is more luck of the draw than being "firm". If you are looking for a NEW car, as discussed, the salesman is usually a newbie, a guy on probation (90 days) or a guy fresh out of probation who needs to get a year (or two) in before he's even considered for promotion to used car sales. Unless you plan to pay MSRP or full list for that new car, a manager will be nearby making sure the salesman doesn't over-step his boundary. If you called first you may have gotten that old, veteran New Car salesman who does not take walk ins. He does, however, answer the phone and he can tell right away if you are someone who wants to buy soon or is phone shopping. If he gets someone who wants to buy today or tomorrow, you'll have his interest.
If he feels you are shopping or are not a serious buyer, he will pass the call off to a newbie.
This New Car veteran is actually an Asst NCM (New Car Mgr). He does not want the title and he does not want the responsibility that goes with the title. However,
when it's busy (and he is not busy) or to cover days off or auction days for managers, he can, and does, step up to take the role of manager to help the green peas.
Also, this veteran will be used for what we call a T.O. (It means a "Turn Over"). A TO is the term when a salesman has struggled and/or the buyer will not commit to buying today. If the NCM is busy with another (real) buyer or has an ad deadline in an hour for an ad, he'll ask the New Car vet to "TO" the deal. His job is to see if the buyer is truly not ready to buy or if the salesman just messed it up, pissed them off or is just not getting it done. For his help, the Used Car vet will usually get a weekly salary of $200, which is in addition to his pay plan. Hey, everything helps. The point here is that this veteran, who also does TOs, knows how to work a deal, knows what management expects and has the (unwritten) authority to make the deal. He is an Asst manager.
So, for a New Car, luck of the draw will determine if you get what you want, otherwise a manager will be in your process (or the TO from a veteran).
However, I wish to address this further by discussing the Used Car Salesman's job and pay plan and role in all of this. After all, he is the highest paid, non-manager (and many times makes more than many managers). These Used Car salesmen are the stars at the dealer. They can (and do) make or break the dealer.
They are the face of the dealer, whether a franchise dealer or a Used Car lot, this is the guy you remember (or want to forget).
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OP
larryh1108
Well-Known Member
The Used Car Salesman and his role in the process.
We talked about the New Car Salesman's role in the process. We learned that he is (usually) a newbie or on probation.
If the New Car Salesman's goal is to maximize his earnings then he will yearn to be a Used Car Salesman.
Any dealer that has an emphasis on used car sales needs an experienced Used Car sales staff. These guys are the top earners. They know how to make the most money on every deal that comes their way. Yes, some deals they earn a mini because the customer is educated and prepared up front.
That happens. However, if a buyer walks in unprepared and does not understand the process then there's a good chance the Used Car Salesman will make his entire week's pay on that one deal. Literally.
Any successful used car dealer (whether a factory dealer or a lot) knows that the used car sales staff can make or break him in his desire to get rich.
Many dealers believe they are so good that they can have the greenest (read cheapest) used car sales staff and since the owner and/or manager is so good that they can control the deals, make the sales and prosper just fine without that veteran Used Car sales guy. Well, in most cases they are wrong. An untrained and inexperienced used car sales salesman can, and does, lose customers before they walk in the door. They can, and do, lose profit out on the lot before the customer walks into the dealer. In short, the green used car sales staff costs a dealer deals and profit.
It just happens because the deal structure and how you handle the buyer is as different as night and day. That recent New Car salesman knows the process of selling that new car (meet, greet, qualify or land the buyer on a car, as discussed in the New Car thread). Then a manager sweeps in behind the newbie armed with MSRP and invoice of the car and then works the deal thru the salesman.
Not the same with the Used Car vet. The Used Car vet has no MSRP on the window (usually the price is not marked unless a tag sale is going on).
Many times a buyer will ask "how much is this car?" and "how much is that car" and "how about that truck over there? How much is it?" This buyer is a typical buyer looking for something but is not on a specific car (or even if it's a car or truck). If this guy buys, I'd bet he had his head removed by that vet. This guy has a specific price range (let's say $5,000) and is looking to get the most for his money. This guy is probably on a used car lot that sells cars for under $10,000 (if it's a well run lot, this owner can make a ton of money. Notice I said "well run"). So many people want cheaper cars for hundreds of reasons. A burned out veteran used car guy generally works here. A used car pro who just got fed up with an owner who reneges on his pay plan will end up here. A good salesman who has trouble getting to work on time (read: has a late night bad habit) usually works here, etc. Rougher cars (higher miles) and rougher salesmen. A match made in heaven!
So, with no structured place to start (we're going to call all asking prices as MSRP because it's become a common term for asking price. MSRP means the Manufacturer's Suggested Retail Price. The factory does not set the retail prices for used cars so technically MSRP is not the proper term.
However, MSRP is the accepted term.
So, the top selling Used Car vet knows his inventory very well. He has to so he can be successful and to build value to the buyer when discussing it.
He know the lot better than anybody because it is his bread and butter. He's the guy who will advise the UCM that the Prius we just go makes a weird noise when you start it up and it's cold but the noise goes away in a few minutes (it wasn't cold when appraised). If the UCM doesn't want to spend any more money on it, he'll tell the salesman (and the other salesmen) to make sure it's warmed up first thing every morning.
The vet will make sure this happens if he knows he can make a decent commission on the car. If he doesn't like the car he'll steer people away from it by telling them that it has "issues" and they don't want that car. This also builds credibility with the buyer because they see the salesman won't sell them a bad car.
We talked about the New Car Salesman's role in the process. We learned that he is (usually) a newbie or on probation.
If the New Car Salesman's goal is to maximize his earnings then he will yearn to be a Used Car Salesman.
Any dealer that has an emphasis on used car sales needs an experienced Used Car sales staff. These guys are the top earners. They know how to make the most money on every deal that comes their way. Yes, some deals they earn a mini because the customer is educated and prepared up front.
That happens. However, if a buyer walks in unprepared and does not understand the process then there's a good chance the Used Car Salesman will make his entire week's pay on that one deal. Literally.
Any successful used car dealer (whether a factory dealer or a lot) knows that the used car sales staff can make or break him in his desire to get rich.
Many dealers believe they are so good that they can have the greenest (read cheapest) used car sales staff and since the owner and/or manager is so good that they can control the deals, make the sales and prosper just fine without that veteran Used Car sales guy. Well, in most cases they are wrong. An untrained and inexperienced used car sales salesman can, and does, lose customers before they walk in the door. They can, and do, lose profit out on the lot before the customer walks into the dealer. In short, the green used car sales staff costs a dealer deals and profit.
It just happens because the deal structure and how you handle the buyer is as different as night and day. That recent New Car salesman knows the process of selling that new car (meet, greet, qualify or land the buyer on a car, as discussed in the New Car thread). Then a manager sweeps in behind the newbie armed with MSRP and invoice of the car and then works the deal thru the salesman.
Not the same with the Used Car vet. The Used Car vet has no MSRP on the window (usually the price is not marked unless a tag sale is going on).
Many times a buyer will ask "how much is this car?" and "how much is that car" and "how about that truck over there? How much is it?" This buyer is a typical buyer looking for something but is not on a specific car (or even if it's a car or truck). If this guy buys, I'd bet he had his head removed by that vet. This guy has a specific price range (let's say $5,000) and is looking to get the most for his money. This guy is probably on a used car lot that sells cars for under $10,000 (if it's a well run lot, this owner can make a ton of money. Notice I said "well run"). So many people want cheaper cars for hundreds of reasons. A burned out veteran used car guy generally works here. A used car pro who just got fed up with an owner who reneges on his pay plan will end up here. A good salesman who has trouble getting to work on time (read: has a late night bad habit) usually works here, etc. Rougher cars (higher miles) and rougher salesmen. A match made in heaven!
So, with no structured place to start (we're going to call all asking prices as MSRP because it's become a common term for asking price. MSRP means the Manufacturer's Suggested Retail Price. The factory does not set the retail prices for used cars so technically MSRP is not the proper term.
However, MSRP is the accepted term.
So, the top selling Used Car vet knows his inventory very well. He has to so he can be successful and to build value to the buyer when discussing it.
He know the lot better than anybody because it is his bread and butter. He's the guy who will advise the UCM that the Prius we just go makes a weird noise when you start it up and it's cold but the noise goes away in a few minutes (it wasn't cold when appraised). If the UCM doesn't want to spend any more money on it, he'll tell the salesman (and the other salesmen) to make sure it's warmed up first thing every morning.
The vet will make sure this happens if he knows he can make a decent commission on the car. If he doesn't like the car he'll steer people away from it by telling them that it has "issues" and they don't want that car. This also builds credibility with the buyer because they see the salesman won't sell them a bad car.
I cringe whenever I hear what people say to a car dealer- they just don't think Language choices matter when talking to a salesperson. As in I NEED to trade this in, I HAVE to sell this to buy another car. I dont TRUST this car anymore. I cant AFFORD to pay more than X or The BANK says I can afford more. I FEEL like treating myself. WOW I LOVE that color. Giving up the fact that you are going to make emotional choices. My experience ( even personally) is that there are times when you simply fall out of love with your current car. But keep your yap shut unless you know what you are doing.
And funny how people will sell or trade a car that needs "expensive "work done, only to joyfully lose more than double or triple that much to replace it with a different used car that is functionally no better and may actually be worse.
And funny how people will sell or trade a car that needs "expensive "work done, only to joyfully lose more than double or triple that much to replace it with a different used car that is functionally no better and may actually be worse.
OP
larryh1108
Well-Known Member
Alfred, you are 100% correct!
A good salesman will pick up subtle hints that a buyer mumbles or says to his other half while on the lot,
test driving or sitting at the desk. The salesman eagerly passes on these tidbits. It can cost the buyer thousands!
Your examples are right on.
Other stupid statements are:
"I'll be glad to get rid of this turd! It cost me money every other week!" (That $1800 car is now worth $500)
"Honey! This car is the EXACT color that we want and couldn't find!" (price just went up $800)
Wife: I'll be so glad to get rid of that car. He acted like he was 16 whenever he drove it and the insurance was killing us! (trade just dropped $500)
"My bank says I can only afford $325 but I know I can pay up to $450." Payment will come in at $449. Guaranteed! Even if it was $350 before the adds he didn't know he wanted.
"If you can get me into that truck, I don't care what the payments are!" Probably has credit issues but does not mean he can't buy it at 21%.
You get the picture.
Also, your story about trading a car that has issues and buying one with worse issues is very common in the under $5000 range.
I've seen it happen too many times. This buyer just wants a different car and pays (basically) $2000 to buy the same thing in a different flavor.
If you (buyer) wants the salesman to overhear something that will affect the prices you can have him overhear you say:
"If they lowball my trade here like the last guy did, we're walking from here, too".
Point is, they are trained to listen to your comments and to use them against you. You can also make them to send him a message, too.
A good salesman will pick up subtle hints that a buyer mumbles or says to his other half while on the lot,
test driving or sitting at the desk. The salesman eagerly passes on these tidbits. It can cost the buyer thousands!
Your examples are right on.
Other stupid statements are:
"I'll be glad to get rid of this turd! It cost me money every other week!" (That $1800 car is now worth $500)
"Honey! This car is the EXACT color that we want and couldn't find!" (price just went up $800)
Wife: I'll be so glad to get rid of that car. He acted like he was 16 whenever he drove it and the insurance was killing us! (trade just dropped $500)
"My bank says I can only afford $325 but I know I can pay up to $450." Payment will come in at $449. Guaranteed! Even if it was $350 before the adds he didn't know he wanted.
"If you can get me into that truck, I don't care what the payments are!" Probably has credit issues but does not mean he can't buy it at 21%.
You get the picture.
Also, your story about trading a car that has issues and buying one with worse issues is very common in the under $5000 range.
I've seen it happen too many times. This buyer just wants a different car and pays (basically) $2000 to buy the same thing in a different flavor.
If you (buyer) wants the salesman to overhear something that will affect the prices you can have him overhear you say:
"If they lowball my trade here like the last guy did, we're walking from here, too".
Point is, they are trained to listen to your comments and to use them against you. You can also make them to send him a message, too.
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OP
larryh1108
Well-Known Member
OK, so now we want to understand what makes that Used Car salesman tick. Well, it's greed. He wants to make as much commission as possible and you are the guy who is going to pay it. They come in all shapes and sizes. They come in at all levels of the slime factor. If you shake his hand and then want to use a wipe to clean off the slime then you should just leave now because no matter what he tells you, you will over pay if you buy from him.
The best salesmen convince you that he is working on your behalf and the manager is the common enemy. He is nice, friendly, likable and maybe even nice enough to date your daughter. However, he gets paid the same as the shark in the shiny suit. He just has a different way of getting your money. He gets you to trust him. That's his style. He does it well.
Now, I am not saying there aren't any nice salesmen because there are. I'm sure many guys here have had great experiences with guys and I bet that when you need another, you'll go back to the same guy. The old pros have a large following because they've taken good care of their buyers. They take good care of anyone you sent to see them. They are just good sales people. They are out there. But, unless you were sent to see "Joe" from someone you trust, you have to believe that the guy unlucky enough to get you is there to line his pocket because no matter how you look at it, they only get paid if you buy a car and they hate wasting their time if they can't make any money. Bottom in is that they still need you.
Since the need to make money is what drives the salesman and the need to make money is what drives the manager and the only reason the dealer is there is to make money, the concept is simple. They want to make money and more specifically, if you are there, they want your money.
This is fine as long as you get fair market value in return along with a pleasant buying experience.
