On the path towards buying a new car, there are many conversations to be had and in just a few years, I went through that process more times than most people will in their entire lives. With no prior experience or relevant skills beyond my half-decent people skills and a passion for all things automotive, I found myself helping people through the buying process from the other side of the desk, without any real idea of what to expect or what I was getting myself into. As a salesman, I didn't do too badly overall. I was no superstar, but my enthusiasm and appreciation of the product combined with a sensible customer service approach was generally well received by the numerous individuals I spoke with. Some of the most satisfying moments were conversations with buyers who understood that I genuinely enjoyed being a helpful and valued contributor to their experience.
Whilst most people were a pleasure to work with, there was also those who didn't have such a good time through it all. Some struggle more than others. Some even more than that and I struggled with them. In much the same way that we're more likely to leave negative reviews than positive ones, unfortunately, those negative experiences remain as the ones that stand out the most when I look back at my time on the job and if I'm honest with myself, it's probably what drove me away. The disappointing part is that it shouldn't have been that way. Buying a car should not be a difficult experience but thanks to a few small, but hugely important details behind the scenes, the expectations of the customer often ends up different from reality, resulting in moments of frustration for all parties involved.
Thanks to the emergence of the internet age, shopping for goods has never been easier. Readily available information streamlines the research and decision-making processes, with online advertising allowing consumers to quickly find a great deal on whatever it is that they may be searching for. Most of this has carried over to the car industry, with many prospective buyers being well-informed of their options long before they ever set foot inside the showroom, a factor greatly welcomed by both customer and salesperson. But to the irritation of the modern day consumer, like for like price comparisons is not an amenity available in this industry, unlike the retail experience that we all take for granted.
A common theme I've picked up on is the questioning of why buying a car can't be done in the same way that we buy might a fridge. After leaving the motor trade, at one stage I found myself working in a retail position and was rather eager to pick up on all the differences between the two industries because I had often pondered that very same question myself. I did find answers and perhaps surprisingly, they became obvious to me rather quickly. One sizable contributor to the differing of experiences is the simple matter of volume. Each individual prospect is far more important to the dealership than to the retail store, as they have fewer opportunities to convert into results. I would safely estimate that in a single day in retail could result in more sales than an entire month at a dealership, so where a missed opportunity or lost customer really doesn't mean much to one, it's hugely important to the other.
Above anything else, the dealership needs to make sales. Outright profit comes second, as the need to meet volume targets means that dealerships can't afford to sit around waiting for high-profit customers to just walk in the door and place an order, instead they need to work hard to try and earn their business, as a single lost sale can be an enormous detriment to the overall result at the end of the month.
But the most important factor here, one that directly contributes to the way that a dealership operates, is the fact that every car on the lot is being held under finance and accumulating interest. This means that the longer a car takes to sell, the higher it's cost to the dealership, creating a situation that is vastly different to that of the retail world as the commodity does not have a set price to the retailer, making the task of establishing margins a bit more complicated than what it may seem from an outsiders point of view. This reinforces the most important goal of the dealership – to move the metal. It directly influences the way that dealerships do business, as a guaranteed low-profit sale today can be worth more than an unassured, high-profit sale tomorrow. Because what if that sale never actually comes through? A confirmed sale is the most powerful negotiating tool of the customer because each individual sale means so much more to the dealership than it does to the retailer.
There are two common myths to bust whilst we're on this topic, 1. Nobody pays RRP; and 2. Dealerships don't sell for losses. Both of those things absolutely do happen - more often than many punters might expect - and they go hand in hand together. There are indeed customers that happily make the decision to purchase at the asking price without any attempt to negotiate any sort of discount, which then, in turn, allows cars to be sold below costs. The profit made from the first sale covers the negative from the second, in effect subsidising that purchase for the second customer. But below cost selling is a bad business practice, so why would the dealership do that in the first place? The longer a vehicle sits, the more interest it accrues, so the term “cutting your losses” becomes more than just a phrase. Eliminating those ongoing costs are an important part of properly managing a department and because manufacturers place incentives on volume, that decision to accept a low or negative profit sale can turn out to be the correct business move come months end.
So what does this all mean to the customer? It may appear to create confusion and many people seem to view the car buying process as one that is carefully structured to provide great advantages to the dealerships, but in reality, that isn't quite the truth. The objective behind the scenes is not always “create profit”, it is often “minimise losses” and the only way to do that is by selling cars, which is of course where you, the customer comes in. If you're a bargain hunter chasing a great deal, then there's no shame in setting yourself a strong target in your pricing goals, but in order to maximise your chances of getting the deal across the line, you will need to be prepared to pull the trigger on the spot, the only detail that really matters to the dealership and the single greatest bargain chip that a customer holds.
As for those who don't see themselves as negotiating hotshots, but still want to make sure they're getting a reasonable discount? Keep your eyes on the various sales websites and look for 'in stock' vehicles that a dealership is keen to move on. Familiarise yourself with the retail pricing of the car you're after and you'll quickly spot the sharp deals on offer. Is there a better method to it all, or a way to make sure you're getting the “best” deal? At the moment, not really. You'll never know with absolute certainty if you could have sliced some extra dollars off the price, or if someone else walked away with a cheaper car somewhere else and unless there is a major shift in the way the process of buying and selling is handled, I can't see this being possible. But could things be changed someday? Quite possibly, with the best example being the way newcomers Tesla have chosen to distribute and sell their product, with the customer purchasing directly from the manufacturer at a fixed, no-haggle price. Is it the way of the future? There might be some creases to iron out before it becomes a mainstream process, but it's a scenario I am most certainly in favour of… but we’ll save all that for another time.
Let's start a Car Conversation, what sort of differences between expectation and reality have you found during your car buying experiences?