It’s about 1630 hours and we’d been there for about two hours or so getting our steps in on the very hot and not so shady lots and looking at the various vehicles on offer.
Keep that time in mind as the dealership’s official closing time for the showroom on a Sunday is 1800.
We’ve found the vehicle we’re looking to negotiate a deal, we’ve got the numbers we’re going to use and now it’s time to really start talking turkey with the salesperson.
Annnnnnd…that salesperson is not going to be the same poor guy we’ve been dragging all over the dealer’s lot all the way near the main highway that’s kind of hell and gone from the showroom.
TIP: don’t freak out if your salesperson changes during the negotiations. In fact, it’d be somewhat shocking if you’re not tag-teamed by a salesperson, their manager, and probably a few others depending on how the negotiations are going from their point of view. It’s part of the psychological operations in play to unsettle you. Don’t let them succeed! They can bring in a small army and it doesn’t make any difference to who is in control of the process and who can walk away…both of which is us!
Taking the place of our friend who was likely grateful to head to the water cooler after all of the vendor Olympics is this rather tall and thin gentlemen who looks like he’d give Kareem Abdul Jabbar a run for his money on the basketball court. I’m sure it wouldn’t surprise you that we’d learn he does coach basketball during one of the periods of “small talk” whilst they were digesting the numbers we were giving them.
After the brief niceties are over where I’m sure he’s wondering why in the world I’m at that table (he’s about to find out…heh heh heh!), he brings out his file and right on the top of the pile is a printed version of THE MENU and the first thing he asks is what payment Ben and Jessica have in mind.
TIP: you’ll see THE MENU at some point but usually it’s in the finance office which is the NEXT step in the process just as any discussions of payments or financing.
Does that sound somewhat familiar?
If so, it should because all THE MENU is when you get right down to it is another version of the FOUR SQUARE I was talking about in Part 2…but on steroids. The monthly payment square is the only one that changes and our newest friend and pal is wanting to know how much of Ben and Jessica’s money he has to play with.
Ben and Jessica knew this was a question we weren’t going to answer for anyone on the sales side of the fence (briefings beforehand are fun and useful!) and I stepped in and kindly reminded him that he hadn’t actually sold a car and thus talking about payments or financing without an agreed deal in place was premature at this juncture.
TIP: if you haven’t agreed an out-the-door price on your new vehicle, nothing else is relevant until you do!
That caught him a bit off-guard as we’d just blew his planned script and sales patter right out of the water.
Car salespeople hate when you do that!
After a couple of minutes where he’s trying to figure out how he’s going to proceed, he buggers off to the sales manager’s bullpen where they could prepare the first offer from the dealer’s side.
He’s going to make that trip a few times and I can guarantee you that very little of the discussion back there out of your sight will have much if anything to do with the actual deal being negotiated.
A few minutes later, he comes back with this initial salvo from the sales manager fish bowl office:
Remember when you were a kid and your parents asked you to make up a wish list for Father Christmas? I’d be awfully surprised if that list merely consisted of the things you’d actually like and nothing more. The vast majority of said lists are generally an exercise in “pitching for as much as you think you can get away with” knowing that anything between getting coal in the stockings and switches under the tree and the full list is a huge win for YOU.
The first offer from the dealer is going to be a variation on the theme…they’re going to pitch for as much as they think they can get away with!
After all, why wouldn’t they? If the buyer is so stupid as to take that offer and go “yeah, OK…looks good!”, then they really deserve what’s coming to them of which this will be only the first half of the reaming before the finance office makes a real pig’s breakfast of the deal.
How do we know this is a “Manufacturer’s Suggested Retail Price” (MSRP) offer?
The most important line on this sheet will be the one for “Adjusted Price”…ignore anything that comes below that particular line item because it’s not at all relevant to what we’re trying to accomplish which is getting the lowest possible “out-the-door” price.
Let’s look back at the notes, shall we?
The dealer is only $105 below the price I picked as my “walk-away” price that I’d established using the range of comparable vehicle “out-the-door” prices in the middle of the page!
What made it a bit more hilarious was the additional layers of BS that the salesperson tried to use to sell us on how good this offer was…
“I’ve never seen the manager mark down a car this much but you seemed to be in a hurry to get to the best deal.”
I never once mentioned being in a hurry the entire time I was at the dealership.
