Education and You



Buying a car takes a bit of common sense.

"Today, boys and girls, will be a lesson on the fundamentals of mathematics. Just a refresher course to make sure you absolutely understand simple addition and subtraction. Now, if you turn your books to page twenty-six, there are a couple of word problems. Billy, would you mind reading the excerpt?"
 
"Customer A and B come to E-Z Motors. They bring an advertisement from the local paper for a new truck discounted at $21,995 from $30,000. They want to pay $300 a month for five years. Are they insane or can you find any more money to take from the dealership?"

I hate to bring up the subject of math for the many of you already out of school. I also understand that individuals must have more value for their dollar. But who in their right mind believes a new truck can be valued at $15,000?

I find it amusing on how many clients approach my dealership and attempt to justify that reasoning. Where am I getting my numbers here at $15,000? Simple math, my friend. Customer A wants to pay $300 for five years. $300 x 60 months = $18,000.

"Hold on, wait a minute. You said $15,000... your math is off, my friend." No, I am pretty dead on.

$18,000 is without any down payment, and without any interest (zero percent financing). I'm missing some numbers from the customer to "get to" $300. I'll be nice, using a 9.99% interest rate (with a strong FICO score), and another ten percent for a down payment. $1,500 and $1,500 respectively. Brings me down to $15,000, $300 a month for five years. And that isn't even counting negative equity from your trade in! Many people do not keep cars well into an strong equity position; nearly a quarter of Americans trade in their vehicles with at least $4,400 in negative equity!

"But I don't want to put any money down," or "If you can't get there, then why are you wasting my time?"

Phrases like this aren't very productive. Not for the customer. Not for the dealership. Again, playing the nice guy, a salesman entertains the customer's idea of $300 a month for a $30,000 truck (generously discounted to over $8,000), but there has to be some sort of education when it comes to ridiculous offers like this, and ignorant attitudes.


Be better prepared when you step foot into a dealership

But there has to be some sort of flexibility. A lot of customers come in with the mindset of "Okay, I am going to be firm, and whatever car I am shown, I do not want to pay a penny over $300 a month." A dealership will go out of there way to make the customer happy, but it has to make sense to both parties in any transaction. I should be asking, "Why are you wasting MY time? I could be selling another car to someone who has a real offer for this truck!"

Usually, customers become a little more flexible when you embarrass them with basic math, but there are some customers who honestly believe, after an $8,000 discount, there can be even more to be taken off the car. Profit margins in vehicles are roughly 3%-5% from cost to sticker, and it becomes progressively smaller going from trucks to compact sedans. And that is simply to keep in competition with other dealers.

Thank our imported manufacturers and bringing bare minimum profits.

So, with that said, educate yourself when you step foot on a dealer's lot. Not only through pricing, but even on vehicle knowledge, options, and features. A salesman will thank you. You will be better equipped to handle tougher questions from the sales managers, and you won't be embarrassed.

Simple math. Keep it in mind.