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Compliance

Close of Negotiations

Compliance expert believes that the current regulatory climate could spell the end of the negotiated car purchase and the deal structure that goes with it.

November 2013, F&I and Showroom - Feature

by David Robertson

An argument can be made that the negotiated car purchase is becoming a relic of the past. If that’s correct, the old ways of structuring a deal will also fall by the wayside.

How can this be? Under our version of free enterprise, high-ticket consumer items are not sold by holding to a fixed price, but through negotiation between the buyer and the seller. The ability to negotiate a vehicle’s selling price isn’t a curse, it’s an opportunity for consumers to favorably influence their payment.

It’s not that establishing a negotiated, agreed-to price has ceased to be an integral component of the purchase process. What’s changed is how it is represented, the point in the process where it influences buying decisions,  and the factors driving that decision. How is a salesperson to survive?

There are few consumer products for which the Internet yields more substantive information than automobiles, including features, pricing, funding options, interest rates, and the book value on the customer’s trade-in. Never in the history of our business have so many prospective buyers been armed with so much information.  

If the customer walks in with the dealer-cost figures recorded on a slip of paper, the time-honored thrust-and-parry inquest of that magic number is rendered useless. It comes down to, “We both know the key numbers, so at what dollar amount are you willing to sell, and at what dollar amount am I willing to buy?” In fact, under the TrueCar system, the dealer markup is essentially a foregone conclusion.

The trade difference or agreed-to price, once orchestrated by the salesperson, is the pivotal number when people are paying cash or obtaining funding outside the dealership. However, for those who finance or lease with the selling dealer, it’s not the selling price, but the monthly obligation that becomes the deciding factor  — and for good reason.

First, most people pay their bills on 30-day cycles and measure their available funds on a monthly basis. Second, the test of affordability is now tempered by other factors, such as the repayment term and cost of credit for installment purchases — or the depreciation and money factor for a consumer lease — with subvented programs often sweetening the deal.

The significance for the salesperson is that the purchase decision process has shifted from negotiating a mutually agreeable price to identifying an acceptable monthly payment, moving that decision from the salesperson’s desk to the F&I office. In the near future, it may reside in a kiosk in what once was the dealer’s showroom.

In the past, if spending hours or even days negotiating with the salesperson meant parking the latest hot new model in the driveway, it was time well spent. Today, with computers designing them and robots building them, vehicles may not engender the passion that used to animate a car purchase.

With the loss of passion goes the psychological leverage the salesperson once had over the prospective buyer. With two or more car payment books already in the customer’s desk drawer, getting the lowest monthly payment for the longest term possible usually seals the deal.

If the culminating event in the salesperson’s shtick isn’t negotiating the sales price, what role will he or she play? Well, there will always be traditional buyers and automotive aficionados, although their numbers will dwindle. The salesperson must now quickly discern whether the customer is “old school” or of the “wired” variety.

It’s imperative that today’s salesperson is computer savvy and a frequent visitor of vehicle information sites. The fundamentals of sales discourse — a respectful greeting, an inquiry into the customer’s needs and establishing value in the vehicles offered for sale — still apply. However, they must be tailored to the factoid-loaded, not-really-interested-in-a-demo-drive, I’ve-worked-out-my-financing buyer.

The salesperson’s new role is that of a “transaction facilitator,” rather than the “deal closer” of old. Keep in mind that Internet buying is pervasive and growing. Consumer Reports estimates that 39 percent of this year’s Christmas buying will be online. That means the commission-paid sales clerk has been replaced by slightly-above-minimum-wage online order-takers and warehouse workers.

Generational shifts aside, talented salespeople will remain in the mix, especially when a high-dollar amount or high level of mandated documentation is involved. There’s also the usual need to deal with a vehicle being traded in, and a FedEx driver can’t set a new car on a buyer’s front porch. But those salespeople will only survive if they master the skills required by the growing legion of Internet buyers.

Comment

  1. 1. David Ruggles [ December 21, 2013 @ 07:40PM ]

    You nailed it Dave. As you mentioned, consumers have never had it so good. Ironic they are even more unhappy today as a group than ever.

  2. 2. Mark [ January 11, 2014 @ 08:40AM ]

    I've been selling cars at the same dealership for over 20 years and seen and used all sorts of selling methods and closing tools. It all comes down to this one simple truth. People buy from those they like and trust. If you focus on being exceptionally friendly and building their trust, you will sell more cars and gain more referrals. However, if you are not genually friendly and not trustworthy, you will not be successful regardless how talented and quick with words you may be.

 

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