The Art of Psychological Warfare in Auto Dealerships
This article is about the different "sales scams" that are done at car dealerships everyday. Describes how dealers fleece the public with false perceptions.
The Art of Psychological Warfare in Auto Dealerships!
Sale Promotion Scams
Sales that deceive and what’s the perception? Let’s talk about auto dealer promotions and the psychological effect they have on unsuspecting customers. There are many different kinds of "sales" auto dealers perform. A few of the different types are the Super Sale, Credit Union Sale, Slasher Sale, Push, Pull & Drag Sale, $29 Acquisition Sale, the Pre-Approved Sale, recent Bankruptcy Sale, Give Away a Gift Sale, and the list could go on for many more.
As sales go, you would think if you went to one you would be saving money. When it comes to auto dealers, nothing could be further from the truth. Never waste your time going to a sale from an auto dealer. Let me give you a brief description of how some of these sales work and you will see why you won’t be saving any money at them.
The Super Sale: This is a relatively new kind of sale that started several years ago. Usually what happens is an auto dealer will hire an outside group sales team to come to the dealership and conduct the entire sale. The company hired to perform and conduct the Super Sale will come to the dealership with extra sales people, a finance manager, two or three closers, and of course a desk manager. The sales plan will include the dealership spending about $10,000 in advertising, which mostly consists of a flyer that will be inserted in all the surrounding local newspapers as well as radio ads and an editorial looking newspaper ad in the paper.
The outside company will typically add $5,000 to the cost of each vehicle and then figure payments based on the longest term possible and only $29 down payment. They will then put the payments in each vehicle on the lot hanging from the mirror on a hang tag advertising "pick a payment, pick a vehicle."
As you can see there is no discount. The public thinks there is a sale and that they are going to get this great deal, but in reality if they fall for the "payment only thinking" they will end up paying way too much for the vehicle. The real price of the vehicle is never displayed at these kinds of sales. Only the payment.
Dealerships, during these Super Sales will make from 50% to 100% of what they normally would make in a month in only a four-day sale period! Needless to say, it is one of the most profitable sales for an auto dealership to conduct.
The dealership must pay the outside company between 20%-28% of the gross profit from the sale. Therefore, if the outside company made the dealership $100,000 in a four day sale, the dealership would pay them $20,000 to $28,000 for that sales event.
There is a saying among car dealers that goes like this, "A sale is only a perception." It goes hand in hand with another car dealer saying, "A good deal is a state of mind." There are people who pay a huge profit to the dealership and they are the happiest people on earth because the dealership did a great job of making them think they got a great deal!
These are the kind of customers car dealers love. Those people who focus on payment only and are oblivious to anything else. They don’t pay attention to how much they really paid for the car or how much they received for their trade-in car. These are the people who cause auto dealers and commission oriented sales people to thrive.
The Push, Pull & Drag sale is when the dealership sends out flyers in newspapers or direct mail and advertises that they will give a minimum of $1,500 trade in value on any car, whether it runs or not. So, if you drag or tow your junker car to the dealership, they will give you a minimum of $1,500 dollars off of the price of their vehicle, even if your trade in car is only worth ten dollars. Basically, if they have a $4,000-$6,000 dollar markup on their car, you’re only getting $1,500 off of asking price. Once again paying too much for the car.
The Pre Approval sale is geared towards people with poor credit. The dealership hires an outside marketing company that will send thousands of letters out to people according to their beacon score. Your beacon score is your credit rating. Usually the beacon scores will be between 500 and 650. The letter will come to the consumer and will have a check attached to it saying the customer is pre approved for a loan amount of $19,995 for example, and they need to call ABC Motors immediately to lock in their loan approval. Sometimes there will be a hook involved in the letter such as a free gift for coming into the dealership.
These sales are also very profitable because the dealership personnel will totally control the customer and basically tell them what kind of car they can buy. They will stuff the customer in whatever car provides the dealer with the most profit as well as con the customer into thinking they have to buy the back end products like an extended service contract, life, accident and health insurance, etc.
This sale works the same for fresh bankruptcy customers. Bankruptcy is a matter of public record and dealerships love to target fresh bankruptcy customers. There are many companies who specialize in bankruptcy lists and sell them to the dealerships. These people just went through a bankruptcy and are most likely embarrassed, depressed, feeling completely inadequate and are desperate to start over and re-establish their credit. Car dealers love to take advantage of fresh bankruptcy customers. I will explain more about bankruptcy in a later chapter of this book as well as bad credit and what to do about it.
Let’s discuss one more type of sale and that is the Credit Union Sale. This sale is also very profitable because it involves a level of trust between the customer and his credit union. A dealership will approach a local credit union about using their customer list as a mailing list and do a combined sale. The dealer gets to mail to the credit union customers and the credit union gets all of the financed contracts from the sale. It’s a win win for both parties.
The credit union will send a letter out to their customer base explaining how they have teamed up with ABC Motors to do a sale. Usually the letter is written by the dealership but it is made to look like it came from the credit union branch president. It is signed by the branch president and gives the dealership strong credibility. In essence, the credit union is really endorsing the dealership and implying to the customer that they are safe to buy a car from the sale. Remember what I told you earlier: A sale is only a perception!
Trust to a seller is like gold bars! If your customers are predisposed to trust you, you can automatically make more money from them. This is why the credit union sale is also such a good sale for the dealer. Speaking of trust, there is another saying in the car business that goes like this, "If you can’t gross your friends and family who can you gross?"