If anything, I was prepared for the process to take 4-6 hours or more!
The only sense of urgency was on the part of the salesperson and his manager to make the deal quickly so they could leave before the doors closed at 1800 hours and they misinterpreted my complete lack of interest in negotiating on the basis of the potential payment with THE MENU he brought with him the first time as being in a rush to get to a deal.
TIP: great deals are like a gourmet meal and a wonderful wine. You shouldn’t rush a great meal so why rush for a not-so-great deal?
The sales person also seemed somewhat surprised that I would have some notes and a counter-offer for him to take back to the fish bowl after conferring with Ben and Jessica.
I can only ascribe that to wishful thinking on his part!
So whilst we had a bit of time to ourselves, this is the one instance where I had a little bit of doubt as to what I was going to counter-propose. If you look at the bit below the comparable sales, you can see some numbers with some arrows which is how I expected the back and forth to go until we got to the area of my target number that I’d circled after the last arrow.
My choices were:
- Be super-aggressive and pitch $20,000 “out-the-door”.
- Save at least one back-and-forth trip to the fish bowl and offer $21,000 “out-the-door”.
I was perfectly fine with either of the offers and it just depended on how aggressive they wanted me to be.
I wasn’t worried about us getting tossed out on our kiesters if I’d offered $20,000…it was aggressive but it wasn’t so much so to be completely insulting and not worthy of a “yeah, right..I can’t possibly make that number happen” response.
On the other hand, $21,000 reflects the fact that I was kind of surprised he put out a bigger than expected initial discount off of MSRP (even though it wasn’t amazing compared to the comparable sales) and even though I was aiming for a bigger saving before I was done negotiating, $21,000 signals that I’m not being an unreasonable ass and that there’s a number to be had if the dealer comes my way far enough.
This is the sort of thing that makes haggling far more of an art than a science and how well you can read people and the situation. There’s no real wrong answer here and sometimes your tactic will work and sometimes it won’t.
The worst that can happen is they think you’re not dealing seriously and tell you to take a hike. Other than a bit of time, you’re no worse off than when you started and it gives you time to read the market a little more and come to a better deal down the road.
We ended up calling over our friendly salesperson and submitted the counter-offer of $21,000 “out-the-door” or “Net Price” on their form.
Always keep in mind though that even though the offers to the dealer are “out-the-door”, my eye is always going to be on the “Adjusted Price” number. That’s the one I’m looking to push as far below my price point as I possibly can.
At this point as we’re pushing the form back across the table, the salesperson decided that we were a bit low on the amount of BS that had been expended so far and figured that we needed a bit more.
It seems that they really can’t keep from spreading the manure when there’s an opportunity to do so.
When he saw the number I was sending back with him, he tried the good ol’ “look, I’m on your side and I’m going to fight to get the best deal possible for you”.
OK…we’re not buying that but whatever makes you feel better, fella! 🙂
But then he went for the full pile of stinkage when he likened himself to being our attorney and us being his clients.
I was looking out of the corner of my eye at Ben and Jessica and her head snapped round quickly with an expression on her face that clearly indicated she’d just gotten a whiff of the pungent odour of freshly laid super-high quality weapons-grade bull poo that was so dank that even she was shocked by it.
It’s all I could do to keep myself from falling on the floor laughing my ass off at the absurdity of his statement!
After he took off for the fish bowl and conversation about the weather or sport, we had a bit of a laugh at that notion…after all, there certainly was a fiduciary relationship in play but it sure as hell wasn’t with them. Right idea, half right on the actual participants!
They sat on our counter-offer a bit longer than expected which I ascribe to trying to bring us their new offer right about the time they’re locking the showroom doors to try to add some psychological time pressure to encourage us to make a deal faster.
TIP: if they want the deal, they’ll stay as long as it takes to get the signature (within reason…they’re not staying until midnight if they think you’re obviously screwing around with them!)
That lower-than-they-wanted counter-offer earned us a visit with the dealer’s next offer from the sales manager himself and he came bearing an extra gift in the form of the “dealer invoice” to try to sell us on their proposed “out-the-door” price of $23,581.22.
That potential profit of $134.56 (the difference between their “Net Price” and the “Total SRP” on the invoice) appears to be rather dire for the dealership but as in everything in this process, a bit of context really helps explain what’s really happening here and why dealers can appear to be selling the car at a loss and yet still seem to be making money hand over fist!