So, to let you get into the salesman's shoes, let's understand how he gets paid and how much he "usually" earns.
The best salesmen convince you that he is working on your behalf and the manager is the common enemy. He is nice, friendly, likable and maybe even nice enough to date your daughter. However, he gets paid the same as the shark in the shiny suit. He just has a different way of getting your money. He gets you to trust him. That's his style. He does it well.
Now, I am not saying there aren't any nice salesmen because there are. I'm sure many guys here have had great experiences with guys and I bet that when you need another, you'll go back to the same guy. The old pros have a large following because they've taken good care of their buyers. They take good care of anyone you sent to see them. They are just good sales people. They are out there. But, unless you were sent to see "Joe" from someone you trust, you have to believe that the guy unlucky enough to get you is there to line his pocket because no matter how you look at it, they only get paid if you buy a car and they hate wasting their time if they can't make any money. Bottom in is that they still need you.
Since the need to make money is what drives the salesman and the need to make money is what drives the manager and the only reason the dealer is there is to make money, the concept is simple. They want to make money and more specifically, if you are there, they want your money.
This is fine as long as you get fair market value in return along with a pleasant buying experience.
So, to let you get into the salesman's shoes, let's understand how he gets paid and how much he "usually" earns.
OP
larryh1108
Well-Known Member
A good Used Car Salesman can make a decent living. If he is good and works in a good, used car dealer (whether a new dealer or a used lot), he should make $52k to $60k a year. He does work 48+ hours a week and does work Saturdays so that is part of the consideration.
Heck, if he works at a medium sized Used Car lot (30-40 units sold a month) and is close to the owner who knows this salesman is good, honest and does not piss people off and will write ads and supervise lot conditions, etc, he may just get paid $1000 a week (52k/yr) with perhaps a monthly bonus of $500 for selling 20+ cars and possibly an annual bonus 0f $2000 if the lot sells 360 total units (30/mo).
That's a good living! The hours are long and the work is hard but a good, honest Used Car Salesman can make a decent living.
As we've discussed, the successful New Car stores and Mega Used Car stores have commission earning sales staff. These guy s are the ones you hear all the horror stories of (and they are probably true) but a good owner will weed out the slime and try to keep the guys who make them money and treats the customers right. This is a process, in and of itself. Of course, a slimy owner loves the slimy salesmen who would whack his own family members if it meant a bonus. There is also the guy, freshly promoted from the New Car Dept who thinks he is all that because he's been selling new cars for a year and a half now. He has no idea of how much he has to learn about used cars to sell them for maximum profit. However, he thinks he knows. After all, he has the same pay plan as the pros do!
Before we get into specifics, almost every dealer that I know pays commission on the profit. A very few just pay per car, no matter the profit. The salesman in this store has no idea of how much the profit is. He has no idea of the true ACV. They work the deals like a New Car salesman and everything comes from the manager working over him. He is a robot working in a store that does not pay their sales staff a lot. An entry level used car store.
So, before the dealer pays a commission on a sold deal, he charges a "pack" against the profit. If you read the New Car thread, you know that the dealer, basically, say that the first $XXXX dollars is mine. I pay the advertising, I pay to have the cars cleaned and repaired, I pay for your desk and the phone and the computer on it. I pay to keep you cool in the summer and warm in the winter. I pay for the customer to walk into that door so you can sell him to make your money. So, when discussing profit over ACV, in a sold used car, the first $1000, $1200, $1500 or even $2000+ goes to the dealer. THEN and only then is the earned commission paid.
Logic would dictate that the dealers who go for volume with lower PPV would also have the lowest pack and that the guys who sell less but demand the top dollar in PPV charges the largest pack. However, there are dealers who want what they want and take what they want and don't care what the sales staff think is fair.
These dealers have a hard time holding on to the best salesmen because the dealer doesn't care about them. These dealers end up with the transient guys who move from dealer to dealer, who are really good but have some kind of bad habit that affects their reliability and their availability (read: they are always late and call in sick a lot but are top sellers when they do show up). A lot of these kind of guys are pushy, over the line, because they have a habit to support.
This may be drugs, drinking, gambling, women or all of the above. They push so hard to make the most they can because they have that habit to feed. They can only work in the transient dealers who put a huge pack on the used cars.
SO, like the New Car commission pay plan, the Used Car pay plan has it's pack and it's mini pay. A mini in Used Cars is usually $100 ( a New Car mini is $50).
Ok, a typical dealer has a New Car pack of $200 and a Used Car pack of $1200 and a Used Truck pack of $2000 before they pay commission.
In the last 10-15 years, used trucks have become a lucrative profit center for any dealer. New trucks cost insane money so their used value is also top dollar. Finding good, clean used trucks is very hard. Cars are disposable but trucks are a different story. If you have a truck and it treats you well, you hold onto it. You don't trade it, you drive it until the wheels fall off or give it to your kid or sell it to your BIL or whatever. Dealers do not see that many nice trucks come their way so when they get one, they will ask top dollar and they will get top dollar. So, truck packs have a $2000 to $2500 pack on it before a salesman gets a payable commission.
Heck, if he works at a medium sized Used Car lot (30-40 units sold a month) and is close to the owner who knows this salesman is good, honest and does not piss people off and will write ads and supervise lot conditions, etc, he may just get paid $1000 a week (52k/yr) with perhaps a monthly bonus of $500 for selling 20+ cars and possibly an annual bonus 0f $2000 if the lot sells 360 total units (30/mo).
That's a good living! The hours are long and the work is hard but a good, honest Used Car Salesman can make a decent living.
As we've discussed, the successful New Car stores and Mega Used Car stores have commission earning sales staff. These guy s are the ones you hear all the horror stories of (and they are probably true) but a good owner will weed out the slime and try to keep the guys who make them money and treats the customers right. This is a process, in and of itself. Of course, a slimy owner loves the slimy salesmen who would whack his own family members if it meant a bonus. There is also the guy, freshly promoted from the New Car Dept who thinks he is all that because he's been selling new cars for a year and a half now. He has no idea of how much he has to learn about used cars to sell them for maximum profit. However, he thinks he knows. After all, he has the same pay plan as the pros do!
Before we get into specifics, almost every dealer that I know pays commission on the profit. A very few just pay per car, no matter the profit. The salesman in this store has no idea of how much the profit is. He has no idea of the true ACV. They work the deals like a New Car salesman and everything comes from the manager working over him. He is a robot working in a store that does not pay their sales staff a lot. An entry level used car store.
So, before the dealer pays a commission on a sold deal, he charges a "pack" against the profit. If you read the New Car thread, you know that the dealer, basically, say that the first $XXXX dollars is mine. I pay the advertising, I pay to have the cars cleaned and repaired, I pay for your desk and the phone and the computer on it. I pay to keep you cool in the summer and warm in the winter. I pay for the customer to walk into that door so you can sell him to make your money. So, when discussing profit over ACV, in a sold used car, the first $1000, $1200, $1500 or even $2000+ goes to the dealer. THEN and only then is the earned commission paid.
Logic would dictate that the dealers who go for volume with lower PPV would also have the lowest pack and that the guys who sell less but demand the top dollar in PPV charges the largest pack. However, there are dealers who want what they want and take what they want and don't care what the sales staff think is fair.
These dealers have a hard time holding on to the best salesmen because the dealer doesn't care about them. These dealers end up with the transient guys who move from dealer to dealer, who are really good but have some kind of bad habit that affects their reliability and their availability (read: they are always late and call in sick a lot but are top sellers when they do show up). A lot of these kind of guys are pushy, over the line, because they have a habit to support.
This may be drugs, drinking, gambling, women or all of the above. They push so hard to make the most they can because they have that habit to feed. They can only work in the transient dealers who put a huge pack on the used cars.
SO, like the New Car commission pay plan, the Used Car pay plan has it's pack and it's mini pay. A mini in Used Cars is usually $100 ( a New Car mini is $50).
Ok, a typical dealer has a New Car pack of $200 and a Used Car pack of $1200 and a Used Truck pack of $2000 before they pay commission.
In the last 10-15 years, used trucks have become a lucrative profit center for any dealer. New trucks cost insane money so their used value is also top dollar. Finding good, clean used trucks is very hard. Cars are disposable but trucks are a different story. If you have a truck and it treats you well, you hold onto it. You don't trade it, you drive it until the wheels fall off or give it to your kid or sell it to your BIL or whatever. Dealers do not see that many nice trucks come their way so when they get one, they will ask top dollar and they will get top dollar. So, truck packs have a $2000 to $2500 pack on it before a salesman gets a payable commission.
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@larryh1108 A few questions:
A) Is the term "Bird Dog" still used/paid for sales leads ?
B) Will a dealer ( new or used) still jump on that guy who waves Benjamins ( eg all cash now) ?
C) For used car deals- importance of having your own pre sale inspection by an independent mechanic- if that isnt encouraged or supported - Red Flag.
A) Is the term "Bird Dog" still used/paid for sales leads ?
B) Will a dealer ( new or used) still jump on that guy who waves Benjamins ( eg all cash now) ?
C) For used car deals- importance of having your own pre sale inspection by an independent mechanic- if that isnt encouraged or supported - Red Flag.
OP
larryh1108
Well-Known Member
Ok, so the Used Car salesman finds a guy who wants that beautiful truck on the front line that is $15,000 less than a new one. It "only" has 70,000 miles on it even though it is 6 years old. The guy who traded it in bought a new one for $65,000 and didn't worry too much about how the numbers fell.
Bottom line, the dealer took it in cheap and wants top dollar retail for it. He knows he will get it.
So, a good Used Car salesman gets the phone call from the guy asking if was still there because he drove by this morning and saw it in the front row.
The buyer asks what the cost is and the salesman tells him that since it just came in he wasn't sure and didn't want to guess but he'd have all the info when he got there after work. The caller said to not sell it because he's been looking for one like it for months and it had everything he wanted.... 4 Drs, short bed, 4x4, tow package and the right color. The salesman told him that there were 10 salesmen there and any one could sell it because it is on the lot for sale. The guy isn[t happy but understands. Appointment set for 5:30, after he gets off from work.
At noon this guy shows up. He feared someone would buy it so he took 1/2 a day off to look at and maybe buy this truck. The salesman does his thing,
gets the keys and they go on the test drive. Beautiful truck in every way. The guy is peeing his pants. He wants this truck.
They get back inside and the guys asks "How much?" The salesman tells him $28,995. (full list price). The buyer gulps and says that's more than he expected, why so high? He says he's seen them online for about $25,000 or so. The salesman asks why he never bought one of them?
The guy says that whenever he calls, it's sold. The salesman then says, well, this one has been here 2 days and it's not sold. Want it or not?
The buyer asks for their best price for a cash deal. The salesman says "Cash or finance, makes no difference to us". The price is still $28,995. The owner told all of us that he is not budging because it is worth every penny, and it is.
Buyer "I need to think about this. $25,000 was all I wanted to spend."
Salesman shakes his hand and wishes him well. He tells the buyer that 2 other salesmen have an appointment after dinner and if he waits too long it will probably be gone. The guy takes his car and leaves. He sits in his car and has a cigarette. He pulls that year and model up on the internet on his phone and sees similar truck for $25,995 and $24,995 at dealers an hour away or more. yeah, they have more miles or no tow package or whatever but it's the same truck. So he calls the cheapest dealer and the salesman who answers tells him it's sold. The guy realizes that if he doesn't step up, someone else will.
He goes in to make the deal at full list.
Ok, this does not usually happen with cars because they are just that... cars. Yes, there are limited production and high demand units that will get the same kind of pricing but since these good, used trucks are harder to find (than cars) they just go for top dollar. It's simple business; supply and demand.
Now, the buyer made a few sins that may or may not have cost him money. Perhaps the List Price was $27,995 but he bumped it $1000 because the guy was drooling all over himself. This cherry truck would have sold for the asking price because someone would step up and pay it since it was so nice and hard to find. The point of this exercise was to show you that the market will determine the retail price of a used car, not any book, magazine or even the ACV of it. The price of a used vehicle is what someone will pay for it. It's up to the UCM and the salesman to know what the market would bear.
Now, about this topic of a sales commission.
Bottom line, the dealer took it in cheap and wants top dollar retail for it. He knows he will get it.
So, a good Used Car salesman gets the phone call from the guy asking if was still there because he drove by this morning and saw it in the front row.
The buyer asks what the cost is and the salesman tells him that since it just came in he wasn't sure and didn't want to guess but he'd have all the info when he got there after work. The caller said to not sell it because he's been looking for one like it for months and it had everything he wanted.... 4 Drs, short bed, 4x4, tow package and the right color. The salesman told him that there were 10 salesmen there and any one could sell it because it is on the lot for sale. The guy isn[t happy but understands. Appointment set for 5:30, after he gets off from work.
At noon this guy shows up. He feared someone would buy it so he took 1/2 a day off to look at and maybe buy this truck. The salesman does his thing,
gets the keys and they go on the test drive. Beautiful truck in every way. The guy is peeing his pants. He wants this truck.
They get back inside and the guys asks "How much?" The salesman tells him $28,995. (full list price). The buyer gulps and says that's more than he expected, why so high? He says he's seen them online for about $25,000 or so. The salesman asks why he never bought one of them?
The guy says that whenever he calls, it's sold. The salesman then says, well, this one has been here 2 days and it's not sold. Want it or not?
The buyer asks for their best price for a cash deal. The salesman says "Cash or finance, makes no difference to us". The price is still $28,995. The owner told all of us that he is not budging because it is worth every penny, and it is.
