Monday, August 08, 2022

Auto Sales Commissions: The Root of all Evil





Of course, the real quote from the Bible, Timothy 6:10, is “The love of money is the root of all evil”. If you don’t already know this, almost all car salespeople are compensated, almost totally, by a percentage of how much profit they make when they sell you a car. The average commission is about 25%. Virtually all car dealers are marking their cars up thousands above MSRP. With the average profit made on a car today being over $5,000, a salesperson earns about $1,250 for each car he sells. An average car salesman sells about 10 cars per month and a good car salesman will sell about 20. They’re earning $12,500 to $25,000 monthly.
As you know, auto sales dealerships are the only retail companies that allow their products’ markups to be determined by the salespeople. The upper management and owners of all other retail companies set the prices of their products to their customers. A car salesman is compensated and motivated to mark up the profit margin on the car he sells you “as much as he can get away with”. On any given day, the exact same MSRP, year-make-model car is sold at widely varying markups to different buyers. The shrewd, experienced negotiator-buyer might buy a new car close to MSRP, but a more gullible, inexperienced buyer could buy $10,000+ above MSRP. In today’s uniquely low supply, high demand automotive environment, car salespeople and dealers are making more money when they sell you a car than ever before in auto-retail history, about 100 years!

It's unethical, immoral and it should be illegal to sell the same product to every buyer at a different price determined by the buyer’s gullibility and inexperience. This is usually correlated to a buyers’ age, education, sophistication, and comprehension of the English language. Our civil rights laws protect certain classes of people against various kinds of discrimination. Interest rates on car loans are even covered by these laws; Why aren’t they also protected against outrageous markups on cars that are sold to others at much lower prices?
 
A car dealer that allows his salespeople to mark up each car he sells as high as he can get away with is guilty of discrimination, pure and simple. This needs to be codified into law by our lawmakers and enforced by our regulators. Ironically, our lawmakers and regulators are members of the privileged class that gets the lowest prices. In fact, one could make the argument that the unrealistically lower prices they’re able to command, may even cause other buyers to pay more. What kind of a “deal” do you think a governor, senator, or congressman gets when he or she buys a car, compared to your price? How about an Attorney General or the head of the County Office of Consumer Affairs?

All car dealers should be required by law to post the out-the-door price on every car they sell and sell every car to every customer at that price. The legal definition of the out-the-door price should be “a price with no added charges except government fees (sales tax and license plate). The governor of the state or the President of the United States should have to pay the same out-the-door price as you and me.

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