Why Even a Best Price Can Sometimes Change

One of the comments often heard by both customers and competitors (and remember that I was one of them) is that the “best price” is not really the best because prices can still be lowered. Yes, you will hear that the best price is really the best price today which means that it might not be the best price next week or next month. There are a few reasons for this, none of which debunks the best price strategy. Long story short: things change.

The things that can change can be big or small. A small change can simply be the number of trade-ins on a specific make or model. For instance, Toyota customers are very loyal and trade for the newest version of a make and model with the frequency of a college student and an iPhone. If we get several Rav4’s traded in for new models we will want the oldest stock on the lot moved out to make room for the newer ones.

Another example of a minor change is how long a vehicle stays on the lot. As I mentioned in my last post, there is a random phenomena that occurs that can cause a vehicle to sit on a lot longer than expected. The longer that vehicle sits on the lot, the quicker that dealer will want that vehicle to move. New inventory keeps people excited and intersted. If you come to the lot several Sundays in a row (yeah, we know you’re avoiding us) and keep seeing the same inventory, you would not come back the next Sunday.

An example of a major change is higher rebates. Once the newest model year is released the manufacturer will increase rebates on the previous model year which can make them cheaper and not significantly more expensive than the pre-owned models. If a customer is looking at a pre-owned GMC Terrain and it is $21,500, but they can get a new one for $24,000 (only about $45 a month more) there is a good chance they will go with the newer model, so the only way to keep the pre-owned inventory fluctuating is to lower the price.

There is also this funny little thing called Capitalism. It is all about what the market will bear. If the entire market, and not just a specific dealer, gets flooded with inventory dealers will start lowering their prices to keep their inventory moving to compete with other dealers. The same build up of inventory can occur if you do not keep up with your competitors.

Our dealership is always striving to give you the best price it can offer considering all market conditions. What this means is that even if our price is X amount of dollars lower than our competitors today it may not be that way next week if we are not careful, so we have to keep up with the market to keep offering you a significant discount over everyone else. Conversely, our competitors know their “best price” too. They are just hoping that you pay a little more.

Ultimately then, it is our duty to keep track of the market and continue to keep our promise to our customers; even if it means the best price for you is not the best price for us.

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My First Week at a Best Price Store

After 15 months of working at a dealership with negotiable prices and commissioned salespeople I recently moved to a store that offers their best price right up front and who has non-commissioned salespeople. It is hard to understand how massive of a change this is to someone outside of the business, but believe me it is an enormous change. I will delve into the differences between the two in a later post, but I decided to make this post more about me experiencing the change, breaking down my old perceptions, and working for an entirely different company with different perspectives.

I will be honest from the start. I was bred to believe that the “best price” story was a false narrative and gimmicky. Although in theory I felt the dealership’s way of doing business fit my approach best I was worried that I might be making a mistake and falling for a marketing ploy. That is not because my previous employer (who was great to me and whom I have great respect for) had negative things to say and brainwashed me to think this way. Frankly, it is just what you have to convince yourself when the store you are working at is selling 40-ish cars and the guys up the street are selling 100+. At the same time, anyone who has asked me how I felt about the “best price” concept will tell you though that I have always done my best to stay neutral. I have always simply shrugged it off with a casual, “Well, everyone has a different way of doing business” or “They both have their benefits.” Now that I have seen the other side though…. I still say they both have their benefits. You thought I was going to go on an epic bashing spree there didn’t you?

The truth is, they do both have their benefits. Here it is: You can possibly get a better deal at a negotiable dealer. (Boss, if you’re reading this, bear with me). You might be able to get a better if you are a hardcore negotiator, if you catch the negotiable dealer at the end of a bad month, or if you happen to like the vehicle that dealer hasn’t been able to get rid of for 6 months. I should note on that last one that I’m still not bashing here. I’ve seen very good vehicles sit on the lot for an unreasonable amount of time. If I could figure out why that happens I’d be rich, but it does. All dealers struggle with this phenomenon. Even a best price store will lower the price of a vehicle if it sits on the lot too long (why a lowered price does not throw a rod into the best price concept will come at a later date). 