Buyer "I need to think about this. $25,000 was all I wanted to spend."
Salesman shakes his hand and wishes him well. He tells the buyer that 2 other salesmen have an appointment after dinner and if he waits too long it will probably be gone. The guy takes his car and leaves. He sits in his car and has a cigarette. He pulls that year and model up on the internet on his phone and sees similar truck for $25,995 and $24,995 at dealers an hour away or more. yeah, they have more miles or no tow package or whatever but it's the same truck. So he calls the cheapest dealer and the salesman who answers tells him it's sold. The guy realizes that if he doesn't step up, someone else will.
He goes in to make the deal at full list.
Ok, this does not usually happen with cars because they are just that... cars. Yes, there are limited production and high demand units that will get the same kind of pricing but since these good, used trucks are harder to find (than cars) they just go for top dollar. It's simple business; supply and demand.
Now, the buyer made a few sins that may or may not have cost him money. Perhaps the List Price was $27,995 but he bumped it $1000 because the guy was drooling all over himself. This cherry truck would have sold for the asking price because someone would step up and pay it since it was so nice and hard to find. The point of this exercise was to show you that the market will determine the retail price of a used car, not any book, magazine or even the ACV of it. The price of a used vehicle is what someone will pay for it. It's up to the UCM and the salesman to know what the market would bear.
Now, about this topic of a sales commission.
OP
larryh1108
Well-Known Member
A)-Yes, most dealers (new & used) pay Bird Dogs (a $50 or $100 referral fee) to leads that result in a sale. That's been going on for decades.
B)- If a guy walks in literally waving Benjamins yelling "Who wants my money", the experienced guys will turn the other way. They want no part of him
There's a 95% chance this guy is an arrogant A-Hole who thinks waving cash will make the salesmen drool, like Pavlov's dog. The truth is this guy will probably jerk the salesman around and make for a bad 2 hours. A manager will instruct a newbie to help him while he (Mgr) keeps a close eye on him in case this guy really wants to buy a car. He will usually offer $1000 behind invoice or ACV because he thinks cash is king. Well, a dealer makes the least amount of money on cash deals. I'd put making a deal with this guy at less than 25%.
C)- I do agree to a point. If the car is still under factory warranty, no worries. If the car has more than 70,000 miles it is a must to have checked out.
The 36,000 to 70,000 miles car or truck is a judgement call. It would boil down to car condition, lot condition and dealer reputation or how you feel about how you've been treated so far. A new car dealer has a reputation (and a factory) to keep on the up and up. The used car lot has more of a chance to try to pull a fast one (save money on recon) When in doubt, check it out. Under $5000 and you'd be a fool to not have it checked out. If they won't let you take the car to a mechanic (and they give some good excuses like insurance liability, etc) then I would certainly think they have something to hide.
Pretty reasonable perspectives for sure. But sometimes miles alone don't tell the whole story- I have seen some crazy shit happen that makes me want to look closely regardless of miles. We once had a customer come in to the dealership who had purchased a car from an out of town used car dealer.( this in the pre Car Fax days) His issue was the rear defogger wasn't working, so we started to troubleshoot. The wiring harness was a mess and something looked fishy. Customer says while we're at it to change the oil too, so up on the lift it went. We then discovered by looking underneath that the car was a total bodge job- the front half from one model year and the rear clip from another. His creme puff was a turd and of course he berated us for telling him about it (like we had sold him the car.) The defog didn't work because it wasnt there on the rear half of the car and never had been.
And of course you get 100,000 mile cars that have been loved like a baby and 20,000 mile cars that were used to deliver newspapers during the week and drifting contests on weekends.
Haha war stories...anyways because of the stuff Ive seen I will want to check out everything and anything. No, I'm not normal at all, Call me paranoid
OP
larryh1108
Well-Known Member
Yes, Alfred, those stories are very real but are the exception, not the rule.
Unless you have a close friend or family member who is a mechanic (AND he will go along with you), getting that mechanic's check up is costly and time consuming. A dealer may not worry so much if he allows these checks.
If he reconditioned the car properly, he isn't worried (see above about various dealers and how they recon cars).
How many times can a buyer pay $75 for a check up? Will he be able to do it if you pull up unannounced? Yes, you asked him if you could bring one by and he was all for it but if he is elbow deep in someone elses's car you may have to wait... a while.
Sound logic and advice for sure but with the Carfaxes today, it is less urgent (even though the Carfax isn't infallible, as we discussed)
If I was the owner/buyer of the car you referenced, I would be back at the selling dealer with a sign and bullhorn and every social media app around opened up and ready to be used.
Also, with those on board computer plugs, you can go to a local Auto Zone and have it scanned for free. Here, in NC, a dealer cannot sell a car without a current state inspection (passed) visible in the car. Many other states require the car must pass emissions or the dealer has to fix it until it passes. This is one of the reasons that many dealers don't want to mess with the older cars with higher mileage. It's not worth the brain damage it causes and can ruin their reputation.
Being OCD is not a bad thing, BTW. As mentioned, each buyer has to be comfortable with their purchase. Nothing wrong with that!
Unless you have a close friend or family member who is a mechanic (AND he will go along with you), getting that mechanic's check up is costly and time consuming. A dealer may not worry so much if he allows these checks.
If he reconditioned the car properly, he isn't worried (see above about various dealers and how they recon cars).
How many times can a buyer pay $75 for a check up? Will he be able to do it if you pull up unannounced? Yes, you asked him if you could bring one by and he was all for it but if he is elbow deep in someone elses's car you may have to wait... a while.
Sound logic and advice for sure but with the Carfaxes today, it is less urgent (even though the Carfax isn't infallible, as we discussed)
If I was the owner/buyer of the car you referenced, I would be back at the selling dealer with a sign and bullhorn and every social media app around opened up and ready to be used.
Also, with those on board computer plugs, you can go to a local Auto Zone and have it scanned for free. Here, in NC, a dealer cannot sell a car without a current state inspection (passed) visible in the car. Many other states require the car must pass emissions or the dealer has to fix it until it passes. This is one of the reasons that many dealers don't want to mess with the older cars with higher mileage. It's not worth the brain damage it causes and can ruin their reputation.
Being OCD is not a bad thing, BTW. As mentioned, each buyer has to be comfortable with their purchase. Nothing wrong with that!
OP
larryh1108
Well-Known Member
Ok, since we are discussing the Used Car Salesman's pay plan right now, I'll give some usual and/or average parts of the typical pay plan and let's see someone calculate the above MSPR plus deal. Keep in mind that these major commission deals are rare (maybe each salesman gets 1-2 per year) but they do happen and the above example was used to show that they do happen and I wanted to see if anybody can explain why this buyer got his head knocked off?
Typical Used Car Salesman pay plan:
$200/week salary - This varies from $0 to $500 per week, depending on how much PPV the dealer expects. The $200 is used to make up for the dealers that expect the PPV on the lower end to increase volume. The top tier, low volume dealers may pay $0 since the average commission more than makes up for the loss of volume. Also, a very good, honest and "nice" Used Car salesman is a valuable commodity for every dealer so a smart dealer uses a salary to keep, or recruit, the top tier (and not slimy) salesman. Also, when a dealer pays a salary, he also expects various sales related work in return like lot maintenance, moving the cars around to maximize exposure and to keep the lineup fresh, to work with the porters to keep them looking ready for sale, to TO struggling salesmen and to sit in the place of managers who are off, at auction or busy elsewhere. A good Used Car salesman is a manager without the title and headaches.
OK,
*200/week salary (this is in addition to any commission earned)
* $1200 pack on used cars
*$2000 pack on used trucks
*25% paid on anything over pack
* An extra 5% commission paid on any amount over $3000 over pack
* 12 car sold bonus of $500 (a monthly goal)
* 15 car sold bonus of $750 (only 1 bonus paid, not at each level)
* 20+ car bonus of $1000
This is a very typical pay plan for the used car veteran. A 20+ car guy can make some serious cash.
Typical payable commission is about $200 (25% of $800 over pack) (remember, higher volume/lower PPV dealers have a lower pack)
Sell 15 cars a month (average salesman) =
$800 in salary (4 wks at $200)
$3000 in commissions ($200 avg x 15)
$750 volume bonus
Total 1 month average = $4550
Annual (12 x $4550) = $54,600
Average 20 cars a month (really good salesman) would = $69,600 annual
Average 25 cars a month (star) = $81,600 annual. These guys usually command a $500/wk salary due to their value and talent to the dealer.
So, the 25 cars a month salesman who gets $500/wk salary would earn in excess of $95,000.
Remember, this is a typical pay plan, nothing inflated to skew the numbers.
A dealer has to pay commission to whoever sells the car so he is not opposed to paying a top producer $100k a year. However, dealers hate to pay the weekly salaries to anybody, whether $200 or $500. Many dealers refuse to pay salaries of any amount and make the volume bonuses pay better.
The best salesmen who are pure assets to any dealer has leverage and will walk if a dealer messes with his pay. He's there to make money and the average dealer is there to make as much as he can while paying as little as possible. It's an ongoing battle but the smart dealer knows what he has and steps up and bites the bullet. He still hates it, though. He'll often takes a good natured stab at his star because he made the owner pay up. All in fun.
Typical Used Car Salesman pay plan:
$200/week salary - This varies from $0 to $500 per week, depending on how much PPV the dealer expects. The $200 is used to make up for the dealers that expect the PPV on the lower end to increase volume. The top tier, low volume dealers may pay $0 since the average commission more than makes up for the loss of volume. Also, a very good, honest and "nice" Used Car salesman is a valuable commodity for every dealer so a smart dealer uses a salary to keep, or recruit, the top tier (and not slimy) salesman. Also, when a dealer pays a salary, he also expects various sales related work in return like lot maintenance, moving the cars around to maximize exposure and to keep the lineup fresh, to work with the porters to keep them looking ready for sale, to TO struggling salesmen and to sit in the place of managers who are off, at auction or busy elsewhere. A good Used Car salesman is a manager without the title and headaches.
OK,
*200/week salary (this is in addition to any commission earned)
* $1200 pack on used cars
*$2000 pack on used trucks
*25% paid on anything over pack
* An extra 5% commission paid on any amount over $3000 over pack
* 12 car sold bonus of $500 (a monthly goal)
* 15 car sold bonus of $750 (only 1 bonus paid, not at each level)
* 20+ car bonus of $1000
This is a very typical pay plan for the used car veteran. A 20+ car guy can make some serious cash.
Typical payable commission is about $200 (25% of $800 over pack) (remember, higher volume/lower PPV dealers have a lower pack)
Sell 15 cars a month (average salesman) =
$800 in salary (4 wks at $200)
$3000 in commissions ($200 avg x 15)
$750 volume bonus
Total 1 month average = $4550
Annual (12 x $4550) = $54,600
Average 20 cars a month (really good salesman) would = $69,600 annual
Average 25 cars a month (star) = $81,600 annual. These guys usually command a $500/wk salary due to their value and talent to the dealer.
So, the 25 cars a month salesman who gets $500/wk salary would earn in excess of $95,000.
Remember, this is a typical pay plan, nothing inflated to skew the numbers.
A dealer has to pay commission to whoever sells the car so he is not opposed to paying a top producer $100k a year. However, dealers hate to pay the weekly salaries to anybody, whether $200 or $500. Many dealers refuse to pay salaries of any amount and make the volume bonuses pay better.
The best salesmen who are pure assets to any dealer has leverage and will walk if a dealer messes with his pay. He's there to make money and the average dealer is there to make as much as he can while paying as little as possible. It's an ongoing battle but the smart dealer knows what he has and steps up and bites the bullet. He still hates it, though. He'll often takes a good natured stab at his star because he made the owner pay up. All in fun.
OP
larryh1108
Well-Known Member
Ok, the main reason I mentioned the pay plan is so you can understand why a salesman pushes for more profit.
Let's assume that every dealer will accept a "pack deal" on almost any car they sell (with exceptions). Some exceptions are that rare, high demand car or truck with great eye appeal. Most cars and trucks that have been for sale for less than 30 days are usually held to a higher profit margin than any 30+ day old unit. So, most cars can be sold at pack on any given day (with the last 2 days also an exception). So, a salesman knows that if he sells you a used car or truck that he will earn (at least) $100. Well, that's nice, I guess, but that's half his average commission and he doesn't like working for "free".
A good Used Car Salesman who does his homework and talks to management, knows what the "pack number" is on most cars on the lot. He knows that the manager will accept any pack deal so he works you, the buyer, for anything over pack.
The salesman knows that for every $100 over pack he sells if for, $25 goes into his pocket. That is what he's thinking when you two are arm wrestling over that last $1000 to make a deal ($1000 apart). If you get all $1000, he "lost" $250. A true incentive to him (and why the pay is structured this way). So, you have a dollar amount in mind and he has a dollar amount in mind but he already knows that management will accept the deal you are offering so he is on his own. If a manager comes in to close the deal, the manager will meet your demand or ask for $250 more than your best price and a deal is made.
Unlike the new car guy, a Used Car Salesman knows he will lose money every time a manager sits down. You won't see the manager much if there is already a deal (by your offer) and the salesman wants a bigger commission. This is where the salesman bounces back and forth. You move $150 and the salesman goes to the manager with your latest offer. The manager starts to get cranky (at the salesman) because he already has a deal and the salesman is now working the manager as well as the buyer. The manager tells him to make the deal because the customer is getting agitated. The salesman tells him that everything is under control and he'll get some more profit. Each time you budge a $100, the salesman makes $25 so those $100 increment bumps by you is worth his effort. Finally, you move $400 ($100 to the salesman) and tell him you are late for dinner and take it or leave it. The salesman knows he has a deal but goes to the manager for his approval. Deal done, the salesman picked up his extra $100 (for a $200 commission) and the deal is consummated.
