I spent 3 years working for a car dealership in sales one of them in management, 8 months wholesaling computers and tech services for Compusa in 2004, and I've also helped tons of people with their negotiation issues.

2p2 has been pretty damned good to me- so I figured I should give back by adding value in the area that I'm best at. Ask away!

What's the car salesman business like?

It's strange honestly. You spend an enormous number of hours at work- yet you have a ton of downtime. As a result within a year or so the only people you spend time with are people who you either a) have sex with or b) work with. As a result you end up having a lot of car salesmen as friends. It has a way of completely consuming your social life.

A lot of the perceptions of car salesmen are dead on accurate. A lot of them are petty hustlers who always think they have an angle- but a lot of them are good people who just sell stuff for a living. There is a TON of shady stuff that goes on in a car dealership.

People mostly hate car salesmen because they feel like they're at a massive disadvantage when they haggle for a car- this is true and it isn't. On the one hand they are at a massive skill disadvantage- but structurally they have every advantage imaginable in the negotiation. Anyone who has any idea what they're doing usually rapes the dealership honestly.

What are some of the things that people are overcharged on at dealerships that they don't seem to realize are negotiable?

The biggest stuff people get hit with at dealerships are add ons of various kinds. Dealerships thrive on hidden expenses and it starts at the beginning.

We start out by asking for 1k over the MSRP because of 'paint and fabric protection' or 'undercoating' or 'dealer fee's' or some other bull****. Most but not all dealers do this. None of this is anything but air. Spraying scotchguard on your seats is obv not worth 1k. It's worth pointing out that this doesn't work even 10% of the time- but it works often enough that it's very very profitable.

Next they try to switch the customer to payments. This works on most customers because they think in terms of payments. Essentially if it fits into their budget they're going to be ok with the deal. Once they have you off of the actual price of the vehicle and get you talking about what kinds of payments/down payment you're ok with they can basically max out the deal from their perspective within the limitations of that payment.

Now you move on to finance. In higher end car dealerships this is actually the biggest profit center in the whole place. It's an important thing to realize that being an F&I guy is actually a significantly better job than being a car salesman. Those guys make roughly the same kind of money that the managers do- and they make it far more consistently. They tend to be outstanding salespeople whose job is to sell you all sorts of crap that you could buy in the real world for much much less. They also do everything in their power to get between you and the bank making the loan on the car so they can middle you and take .25-1% out of the middle on the interest rate.

The main products to never ever buy in finance are Credit Life, which might be the single most -EV insurance product ever marketed... And anything else that isn't GAP insurance, a manufacturer extended warranty (that while profitable for the dealer isn't quite as horrible a deal for you), or financing from the manufacturer. It's important to note that you're probably going to have to deal with the dealership to get financing from the car manufacturer- and that financing often is better than what your bank could give you.

A valuable if rarely useable tip is to never ever buy anything from the aftermarket girl if they have one. Most dealerships don't- but mine did. Basically this was an attractive female who would try to sell you a stereo, new tires, better rims, an interior warranty, car washes, all while shamelessly flirting with you. They added 450$ in gross profit to the average deal at my dealership no joke . They were also kind of easy- but that's a story for another day .

Does the dealership always have a fixed price for each model that they will sell at? If you're negotiating with a salesman, does he know exactly how low he can go? Would you use different negotiating techniques for a private seller/smaller garage/ bigger garage. Do you adapt your style of haggling to try and match what will convince the particular person in front of you to lower the price?

No. Dealerships have targets that are set by the manufacturer that if met pay significant amounts of money. This is why you can usually get a better deal on a new car on the last day or two of the month- lots of dealers will be a unit or two short- and they'll do a LOT to get that extra few cars out the door. When it comes to used cars it has a lot to do with the strategy the dealership follows in terms of pricing and what they paid for the car. It also matters how long they've had the vehicle on the lot collecting dust.

I personally adapt my style based on the situation- but that's not something I'd reccomend for people who negotiate 2-3 times per decade. For them I'd suggest just being a huge dick .

What % above dealer cost should you be willing to pay for a new car? Does it vary much by time of year?

Personally it depends on the brand. For luxury cars like you're likely to be shopping I'd be willing to go 1-2% over invoice. For more standard consumer cars like ford, gm, chrysler, honda, toyota, etc I'd be unwilling to pay more than invoice simply because someone WILL whore the car out to me if I try hard enough.

It doesn't really vary by time of year no. You can actually do better than dealer cost if they have quotas that need meeting so it's more about time of month than time of year- that's an important point that bears repeating. You just have to be willing to let go of your very American desire to not 'chisel' people.

