Almost all car salespeople and sales managers are paid a percent of the profit on the cars they sell. The average percent paid to the salesperson is 30%; he makes $60 on a $200 profit and he makes $1,200 on a $4,000 profit. The profit per car for the average car salesperson in a month varies greatly and can range from as low as $100 (or less) to as much as $10,000 (or more)… even on the identical car! A car salesperson’s success depends on how high a price he can sell you the car, so each deal is different and depends on the dynamic between the salesperson and the customer.
All of this is because of the antiquated system of selling cars, a system that was derived from nineteenth century horse-trading. Back in the day, horse-buyers were far better at negotiating a price fair than car-buyers today. Most people couldn’t afford a horse, and those that could were far better prepared and equipped to negotiate.
These days, some car buyers are very shrewd, savvy negotiators and can hold their own with any car salesman. However, many car buyers are not as well prepared. Young, first time car buyers might not be so shrewd. Buyers whose first language isn’t English can have problems. The elderly, especially widows, are often victimized by car salesmen. The shrewd negotiator can actually buy the exact same car from the same dealer and salesman on the same day for thousands less than the elderly widow.
One of the most important things you can do to prevent paying a much larger profit for the same car than the next customer is to compare prices with different dealers for the EXACT SAME YEAR-MAKE-MODEL with the exact same accessories and exact same MSRP. Remember to use the MSRP, the manufacturer’s suggested retail price and not the dealers price often displayed next to the MSRP sticker.
It can be difficult to get a firm price from a car dealer, but I’ve found a method from my hundreds of mystery shopping reports that works every time. Tell the dealer that you are financing through your credit union or bank, and they require an official signed buyer’s order from the dealership before they will give you the check made out to the dealer. Take that buyer’s order to at least two other car dealers of the same make and ask them to beat that bottom line price. You can also compare that price to the TrueCar price at www.TrueCar.com and the Costco Auto Buying program at www.CostcoAuto.com.
One word of warning is DO NOT VARY FROM THE EXACT CAR YOU SELECTED when you compare prices. Each car dealer you visit will do and say anything to persuade you to choose a different car. The dealer knows that his hands are tied and he must cut his profits if he gives you his best price on the car you’ve selected. He may tell you another car is better, cheaper, or that the car you selected is not available. Persist and get at least three prices on the car you decide on.