So, to sum it up, if a manager comes and sits down in a used car transaction, it means one of two things. It means that you aren't budging and the profit is not even at pack (no deal where you sit). OR, he's tired of the salesman working you for a paycheck and knows you are getting aggravated. The manager will come in and take the deal after trying to get $100 more.
If you say no, he makes the deal and goes on to the next salesman.
So, the Used Car Salesman Pay Plan plays a part in how easy or hard the process goes. A good salesman will never let you walk if he has a pack deal (the manager will make sure of it) but he will try to make as much money as possible for his paycheck.
Let's assume that every dealer will accept a "pack deal" on almost any car they sell (with exceptions). Some exceptions are that rare, high demand car or truck with great eye appeal. Most cars and trucks that have been for sale for less than 30 days are usually held to a higher profit margin than any 30+ day old unit. So, most cars can be sold at pack on any given day (with the last 2 days also an exception). So, a salesman knows that if he sells you a used car or truck that he will earn (at least) $100. Well, that's nice, I guess, but that's half his average commission and he doesn't like working for "free".
A good Used Car Salesman who does his homework and talks to management, knows what the "pack number" is on most cars on the lot. He knows that the manager will accept any pack deal so he works you, the buyer, for anything over pack.
The salesman knows that for every $100 over pack he sells if for, $25 goes into his pocket. That is what he's thinking when you two are arm wrestling over that last $1000 to make a deal ($1000 apart). If you get all $1000, he "lost" $250. A true incentive to him (and why the pay is structured this way). So, you have a dollar amount in mind and he has a dollar amount in mind but he already knows that management will accept the deal you are offering so he is on his own. If a manager comes in to close the deal, the manager will meet your demand or ask for $250 more than your best price and a deal is made.
Unlike the new car guy, a Used Car Salesman knows he will lose money every time a manager sits down. You won't see the manager much if there is already a deal (by your offer) and the salesman wants a bigger commission. This is where the salesman bounces back and forth. You move $150 and the salesman goes to the manager with your latest offer. The manager starts to get cranky (at the salesman) because he already has a deal and the salesman is now working the manager as well as the buyer. The manager tells him to make the deal because the customer is getting agitated. The salesman tells him that everything is under control and he'll get some more profit. Each time you budge a $100, the salesman makes $25 so those $100 increment bumps by you is worth his effort. Finally, you move $400 ($100 to the salesman) and tell him you are late for dinner and take it or leave it. The salesman knows he has a deal but goes to the manager for his approval. Deal done, the salesman picked up his extra $100 (for a $200 commission) and the deal is consummated.
So, to sum it up, if a manager comes and sits down in a used car transaction, it means one of two things. It means that you aren't budging and the profit is not even at pack (no deal where you sit). OR, he's tired of the salesman working you for a paycheck and knows you are getting aggravated. The manager will come in and take the deal after trying to get $100 more.
If you say no, he makes the deal and goes on to the next salesman.
So, the Used Car Salesman Pay Plan plays a part in how easy or hard the process goes. A good salesman will never let you walk if he has a pack deal (the manager will make sure of it) but he will try to make as much money as possible for his paycheck.
OP
larryh1108
Well-Known Member
The 30-60-90 Day Rule and how it affects what you pay for a used car.
The 30-60-90 day old rule plays a large part in determining the sale price of that used car or truck.
In the simplest of explanation, these numbers are the age of the unit in question, from the day it was acquired to today.
Most used cars need to be reconditioned before they can hit the lot. This usually takes 7-10 days, for various reasons.
Service work first, then minor paint work (air brushing or the paintless dent repair (PDR) then detail. It is it's own process. So a dealer has about 21 days of "Prime Salability".
SO, for the first 30 days a unit is in stock, management wants the most profit it can generate. It is (usually) not advertised.
It is marked up the highest realistic amount (asking price or MSRP) and discounted the least. They will not accept a pack deal on these units. They want to find out what fair market value is for this unit and they want every penny. The salesmen don't mind this because it means a really nice commission but they do mind when they turn down a deal that pays $300 because it is not enough ($1200 over pack).
While that <30 day unit is sitting at full MSRP, the Used Car Mgr (UCM) shops local ads for similar units to get a feeling for what is out there. He also knows that you shop these same ads and he needs to be "close". If you land on a <30 day old unit and you want it, you'll need to step up or wait to see if it's there a month from now. Simple. Pay now or gamble if someone else will step up. These higher gross sales perform 2 functions.
The obvious reason is it means more money for everybody at the dealer. Simple. However, managers are paid on volume AND average PPV. SO, they need the large over pack profits on the <30 day cars to make up for the losers (under pack) deals on the end of the month deals and the 60+ day old cars.
SO, Used Car Managers (and New Car Managers) make their good money on their bonus at month's end. They have several goals to make before they earn their percentage. (we'll discuss the various ways the Used Car Manager gets paid later). For ease of discussion, let's say the UCM earns 2% of the profit figured from ACV (no pack applied). If they sell 1oo total used cars and trucks and average $2000 PPV, they generated $200,000 in front end profit. They met the 100 car goal and the $1800 PPV so he gets his 2% bonus of $4000. (He also gets a weekly salary that pays him for his managerial duties, which will be covered later along with some pitfalls that hurt his bonus).
However, if he falls short of his 100 sold units goal or he misses his PPV goal, he could lose 1/2 to 1 full % of his bonus % which means his $4000 bonus is now $2000 (1% less) or $3000 (1/2% less). Missing his averages hurts his pocket (hence the urgency on the last 2 days to make deals.
Using meeting goals as paramount to making a good bonus instead of a poor bonus, you can see the need to put profit dollars in the bank on the <30 days old units (as well as that 1x a month monster profit deal as mentioned earlier). If a UCM has a few MSRP deals, he knows he can push lower profit deals at the end of the month to finish strong.
The 30-60-90 day old rule plays a large part in determining the sale price of that used car or truck.
In the simplest of explanation, these numbers are the age of the unit in question, from the day it was acquired to today.
Most used cars need to be reconditioned before they can hit the lot. This usually takes 7-10 days, for various reasons.
Service work first, then minor paint work (air brushing or the paintless dent repair (PDR) then detail. It is it's own process. So a dealer has about 21 days of "Prime Salability".
SO, for the first 30 days a unit is in stock, management wants the most profit it can generate. It is (usually) not advertised.
It is marked up the highest realistic amount (asking price or MSRP) and discounted the least. They will not accept a pack deal on these units. They want to find out what fair market value is for this unit and they want every penny. The salesmen don't mind this because it means a really nice commission but they do mind when they turn down a deal that pays $300 because it is not enough ($1200 over pack).
While that <30 day unit is sitting at full MSRP, the Used Car Mgr (UCM) shops local ads for similar units to get a feeling for what is out there. He also knows that you shop these same ads and he needs to be "close". If you land on a <30 day old unit and you want it, you'll need to step up or wait to see if it's there a month from now. Simple. Pay now or gamble if someone else will step up. These higher gross sales perform 2 functions.
The obvious reason is it means more money for everybody at the dealer. Simple. However, managers are paid on volume AND average PPV. SO, they need the large over pack profits on the <30 day cars to make up for the losers (under pack) deals on the end of the month deals and the 60+ day old cars.
SO, Used Car Managers (and New Car Managers) make their good money on their bonus at month's end. They have several goals to make before they earn their percentage. (we'll discuss the various ways the Used Car Manager gets paid later). For ease of discussion, let's say the UCM earns 2% of the profit figured from ACV (no pack applied). If they sell 1oo total used cars and trucks and average $2000 PPV, they generated $200,000 in front end profit. They met the 100 car goal and the $1800 PPV so he gets his 2% bonus of $4000. (He also gets a weekly salary that pays him for his managerial duties, which will be covered later along with some pitfalls that hurt his bonus).
However, if he falls short of his 100 sold units goal or he misses his PPV goal, he could lose 1/2 to 1 full % of his bonus % which means his $4000 bonus is now $2000 (1% less) or $3000 (1/2% less). Missing his averages hurts his pocket (hence the urgency on the last 2 days to make deals.
Using meeting goals as paramount to making a good bonus instead of a poor bonus, you can see the need to put profit dollars in the bank on the <30 days old units (as well as that 1x a month monster profit deal as mentioned earlier). If a UCM has a few MSRP deals, he knows he can push lower profit deals at the end of the month to finish strong.
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OP
larryh1108
Well-Known Member
So, we now see that the age of a used car for sale affects the retail price. A vehicle that is under 30 days old (in inventory) will command top price with little negotiation.
The next level is the unit that is 31 days old to 59 days old. For some reason, these vehicles didn't sell for MSRP (or close). Many factors come into play. The time of year (June, July and August for e.g.). When sales, in general, are down and the walk in traffic is way down, it's hard to move any car. This is especially true for the average, everyday day car or truck. If it's just another car to the buyer, there is a good chance it will sit on the lots for more than it should. Depending on where you live, all car sales are very slow when the temperature outside is -10 degrees. Who wants to shop for a car when the wind chill is colder than the North Pole?
Keep in mind that when the New Car sales are hot and heavy (Year End Sales and Model Year End Sales), the traffic is in the New Car dept, not the
used car dept. However, during these times the used cars come flooding in from trade ins which also depresses their value (that old supply and demand thing again).
The supply of used cars rise to the value drops. However, they can have a ton of nice used cars ready for the late September, October and early November used car sales season (when northern buyers buy in anticipation of winter coming). These used car buyers want to get rid of their cars that won't make it thru the winter.
(The BHPH lots stock up on these and recondition them and do the body work in anticipation of the BHPH year saving tax season.
SO, when new car sales are hot, used car s are slow and the dealers take in A LOT of bagels and undesirable cars. This is like Christmas to the low end wholesalers.
However, the used cars on their lot for sale begin to age. Aging inventory is not a good thing for many reasons.
First, a good Used Car Manager (UCM) knows when the slow times are and scales back his inventory. These slow times are a matter of the store's own
historical records (if they've been open for 2 years or more). However, like any business, these trends are well known.
The next level is the unit that is 31 days old to 59 days old. For some reason, these vehicles didn't sell for MSRP (or close). Many factors come into play. The time of year (June, July and August for e.g.). When sales, in general, are down and the walk in traffic is way down, it's hard to move any car. This is especially true for the average, everyday day car or truck. If it's just another car to the buyer, there is a good chance it will sit on the lots for more than it should. Depending on where you live, all car sales are very slow when the temperature outside is -10 degrees. Who wants to shop for a car when the wind chill is colder than the North Pole?
Keep in mind that when the New Car sales are hot and heavy (Year End Sales and Model Year End Sales), the traffic is in the New Car dept, not the
used car dept. However, during these times the used cars come flooding in from trade ins which also depresses their value (that old supply and demand thing again).
The supply of used cars rise to the value drops. However, they can have a ton of nice used cars ready for the late September, October and early November used car sales season (when northern buyers buy in anticipation of winter coming). These used car buyers want to get rid of their cars that won't make it thru the winter.
(The BHPH lots stock up on these and recondition them and do the body work in anticipation of the BHPH year saving tax season.
SO, when new car sales are hot, used car s are slow and the dealers take in A LOT of bagels and undesirable cars. This is like Christmas to the low end wholesalers.
However, the used cars on their lot for sale begin to age. Aging inventory is not a good thing for many reasons.
First, a good Used Car Manager (UCM) knows when the slow times are and scales back his inventory. These slow times are a matter of the store's own
historical records (if they've been open for 2 years or more). However, like any business, these trends are well known.
OP
larryh1108
Well-Known Member
So, let's assume that the Used Car Manager (UCM) on staff is sharp and knows the business flow. He still has (about half) of his inventory in the 30-60 day old status. Obviously, the closer to 30 days old, the higher the asking price and the closer to the 60 days old mark, the lower the asking price. Logical. However, the 30-60 day old units can be had as a pack deal unless the car has something "special" about it. No one may be able to put their finger on it but when you look at it sitting there, you say "that's a nice car". Maybe the color, maybe the paint is just extra special in the right sunlight, etc. Nothing specific but it has "something about it". I know that, many times, if a Used Car Manager worked at a different brand when he cut his teeth and he is partial to their inventory. I cut my teeth at a very large Chevy dealer and, for some reason, I liked the Chevy trucks more than the Ford truck and priced them a little different. Even when I worked at a Ford dealer, I still over valued Chevy trucks.
So, if you know a car has been on the lot +30 days, it's time to make a move (if a pack deal works for you). However, with few exceptions, no one really knows what pack is on a particular car. You can't look it up on the 'net. Very few non-managers at the dealer have access to the numbers. So, how do we know just what the pack number is? You don't. Pack deal or full retail deal, fair market value is what that vehicle is worth. It is only worth what someone will pay for it. If it's +30 days old, the UCM feels his fair market value was too high and he adjusts his sights.
Let' talk about this. Let's say that you are in the market for a nice, used truck. Not the $60,000 type but a truck that you can love AND afford.
You drive by a Chevy dealer every day on your way to work and one day a truck appears that you never saw before (one reason they move the lot around 1x to 2x a week). It looks like something you may be interested in but you are in no hurry because your old work horse is still running just fine. It has been used and abused and looks like it and you know that the trade value is going to be nothing (and you are right). So, when the right truck comes along, you will see if it works. You decide to stop by on your way home from work.
