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  #1  
Old 08-05-2003, 09:55 AM
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"Selling cars in the USA -- the inside scoop"

The numbers he quotes in the article sound WAY off in the upper ranks (unless someone wants to correct me, Jon? Ted? Adrian? Chris?), and he never said what kind of dealership he worked for, but it was an ok read anyway...

http://www.kuro5hin.org/story/2003/8/4/163150/0581
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  #2  
Old 08-05-2003, 10:06 AM
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Quote:
Originally Posted by alee
The numbers he quotes in the article sound WAY off in the upper ranks (unless someone wants to correct me, Jon? Ted? Adrian? Chris?), and he never said what kind of dealership he worked for, but it was an ok read anyway...

http://www.kuro5hin.org/story/2003/8/4/163150/0581

The numbers in the upper ranks look way off to me too, but I'm in a relatively small dealership (I made more than my sales manager last year).He has the salesman commission percentage very close to reality and I agree that 20% of the sales people in the dealership are responsible for 80% of the sales. I would be interested to see what others have to say about this.




Ted

Last edited by TedW; 08-05-2003 at 10:45 AM.
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  #3  
Old 08-05-2003, 10:13 AM
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Quote:
Originally Posted by TedW
The numbers in the upper ranks look way off to me too, but I'm in a relativily small dealership (I made more than my sales manager last year).He has the salesman commission percentage very close to reality and I agree that 20% of the sales people in the dealership are responsible for 80% of the sales. I would be interested to see what others have to say about this.




Ted

Could you post the text of the article? The page just loads and loads but never displays.
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  #4  
Old 08-05-2003, 10:20 AM
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Quote:
Originally Posted by alee
The numbers he quotes in the article sound WAY off in the upper ranks (unless someone wants to correct me, Jon? Ted? Adrian? Chris?), and he never said what kind of dealership he worked for, but it was an ok read anyway...

http://www.kuro5hin.org/story/2003/8/4/163150/0581
"Top down: General Sales Manager - 1(T&A) - HMFIC. Theoretically in charge of everything, however, like any super-senior manager, this guy can take a VERY hands off approach, or not. Depends on the individual. Also, note that he's in charge of the dealership operations, NOT the business. There is usually an owner, owner's kids, a comptroller, and the usual U.S. corporate B.S. above this guy. GSM's can make from $15,000 to $50,000 per month, and they get a cut from each and every deal the dealership does."

A very accurate assessment, although salary/income is a bit on the
high side...

The other positions look accurate too, but also a tad high.

edit: figures are way high.
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  #5  
Old 08-05-2003, 10:39 AM
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Quote:
Originally Posted by Jon Shafer
edit: figures are way high.
Yeah, that's what I thought. Jon, I didn't know you made $50k a month.
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  #6  
Old 08-05-2003, 10:42 AM
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Quote:
Originally Posted by robg
Could you post the text of the article? The page just loads and loads but never displays.


Here is the text taken from: http://www.kuro5hin.org/story/2003/8/4/163150/0581



Selling cars in the U.S. - the inside scoop (Culture)

By el_guapo
Mon Aug 4th, 2003 at 09:15:17 PM EST

OK, a quick foreword. I am a dyed in the wool tech weenie. Hardcore Cisco jockey. I got whacked from a classic tech company back in January, and I was faced with the very real prospect of being unemployed for a Very Long Time(c). So I thought: "what the hey, I'll sell cars until I can be a professional propeller head again". Boy oh boy, was THAT an experience. Details below.... (Note, I'm detailing 2 very different markets, Arizona and Texas - abbreviated T, A, or T&A



I'm going to answer the most obvious question first: Are car salesmen as slimy as their reputation suggests? Yes. And no. In my short 4-month exposure, I learned that car salesmen represent a very real cross section of humanity. Are there complete dirtbags that will lie and cheat and do whatever they can to get every last penny out of you? Yup. Are there some really decent folks who just want to help you pick out the car that is best for you, and hope they can come out of the transaction earning a little money? Yup. There's probably 10 of the former for every single of the latter.
Part One: Dealership Organization (aka: just how much can these guys make?) From 1.a(top) to 9.z(bottom)

Top down: General Sales Manager - 1(T&A) - HMFIC. Theoretically in charge of everything, however, like any super-senior manager, this guy can take a VERY hands off approach, or not. Depends on the individual. Also, note that he's in charge of the dealership operations, NOT the business. There is usually an owner, owner's kids, a comptroller, and the usual U.S. corporate B.S. above this guy. GSM's can make from $15,000 to $50,000 per month, and they get a cut from each and every deal the dealership does.
Sales Manager - 2.a(T&A) - aka: "Desk Manager", these are the guys your salesman goes to when he says "Let me ask my manager". And, contrary to popular belief, they do NOT walk up there and shoot the breeze pretending to wait for an answer. I have no clue how this rumor started, but think about it: how does wasting your time help anybody? It is in that dealership's best interest (including the salesman) to get your transaction concluded as quickly as possible, so they can get back to the business of selling the next guy a car as quickly as possible. Desk Managers can earn from $10,000 to $20,000 per month, and get a cut from each deal they themselves write.