What this all comes down to is a preference. If you like to negotiate, you know that negotiable dealers are easier to deal with at the end of the month, and you like the vehicle that has been on the lot for 6 months you should go for it! I have come to realize though that a best price dealer does not necessarily think they are going to get every single car deal. The concept is based on the idea that on a consistent basis you can count on being able to get a fair deal on a vehicle without having to negotiate and find the right car on a Tuesday at the end of the month where a dealer is having a bad month and needs to get rid of a car and the wind is blowing out of the east and there is a 60% chance of rain and they broke a mirror the night before while walking under a ladder and…. you get the point.

As I have said, having worked at a negotiable dealer I thought this was all hippie stuff. I even thought for certain that it would not take long before the salespeople and managers were telling me behind closed doors, “Yeah, this best price stuff is hogwash and the owners are screwing us.” I am not even exaggerating. I was shocked to find that the staff really felt good about what they did. They truly bought into the process; even the people who were there before the store changed their approach. Anyone who has ever been through such a huge organizational change can attest to how difficult this is to accomplish. I even took the top salesperson out to lunch fully expecting them to tell me that the story was a crock, that they felt like they were getting taken, or that they did not even adhere to the company’s practices, and that they were a rogue vigilante who still did things their own way. Nope.

I have found quickly that not only do the employees and managers feel this way, but that our owner, Dan Anderson and his wife Stephanie, truly believe in what we are doing. And after my first week at a best price store, I can rest easy now having the confidence that I believe it too.

The Howling Dog and the Nursing Home

Have you ever went to a nursing home? Have you ever heard the way the staff talks to the folks that live there? If you have, you should already know how to avoid the wrong salesperson. Have you ever heard of a dog whistle? The pitch is so loud that, although humans can’t hear it, the sound can make a poor dog howl. Don’t be the human that can’t hear the sound.

If you go into a nursing home, or even just a doctor’s office, you’ll notice that the staff talks to the older patients with a really high pitched voice completely different than the one they use when they talk to younger people. I think it is the result of people trying to be sweeter to old folks and good on em’ I say! But the staff of a nursing home or doctor’s office just can’t be that chipper all day. They are on their feet all day going from patient to patient as fast they can and they see some pretty bad stuff.

So that means sometimes they have to fake it. And that’s what that voice you hear is. It’s perfectly fine and innocent in that environment (even a bit heroic considering the effort they have to put in), but if that’s the way your car salesperson is talking to you, especially if you are younger, you have a problem! If you hear your salesperson talking to you in that high, dogs are howling voice, it means they are faking it. It means they are putting on a show for you. They are sweet talking you. They are desperate for you to like them and want you to think “Gosh, this salesperson is swell!” They want you to trust them, but trust me, you cannot.

Listen to the other salespeople in the dealership. Every salesperson wants you to like them, but are they using that high pitched voice? Even listen to the way your salesperson talks to other people at the dealership. Are they talking to them differently than they are talking to you? Uh oh… you have THAT salesperson then. The salesperson that wants you hanging on their words and thinking you’re just the sweetest person ever and then BAM! you’re paying window sticker price or negotiating $200 when other people are negotiating $1,000.

So if you’re ever on a car lot and a salesperson comes out using the nursing home voice and all of the dogs in the neighborhood start howling run for your lives!

Seriously though, here is my tip: If you ever run into that salesperson, just say, “Well, I have talked to another salesperson out here before. I would like to keep working with them. I don’t remember their name though. Can you name some?” Then, whoever’s name they say first just tell them that’s them and ask if they can come out and help. If they are busy with another customer, just remember the name and come back later and ask for them again. Either way, that salesperson has probably talked to dozens of people on the lot that week and it’s hard to remember everyone, so they will just go with it thinking they might not have remembered you.

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The Trade-In Process (Part 1)

For this post, I decided it was important for me to do some research on the subject considering that this is one in which I can see dealers handling the process differently. I was not necessarily surprised to see a lot of misinformation, but I was surprised to see some of the tactics that some dealers use (or have used) in the trade process. Since there is a lot of information to be discussed about this process I have decided to break this topic into separate posts so that I am neither too brief on the subject nor too long winded on it. For today, I am simply going to give you a snapshot of how the trade process should. Then, I will tell you a few things to absolutely not put up with that I found during my research.