I missed this point when I responded to you. The salesman has absolutely no idea if they're doing it right. Telling the salesman is a great way to have the impotent little **** go straight to the customer and say "I could do x" where x is the bottom line minimum price. For some reason most people seem to hate money...

If a house is listed for $150k and you've calculated that it's a good deal if you can get it for $110k, what's a good initial offer?

Is it true that if you make too low of an offer (if you're buying), or ask to high of a price (if you're selling), that you run the risk of the other party not taking you seriously and cutting off future negotiations? How do you determine where to start?

Lastly, how many drops/counter offers are usually made in a typical successful negotiation? So in my original example, would it be best to start at less than I'm willing to pay (say, 90k), so I have room to counter at 100k, and finally accept $110k? Is there a standard formula that professional negotiators follow? Also, what are some tips to finding out what's motivating the other party to sell/buy and how can I use that info to my advantage? Thanks.

I'm a technical person that's starting a client-project based business. Most of our revenue will be decided during face-to-face meetings and I'm very interested in ways to increase my negotiating skills.

What sort of advice would you give to someone that hasn't done a ton of haggling in the past but would like to become decent fairly quickly? Are there any videos or resources available? How important is body language, and how do you find negotiations different over the email or phone?

The best place to start to answer this question is the second part: Usually not. If you make a lowball/highball offer people usually sputter and tell you off. This is a good thing. It allows you to say to them "well what would you take/pay for it then?". This very frequently leads to them dropping their bottom line number.

It's hard to accurately estimate how many drops/offers are usually made as it's very very villain dependent (lol poker terminology- but it really works here). My standard strategy by default is to keep counter offering until they say 'no' or take one of my offers. If they say no and it's a price I'm very happy with sometimes I'll take it outright. If it's NOT something I'm super happy with I'll probably let them stew for 24 hours to 1 week to give them time to cave before calling them and caving myself. This isn't reccomended if you're a motivated seller in a buyers market (IE the car business). In the car business you take a reasonable offer- but make them actually walk out first. If any of you have ever been chased out of the building by a car salesman this is why.

Letting them stew is MUCH MUCH better in RE negotiations because it will take them a much longer time to find another customer/buyer.

The best strat for getting the most information is to give away as little as possible yourself. Talking is very -EV. All you can do is give away information that you probably shouldn't. Just let them talk- awkward silences make people babble and **** up .

Start out with a standardized system that works. It seriously matters... The only problem I see here is that you have to be able to negotiate aggressively without pissing people off- which is a real acquired talent.

It's important to have a clear idea of the price points you want to hit- and hold to your position. If you start regularly undercutting yourself it will get out and negotiations will get exponentially harder.

great thread topic OP, loving it

Thanks

EDIT: Alright I'm going to sleep. I'll answer any/all questions in the morning.

Thanks for the thread sir & really like how your weaving "poker talk" into your reply posts. Got a few questions, but will start with just 2.

(1.)Why are car dealerships constantly hiring & running ads for a dozen or more hires at a time? I guess the obvious reason would be high-turnover, but is there anything to my theory that bringing in new hires generate sales? If I had a car dealership I would hire just about anybody I could get with the hope that they could sell a couple of cars to their family members, friends & friends of friends before they just quit.

(2.) Is the service department more profitable then sales? Are there any good reasons to have your car serviced @ the dealership vs a private garage? I try to never take a car to the dealership for service anymore due to their rates.

I wasn't going to answer any more questions tonight. These questions are simply awesome though and I really want to answer them.

1) Car dealerships have ridiculous turnover rates. There are plenty of reasons for this and I'll go over them.
reason #1) New salespeople sell more cars than slightly less new salespeople. There are really excellent reasons for this- new salespeople are fresh, enthusiastic, they still believe our bull****, and best of all know absolutely nothing. The knowing nothing thing is really great believe it or not... When we lie to them on every single deal about what we can and cannot do they don't catch on and tip off the customers or start working the managers. They don't say stupid things to make themselves sound knowledgeable. They don't reek of scumbag to the customers. They have absolutely no ego... And when they run good they have no idea that they're just running good and give off all kinds of sunshiny vibes because they think it will go on forever. Ironically none of these reasons have anything to do with friends and family. Most car dealerships have a lot of business to attend to- an extra 3-4 customers while nice doesn't do THAT much for the business % wise.

reason #2) New Salespeople will work more hours than slightly less new salespeople. Most people burn out after a month of working 8a-10p M-F and 7:30a-8p on Saturday. Eventually we give people days off- but not until they've lasted at least 3 or so months . This is some serious macho bull**** that is probably counterproductive- but it's what's been done for 50 years.