You hit the dealer on the way home and thru the usual chit chat the salesman finds out that you are looking for a nice, used truck in the $12,000 to $15,000 range. You are not in any hurry (good for you, bad for the salesman) and that you know your way around trucks. You also allow him to see that you know the going rates for various trucks since you've been "shopping" for about 3 months. Ok, table set. The salesman knows that you aren't a "laydown" (term used to describe a buyer who will put up little to no resistance and "lays down" for a good sales pitch).
The salesman asks that if the right deal was made would you buy today. (Usual question and very important). If you say it's a good bet, he'll get serious. If you say no, that you are still a month away, he changes his posture to be more informational and less pushy (a good salesman) or he'll get an attitude and basically brush you off (a bad sales man or a slimy star looking for a deal right now). If the good salesman treats you right, you could come back when you are ready and see him. Many studies have shown that 80% of car buyers decide on that specific car because they liked the salesman. Price is second. Go figure!
Since you said it's a good chance, the salesman take you to test drive it. Before you get in, you ask the selling price. The salesman says that he believes the asking price is $16,995 but needs to check with the UCM to be sure. "Ok", you think, "we're close enough to take a test drive". SO, you drive it and see that it is a nice truck, basically what you need and want. The miles are higher than you expected (it looks very nice) but the salesman assures you that they are all highway miles (like he really knows, right?). Nothing says "WoW' about it but that's what you want. You don't want to pay for "WoW", you want a nice, clean, reliable truck for your needs. So you feel it's worth talking about (knowing it starts a process but you have time).
So far the salesman has been fine. No pressure or sliminess. Not offensive. He knows you were not in a hurry and just want a good deal. He relays this to the manager; he'll buy today if the price is right or else he will just move on. He's not a rookie buyer or a laydown. No BS, let's see where he stands. Ok, the UCM opens the deal up at the $16,995 the salesman quoted. Pack is $13,500 but the salesman does not know this nor do you (obviously). So the deal is opened at MSRP and he tells the salesman to find out where this buyer's figure is to see how far apart we are. SO, the salesman sits down and says that we understand that he is shopping but will buy at the right price and you will leave if a deal isn't made with no hard feelings.
Great, we all are on the same page. The manager wants to know what that price is that will make a deal today, right now.
So you know how this works and you give him a low figure to see where they are at. The games begin but this seems like it will end soon, one way or another. So, why not low ball them. You tel him you will buy it right now for $12,000+++. The salesman writes it down but says that they don't mark up their trucks $5,000 (but they do, sometimes), but he will take it to the UCM but doubts there is a deal here. Ok, he goes to the UCM who sees the offer and says that the salesman told him he was a serious buyer and this number is a stroke job. So he counters with his best price to either sell this truck or to move on. So, the UCM writes down $15,000+++ (he knows pack is $13,500 but it's <30 days old so he is holding out for more).
So, the salesman returns and tells you that the offer he made was rejected and wasn't even close. The UCM says his best price is $15,000 and not a penny less. You jump up and tell him that we aren't close but you are prepared to go $13,000+++. The salesman goes back and the manager tells the salesman to thank him and to give him his card but no deal. So, the salesman comes back with the news and hands you his card. On the way out he asks you if there is a number that could work if he works on the UCM. You tell him that $13,500 is your best price and to call if you can get to that number, otherwise, do not call. You are ok with all that went down and liked the salesman. Sometimes a deal can't be made.
No hard feelings on either end. That's the car business, after all.
Ok, the purpose of this exercise is to show how a UCM will turn down a pack deal if the unit is <30 days in stock. Fast forward a month later and as you drive by the dealer every day going to work, you see the truck is still there. You know it's more than you are willing to pay because of the miles but you did like the truck. Maybe another visit to see your salesman? Nah, you say, he has your number and price. Too rich for your blood.
So, this car hits the 31-60 day old mark and you, as the salesman, know that they move some more on these units. It's still only 36 days old but the UCM now has different eyes on his inventory. Time to sell these units. As the salesman walks the lot (as he should do every day) to see what's new and to check for low tires and missing Buyer's Guides (AS IS-NO WARRANTY signs required by law), he sees that truck and remembers you.
A good salesman keeps the old worksheets with your name and number on it and the prices you discussed. The number $13,500+++ is circled as your last offer.
The UCM calls a brief meeting to give a rah-rah speech. He tells ever salesman there to pull out their old, unsold deals and to call every one to see if they are still in the market. Tell them we have a huge sale coming up (may or may not be true) and that we are dealing! So, you contact the truck buyer (you) and he tells you that they have a big clearance sale coming up and that you are confident that you can buy your truck for close to your latest offer. You, knowing they let you walk at $13,500 but really don't want to spend any more, tell the salesman that you are pretty firm on the $13,500 and to not waste your time. The salesman tells you that this is going to be a good sale and it will be worth the time it takes for the manager to say yes or no if you are at the store, not over the phone. Story policy is that we don't negotiate over the phone (a very real policy and smart business (pre-internet payments and deposits).
So, you are still looking and have some time to kill. So far, the salesman has treated you right and the experience has been OK so you agree to stop by after work. So, the salesman has a porter pull the car from the line, wash the road dust off, wipe down the dash with some Armor All, shines the wheels and parks it by the front door. He's trying to entice you, as you know. So you walk in, exchange pleasantries and tell him you haven't changed your mind, The price was, and still is, $13,500++. The salesman asks if you will buy it today at this price and you (reluctantly) say yes.
The salesman starts a new worksheet with $13,500+++ written and circled with the note "Will buy today at this price". He runs up to the manager with the new and old worksheet to remind the manager that you were there before and how it went (you walked). He reminds the UCM of the meeting to get "be-backs" back in to make deals and here he is, ready to buy, (A be-back is someone who was there before who said he would "be-back" later). You tell the UCM that he has one chance to make this deal. So, the UCM sees that your offer is at pack (a coincidence on your part) but he always wants more so he writes $13,995+++ and writes "Today Only".
...(con't)..
So, if you know a car has been on the lot +30 days, it's time to make a move (if a pack deal works for you). However, with few exceptions, no one really knows what pack is on a particular car. You can't look it up on the 'net. Very few non-managers at the dealer have access to the numbers. So, how do we know just what the pack number is? You don't. Pack deal or full retail deal, fair market value is what that vehicle is worth. It is only worth what someone will pay for it. If it's +30 days old, the UCM feels his fair market value was too high and he adjusts his sights.
Let' talk about this. Let's say that you are in the market for a nice, used truck. Not the $60,000 type but a truck that you can love AND afford.
You drive by a Chevy dealer every day on your way to work and one day a truck appears that you never saw before (one reason they move the lot around 1x to 2x a week). It looks like something you may be interested in but you are in no hurry because your old work horse is still running just fine. It has been used and abused and looks like it and you know that the trade value is going to be nothing (and you are right). So, when the right truck comes along, you will see if it works. You decide to stop by on your way home from work.
You hit the dealer on the way home and thru the usual chit chat the salesman finds out that you are looking for a nice, used truck in the $12,000 to $15,000 range. You are not in any hurry (good for you, bad for the salesman) and that you know your way around trucks. You also allow him to see that you know the going rates for various trucks since you've been "shopping" for about 3 months. Ok, table set. The salesman knows that you aren't a "laydown" (term used to describe a buyer who will put up little to no resistance and "lays down" for a good sales pitch).
The salesman asks that if the right deal was made would you buy today. (Usual question and very important). If you say it's a good bet, he'll get serious. If you say no, that you are still a month away, he changes his posture to be more informational and less pushy (a good salesman) or he'll get an attitude and basically brush you off (a bad sales man or a slimy star looking for a deal right now). If the good salesman treats you right, you could come back when you are ready and see him. Many studies have shown that 80% of car buyers decide on that specific car because they liked the salesman. Price is second. Go figure!
Since you said it's a good chance, the salesman take you to test drive it. Before you get in, you ask the selling price. The salesman says that he believes the asking price is $16,995 but needs to check with the UCM to be sure. "Ok", you think, "we're close enough to take a test drive". SO, you drive it and see that it is a nice truck, basically what you need and want. The miles are higher than you expected (it looks very nice) but the salesman assures you that they are all highway miles (like he really knows, right?). Nothing says "WoW' about it but that's what you want. You don't want to pay for "WoW", you want a nice, clean, reliable truck for your needs. So you feel it's worth talking about (knowing it starts a process but you have time).
So far the salesman has been fine. No pressure or sliminess. Not offensive. He knows you were not in a hurry and just want a good deal. He relays this to the manager; he'll buy today if the price is right or else he will just move on. He's not a rookie buyer or a laydown. No BS, let's see where he stands. Ok, the UCM opens the deal up at the $16,995 the salesman quoted. Pack is $13,500 but the salesman does not know this nor do you (obviously). So the deal is opened at MSRP and he tells the salesman to find out where this buyer's figure is to see how far apart we are. SO, the salesman sits down and says that we understand that he is shopping but will buy at the right price and you will leave if a deal isn't made with no hard feelings.
Great, we all are on the same page. The manager wants to know what that price is that will make a deal today, right now.
So you know how this works and you give him a low figure to see where they are at. The games begin but this seems like it will end soon, one way or another. So, why not low ball them. You tel him you will buy it right now for $12,000+++. The salesman writes it down but says that they don't mark up their trucks $5,000 (but they do, sometimes), but he will take it to the UCM but doubts there is a deal here. Ok, he goes to the UCM who sees the offer and says that the salesman told him he was a serious buyer and this number is a stroke job. So he counters with his best price to either sell this truck or to move on. So, the UCM writes down $15,000+++ (he knows pack is $13,500 but it's <30 days old so he is holding out for more).
So, the salesman returns and tells you that the offer he made was rejected and wasn't even close. The UCM says his best price is $15,000 and not a penny less. You jump up and tell him that we aren't close but you are prepared to go $13,000+++. The salesman goes back and the manager tells the salesman to thank him and to give him his card but no deal. So, the salesman comes back with the news and hands you his card. On the way out he asks you if there is a number that could work if he works on the UCM. You tell him that $13,500 is your best price and to call if you can get to that number, otherwise, do not call. You are ok with all that went down and liked the salesman. Sometimes a deal can't be made.
No hard feelings on either end. That's the car business, after all.
Ok, the purpose of this exercise is to show how a UCM will turn down a pack deal if the unit is <30 days in stock. Fast forward a month later and as you drive by the dealer every day going to work, you see the truck is still there. You know it's more than you are willing to pay because of the miles but you did like the truck. Maybe another visit to see your salesman? Nah, you say, he has your number and price. Too rich for your blood.
So, this car hits the 31-60 day old mark and you, as the salesman, know that they move some more on these units. It's still only 36 days old but the UCM now has different eyes on his inventory. Time to sell these units. As the salesman walks the lot (as he should do every day) to see what's new and to check for low tires and missing Buyer's Guides (AS IS-NO WARRANTY signs required by law), he sees that truck and remembers you.
A good salesman keeps the old worksheets with your name and number on it and the prices you discussed. The number $13,500+++ is circled as your last offer.
The UCM calls a brief meeting to give a rah-rah speech. He tells ever salesman there to pull out their old, unsold deals and to call every one to see if they are still in the market. Tell them we have a huge sale coming up (may or may not be true) and that we are dealing! So, you contact the truck buyer (you) and he tells you that they have a big clearance sale coming up and that you are confident that you can buy your truck for close to your latest offer. You, knowing they let you walk at $13,500 but really don't want to spend any more, tell the salesman that you are pretty firm on the $13,500 and to not waste your time. The salesman tells you that this is going to be a good sale and it will be worth the time it takes for the manager to say yes or no if you are at the store, not over the phone. Story policy is that we don't negotiate over the phone (a very real policy and smart business (pre-internet payments and deposits).
So, you are still looking and have some time to kill. So far, the salesman has treated you right and the experience has been OK so you agree to stop by after work. So, the salesman has a porter pull the car from the line, wash the road dust off, wipe down the dash with some Armor All, shines the wheels and parks it by the front door. He's trying to entice you, as you know. So you walk in, exchange pleasantries and tell him you haven't changed your mind, The price was, and still is, $13,500++. The salesman asks if you will buy it today at this price and you (reluctantly) say yes.
The salesman starts a new worksheet with $13,500+++ written and circled with the note "Will buy today at this price". He runs up to the manager with the new and old worksheet to remind the manager that you were there before and how it went (you walked). He reminds the UCM of the meeting to get "be-backs" back in to make deals and here he is, ready to buy, (A be-back is someone who was there before who said he would "be-back" later). You tell the UCM that he has one chance to make this deal. So, the UCM sees that your offer is at pack (a coincidence on your part) but he always wants more so he writes $13,995+++ and writes "Today Only".
...(con't)..
OP
larryh1108
Well-Known Member
...(con't)
The UCM's psychology is that the first numbers match his offer ($13,xxx) and he's trying to get an extra $500. He tells the salesman to not let you walk, under any circumstance (translation: there is a deal at the $13,500) but work him for some more money. So, the salesman is now confident that he has a deal ($100 mini commission) and that anything more means $25 per hundred in extra commission). SO, he sits down at the desk and tells you that we are sooooooooooo close to a deal. You see the $13,995 and know it's not the same as $13,500 so you get a little twitchy and tell the salesman that he thought you had a deal at $13,500. The salesman says that the manager's number is really $14,000 which was $1000 less than his last offer. However, the salesman says that if you can come up to $13,800 that you know the manager will take the deal, That means we came down $1200 and you came up $300. That's a good deal for you (and $75 for the salesman).