The majority of the profits will come in the finance office but there are plenty to be had here!
I’ll confess that the highlighted bit is the first time I’ve *EVER* seen a dealer’s invoice actually call out and admit the various holdbacks and incentives that the dealer is retaining on this car with the amount they’re admitting to being $1,079.79. So the real dealer’s invoice number is at least that much lower than the total dealer’s SRP on the paper which comes to $22,366.87 or $1,214.35 in profit.
Most salespeople or sales managers will never even admit that those holdbacks and incentives exist!
But wait, there’s more and that’s why I asked the sales manager point blank “which invoice is this?”
That one kind of flustered him until he could mumble something along the lines of this being the only invoice he has.
Au contraire, mon frère!
Does he seriously want me to think that one of the largest dealer networks in the country paid anywhere close to that number on the “invoice”? A dealer network so large that they can dictate what price they want to pay and the manufacturers will gladly supply them with the inventory for their lots?
Now, if he’d like to show us the actual payment in the accounting system for this particular VIN…then he’d have an invoice number that is truly meaningful.
Good luck ever seeing that number escape their computer or their lips! In over 40 years of negotiating car deals, I’ve yet to have any dealer admit the true number they paid as opposed to the dummied up invoices that are like props in a car negotiation!
TIP: the dealer’s invoice looks impressive and is designed to make you think the dealer is losing money on the deal. They’re not losing money no matter what they show you. It’s just another layer of puffery and BS that is meaningless and should not affect your negotiations whatsoever!
We send our friendly sales manager on his way so that we can confer a bit more about the offer from the dealer.
I think there’s still more to be extracted from the dealer and I’m more than happy to do just that! We’re only $471.65 from my target real price so I’m going to go after as much of their “Dealer Admin Fee” as I can get away with our next counter-offer of $23,000 “out-the-door”.
That number was chosen to look like I’m playing with their “Net Price” but I’m still moving the “Adjusted Price” in the direction I want it to go which is the only number I care about!
Our salesperson comes back to receive this offer and the conversation takes a bit of an interesting side street when I point out to him that the only numbers on that form that are not negotiable are the taxes and title/registration fees imposed by the State of North Carolina.
He actually tries to claim that the dealer is required to charge the “Dealer Admin Fee” fee to every customer by law.
Oh, really? That’s news to me though this is not the first time I’ve heard the “we have to charge everyone the doc fee as it’s not fair for us to charge everyone else but you”.
That may well be your *POLICY* and no one really wants to come off as being not fair or aboveboard but it most certainly is not required to be charged by the law.
This hat-trick of unbelievably smelly bovine faeces is firmly refuted in the North Carolina General Statutes:
(b) Nothing contained in this section or elsewhere under the law of this State shall be deemed to prohibit a dealer from, in the dealer’s discretion, deciding not to charge an administrative, origination, documentary, procurement, or other similar administrative fee or reducing the amount of the fee in certain cases, as the dealer may deem appropriate.
NCGS Chapter 20. Motor Vehicles § 20-101.1. Conspicuous disclosure of dealer administrative fees
Now, there are cases where even that exception might be called into question legally but that’s going to be if the dealer decides to return to the bad old days and consistently charge documentation fees only to certain groups of individuals based on the ethnicity our salesperson and his manager happens to be a member of or to charge only women those extra fees to relieve their purses of the burden of carrying extra cash.
*THAT* would likely run afoul of state and federal anti-discrimination statutes and be a class-action lawsuit just waiting to happen!
This is precisely the reason my whole focus is moving the “Adjusted Price” back to where I want it to be!
I truly do not care if they want to write the deal to include the doc fee “so they can appear to be fair” as long as it appears above the “out-the-door” price I’m offering which is pegged on the “Adjusted Price” I’m negotiating!
They could double that fee on the sales contract for all I care as long as not one penny ends up south of that “out-the-door” price!
This way, their policy is satisfied and I’ve removed enough of that fee to get under my number and make me happy! 🙂
TIP: any price for any line item you see on the deal is negotiable unless the state or the Feds say otherwise or you’ve had the misfortune of finding a car you want at a “no-haggle” dealership which is why negotiating for Nicholas’ Camry was probably my least favourite negotiation ever!