What's The Catch?

I was reminded again today of one of the paradoxes of retail automobile sales and it is this: most customers claim to hate the old school way of negotiating the price and wish dealers would instead take a simple, full disclosure sales approach. And yet, when dealers grant this wish customers often retreat because they think they are now paying too much!

The traditional approach to retailing a car goes like this; the salesman says “The price is $ X. Shall I draw up the paperwork?” Then the customer says, “Well no, you have to come off that a little bit.” (Or “No, you have to come off of that a lot” or “No, I’m willing pay $ Y and not a penny more” or something like that). The salesman then marches to the sales office and tells the manager the customer wants a discount or tells him what the customer wants to pay. The manager counteroffers and the salesman takes that new number back to the customer. The customer then either agrees with the new number or says “No” at which point the salesman trudges back to the sales office for a new counter offer, repeating this back-and-forth process as many times as necessary until either the parties agree to a price or the customer goes home without a new car.

Now, when you read the paragraph above the procedure looks very nonthreatening, doesn’t it? It’s a simple back-and-forth negotiation and not hard to understand. So why does it fill people with such dread?

We know the answer: it fills them with dread because they (the customers) know going in that they do not possess the knowledge that would put them on equal footing with the salesman. They don’t know what their trade-in is really worth (wholesale), and they don’t know the fair market retail price of the car they are trying to buy. Even though much of this info IS available to the consumer who wants to research in advance of his/her visit to the dealership, most do not do this homework. And many who have done the homework misunderstand the info and therefore come into the dealership with flawed expectations of what should take place.

One much trumpeted solution is for dealers to be liberal with their knowledge and information. We’ve all seen the slogan for Syms stores, “An educated consumer is our best customer.” Well, why can’t car dealers apply this same approach to car sales? The answer is they can; indeed, I sell this way and have for more than 10 years. But for some people full disclosure turns out to be not enough. No matter how much info the dealers gives them, and no matter how many invoices or interest rate charts he shows them, these people still have mistrust.

Since the customer in this example doesn’t possess the knowledge of the salesman, there is no way for him/her to know where the truth really lies. No matter how transparent the sales process, no matter how liberal the salesman is with info, this customer is convinced that there must be a catch! “Is that the real invoice he is showing me?” “Is he telling me the truth about my trade-in?” “Is he making a gazillion dollar profit off of me?” “Oh no,” they think, “I can’t figure out the catch – then (gasp) maybe that IS the catch? I’m in a trap!” The result of this downward spiraling logic? Paranoia.

Back when I sold new homes we had a sales trainer who taught us “Remember, the day the customers first walk into your model home they are not looking for a house. They are looking for a salesperson who understands them.” Because once they sense that the salesperson genuinely cares about helping them they can let down their guard and enter to a bond of trust. Then, and only then, can they begin picking out a house. Or, in today’s example, a car.

So my advice to customers? Relax. Then find a salesperson whom you trust. The car part will take care of itself.