You think about it and make all kinds of faces. The UCM is watching, ready to come talk to you if you show signs of leaving. You really do like the truck and know it may be another 6 months until you find another one like this one at this price. You tell yourself that you can get good value selling your old truck to someone at work so you agree with the deal IF the salesman throws in a free oil change. That is something that they like to do to get you to their service department (internal cost $25). So, you make the deal.
This exercise was to show how the age (on the lot) of a used vehicle can affect what you pay for it. You "saved" $1700 by gambling that the truck you wanted would be there in a month and you were right. However, many times in the past 6 months you didn't "win" and you lost out on that truck. It seems that this truck was meant for you.
Summary: A vehicle that sits on the lot for over a month is ripe for getting a better deal. If you were looking at any vehicle a month or so ago and didn't buy (price too high, not ready to buy, money not in your hand yet, etc.) and it is still there, if you know what the fair market value is (by shopping prices on the internet) then you can and will save money if you move. (timing is everything, at times).
Cars that are 31-60 days old are usually the ones the dealer puts in print ads or internet "specials". They mark them $1000 over pack to allow some wiggle room for trade over-allowances or some haggle room. Most salesmen tell a buyer who came in off an advertised price that ad prices are "usually" not negotiable (to set the table for the next steps). There is good value in these 31-60 day units. These are probably the most fairly priced units on the lot.
The UCM's psychology is that the first numbers match his offer ($13,xxx) and he's trying to get an extra $500. He tells the salesman to not let you walk, under any circumstance (translation: there is a deal at the $13,500) but work him for some more money. So, the salesman is now confident that he has a deal ($100 mini commission) and that anything more means $25 per hundred in extra commission). SO, he sits down at the desk and tells you that we are sooooooooooo close to a deal. You see the $13,995 and know it's not the same as $13,500 so you get a little twitchy and tell the salesman that he thought you had a deal at $13,500. The salesman says that the manager's number is really $14,000 which was $1000 less than his last offer. However, the salesman says that if you can come up to $13,800 that you know the manager will take the deal, That means we came down $1200 and you came up $300. That's a good deal for you (and $75 for the salesman).
You think about it and make all kinds of faces. The UCM is watching, ready to come talk to you if you show signs of leaving. You really do like the truck and know it may be another 6 months until you find another one like this one at this price. You tell yourself that you can get good value selling your old truck to someone at work so you agree with the deal IF the salesman throws in a free oil change. That is something that they like to do to get you to their service department (internal cost $25). So, you make the deal.
This exercise was to show how the age (on the lot) of a used vehicle can affect what you pay for it. You "saved" $1700 by gambling that the truck you wanted would be there in a month and you were right. However, many times in the past 6 months you didn't "win" and you lost out on that truck. It seems that this truck was meant for you.
Summary: A vehicle that sits on the lot for over a month is ripe for getting a better deal. If you were looking at any vehicle a month or so ago and didn't buy (price too high, not ready to buy, money not in your hand yet, etc.) and it is still there, if you know what the fair market value is (by shopping prices on the internet) then you can and will save money if you move. (timing is everything, at times).
Cars that are 31-60 days old are usually the ones the dealer puts in print ads or internet "specials". They mark them $1000 over pack to allow some wiggle room for trade over-allowances or some haggle room. Most salesmen tell a buyer who came in off an advertised price that ad prices are "usually" not negotiable (to set the table for the next steps). There is good value in these 31-60 day units. These are probably the most fairly priced units on the lot.
OP
larryh1108
Well-Known Member
Units that are 60-90 days aged.
These units are the best bargains on the lot. The pickings are slimmer and no one wanted these units for 60 days so someone missed the boat when they were taken in on trade (put too much into it to make a deal at month's end) or the wholesalers wouldn't pay what you had in it (forget the $500 profit) or the color is not right and many times, nothing is wrong with it at all. It just didn't sell. No test drives for 2 months, no deals worked, no phone calls from the 'net. Nothing. So, the UCM needs to figure out how to move these cars and trucks to get them off the lot for several reasons:
First, used vehicles lose value every month whether you own it or the car dealer owns it. Yes, no miles are added to the dealer's cars but there is no real difference between 63,000 miles and 68,000 miles when on his lot but it is a month older. An average figure for a vehicle's yearly loss is about $2000. Some cars it's more and some cars it's less. More expensive and luxury brands can lose $3000 to $4000 or more. It is, after all, a year older. This is just the way things work.
So, let's assume that the average vehicle loses $2000 a year and it's been on the lot for 3 months (90 days). It has lost $500 in value by just sitting there (1/4 of $2000). So, if this car has sat for 90 days not only is there some unknown reason why but it is now worth $500 less. If it was worth $10,000 when he took it in (ACV), it is now worth $9500 at 90 days. Not a good thing.
Ok, now an owner and/or GM gets a monthly inventory report that shows the aging of his inventory. It shows, sorted, the units from oldest to newest in relation to age. The UCM also gets this same report and circles the 60-90 day old units. These units need to be moved ASAP to prevent large wholesale losses (the value, as it sits, is a wholesale value until he sells it). Now, something needs to be pointed out. The owners and/or GM HATES to see 90+ day old units on this report. Get enough of them over a period of months and the UCM may very well be looking for a job. A UCM begins to sweat it out if he has a bunch of cars hitting 75 days old on the report because it is HIS responsibility to make sure they don't get that old. He has to find a way to sell them retail (to you) or to find a wholesaler that will pay what he has in them (to avoid a wholesale loss, which shows up as an exception report that goes to the top). So, he is stuck between a rock and a hard place and HAS to move the >75 day old units or risk losing his job. (Even the best guys and life long employees can't continually have large wholesale losses).
SO, he has to get creative with these units that are 60+ days old. He has them re-freshened up (new tire shine, new Armor All on the dash, fresh washing, etc) and then he parks them by the front and side doors as well as the main drive. (As mentioned, the Factory Reps will strongly encourage this practice to come to an end but sometimes it has to be done. These aged units are well signed with a "Hot Price" (again, who knows what a Hot Price really is?). If it's close to the end of the month the UCM may even have the retail price listed at pack leaving little room for negotiation or trade over-allowance. It someone lands on the car and it needs some money to make the deal, the UCM will put $500 or more "too much" into a trade to make this 80 day old car go away. As mentioned earlier, this reduces the PPV (taking a short deal, maybe to actual ACV) but potentially affects the total PPV average and messing with his bonus. However, a short bonus is better than the unemployment line. The pressure is really intense for those on the bubble. The aged units must go no matter what, plain and simple. If the UCM put too much into it when he took it in on trade, whether he put too much into the reconditioning (discovered a surprise?), whether he paid too much at auction (more about auctions later) or just bad timing and economy, it is the responsibility of the UCM to not let cars get to be 90 days old.
What does this mean to the buyer? Well, it means great deals on the aged units but, generally, the buyer has no idea how old this unit is other than the year of the car. Also, most buyers (and managers) don't know what the retail value really is. The UCM has been wrong for the last 3 months and he is an expert so how do we know if it's aged and discounted to where they truly aren't making any money?
Again, a car or truck is worth what you are willing to pay for it so the dealer has to build value in it. A UCM will be willing to put up to $1000 more into your trade to make it go away. This is true money, not over-allowance. He figures he has 80 days to make up for that extra $1000 in your trade and a 90 day unit is now gone and off the report. His PPV took a hit too but sometimes you hope you have enough "in the bank" from <30 day old units to cover these give-aways. Hope and pray, that is.
These units are the best bargains on the lot. The pickings are slimmer and no one wanted these units for 60 days so someone missed the boat when they were taken in on trade (put too much into it to make a deal at month's end) or the wholesalers wouldn't pay what you had in it (forget the $500 profit) or the color is not right and many times, nothing is wrong with it at all. It just didn't sell. No test drives for 2 months, no deals worked, no phone calls from the 'net. Nothing. So, the UCM needs to figure out how to move these cars and trucks to get them off the lot for several reasons:
First, used vehicles lose value every month whether you own it or the car dealer owns it. Yes, no miles are added to the dealer's cars but there is no real difference between 63,000 miles and 68,000 miles when on his lot but it is a month older. An average figure for a vehicle's yearly loss is about $2000. Some cars it's more and some cars it's less. More expensive and luxury brands can lose $3000 to $4000 or more. It is, after all, a year older. This is just the way things work.
So, let's assume that the average vehicle loses $2000 a year and it's been on the lot for 3 months (90 days). It has lost $500 in value by just sitting there (1/4 of $2000). So, if this car has sat for 90 days not only is there some unknown reason why but it is now worth $500 less. If it was worth $10,000 when he took it in (ACV), it is now worth $9500 at 90 days. Not a good thing.
Ok, now an owner and/or GM gets a monthly inventory report that shows the aging of his inventory. It shows, sorted, the units from oldest to newest in relation to age. The UCM also gets this same report and circles the 60-90 day old units. These units need to be moved ASAP to prevent large wholesale losses (the value, as it sits, is a wholesale value until he sells it). Now, something needs to be pointed out. The owners and/or GM HATES to see 90+ day old units on this report. Get enough of them over a period of months and the UCM may very well be looking for a job. A UCM begins to sweat it out if he has a bunch of cars hitting 75 days old on the report because it is HIS responsibility to make sure they don't get that old. He has to find a way to sell them retail (to you) or to find a wholesaler that will pay what he has in them (to avoid a wholesale loss, which shows up as an exception report that goes to the top). So, he is stuck between a rock and a hard place and HAS to move the >75 day old units or risk losing his job. (Even the best guys and life long employees can't continually have large wholesale losses).
SO, he has to get creative with these units that are 60+ days old. He has them re-freshened up (new tire shine, new Armor All on the dash, fresh washing, etc) and then he parks them by the front and side doors as well as the main drive. (As mentioned, the Factory Reps will strongly encourage this practice to come to an end but sometimes it has to be done. These aged units are well signed with a "Hot Price" (again, who knows what a Hot Price really is?). If it's close to the end of the month the UCM may even have the retail price listed at pack leaving little room for negotiation or trade over-allowance. It someone lands on the car and it needs some money to make the deal, the UCM will put $500 or more "too much" into a trade to make this 80 day old car go away. As mentioned earlier, this reduces the PPV (taking a short deal, maybe to actual ACV) but potentially affects the total PPV average and messing with his bonus. However, a short bonus is better than the unemployment line. The pressure is really intense for those on the bubble. The aged units must go no matter what, plain and simple. If the UCM put too much into it when he took it in on trade, whether he put too much into the reconditioning (discovered a surprise?), whether he paid too much at auction (more about auctions later) or just bad timing and economy, it is the responsibility of the UCM to not let cars get to be 90 days old.
What does this mean to the buyer? Well, it means great deals on the aged units but, generally, the buyer has no idea how old this unit is other than the year of the car. Also, most buyers (and managers) don't know what the retail value really is. The UCM has been wrong for the last 3 months and he is an expert so how do we know if it's aged and discounted to where they truly aren't making any money?
Again, a car or truck is worth what you are willing to pay for it so the dealer has to build value in it. A UCM will be willing to put up to $1000 more into your trade to make it go away. This is true money, not over-allowance. He figures he has 80 days to make up for that extra $1000 in your trade and a 90 day unit is now gone and off the report. His PPV took a hit too but sometimes you hope you have enough "in the bank" from <30 day old units to cover these give-aways. Hope and pray, that is.
OP
larryh1108
Well-Known Member
Another "out" for these aged units is to trade them with other dealers who also have their own 75+ aged vehicles. In both cases, the units are not desired by the other store but the pressure is intense from upper management to move these off the report that both UCMs just bite the bullet and swap cars for actual ACV cost in both. Both managers know the cars are reconditioned already and know that for some reason they didn't sell. After all, they are 75+ days old.
Neither UCM would buy these units at the auction and would undervalue them if traded in but sometimes you have to do what you have to do. This is not an ideal situation for either store but they are frsh units (at the new store) and the sales staff thinks they are fresh meat for their customers. The UCM does not play the <30 day game, either. These are aged units that need to go on the first pack deal offered by a buyer. Sometimes it works and sometimes it doesn't. No one can say why but some units are sale proof without any logic. If they get to 90 days again, the unit is now $1000 under it's original value ($500 from the other store and another $500 from the current 3 months). At some point the UCM needs to figure out how to get rid of these units.
It may not be a lot but 3 or 4 of these traded, double aged units could lose some serious money at auction.
Another way to get rid of an aged unit is to package it with a fresh, desirable unit and sell to a wholesaler. The wholesalers of the more expensive units ($5000 and up) aren't dummies or suckers. They usually were Used Car Managers who got burned out of screwed over too many times so they got their wholesale license to be the middle man. These guys usually don't use a credit line for the cars because cash is king and the cars are in and out in a week or so (depending on reconditioning needs for the fresh trades). When buying distressed units (the term for aged vehicles) there is no good ole boy spiffs because the wholesaler is now doing the dealer a favor. Usually the dealer does the wholesaler a favor because the UCM can make 10 phone calls to different wholesalers for fresh trades taken in at a fair price. So, if this particular wholesaler is the "first call" he appreciates it and sometimes has to pay him back by taking the aged units.
As discussed, the wholesaler usually pays a $500 wholesale profit per car (plus the spiff) if the UCM takes it in $500 under true value (see above). Now, on these distressed units, not only are they not the usual $500 behind the desired price, they are now $1000 over since they are aged and a tough sale.