The first thing that happens when you bring in your trade is that we will get all of the information off of the vehicle so that we can appraise it accurately. First, we will get the make, model, trim level (please, please, please refer to my blog post “What’s In A Name” about this subject), mileage, and VIN (vehicle identification number) of the vehicle. I will also typically do a quick walk-around of the vehicle myself to both make sure the appraiser sees any visual damage on the vehicle and also to make sure that he notes all of the additional options your vehicle has that adds to the value (large dealerships will usually have someone whose main job is to do the appraisals whereas our Sales Manager does all of ours).

Next, we will use the VIN number to run a vehicle report history. This history tells us multiple things about your vehicle including number of owners, number of accidents, and an odometer check making sure there has been no rollback on mileage. There is other information available such as if there were any hail damage reports, water damage reports, or, more importantly whether there is a salvage title on the vehicle.

As you might expect, an odometer rollback is never a good thing. This means that it is now and forever impossible to tell exactly how many miles a vehicle has on it. This can make a vehicle very hard to sell and therefore will likely decrease the vehicles value. Number of accidents is not as important as the severity of an accident, but if the number is high it can impact value. The importance of the number of owners depends on the age of the vehicle. If the vehicle has 4 owners and is fifteen years old, that is pretty normal, but if a vehicle is only five years old and has 4 owners that can be a sign of trouble. Not to mention that one of the first questions people ask is how many owners a vehicle has. For vehicles that are five years and newer people typically only want to hear that the vehicle has one owner; maybe two.

While the salesperson is running these reports and making sure you are comfortable, the appraiser will be out driving your vehicle. Before they go out they will do a quick walk-around of the vehicle looking for any damage to the vehicle and looking at tire wear. After that, they will make the same trip on every drive taking your vehicle through rough roads to listen for something like bad shocks. Then they will take it on the highway to listen for sounds that a rougher and louder road might cover up like tire noise.

While they are out they will also check to make sure everything works such as the air conditioning, radio, automatic windows, etc. This may seem like ways for the dealer to de-value your vehicle, but it is more so that they will know what they will have to fix. Try thinking about it like this: If you were going to a reputable dealership to buy a pre-owned car would you not expect the air, radio, and windows to work? The dealership will have to fix these little problems which will obviously cost them money.

After all of this, the appraiser will take this information and use several resources to determine the value of your vehicle so that they can make you a trade offer. I will discuss this trade evaluation process in the next blog post so that you know exactly how they will come up with your value and I will give you some tips on how to be ready for this step in the car buying process.

I will end this post with two things I read about in my research of the trade process you should absolutely not put up with. Walk out if these things happen to you at a dealership:

1. DO NOT let the salesperson or the appraiser do a walk-around of the vehicle and invite you to be with them for the purpose of pointing out every ding, dent, or minor blemish to your vehicle. They are merely trying to reduce the value of the vehicle in your eyes. This is just flat-out disrespectful. With the internet age and impact of social media, I think this tactic has likely gone by the wayside since they don’t want people openly sharing this distasteful treatment.

2. DO NOT let a dealership lose or hide your keys. I cannot believe I even had to type that, but apparently some dealerships will purposely lose your keys (I heard of one that openly threw the keys on the roof!) so that you will be at the dealership longer and they can keep negotiating with you  and wear you down. Again, I imagine that this has disappeared in the social media age, but the fact that I read it on several current articles absoutely floored me.

Please leave me a comment if either of these things have happened to you.

“Give Me Your Bottom Dollar.”

There are several variations of this statement:

“What’s your best price?”

“I’m not paying more than…”

“You better sharpen your pencil.”

The goal is always the same though. You want the absolute lowest price that you can get on a vehicle. What you need to know is that the lowest price on a vehicle isn’t always the best deal.

For example, at my dealership, we offer a warranty on used vehicles for the first 30 days or first 1,000 miles, whichever comes soonest, on 20% of parts and 20% labor. The fact of the matter is that any used car, no matter where you buy it and no matter how well it is inspected, is still a used car with many unknowns. This warranty is to account for that fact. Usually these issues will rear their heads in that period.

