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Negotiating And Increasing Gross Profit - Part One

Do customers negotiate?

Of course you answered Yes. So the real question is how effective at negotiating should a sales person be?

Who Do You Want to Be?

  • Each salesperson in this example delivers 100 vehicles per year and work at the same dealership.

Avg. gross/veh.
@ 100 veh/year
@25% com

They all delivered 100 vehicles but what is the problem? It does not take a rocket scientist to now that Bob does not understand how to negotiate, Sue is average and Paul definitely understands the psychology of negotiating. There is an old saying in the car business and any business that “the customers that pay more are your best and happiest customers for life”. When you think about this saying, it sounds crazy. Why are they the happiest?

Five reasons:
  1. professional service was given,
  2. a positive mental attitude was given,
  3. professional product knowledge was given,
  4. a complete understanding of people’s emotions,
  5. a professional knowledge of how to negotiate

You are not going to make a million dollars off of every customer but if you “give” to everyone you will see any increase in every area of your professional and personal life.

When we start in the car business, one of the first things we learn is get an offer from the customer, write it down, and get a deposit. The reasons a lot of dealerships do this is because they are scared they might lose the customer and a lack of trust in the ability of the salesperson. The best sales people and top grossers have a well thought out strategy on negotiating are not a worry to the sales management. How you present and start your negotiations will determine your gross profit and if the sale is made. Higher gross profit does not mean lower CSI or SSI. It's all a matter of how the customer feels about the negotiations, and not how much we made.

Sales people have two jobs at the dealership; one is helping people find a new vehicle and the second is professional negotiator.

What is the number one reason a person (consumer) will purchase from one dealer or manufacture over another? And the answer is

“the Salesperson.” YOU…

The following are some point, to think about when negotiating.

Darin’s “Not to Do’s” in Negotiations

NEVER ask for an offer at the start of your negotiations.

WHY? Because the customer will always offer a ridiculous number or they will not want to offer anything. Professional negotiators do not ask what you want to pay. They show you a small savings or no savings and then ask you to sign. Then, if the customer does not agree, they professionally negotiate.

NEVER write down the first number the customer says.

WHY? Because if you do, then the customer will think you would not have written it if they were not close to a deal.

Also, you have given them hope and getting them to move up on their number becomes much more difficult. Keep it verbal for as long as you can. Then when you cannot go any further write it down.

NEVER ask for a deposit at the start of your negotiations!

WHY? Because a deposit is only given when the figures / price / payments have been agreed upon. Customers hate when we ask for a deposit at the start of the negotiations. Think about it! We haven’t even agreed on a number yet. “We” meaning the customer and the dealership. You definitely have to get something.

NEVER say what do you have to do to earn your business today!

WHY? Because if you have done your job correctly, you do not have to ask. This has to be one of the most poorly used lines in any sales business. It’s so common that it is being used in movies and TV sitcoms like Jerry Seinfeld

NEVER say I told you I was going to get you a good deal.

WHY? Because they do not believe you and if we end up negotiating further your credibility will decrease.

NEVER ask the customer what kind of mark-up or profit they thinks we have in our vehicles!

WHY? Because the customer will not believe you, no matter what you say. We can even show them the invoice and they will think we doctored it or have two sets of invoices, one for customers and the real invoice.

NEVER tell the customer “My manager must be in a good mood.”

WHY? Because the customer usually will not care. Your authority and credibility as a professional decreases again.

NEVER tell the customer to believe you or trust you!

WHY? Because when it comes to negotiations they do not believe you or possibly trust you. It’s not just our business. It's every sales business. People are tired of it. So don’t say it and just do your job.

NEVER let the customer write on your worksheet.

WHY? Because you are letting them take control and they are now telling you what to do. Would you ask your doctor if you could make some notes on their worksheet? It’s yours not the customer’s.

NEVER tell the customer we are not making any money on the vehicle.

WHY? Because you sound foolish and they will not believe you. Most customers want us to make no money. We sound weak and unprofessional when we talk like this.

NEVER bring your customer into the manager’s office, unless advised.

WHY? Because this closes the door on your negotiations and you will corner the manager who might not be completely prepared. It also lowers your professionalism and authority.

NEVER tell the customer that you are going to lose your job if you take this number to your manager.

WHY? Because the customer does not care if you do. They only care about themselves.

NEVER argue with the customer when negotiating.

WHY? Because professionals are cool under pressure. When you are negotiating, you should only be discussing NUMBERS. It’s all about numbers, so keep focused.

Some Negotiating Points To Follow:

  • To increase gross profit, you have to negotiate from small increments of money, not thousands of dollars.
  • Do not discuss the price or figures with the customer while you are standing in the showroom or the dealership lot.
  • The salesperson or manager should always lead with the price.
  • Never ask the customer for an offer
  • Always portray your numbers as favorable to the customer.
  • If the customer proposes a counter offer, then whatever it is, be surprised (React)
  • At the start of your negotiations, write down the third verbal offer from your customer get it initialed by the customer and get some leverage.
  • Never write down the first or second number the customer says.
  • Always enforce the numbers you have been given by your manager.
  • Remember your job is selecting the right vehicle for your customer.
  • The manager (dealership) approves the transaction.
  • Do not panic during your negotiation, its just one part of your job, get good at it.
  • No one leaves the dealership without the ok of the manager.


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