SO, they get together and combine 2 or 3 cars in a package deal. The UCM offers the wholesaler 2 desirable units that the wholesaler has been trying to get for several weeks (the UCM wanted to retail it) or 2 fresh trades that would normally stay on the lot and steps up to make a 3 car package. The wholesaler knows the aged unit is already reconditioned so no worry there. The 1 unit he's been trying to get for 2 weeks has also been reconditioned so no worry there. So, he steps up to buy 3 units for what the UCM needs to make a $500 profit on the 2 fresh units and he breaks even on the aged unit. Also, the UCM also "owes" the wholesaler another "favor". (No spiff on a few cars, another shot at a nice car, etc.). Now, the wholesaler cuts 1 check for all 3 units and the UCM breaks it down his way (as just mentioned) and the wholesaler turns in his paperwork a totally different way (to adjust the ACVs to his liking). The check is written for 3 and the wholesaler breaks it down where each fresh unit gets and additional $500 added to it and the distressed unit has that same $1000 deducted from his ACV. Same money, broken down differently.
Neither UCM would buy these units at the auction and would undervalue them if traded in but sometimes you have to do what you have to do. This is not an ideal situation for either store but they are frsh units (at the new store) and the sales staff thinks they are fresh meat for their customers. The UCM does not play the <30 day game, either. These are aged units that need to go on the first pack deal offered by a buyer. Sometimes it works and sometimes it doesn't. No one can say why but some units are sale proof without any logic. If they get to 90 days again, the unit is now $1000 under it's original value ($500 from the other store and another $500 from the current 3 months). At some point the UCM needs to figure out how to get rid of these units.
It may not be a lot but 3 or 4 of these traded, double aged units could lose some serious money at auction.
Another way to get rid of an aged unit is to package it with a fresh, desirable unit and sell to a wholesaler. The wholesalers of the more expensive units ($5000 and up) aren't dummies or suckers. They usually were Used Car Managers who got burned out of screwed over too many times so they got their wholesale license to be the middle man. These guys usually don't use a credit line for the cars because cash is king and the cars are in and out in a week or so (depending on reconditioning needs for the fresh trades). When buying distressed units (the term for aged vehicles) there is no good ole boy spiffs because the wholesaler is now doing the dealer a favor. Usually the dealer does the wholesaler a favor because the UCM can make 10 phone calls to different wholesalers for fresh trades taken in at a fair price. So, if this particular wholesaler is the "first call" he appreciates it and sometimes has to pay him back by taking the aged units.
As discussed, the wholesaler usually pays a $500 wholesale profit per car (plus the spiff) if the UCM takes it in $500 under true value (see above). Now, on these distressed units, not only are they not the usual $500 behind the desired price, they are now $1000 over since they are aged and a tough sale.
SO, they get together and combine 2 or 3 cars in a package deal. The UCM offers the wholesaler 2 desirable units that the wholesaler has been trying to get for several weeks (the UCM wanted to retail it) or 2 fresh trades that would normally stay on the lot and steps up to make a 3 car package. The wholesaler knows the aged unit is already reconditioned so no worry there. The 1 unit he's been trying to get for 2 weeks has also been reconditioned so no worry there. So, he steps up to buy 3 units for what the UCM needs to make a $500 profit on the 2 fresh units and he breaks even on the aged unit. Also, the UCM also "owes" the wholesaler another "favor". (No spiff on a few cars, another shot at a nice car, etc.). Now, the wholesaler cuts 1 check for all 3 units and the UCM breaks it down his way (as just mentioned) and the wholesaler turns in his paperwork a totally different way (to adjust the ACVs to his liking). The check is written for 3 and the wholesaler breaks it down where each fresh unit gets and additional $500 added to it and the distressed unit has that same $1000 deducted from his ACV. Same money, broken down differently.
OP
larryh1108
Well-Known Member
Another way the UCM finds to move the 75+ day old units is by bribery. Yes, bribery. He bribes the sales staff to make a deal happen. He puts up a "Spiff List"
with the targeted cars listed with the Spiff amounts listed. A usual spiff for these cars is 50/50 commission with no pack or a $500 mini whichever is greater. The caveat is that the sale must pay for the spiff and pack is not considered since it's a no pack deal. So, if a salesman "pushes" someone into an aged car for a $1500 profit (no pack), he'll get a commission of $750. If he gets a $600 deal (no pack) he gets the $500 mini since $600 covers the $500.
If he gets a $400 deal (no pack) he gets $200 since he did not cover the $500 mini. If he gets $100 profit, the UCM will gladly take it and pay the $100 mini.
Whatever it takes to make it go away. So, if you are ever steered to a specific unit, several times after saying "No", then it has a nice spiff on it.
Many smart UCMs put out a spiff list the last week of every month with the 60+ day old units on it. It will pay a $300 mini if the deal is accepted but they UCM is looking for a pack deal (which is usually a $100 mini). Etc. These incentives wakes up the guys who are having a bad month and the vets who want even more money. Money is good, after all.
So, the 60-90 day old units presents a problem to the UCM that has to be addressed. But, like we discussed, the buyer has no idea which cars are "special" unless they have the Red Tags on them with (what they say) is an incredible price. The salesman may even say it has to go but (honestly) they all have to go and even if this car is 70 days old on his lot, there is a similar car at another dealer with the same price that has only been their for 2 weeks.
Prices are whatever the consumer will pay. An average car (as in nothing special about it) needs to find a buyer looking for a good deal on an average car.
The salesman's job is to convince the buyer at his desk or on the phone that his average car is better than the other average car at Dealer XYZ.
with the targeted cars listed with the Spiff amounts listed. A usual spiff for these cars is 50/50 commission with no pack or a $500 mini whichever is greater. The caveat is that the sale must pay for the spiff and pack is not considered since it's a no pack deal. So, if a salesman "pushes" someone into an aged car for a $1500 profit (no pack), he'll get a commission of $750. If he gets a $600 deal (no pack) he gets the $500 mini since $600 covers the $500.
If he gets a $400 deal (no pack) he gets $200 since he did not cover the $500 mini. If he gets $100 profit, the UCM will gladly take it and pay the $100 mini.
Whatever it takes to make it go away. So, if you are ever steered to a specific unit, several times after saying "No", then it has a nice spiff on it.
Many smart UCMs put out a spiff list the last week of every month with the 60+ day old units on it. It will pay a $300 mini if the deal is accepted but they UCM is looking for a pack deal (which is usually a $100 mini). Etc. These incentives wakes up the guys who are having a bad month and the vets who want even more money. Money is good, after all.
So, the 60-90 day old units presents a problem to the UCM that has to be addressed. But, like we discussed, the buyer has no idea which cars are "special" unless they have the Red Tags on them with (what they say) is an incredible price. The salesman may even say it has to go but (honestly) they all have to go and even if this car is 70 days old on his lot, there is a similar car at another dealer with the same price that has only been their for 2 weeks.
Prices are whatever the consumer will pay. An average car (as in nothing special about it) needs to find a buyer looking for a good deal on an average car.
The salesman's job is to convince the buyer at his desk or on the phone that his average car is better than the other average car at Dealer XYZ.
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OP
larryh1108
Well-Known Member
So, we now see that the age of a vehicle (days on the lot for sale) greatly affects how they work the deal (negotiate), The more days the unit has been on the lot, the more they are willing to drop the price. Nice to know. BUT!
Who know how long that unit has been there?
Well, if you drive by the lot every day and see the same truck you've been eyeballing for 2 months now, chances are it's a good time to go and ask about it. They want it gone more than you want to buy it.
As mentioned, a used unit cannot hit 90 days old on the used car inventory exception report. It means a meeting with the top dogs and they want to know WTF happened. Why is it on the exception list? How did you screw up? Upper management books out the car and see that you are $2000 upside down in it. How is that possible? They track where it came from. If it was a trade in, they pull the actual deal to see if you put more money into the trade to pad the profit (a serious no-no) and if you had a light profit deal and put too much into the trade, why? (was it an 80 day old unit that was sold?, e.g.) Was this a trade for a buddy, family member or ??
They want to know why they are losing $2000 on a used car. (Losing money is a serious thing especially when money exchanges hands so freely). It's hard to watch when and how the money changes hands but if it costs the dealer money (90+ day old cars) then something smells fishy. Did the UCM try to help a buddy at the auction by trying to run up the price of his buddy's car and went 1 bid too many?
(common). Was this unit traded for another 90+ day unit with a buddy at another dealer? (This does happen but if it happens too much, they get suspicious). Bottom line, a UCM does not want a 90+ day old unit on his used car lot.
However, all this being said, it means little to you, the buyer, because what he owns the car for or how long it's been on the lot makes no difference to you. You want it at a fair market value price. A pack deal means nothing to you, whatever that is. You want a fair price.
So, all this means is if you land on the right car and you want it at the best price possible then if it's a 60 - 90 day old unit you just may get it for a price you like with minimum resistance. The pay of the UCM may be a lot of money but the pressure is tremendous with a lot of pitfalls.
Who know how long that unit has been there?
Well, if you drive by the lot every day and see the same truck you've been eyeballing for 2 months now, chances are it's a good time to go and ask about it. They want it gone more than you want to buy it.
As mentioned, a used unit cannot hit 90 days old on the used car inventory exception report. It means a meeting with the top dogs and they want to know WTF happened. Why is it on the exception list? How did you screw up? Upper management books out the car and see that you are $2000 upside down in it. How is that possible? They track where it came from. If it was a trade in, they pull the actual deal to see if you put more money into the trade to pad the profit (a serious no-no) and if you had a light profit deal and put too much into the trade, why? (was it an 80 day old unit that was sold?, e.g.) Was this a trade for a buddy, family member or ??
They want to know why they are losing $2000 on a used car. (Losing money is a serious thing especially when money exchanges hands so freely). It's hard to watch when and how the money changes hands but if it costs the dealer money (90+ day old cars) then something smells fishy. Did the UCM try to help a buddy at the auction by trying to run up the price of his buddy's car and went 1 bid too many?
(common). Was this unit traded for another 90+ day unit with a buddy at another dealer? (This does happen but if it happens too much, they get suspicious). Bottom line, a UCM does not want a 90+ day old unit on his used car lot.
However, all this being said, it means little to you, the buyer, because what he owns the car for or how long it's been on the lot makes no difference to you. You want it at a fair market value price. A pack deal means nothing to you, whatever that is. You want a fair price.
So, all this means is if you land on the right car and you want it at the best price possible then if it's a 60 - 90 day old unit you just may get it for a price you like with minimum resistance. The pay of the UCM may be a lot of money but the pressure is tremendous with a lot of pitfalls.
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OP
larryh1108
Well-Known Member
Let's talk auctions. Auctions play a big part in the Used Car process. For some reason, the general public has some kind of mystical wonderment when they talk or ask about them. To me, they are the worst part of being a part of a car dealer.
Auctions are good for a few types of vehicles. The best cars are the off lease units. These units are usually 3 years old and have less than 40,000 miles on them. Leased vehicles tend to be treated better than the usual vehicles traded in because the lessee has to pay for any excess wear and tear and miles over their limit. They are usually serviced well because many leases come with a 3 year service contract (bought or thrown in to the lease) for free oil changes for the term of the lease. This protects the car and the lessee.
So, if the factory runs an off lease run, only new car dealers of that make can participate in the bidding (with the sneaky exception mentioned earlier).
This is an opportunity for the dealer to pick up some nice, newer inventory for fair market value. Sometimes they end up paying more than the original residual predicted by the leasing lender of the factory but many times they actually pay less than the projected residual.
No matter what, the cars are usually nicer than most others at auction. Now, the auction has to make money for hosting this event so they charge a "Buy Fee" for every car sold at auction. The fees vary by selling price but it's safe to say that the fee is in the area of $200. Of course, this fee is passed on to the ACV of the car. The also charge a fee to the seller for hosting the unit that sold. The auction gets it from both ends.
The next level of cars are the bank repos. These cars vary in condition from decent to just plain awful. Their age varies as well because they may have been purchased new or very used. A repo is a repo. Some people took care of their car until something drastic happened that changed their income. Other people just don't do regular maintenance because they don't have the time or money (and are irresponsible in general).
Other people just abuse their cars when they know it will be repoed and they hide them as well (move without telling anyone where, always park it in a garage, swap with a buddy who is also looking at a repo, etc). They just know it won't be long so they just abuse it. Then there are the older cars that people stop paying for when they stop running. The whole gamut.
Dealers are allowed to cruise the auction lots the day before an auction to test drive units that may interest them. They can't leave the grounds but they can see if the units start, if the engines make any noises when cold and if the trans slips. Good dealers check the cars out before bidding, lazy dealers don't and they just roll the dice. This is how a lot of 90 day units end up on the lot, excessive reconditioning due to being lazy. If this is a common thing with a UCM (excessive 90+ day units purchased from auction) then they know it's due to taking shortcuts.
The next type of cars run thru the auction is the various dealers running their aging inventory thru it before it's too late. The dealer usually has a "reserve" figure on it meaning there is no sale if a minimum price is not met (Ebay and Gunbroker users are familiar with this). When he does this he wants to get a feel for the current market to decide if he should dump it at auction or find a different way to dispose of it.
He gets the most honest fair market value there is. However, auctions have a No Sale Fee for reserve auctions. If it doesn't meet the reserve price, a No Sale Fee of $75 is still due. Of course, this is added to the ACV of that car.