This is a straight-line policy on every used vehicle with under 100,000 miles. Anything over 100,000 has no coverage. Here’s the deal though. As salespeople, we want our customers to be happy (obviously the dealership does too), not just because we care (it may be hard to believe, but we do), but also because car salesman (who are paid commission) live off of repeat business and referrals. If you’re not happy, neither of those things will happen for them.

So if there is a problem (say a $600 fix) your salesperson will fight to have that problem fixed for you even if it costs him money (it’s likely the salesperson will lose whatever percent of commission he makes off of the profit margin). And not just the warranty coverage. Free. Past your 30 days or 1,000 mile warranty (within reason)? Free. Over 100,000 mile vehicle and no warranty at all? Free. If you fought to get that last $300 off of the price of the vehicle that is harder to do now. I think most people would rather pay the $5 extra dollars a month that $300 will cost them rather than have to front $480 or more at one time.

The policy we have in place is to protect the dealership (and even the salesperson) from the unknown. If there’s a $2,000 problem the dealership had no way of knowing would occur in the first 30 days or 1,000 miles they can’t be expected to fix it for free. From my experience people understand that and understand that used vehicles are a bit of an unknown. I’ve been at Lovegreen’s now for 9 months and NOT ONE SINGLE TIME have we used the 30 day or 1,000 mile and 20% rule. That means one of two things or both: 1. We sell reliable vehicles and 2. We take care of our customers.

Reading a Window Sticker

You might be familiar with the term “sticker price,” but there is a lot more information available to you on a window sticker. You will find the standard options on the vehicle, the optional equipment added to that specific vehicle, estimated miles per gallon, annual fuel cost, comparisons to the average fuel cost, smog and gas ratings, and safety ratings. Every brand’s window sticker looks a little different. I’ve provided an example of what a Chrysler (Chrysler, Dodge, Ram, Jeep) and Ford window sticker look like at the bottom.

Looking on the Ford window sticker for instance, you’ll find all of the standard equipment that goes on any 2016 Ford Explorer Base model 4WD vehicle in the upper left hand corner. This means that any 2016 Ford Explorer Base Model 4WD vehicle, no matter where you find it, will have those features. Below these standard features (below the line on a Ford sticker) are optional features that this specific vehicle has. There are group packages* or standalone options available on most vehicles.

When comparing prices from dealership to dealership it is incredibly important to be able to understand how to read this portion of a window sticker. It is one of the biggest mistakes buyers make in the buying process. We have seen many times where a customer is looking at our vehicle, sees a feature on it, shops elsewhere, and thinks they are getting that vehicle cheaper at another dealership with all of the same features. For example, the Explorer window sticker provided shows that this specific vehicle has Sirius XM radio as equipment added to it over the standard base model. The XM radio costs an extra $195. A person might go to another dealership, not get the XM radio, get a price that’s $195 cheaper, and think they saved money at that dealership. If a person does not want XM radio, then they did save money, but what happens too often is that they bought the vehicle for $195 less THINKING they got XM radio only to find out later that they did not. This example is a pretty minor one, but imagine thinking you’re getting a rear view camera or navigation and you didn’t!

There are other things that might be important to you on the window sticker as well. You can see that the mpg estimate* on the Explorer are 19 combined, 16 city, and 23 highway on the upper right. Make sure you compare these 3 numbers equally and that you don’t mistakenly compare the city mileage on one vehicle to the highway mileage on another. You can also find an estimated cost for fuel in a year, and how much that vehicle’s gas will cost you more than the average new vehicle. Another piece of information is the smog rating and gas rating of that vehicle on a scale of 1 to 10. Anymore, unless it’s a hybrid or an electric vehicle it will not be very high.

Lastly are the safety ratings of the vehicle on the bottom right. These are all usually pretty high on vehicles anymore no matter the brand. That’s why you don’t see as many commercials about safety ratings anymore. There might be another reason for that though. I’ve been in the business for less than a year and we always get these reports on what the most important things are to a buyer in their search for a new vehicle. One of the things that always tops that list is safety features, yet in my time in the car business I have not had one single customer asks me about safety features in a vehicle like crash ratings, air bags, etc. Either car companies have figured this out or customers are catching onto the fact that, safety wise, these vehicles are all pretty well the same quality*.

Ford Window Sticker

Chrysler Window Sticker

NOTE: An * by text means that this item will be discussed further in a future blog post