Finance and Insurance - 2.b(T&A) - The guys in the back that actually sign all the real forms (all of the ones you've signed up until now were complete bull****). These guys have the best job of all, IMHO. Every one of their "customers" has already been completely dealt with, the bad credit folks have already been filtered out (dealerships spend TONS of effort selling cars to people that ultimately turn out to not be able to buy a car), etc. If a customer sits down with an F&I guy, statistically, there's about a 99% chance that they're leaving his office with a new car. F&I guys can make $10,000 to $20,000 per month, and get a cut from each deal they themselves write. Wanna piss off an F&I guy? Pay cash for the car (or finance with your own bank or credit union, the same thing to him) - he will literally get $0 for that deal, effectively working for free.

Assistant Sales Managers - 3.a(A) - aka: Team Lead. Dealerships break their salesmen up into "Teams", which is actually a joke as there is NO teamwork involved. "Teams" are actually a concept created by the dealership for the sole purpose of making scheduling time easier. Turnover is so high that keeping the work schedule up to date with who actually works there would be a monumental task. So they just schedule the teams, and let HR keep the teams staffed. ASM's can earn from $4,000 to $10,000 per month, and get a cut from all of the deals that their team writes. In Arizona, ASM is one of a couple of "first steps" that the dealership can use to promote high producing salesmen after they've "done their time".

Fleet Sales - 3.b(T&A) - Another carrot, after a person has proved themselves "on the floor" (i.e. regular salesmen), they can be moved to fleet sales. The nice thing about fleet sales is that the sales here are almost always done deals. You don't have to work the customer, fact find, select a vehicle, or any of the other onerous things that a salesman taking a cold call has to do. In all probability, it's a repeat customer, they know what they paid for the last vehicle so you don't have to haggle with them, etc etc etc. You're a glorified "form filler-outer". Fleet Sales, like ASM's, can make between $4,000 to $10,000 per month, and get a cut from each deal they write. Fleet guys survive from volume, volume, volume. A really good floor salesman might sell 15 cars a month, a really good fleet guy will move 30.

Internet Sales - 3.c(T&A) - Positionally identical to Fleet Sales and ASM, another "first step" for promoting a good salesman. Another cushy job, too. Again, you have to expend exactly zero effort to find your customers, your website snagged them all. Also, internet customers are usually cut and dried. They know what they want, they know what you paid for it, and they know what they'll pay for it. These deals start out being finished, as it were. Internet Sales can make from $4,000 to $10,000 per month, and get a cut from each deal they write. Like fleet, volume is everything.

Floor Salesman - 4(T&A) - This one is hard to typify. If he's been there a while (say >5 years), this job is cushy in the extreme, as all of your business is repeat. If not (and most aren't), you're as low as low can be at that dealership. A typical new hire new car salesman is going to work from 50 to 90 hours per week, earning 25% of commissionable gross, with a guaranteed minimum of $100.00 per vehicle sold. The vast majority are going to sell between 5 and 15 cars a month, earning between $2,000 and $7,000 per month.

OK, realize those number are averages, I know of a salesman in Texas that sells >20 cars each and every month, and makes something like $180,000.00 per year. Of course, he's at a huge dealership, and he's been there like 12 years. Basically, 20% of the people in a dealership make 80% of the money.

Part Two: Anatomy of a Car Deal(T&A) - Car deals are broken down into two basic parts: The Front End The front end is basically what you paid for the car minus what the dealer paid for the car plus "pack". You can go to www.edmunds.com or www.kbb.com and usually find out exactly what the dealership paid for his new cars. That cost is basically invoice price minus holdback. Invoice is the theoretical dealer cost, and holdback was supposed to be a secret amount that let them sell it at invoice and still make money. Supposedly in the old days, holdback was how that dealership paid it's fair share of national advertising campaigns and whatnot. This isn't the old days anymore, and now that folks have learned about holdback, it's simply a "secret" mark-up now. OK, so WTF is that "Pack"? Pack is a theoretical number that represents what it costs that dealership to sell you a car. If it's a snazzy new dealership, on really expensive land, with a huge advertising budget, it's going to have a large pack. Say $750 per car. Small dealerships may have a Pack more like $250 per car. So, let's analyze that thing that doesn't exist, the typical car deal:

MSRP: $21,000.00 - FYI only, not relevant in this calculation

Price you paid: 20,000.00 minus

Invoice: 18,500.00 minus

Hold Back: $500.00 plus

Pack: $500.00 equals

Front End Commissionable Gross: $1,500.00 times

Commission rate 25% equals

Salesman Commission $375.00

Some quick math reveals that if a salesman moves 15 of these deals a month he makes $5,625.00 per month. Noting that most don't sell 15 per month, and that the above referenced deal would be a wet dream to most car salesmen. IE: almost none make that kind of money. Perhaps you can now see that despite the fact that the car salesman is easily the hardest working guy on the lot, he is also generally the least well paid. What would the salesman make if you weren't a pushover and only paid him $18,500? Well, he earns what is known in the business as a "mini": the smallest commission that dealership will pay. This is usually $100.00, but can vary somewhat. Why would a dealership sell you a car for what that dealership paid for said car? Now we get to one of the last nasty little secrets of the business:

Part Three: The Back End

The Back End is money the dealership makes that most people don't know about; and IMHO is literally theft on their part. Huh? How so? First, think about this, if you and I can go into any bank and get a loan with an interest rate of, say, 5.9% for a new car - and we generate a total of maybe 1 loan every 2-3 years; think about what kind of rate a dealership that generates 300 loans a month can get. If you can get 5.95, then that dealership can realistically get 1.9%, and then sell that loan to you for 5.9%, and they keep every penny of the difference. How is this theft, you say? Well, you are literally the one getting approved at that 1.9% rate. They are literally lying to your face when they tell you that you were approved at 5.9%. Ever wonder why you have to wait 2 entire forevers from the time you agree to buy the car to the time you're actually sitting down in back signing the real papers? I mean, it can't take that long to enter all the information into the computer, right? It's because he's literally pouring over your credit and financials to see what kind of rate he thinks he can stick you with. God help you if your credit was just high enough to get approved. Your "buy" rate (as it's called) will likely be something like 12%-15%, and they're going to tell you that your loan was approved for 22%. No ****.

Oh, and for you smarty-pants that go to your credit union/bank and get preapproved, then go in brandishing the approval form saying "I'll only finance with you if you can match this rate". Hoo boy, they love you!! They only look perturbed (they want you to think you're the ****, after all), but inside they're dancing with joy. They now know the exact amount they can you over on the interest rate. For the people who don't bring in an interest rate, well, the F&I guy just kind of has to feel you out. This is actually kind of dangerous, because if he quotes you a rate that you know is too high, what excuse can he pull out of his ass to justify lowering that rate? "Uhhh, the computer printed the wrong rate"? He certainly can't tell you the truth! "Ha Ha, you got me, I was actually trying to defraud you out of some extra money! Silly me!". The sad thing about this fraud, and I do consider it fraud, is that the banks are part and parcel to it. Screwing you over on the interest rate is one of many ways the F&I guy makes tons of money off of you. He also gets a huge cut of: Credit Life, GAP Insurance, Extended Warranties and those completely bull**** "security stickers" and window etching.

Part Four: Various Sundry Other Ways They Rip You Off

Paint Sealant, fabric protection and under body coating: These are usually bundled together in a "Value Package" (HA!), and the only one that gains value is the dealer. This little gimmick is ed up no matter how you look at it. If they're (pseudo)honest, and it's actually all there you've got a glorified wax job, a $6.00 can of Wal-Mart brand fabric sealer applied by an illegal immigrant making $5.00 and hour, and an under body coating that actually increases the odds that your car will rust. Total value: $25.00, your price? Usually something like $995.00. Never pay for this stuff, not even the $25.00 dealer cost. A)It's not worth it, and B)it's almost NEVER actually there. Yes, they will lie to your face and tell you that stuff is on there when it isn't.

Window etching: this is sometimes rolled into the package above. Never pay for this either. Their cost: $8.00, your cost: usually like $149.00. Why not pay for it, if it's actually on the car? A)It's as worthless as the above package - how many thieves do you know that are going to give the slightest **** that a partial VIN is on the windows? B)You can get a kit yourself for a whopping $19.95. There's probably lower prices than that out there, I'm lazy :P

Accessories: Man oh man oh man. Accessories are easy to figure out. Want to know the dealer cost on an accessory? Divide the price in half. That $499.00 Honda cassette deck you want installed cost that dealer $249.00. If you just have to have a factory cassette (or whatever), negotiate the price. They're going to show you an official looking MSRP sheet, and innocently act like the factory set that price. Bull****. Offer them a reasonable price, and they'll take it. You're not going to get accessories for less than cost though. From his standpoint, why would he pay you to take an accessory?

FYI: a typical car deal might be: Front End = $500.00 profit, Back End = $3,000.00 profit. See why it sucks to be that floor salesman??