Another source of auction cars are the trade ins that a specific dealer doesn't want to sell himself. This dealer also does not trust the wholesalers and their stacks of hundreds working with their UCM and paying spiffs. These owners are a little paranoid that the UCM and wholesaler make deals where the UCM undersells the cars for that nice little spiff for each car. So, these owners want fair market value for every trade they won't retail. There is nothing wrong with this since the back door deals don't dictate the price, fair market value does. It's also a way to gauge how well his UCM appraises his trade ins. If most cars are sold for profit at auction, that means that the UCM is allowing deals to slip away because he is under valuing his trade ins and some people walk. If every car run thru the auction loses money, then the UCM is putting too much money into the trades, costing the dealer money. The auctions tell dealers a lot of things. Most dealers I know expect to lose money on trade ins. Not a lot but if some money is lost on trades each month, without being excessive, then that tells upper management that the trade ins are being fairly assessed.
Next you have the bagel lanes. As it sounds, these lanes are filled with the bottom of the barrel trade ins that the bottom feeders try to buy for as cheap as possible. These cars go for $50 to $1000. Fun times if you have a BHPH lot or that corner gas station lot. Watching these guys battle over $10 bids is fun to watch.
Auctions are not fun to go to. They are VERY LOUD (imagine 10 lanes of auctioneers upping the bids with their unique styles) all over the loud speakers. Also imagine 10 lanes with 3 cars inside the building (with the line running outside) that's 30 cars, all running inside and many with emission problems. All that smog being sucked into your lungs. After 2 hours at the auction you'd think you just smoked 3 packs of cigarettes in 2 hours (literally). Next, you are there to buy cars and, to me, I never got a good feeling when I won the auction. To me, it means that of all the experience bidding on a specific car, hundreds of year total if you add it up, and you are the one who paid the most for it. How does that make you feel smart? It doesn't. It makes you feel stupid, in fact. However, this is how the game is played.
On the positive side, you get to visit with guys you've worked with and have known for most of your adult life. You get to BS some, share stories of deals gone good or bad and of the good old days of making 6 figures with no pressure. You may or may not decide to grab a bite while there with your buddies or if you have to rush back to get ready for the cars you just bought. Until you sell each one of these car, you wonder what made you think that you got a good deal on the cars you bought at auction. 90 days is a short time away. Ahhhh, the good old days of just selling cars with no worry of PPV, units sold and 90 day units. THOSE were the good old days for sure...
Auctions are good for a few types of vehicles. The best cars are the off lease units. These units are usually 3 years old and have less than 40,000 miles on them. Leased vehicles tend to be treated better than the usual vehicles traded in because the lessee has to pay for any excess wear and tear and miles over their limit. They are usually serviced well because many leases come with a 3 year service contract (bought or thrown in to the lease) for free oil changes for the term of the lease. This protects the car and the lessee.
So, if the factory runs an off lease run, only new car dealers of that make can participate in the bidding (with the sneaky exception mentioned earlier).
This is an opportunity for the dealer to pick up some nice, newer inventory for fair market value. Sometimes they end up paying more than the original residual predicted by the leasing lender of the factory but many times they actually pay less than the projected residual.
No matter what, the cars are usually nicer than most others at auction. Now, the auction has to make money for hosting this event so they charge a "Buy Fee" for every car sold at auction. The fees vary by selling price but it's safe to say that the fee is in the area of $200. Of course, this fee is passed on to the ACV of the car. The also charge a fee to the seller for hosting the unit that sold. The auction gets it from both ends.
The next level of cars are the bank repos. These cars vary in condition from decent to just plain awful. Their age varies as well because they may have been purchased new or very used. A repo is a repo. Some people took care of their car until something drastic happened that changed their income. Other people just don't do regular maintenance because they don't have the time or money (and are irresponsible in general).
Other people just abuse their cars when they know it will be repoed and they hide them as well (move without telling anyone where, always park it in a garage, swap with a buddy who is also looking at a repo, etc). They just know it won't be long so they just abuse it. Then there are the older cars that people stop paying for when they stop running. The whole gamut.
Dealers are allowed to cruise the auction lots the day before an auction to test drive units that may interest them. They can't leave the grounds but they can see if the units start, if the engines make any noises when cold and if the trans slips. Good dealers check the cars out before bidding, lazy dealers don't and they just roll the dice. This is how a lot of 90 day units end up on the lot, excessive reconditioning due to being lazy. If this is a common thing with a UCM (excessive 90+ day units purchased from auction) then they know it's due to taking shortcuts.
The next type of cars run thru the auction is the various dealers running their aging inventory thru it before it's too late. The dealer usually has a "reserve" figure on it meaning there is no sale if a minimum price is not met (Ebay and Gunbroker users are familiar with this). When he does this he wants to get a feel for the current market to decide if he should dump it at auction or find a different way to dispose of it.
He gets the most honest fair market value there is. However, auctions have a No Sale Fee for reserve auctions. If it doesn't meet the reserve price, a No Sale Fee of $75 is still due. Of course, this is added to the ACV of that car.
Another source of auction cars are the trade ins that a specific dealer doesn't want to sell himself. This dealer also does not trust the wholesalers and their stacks of hundreds working with their UCM and paying spiffs. These owners are a little paranoid that the UCM and wholesaler make deals where the UCM undersells the cars for that nice little spiff for each car. So, these owners want fair market value for every trade they won't retail. There is nothing wrong with this since the back door deals don't dictate the price, fair market value does. It's also a way to gauge how well his UCM appraises his trade ins. If most cars are sold for profit at auction, that means that the UCM is allowing deals to slip away because he is under valuing his trade ins and some people walk. If every car run thru the auction loses money, then the UCM is putting too much money into the trades, costing the dealer money. The auctions tell dealers a lot of things. Most dealers I know expect to lose money on trade ins. Not a lot but if some money is lost on trades each month, without being excessive, then that tells upper management that the trade ins are being fairly assessed.
Next you have the bagel lanes. As it sounds, these lanes are filled with the bottom of the barrel trade ins that the bottom feeders try to buy for as cheap as possible. These cars go for $50 to $1000. Fun times if you have a BHPH lot or that corner gas station lot. Watching these guys battle over $10 bids is fun to watch.
Auctions are not fun to go to. They are VERY LOUD (imagine 10 lanes of auctioneers upping the bids with their unique styles) all over the loud speakers. Also imagine 10 lanes with 3 cars inside the building (with the line running outside) that's 30 cars, all running inside and many with emission problems. All that smog being sucked into your lungs. After 2 hours at the auction you'd think you just smoked 3 packs of cigarettes in 2 hours (literally). Next, you are there to buy cars and, to me, I never got a good feeling when I won the auction. To me, it means that of all the experience bidding on a specific car, hundreds of year total if you add it up, and you are the one who paid the most for it. How does that make you feel smart? It doesn't. It makes you feel stupid, in fact. However, this is how the game is played.
On the positive side, you get to visit with guys you've worked with and have known for most of your adult life. You get to BS some, share stories of deals gone good or bad and of the good old days of making 6 figures with no pressure. You may or may not decide to grab a bite while there with your buddies or if you have to rush back to get ready for the cars you just bought. Until you sell each one of these car, you wonder what made you think that you got a good deal on the cars you bought at auction. 90 days is a short time away. Ahhhh, the good old days of just selling cars with no worry of PPV, units sold and 90 day units. THOSE were the good old days for sure...
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Sounds like just the two of us talking here.
As to auctions in particular, the last used car ( truck) I purchased, I happened to deal with a straight up independent used car lot that had bought a one owner pickup that they thought would go quickly but somehow ( November/December) sat on their lot 60 days longer than planned. I purchased it ( cash) very late in December for not more than 500 over their auction purchase price- they were just clinically clearing the stuff that didnt sell so they could go to the next auction with dry powder. All open Kimono and I was fine with their total profit after doc fee of ~795. I could not have purchased it privately anywheres close to it nor had access to auction pricing so the alternatives were moot and no private seller was going that low on the same truck. Elementary.
of us talking here.As to auctions in particular, the last used car ( truck) I purchased, I happened to deal with a straight up independent used car lot that had bought a one owner pickup that they thought would go quickly but somehow ( November/December) sat on their lot 60 days longer than planned. I purchased it ( cash) very late in December for not more than 500 over their auction purchase price- they were just clinically clearing the stuff that didnt sell so they could go to the next auction with dry powder. All open Kimono and I was fine with their total profit after doc fee of ~795. I could not have purchased it privately anywheres close to it nor had access to auction pricing so the alternatives were moot and no private seller was going that low on the same truck. Elementary.
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larryh1108
Well-Known Member
I know a lot of dealers that clear out their inventory in December and not replenish it until after the 1st of January.
They always said that they have to pay some kind of tax on whatever inventory was in stock. I know that is how it worked in IN but I also heard it down here in NC. I never really asked mush more about it because as I understand accounting, year end inventory is an asset until sold and then the profit is taxed. How can inventory be taxed if it isn't sold? They tax assets?
They always said that they have to pay some kind of tax on whatever inventory was in stock. I know that is how it worked in IN but I also heard it down here in NC. I never really asked mush more about it because as I understand accounting, year end inventory is an asset until sold and then the profit is taxed. How can inventory be taxed if it isn't sold? They tax assets?
OP
larryh1108
Well-Known Member
As we close out the section of the Used Car Experience, we should recap a few important items.
*First, as we've discussed many times, there is no hard and fast rule about how much a used car is marked up.
New cars have invoices and the prices are easy to look up on the net. That is a hard and firm number. It's not hard to know what cost is and offer profit from there to make a deal. For this reason, new car markups are not that great.
The average markup on a new car is 5%-6% (luxury lines more). Not a lot when you consider that paying MSRP is just not done very much by the educated consumer.
Used cars, on the other hand, have no firm cost. Yes, the 'net offers what it should be or could be but there are so many variables (miles, condition, equipment, CarFax, service history, bought as a trade in or at auction, etc.) that how can anybody know what the true cost is? So, used car retails are determined by fair market value. Lately, internet apps have come about showing what the retails, by average, go for in your area. These are nothing more than guides to show "about" what they should cost. If you see the curve for the pricing, it shows some people paid the highest and some paid the lowest and the greatest group paid somewhere in the middle. That somewhere in the middle has a spread of about $1000. The point is, people paid all over the board for a similar car. There is no ideal price.
If you concentrate on how much the dealer is making instead of what a fair price is, you could end up paying more than you should.
Negotiating the price of a used car like you do a new car, is counter productive for several reasons. #1 is you have no idea what the dealer has in the car. Did he take it in cheap? Did he fully recondition it? Did he buy it at auction? Is buying it at auction a better or worse thing than if it was traded in? If Dealer AB paid $500 less than Dealer XY for a similar car but sells it for the same price as Dealer XY, he'll make $500 more in profit. Does this mean he ripped you while Dealer XY was fair?
The answer is no, if the retail price is the same. That's my point. You may get ripped or you may have gotten a great deal but there is no real way of knowing without having access to the books. It doesn't matter. If you bought it, you own it and if it's a good car that treats you well, you'll get over the feeling that you paid too much because everybody thinks that too. It's all relative.
#2 is if you find out their true ACV and work from there, you may get a good deal if it's aged or whatever but what if the dealer had to put more into it for reconditioning than expected or just guessed wrong and paid too much at the auction? No, it's better to just figure out what you want to pay and feel good about it when it's over.
I am going to open a new thread to cover the financing end of the process. More people may just want to read about that than pour over the lengthy posts here and just gloss over it, or miss, what is important there.
*First, as we've discussed many times, there is no hard and fast rule about how much a used car is marked up.
New cars have invoices and the prices are easy to look up on the net. That is a hard and firm number. It's not hard to know what cost is and offer profit from there to make a deal. For this reason, new car markups are not that great.
The average markup on a new car is 5%-6% (luxury lines more). Not a lot when you consider that paying MSRP is just not done very much by the educated consumer.
Used cars, on the other hand, have no firm cost. Yes, the 'net offers what it should be or could be but there are so many variables (miles, condition, equipment, CarFax, service history, bought as a trade in or at auction, etc.) that how can anybody know what the true cost is? So, used car retails are determined by fair market value. Lately, internet apps have come about showing what the retails, by average, go for in your area. These are nothing more than guides to show "about" what they should cost. If you see the curve for the pricing, it shows some people paid the highest and some paid the lowest and the greatest group paid somewhere in the middle. That somewhere in the middle has a spread of about $1000. The point is, people paid all over the board for a similar car. There is no ideal price.
If you concentrate on how much the dealer is making instead of what a fair price is, you could end up paying more than you should.
Negotiating the price of a used car like you do a new car, is counter productive for several reasons. #1 is you have no idea what the dealer has in the car. Did he take it in cheap? Did he fully recondition it? Did he buy it at auction? Is buying it at auction a better or worse thing than if it was traded in? If Dealer AB paid $500 less than Dealer XY for a similar car but sells it for the same price as Dealer XY, he'll make $500 more in profit. Does this mean he ripped you while Dealer XY was fair?
The answer is no, if the retail price is the same. That's my point. You may get ripped or you may have gotten a great deal but there is no real way of knowing without having access to the books. It doesn't matter. If you bought it, you own it and if it's a good car that treats you well, you'll get over the feeling that you paid too much because everybody thinks that too. It's all relative.
#2 is if you find out their true ACV and work from there, you may get a good deal if it's aged or whatever but what if the dealer had to put more into it for reconditioning than expected or just guessed wrong and paid too much at the auction? No, it's better to just figure out what you want to pay and feel good about it when it's over.
I am going to open a new thread to cover the financing end of the process. More people may just want to read about that than pour over the lengthy posts here and just gloss over it, or miss, what is important there.