reason #3) It usually takes people 6 months to a year to return to being as good as a fresh salesperson. People who last this long usually actually do learn something and become effective in their own right instead of just being ******ed puppets. The problem is that people who think they're something more than a ******ed puppet while not knowing nearly enough **** up a lot of deals... So we torture them until they quit or learn something as a new hire will probably be better for business than them anyway . Of course eventually 10% of the people who make it past a year become serious star salespeople. These people make a very very good living. It's not uncommon for them to sell 200-300 cars per year at an average commission of 450$ or so+ at least 60k in bonuses. It's the chance of developing one of these people and the fact that experienced salespeople need much less attention from management that we don't just fire them all after 1-2 months .

2) The service department has a higher % profit margin than sales. That being said it generates a much smaller number. Add to this the fact that the GM's and owners of stores nearly always come from sales and they're looked down on by most of the dealership. I should probably mention that I was the assistant service manager of a honda dealership for 1.5 years. It sucked but mostly because my boss was an idiot. Service is a much longer term universe than sales- the average employee has been there 5+ years. The service advisors who write you up when you come in are salespeople- usually semi successful but not outstanding car salesmen who the dealership doesn't want to work out of a job- but not good enough to bump up to management or finance or good enough to be a career sales star. They make 70k a year roughly though- so it's a pretty good gig.
To answer your question about dealership service there are different perspectives. They're actually a pretty good place to get your car repaired if it breaks. That being said doing things like routine maintenance beyond an oil change is a horrible idea- that's where most of the margin comes from. At my Honda dealership we sold a 60k service for 640$~ and in that was 4.2 hours of labor. We paid that tech 20-30$ an hour for his time, billed the customer 89$ an hour, and the tech was done w/ the work in under an hour . There's a lot of drama in the service department about who gets the gravy routine services .

When it comes to repairs you're usually dealing with people who are very good at their jobs. I wouldn't reccomend letting them do serious transmission or engine work as their parts are super expensive. When it comes to things like annoying diagnostic heavy electric issues though- there's no one better than the dealer.

I forgot to mention the beauty that is the parts department. This varies from dealership to dealership but % wise it's probably the most profitable part of the dealership.

New cars are simply a waste of money, unless a person really really likes "new car smell" or can write off their lease, etc.

Is buying a used car from a dealer also burning money? They play up the angle about certifying the car, etc., but really that isn't anything your local technician can't do for you. Other than having to pay sales tax which in some areas you don't in a private sale, should a person shop for used at the dealer?

Please expand.

Awesome thread. Thanks.

In a couple weeks I'm going to be helping my friend buy a car (probably used); this thread is super helpful, keep it up!

When I worked in the car business the loan bubble was in full swing. As a result we and everyone else did a lot of really questionable things to get car loans taken by banks. I'd rather not go into exactly what I'm talking about- but I had a very easy time predicting that something was very wrong with the US economy and wasn't in stocks when 2008-2009 came because of what I personally had seen.

As for structural advantates possessed by the customer they're powerful and you already experienced them with your mom.

1) If you do your research you have far more information than anyone should have going into a negotiation. You know what we paid for the car (new), what the wholesale book of the car is (used), and you know that we pretty desperately want to sell it to you.

2) I'm repeating myself but we pretty desperately want to sell it to you. If there is anything positive about the deal at all we'll probably take it. This is very very different from most negotiations you'll engage in.

As a result any competent negotiator (see: your mom) will eat the dealershipfor breakfast.

How do you approach a negotiation where you feel you have very little leverage (ie you need to make the deal regardless) but the other party does not know it?

Examples:
-If you make a sale it is 100% profit thus any sale is good
-Getting a raise at a job you don't intend to leave

In my imaginary world I would go around to a few dealerships and tell them that they have one shot to offer me a price on the car and that I either have, or will do the same at other dealerships. The best deal will get my business.

How realistic is this approach? Do you think they'll drop the price almost as low as they can to ensure they get the business or do you think each dealership will give me a midrange price and hope that they end up being the lowest midrange?



My other idea about negotiating is to say, "I have a number written down on a piece of paper stating how much I'd be willing to buy the item for. I want you to write down on a piece of paper stating how much you'd be willing to sell the item for. As long as my number is higher then we'll split the difference. If my number is lower than it's not worth it to either of us and we're done here." I think I like this method where there aren't multiple places to get the same item (like a car dealership), but I'd take your thoughts on the method in general. It seems like everyone should leave happy no matter what, but I also could see it aggravating a lot of people.