Now, for the part that can actually save you some real dinero - "How do I get the best deal on my new car"? Very simple. Find the web sites of the 2 closest dealerships selling the car you want. Get an online quote (include the interest rate in your request!!) from one of them, then take the email offer he sent you, and forward it to the other. Lather rinse repeat until they've obviously cut every last dime out of the deal. Do this towards the end of the month, but not the last day, since if you have to walk on the deal to make a point you'll have to wait another 30 days for them to be that price aggressive again. Give yourself 2-3 days, that should be close enough that they're hungry to make their 30 day numbers, and leave you enough time to walk and be able to come back the next day.
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  #7  
Old 08-05-2003, 10:50 AM
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jon: just curious, do the big stars that you sell to haggle?
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  #8  
Old 08-05-2003, 10:57 AM
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Good question, but you and everyone else are probably not
going to like the answer.

Big stars steal cars.

Dealer Principals/Owners give cars away to celebrities...
When I say "give away" I mean that the margin of profit
is very slim, much lower than average.

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Old 08-05-2003, 11:00 AM
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The financing Back End part makes a lot of sense; I don't know how I didn't think about that myself. I'll have to remember this one the next time I deal.
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  #10  
Old 08-05-2003, 11:10 AM
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Quote:
Originally Posted by Jon Shafer
Good question, but you and everyone else are probably not
going to like the answer.

Big stars steal cars.

Dealer Principals/Owners give cars away to celebrities...
When I say "give away" I mean that the margin of profit
is very slim, much lower than average.

oh well, kinda makes sense to me. what better way to advertise. especially if they didn't care to remove the dealer sticker from the rear.
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  #11  
Old 08-05-2003, 11:13 AM
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I love this quote.

"But you forgot to highlight the biggest liars/cheats of them all: customers. You mention 10 to one bad to good salesmen. I would say 20 to 1 for bad to good customers. They lie to you about their credit and you spend a few hours with them instead of spending the time with someone qualified to buy. Then they fail to mention to you that the head is cracked on their trade-in, which you find out after the deal. Then they tell you at the last minute that they can't come up with the down payment, so you have to go back and start F&I all over again. Car salesmen have to lie, cheat, and steal just to keep up with the customers."
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  #12  
Old 08-05-2003, 11:42 AM
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Quote:
Originally Posted by Jon Shafer
Good question, but you and everyone else are probably not
going to like the answer.

Big stars steal cars.

Dealer Principals/Owners give cars away to celebrities...
When I say "give away" I mean that the margin of profit
is very slim, much lower than average.

Surprised to hear that there is any profit.
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  #13  
Old 08-05-2003, 11:42 AM
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This is a good but sad article. Good because it's true for the most part in many dealerships, specifically Honda and Toyota dealerships where it sounds like this guy worked.

Sad because this weak guy can't cut it in sales and he has to cry and sob and give some good dealers a bad rap. This business chewed him up and spat him out just like his other job.

I don't fault any dealership for maximizing profit opportunities on every car sale. This guy needs to remember that it's a "for profit" enterprise and not the other way around. I give this guy credit for showing the gist of the "internal anatomy" of dealer operations. Thankfully, for many informed consumers, they already know most of the mechanics of how dealers operate. Also, this guy tries to come out a hero by giving folks advice on how to buy a car when Mr. Rizzo himself and other customers have known about this technique for eons.

I loved the reply post about customers lying. There's alot of truth to that and it cracks me up because it brings me back to my Honda days at SF Honda when I was a green pea and my manager at the time told me, "Buyer's are Liars!"

Jon's right about "big stars steal cars." I won't name names, but you'd think these guys could really step up to the plate and throw some bones your way, but they can be the biggest mooches of all.
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  #14  
Old 08-05-2003, 11:47 AM
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Quote:
Originally Posted by adrian/chrisbmw
Jon's right about "big stars steal cars." I won't name names, but you'd think these guys could really step up to the plate and throw some bones your way, but they can be the biggest mooches of all.
Here in LA, everyone knows that the celebs get everything comp'd. Figure real estate is about the only thing they need to shell out top dollar for. Every other industry has such a brown nose, that everything is practically handed to them. Ever see those gift baskets that awards show presenters/nominees get? And I love it when Conan O'Brien (who is decidedly D-list) talks about how he got a big shipment of xyz because he and a guest talked about it the previous night.
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  #15  
Old 08-05-2003, 11:56 AM
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This one is especially memorable because he was just
inducted into The Hall Of Fame this past weekend.....



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  #16  
Old 08-05-2003, 12:00 PM
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Quote:
Originally Posted by Jon Shafer
This one is especially memorable because he was just
inducted into The Hall Of Fame this past weekend.....



Hmm..I wonder if some Ford salesman/GM has a pic like that in front of a certain white Bronco.
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  #17  
Old 08-05-2003, 12:48 PM
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Quote:
Originally Posted by Jon Shafer
This one is especially memorable because he was just
inducted into The Hall Of Fame this past weekend.....



Isn't that Hank Stram?
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