How Dealerships Sell Cars and Make More Money

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If you’ve ever wondered how car dealerships sell cars and make as much money as they can from every sale, you probably won’t be too surprised to hear there are tried and tested methods they employ. I’m not talking here about sharp practices, lying, or cheating; just longstanding techniques that are put together to form a car dealership sales process.

Every car dealership or dealership group will use its own version of a sales process but almost all of them are based around an old system called Pendle. The process is something like a pre-planned script, but it’s more about the actual steps and the order of those steps than any specific words or phrases.

Most dealers don’t make anything like as much profit on the sale of a new car as you might think. The big profits usually come from arranging financing, add-ons, and making money reselling your trade-in. 

A dealer can make ten times as much through the finance commission as they do on the sale of a new car, and the sales process is designed to maximize those add-on profits. However, to sell the add-ons they have to sell you a car first, and the sales process is how they go about doing just that.

By reading this article and learning how dealerships try to manipulate the situation to get you to buy from them, you can then turn the tables on them, get a better deal for yourself, and end up buying only what you want rather than what they want you to buy.

The steps of the car dealership sales process used to sell cars and make as much as possible from each sale will look something like this:

  • Meet and greet
  • Rapport building
  • Orientation
  • Qualifying
  • Part-ex appraisal
  • Test drive
  • Trial close
  • Deal presentation
  • Negotiation
  • Objection handling
  • Assumptive close (If I can then will you?)
  • Second facing
  • Close
  • BM introduction

1. Meet and greet

There’s nothing too underhand or subversive about the meet-and-greet stage. This is really just about being polite and welcoming and making you feel at ease and that you’re in the right place to buy a car. On the other hand, this is also the point where that particular salesperson stakes their claim to you as a customer, and to any commission that results from a successful sale.

2. Rapport building

Rapport building is designed to move the relationship between you and the salesperson to the next level. It’s still about relaxing you and making you feel at ease, and that’s good because buying a car and negotiating a deal can be pretty stressful and daunting for some people.

Don’t be fooled though. This is also about getting to know you, finding common ground, and for the sales exec to find out about things they probably wouldn’t go through when collecting your personal details.

Some things you might talk about at this stage could be stored at the back of the salesperson’s mind to be used later, such as whether you have children or dogs, how many you might have of either or both, and what sort of hobbies and interests you might have.

For example: if you say you play golf, the sales exec will know you’ll need a vehicle with a large trunk to fit a set or two of clubs in. They’ll also know that you probably have a decent amount of disposable income as playing golf and being a member of a golf club isn’t usually cheap, and it also marks you out as being of a certain social demographic.

Likewise: if you say you are into lake fishing and you have your own boat, the salesperson will know that towing capability and four-wheel-drive are probably going to be important factors in your buying decision.

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3. Orientation

Orientation is where the salesperson tells you how things are going to progress. Basically, they’re telling you how things are going to go, in what order they are going to happen, and that they are in control of the next couple of hours. In some ways, this is a good thing as it makes the customer aware of what’s going to happen, and it makes it clear that you buying a vehicle is not going to be a five-minute endeavor.

ADVICE: If you don’t have a couple of hours to spend going through the motions, this is the point where you need to speak up. You may just be a casual enquirer looking to see what the latest models are like, and you may have no intention of buying on the day whatsoever. If you don’t have the time to spend going through the whole process or you just don’t want to, this is the time to make it clear.

4.  Qualifying

Qualifying is nothing to do with if you can get finance or not. This is the part where you will be quizzed for vital information the sales executive needs to know, as well as information they want to know about you.

The basic info they’re going to ask you for is fair enough. They will want to know your name, address, phone number, email address, etc. If you’re going to be test-driving a car they have to know this stuff, and they may also ask to see your driving license too.

You will also be asked if you have a trade-in, and if you do have one, the sales exec will ask for basic details. This will include things like what brand it is, what model, what year it is, and how many miles it’s done. They will also ask you about your service history and if you’ve ever been involved in an accident in the vehicle.

Buyers shouldn’t be concerned about any of what I’ve just mentioned they will ask you, but we then come to stuff you may not be so comfortable with. You may now be asked if you have a budget in mind, how long you intend to keep your next vehicle, what features are important to you, when you want to be in your new vehicle, and plenty more.

ADVICE: You don’t have to answer the questions in that last paragraph if you don’t want to. On one hand, it’s helping the sales exec tailor a deal to suit your needs, but on the other hand, it’s also giving a lot away. Kindly decline those questions at this point if you prefer, but don’t be shy about telling the salesperson if you have finance outstanding on your trade-in.

