Three decades ago, renowned sales trainer Zig Ziglar walked into a Dallas car dealership to buy a Cadillac DeVille. He was greeted by master car salesman Chuck Bellows. The occasion may represent one of the greatest selling matchups of all time.
As he recalled in his best-selling book, 'Zig Ziglar's Secrets of Closing the Sale,' the pair sparred at length over the value of Ziglar's trade-in and what he would have pay to get his new car. In the end, Ziglar got the price he wanted, but not before dissecting and savoring each of Bellows' perfectly executed selling and closing techniques. Years later, he devoted an entire chapter of his book to his encounter at the car dealership.
Although consumers now have access to pricing and rebate data that no buyer had in the 1970s, few car shoppers have Ziglar's knowledge of the selling process. There is hope, however, for the mere mortals on the buying side of the great sales divide. High-powered sales consultants to new and used car dealers naturally know a great deal about the transactions' flip side. And they can be persuaded to share their insights.
Their advice: Choose a good car dealership. Use your information on invoice pricing as effectively as possible. And pay close attention to the "back end" of the deal where the real money is riding today. Sales consultants recommend, in particular, that buyers shop just as hard for the car dealership as they would for the car or truck. That's what they would be doing when making a purchase if they didn't already know many new and used car dealers first-hand due to their work.
Top 20 Selling Vehicles
Sales data shown is of top 20 selling cars and trucks as compiled by Autodata Corporation.
"I think there are some alternatives that most consumers aren't using," says Mark Rikess, CEO of The Rikess Group, a consulting and training firm in Burbank, Calif. "I would probably check the blogosphere a lot more than most consumers are doing today. There is more and more blogging on dealerships." Many Web searches will find much more than car dealership advertising, he says. "I would see if someone has complained about it or has said it is a great place to do business."
In this early research phase, Rikess also recommends contacting three nearby car dealerships to "see who responds quickly and who is going to be the greatest help. This isn't necessarily about the best price. I would be looking for someone who furnishes me with all the information I want in a timely manner."
Once buyers identify a potential car dealer, Rikess says they should "take control of the process. If consumers have a pretty good idea of what their trade-in is worth and what they should be paying for a vehicle, they should leverage that homework, that research, upfront in the process. I might say, 'Tell me, at a minimum, what the ball park is for this vehicle before we go any further.' And if the car dealership isn't amenable to that, I would probably move on."
Presuming the consumer eventually finds the right new or used car dealer, the deal could play out the way car dealership training and vehicle financing expert Alan Algan bought his BMW Z in 2004. He paid $1,000 below invoice after researching prices and rebates. "The dealership had a couple of vehicles that had been sitting there for six or seven months, and the staff said they would just love to get rid of them," says Algan, who is CEO of the Automotive Dealership Institute in Scottsdale, Ariz.
In this era of low vehicle profit margins, Algan has been able to buy a number of cars for $500 above invoice after he found out that the vehicles enjoyed hefty rebates and had been languishing on dealers' lots. It's true that the wide availability of pricing information has strengthened the buyer's bargaining position. The right car dealership program can save hundreds or thousands of dollars off the invoice.
But consultants point to the large sums still on the table after the parties agree on a price for the vehicle. It may well represent the only potential profit the car dealership sees in the deal. As a result, it will be especially determined to get some of it. The money will stay on the table until they hammer out the value of any trade-in as well as financing, insurance or warranty details.
"There's been a profit shift from the front end to the back end," Algan says. Customers can take precautions so they won't lose ground after their pricing deal. One suggestion is not to venture into the "back end" in the first place.
"If I were going to advise a relative, and I were looking at this strictly from a consumer's point of view, I would say don't finance it at the dealer. Do get a low rate. Don't buy anything from the finance office unless you definitely need it for some good personal reason," says Jeff Bennett, a former Toyota dealer who teaches automotive marketing at Northwood University in Midland, Mich.
He adds, "Sell your car yourself, and sell it before you buy a new car, if possible." But Algan notes that even the best deal can quickly evaporate if the car dealership doesn't have some way of making money. If he were to walk into a car dealership and insist on invoice pricing for a $20,000 car, Algan says, "The sales staff will spend hours and hours trying to get me to move up to maybe $21,000 or $22,000."
If he holds out, the sales manager might give him a chance to buy the car for $20,000, if and only if he agrees to have the car dealership arrange financing. "If I say, 'I have my checkbook with me, and I'd like to write you a check for the whole amount,' he'll say 'I don't think so. Good luck to you.' And he will let me go."
In some situations, automakers are also helping new and used car dealers make money at the back end, Algan says. The alarm system is one example. Vehicles are manufactured with the wiring for an alarm system already installed, he says. But automakers sell the alarm itself separately, for as much as $1,200, and the price is added to the cost of the new vehicle.
If buyers say they are tempted to buy a $300 alarm at a big-box electronics store, the car dealership's staff might gravely warn them that its installation could void the vehicle's warranty if it damaged the on-board computer. Then comes the counter-proposal. If they buy the manufacturer's alarm, its price could be rolled into the financing and cost just an extra $12 or so a month.
"This is legitimate," Algan says. "It's a good product, it's built specifically for the vehicle, it's covered under the warranty, and the dealer makes another $800 or $900 on the alarm system."
Bennett stresses that car dealerships need be profitable, and not just so they can prosper. They need good cash flow to provide good service. Firms operating on a shoestring have a tough time doing that, he notes.
The bottom line for the customer: A single mechanical breakdown far from civilization could easily wipe out the gains from even the most exquisitely negotiated deal. That's another good reason for finding a good car dealership in the first place.