5. Trade-in appraisal

This section will take less time if you’ve already given as much information as possible about your trade to the salesperson during the qualifying section. But even if you’ve been very comprehensive in supplying information about your trade-in, the sales exec will still need to go out and see it for themself. If they are doing their job properly the sales exec should also want to drive your trade-in, but plenty won’t. Some sales execs can be pretty lazy, so it might tell you they’re more bothered about getting to the juicy parts of the process.

Be prepared. You’ll now be subjected to the “silent walk around.” This is where the sales exec will walk all the way around your vehicle touching things, pointing to things, rubbing things, and writing things down. This is designed to subtly (or not-so-subtly) point out to you all the faults with your trade-in and to lower your expectations when it comes to the valuation.

ADVICE: Make sure your trade-in is in the best shape it can be. Check out my article about how to prepare your vehicle for sale here for details on how to present your trade-in so that you’ll get the best price possible.

6. Test drive

There’s more to a test drive than you may think, and you don’t have to take one if you don’t want to. I’ve had plenty of customers who weren’t comfortable driving a car for the first time with a stranger sitting beside them, so decline a test drive if you really don’t want one.

I’ve written an article all about whether you actually need to take a test drive or not that you can check out here, but keep it in mind that the salesperson will be under considerable pressure from their superiors to get you out on a test drive.

Dealers want you to take a test drive because it offers them the opportunity of getting you into a captive selling environment. It allows them the chance to point out all the great things about the new car, and how it’s so much better than what you have now. It also gives the sales manager time while you’re out on the test drive to get a price for your trade-in and to put a deal together based on the information you’ve given up to this point.

7. Trial close

When the test drive is over you’ll be asked what you think and if you like the car. If you did, and if the salesperson has had generally positive responses from you during the drive, they’ll try a trial close on you.

This will be along the lines of, “So, if we can get the numbers right, is this the car for you?” I know, it’s cheesy, but they’ll ask you something along those lines. It probably doesn’t matter what you say at this point. You will now be moved onto the next section – unless you say you hated it and you’re going to stick with what you already have – of course.

8. Deal presentation

Once the test drive is over and you’re sitting back down with a coffee in the comfort of the dealership, you’re now at the point where the sales exec will roll out the company’s first offer. Under no circumstances whatsoever should you look at the deal and say yes at this point. This is an opening offer, and although they will hope you’ll accept it, no dealer is really expecting you to accept it.  

In many cases, this will also be what they’d call a “stacked deal.” That doesn’t mean it’s stacked against you – although it probably will be – it does mean it could include a load of stuff you might not want. It could include paint protection, fabric protection, alloy wheel insurance, GAP insurance, and who knows what else?

If you don’t want any of these additional products, then get them stripped out right here and now. Even if you are interested, you’ll get them for a lower price offer when you get to step 13.

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The first deal presented will also have your trade-in value at the lowest amount (or lower) the dealer thinks they can get away with, it will have the very minimum discount on the vehicle you’re looking to buy, and the finance rate will be the highest they think they dare set it at.

ADVICE: The trade-in price, the price of the new vehicle and the finance rate are all up for negotiation. Keep in mind that it’s a balancing act though. The dealer will have a certain amount of profit built into that initial offer, and that’s their room for negotiation. If you say it’s the trade-in price you’re not happy with, they may use some of the profit in the vehicle they’re selling you to bolster the price they’re giving you for your trade. If you get them to move massively in one area it will reduce the amount of leeway they have in other areas.

9. Negotiation

If you’ve followed the advice I’ve given elsewhere on this website, you’ll have gone into the dealership with a budget in mind and you’ll know where you need to be to do a deal. You’ll have a good idea about how much you should be paying for the new car, you’ll know what the ballpark figure is for your trade-in to a dealership, and you’ll know what a competitive finance deal looks like.

When you visit a dealership with all that information with you, it might be tempting to try and cut to the chase and try to get straight to those numbers and cut out the nonsense. That’s not going to work unless you say those are the numbers you’ll do a deal out and stick to it, and you walk out of they don’t play ball.

A lot of going backward and forwards is expected at this point, and it could be better to play along for a while.

ADVICE: Play a dealer at their own game. They have come at you with a deal that’s way better for them than they expect to end up with, so you should do the same. Counter them with your own offer that’s better than you think is realistic for you to achieve. Ask for a bit more than your trade-in is worth, tell them you want the new vehicle for less than you know is the average selling price, and try for an interest-free finance deal. You won’t get all of that, of course, but it then gives you room to move too. It’s all a big game, and it doesn’t hurt to play along.

10. Objection handling

Any objections you come up with about the deal and for not buying the car won’t be new to the sales executive. Remember, you do this once every few years, but they do it several times every day of their working life.

Don’t feed them a line of BS. If you don’t like the vehicle, tell them. If you don’t like the colors they have available, tell them. Don’t tell them you want to “go away and think about it.” That just tells them there’s an objection to be overcome that you haven’t divulged yet. If you want to be taken seriously and treated with respect – be honest with them, and use it to your advantage.

If the only one they have is blue but you want green, tell them you’re not keen on blue. In fact, tell them that even if you’re ok with blue. Dealers are keen to sell the model they have in stock, but they can get others from the manufacturer or do swaps with other dealers if they have to. And if they’re really keen to sell you the one they have in stock, they’ll also be prepared to move on price more than if they had to incur the extra costs of bringing another in from somewhere else.

11. Assumptive Close

Ok, so you’ve put a counteroffer on the table, it’s been rejected and countered with another offer from the dealership, and now you’ve made another offer. This dance may have even gone on longer than that at this point, but the dealer has finally come to the table with something that looks pretty close to where they think you really want to be. At this point, the sales exec will try an assumptive close.

They know they’re close to a deal. They can see it in your eyes. You’ve made your latest counter-offer and the salesperson knows the boss is close to where they need to be with your latest figures. Before they head off into the back to get a yes or no, they need some commitment from you to get the sales manager to sign-off on the deal.

A sales manager will ask the sales exec if their customer will agree to this particular deal they’ve brought to them. The sales exec is now selling to the sales manager instead of to you. If you’ve positively told the salesperson that you’ll deal at those numbers, and the deal still makes a decent profit, the sales manager is likely to agree, but only knowing you’ve already effectively said yes yourself.

To get this commitment from you before they go to sell the deal to their boss, the sales exec will ask something along the lines of, “If I can get my manager to say yes to these figures, are you going to buy the car today?” If you don’t give an affirmative answer, there’s no point in the sales exec going back to their boss, and they’ll return again to step 10, the objection handling.

12. Second facing

If you’re proving to be a tough negotiator – which I hope you will be – you’re then likely to get a second facing. This is where the sales manager or some other person more senior than the salesperson you’ve been dealing with comes to see you. This may seem like a good sign that they’re weakening and coming round towards agreeing to your (potentially) excessive demands but don’t count on it.

It could well be that the sales exec thinks you just need that little extra push, and the more senior person will have the authority to agree to something they may not be able to agree to. It could be that the sales team thinks you’re nearly there, and this is where you get that little bit extra to sweeten the deal even further.

Don’t take it for granted though. Many dealerships will have a strict policy that a customer doesn’t get to walk out before they’ve been “second-faced” by someone senior to make sure the sales exec has done all they can – and that the sales exec has done their job properly. You may be about to get the final deal, but if you’ve pushed things too far – to the point where there’s nothing left in the deal for the dealership – you may be about to walk out empty-handed.

ADVICE: Once again, if you’ve done your research you can avoid an embarrassing failure to get a good deal or an even more embarrassing climb down at the last minute. Know what a good deal looks like for the vehicle you’re interested in, and you’ll know when to say yes or to walk away for real.

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13. The Close

The negotiating is done, you haven’t walked out, and they haven’t told you to leave either. The sales exec (or the more senior person) will now ask you outright if you agree to the deal. This is what’s called the close. Don’t underestimate what a monumental moment this is for a salesperson.

Even though they’ve got you to the point where it seems as though all is agreed, some sales execs can find it hard to ask this most important of questions.

If you were never prepared to say yes at this point, you probably shouldn’t have even allowed the dealership to get to stage 3 of this sales process in the first place. The most powerful factor you have for getting a great deal is going into a dealership knowing you are there to buy from them, but only if you are offered the right deal.

You might think this is the end of things, but it isn’t. There’s one more step to navigate, and this can be a big one if you’re not prepared.

14. BM introduction

It doesn’t matter whether you’ve already agreed to the dealership’s finance or whether you’re paying cash, you’ll still be introduced to the Business Manager, or Finance manager as they might be known. You might be told they are the one who is authorized to take your deposit, but that’s just another way of getting you in to see them.

This is the person who deals with finance and insurance products. If you’ve rejected all those items that were stacked into the initial offer, this person will now try and convince you to change your mind about them. If you’ve insisted you’re paying cash, this is where they’ll do a “cash conversion presentation,” which is a convincing argument for why it’s better to use finance than to pay cash for a depreciating asset.

Of course, if you’ve agreed to the finance, the BM will mostly be interested in getting you proposed to the finance company and signed up correctly. Along with still trying to change your mind about the insurance products you’ve already said no to, of course.