The word "gross" in the business means profit. Therefore the saying means "If you can’t make money off of your friends and family then who can you?" It is much easier to make money off of friends and family because they naturally trust you to give them a good deal. I personally have never made money from my friends or relatives but I have seen lots of other people in the car business that made lots of profit from their family and friends. I think it is disgusting to rip off friends and family, or anyone for that matter, but I have personally seen people do it. Their greed overcomes them.
The Website $1,000 Free Gift Certificate Scam is one of the newest ones out there. You won’t even find these sales descriptions on any of the popular car sites because they don’t know about them. This one is where you will receive a post card or letter from the local car dealership that basically invites you to the dealership to look at their cars and just for coming in they will give you a gift certificate worth one thousand dollars in free merchandise.
You simply go to the website that is on the certificate they give you and you can choose from many different types of merchandise such as electronics, camping equipment, kitchen, sporting goods, etc. The scam is that the equipment is grossly overpriced along with the shipping charges. The actual shipping charges cost more than the product and that is how the website makes its profit. Of course the consumer thinks the products are free but they still have to pay the shipping charges. If you picked out one thousand dollars worth of products from the website it would cost you about three hundred dollars in shipping for the products that are really worth about $150-$200 in real money.
This scam brings in lots of people to the dealership but the fact is most of the people are those with bad or challenged credit and of course if they buy a vehicle they get taken advantage of the most.
Getting customers into the auto dealerships has become an art form in trickery, deceit and the latest techniques in psychological button pushing. It plays on peoples need for something for free. Auto dealers use televisions, bicycles, sporting goods, gift certificates, and anything else they think will get you into their showroom floor. Whatever they are giving away for free you are ultimately paying for in the car deal.
The bottom line is you don’t need to go to a special sale in order to get a good deal. Car sales are designed to rip you off, not give you a great deal. In this day and age no one should have to subject themselves to the psychological tricks, mind games, back and forth garbage, and take no prisoners attitude at most auto dealers.
*********************************************************************
Peter M. Humleker is a consumer advocate, consultant and author of the book, "Car Buying Scams, Auto Dealer Executive "Breaks Code of Silence!" He can be reached at www.carbuyingscams.com
This article © 2004 Peter M. Humleker Jr. All Rights Reserved
*********************************************************************
Sale Promotion Scams
Sales that deceive and what’s the perception? Let’s talk about auto dealer promotions and the psychological effect they have on unsuspecting customers. There are many different kinds of "sales" auto dealers perform. A few of the different types are the Super Sale, Credit Union Sale, Slasher Sale, Push, Pull & Drag Sale, $29 Acquisition Sale, the Pre-Approved Sale, recent Bankruptcy Sale, Give Away a Gift Sale, and the list could go on for many more.
As sales go, you would think if you went to one you would be saving money. When it comes to auto dealers, nothing could be further from the truth. Never waste your time going to a sale from an auto dealer. Let me give you a brief description of how some of these sales work and you will see why you won’t be saving any money at them.
The Super Sale: This is a relatively new kind of sale that started several years ago. Usually what happens is an auto dealer will hire an outside group sales team to come to the dealership and conduct the entire sale. The company hired to perform and conduct the Super Sale will come to the dealership with extra sales people, a finance manager, two or three closers, and of course a desk manager. The sales plan will include the dealership spending about $10,000 in advertising, which mostly consists of a flyer that will be inserted in all the surrounding local newspapers as well as radio ads and an editorial looking newspaper ad in the paper.
The outside company will typically add $5,000 to the cost of each vehicle and then figure payments based on the longest term possible and only $29 down payment. They will then put the payments in each vehicle on the lot hanging from the mirror on a hang tag advertising "pick a payment, pick a vehicle."
As you can see there is no discount. The public thinks there is a sale and that they are going to get this great deal, but in reality if they fall for the "payment only thinking" they will end up paying way too much for the vehicle. The real price of the vehicle is never displayed at these kinds of sales. Only the payment.
Dealerships, during these Super Sales will make from 50% to 100% of what they normally would make in a month in only a four-day sale period! Needless to say, it is one of the most profitable sales for an auto dealership to conduct.
The dealership must pay the outside company between 20%-28% of the gross profit from the sale. Therefore, if the outside company made the dealership $100,000 in a four day sale, the dealership would pay them $20,000 to $28,000 for that sales event.
There is a saying among car dealers that goes like this, "A sale is only a perception." It goes hand in hand with another car dealer saying, "A good deal is a state of mind." There are people who pay a huge profit to the dealership and they are the happiest people on earth because the dealership did a great job of making them think they got a great deal!
These are the kind of customers car dealers love. Those people who focus on payment only and are oblivious to anything else. They don’t pay attention to how much they really paid for the car or how much they received for their trade-in car. These are the people who cause auto dealers and commission oriented sales people to thrive.
The Push, Pull & Drag sale is when the dealership sends out flyers in newspapers or direct mail and advertises that they will give a minimum of $1,500 trade in value on any car, whether it runs or not. So, if you drag or tow your junker car to the dealership, they will give you a minimum of $1,500 dollars off of the price of their vehicle, even if your trade in car is only worth ten dollars. Basically, if they have a $4,000-$6,000 dollar markup on their car, you’re only getting $1,500 off of asking price. Once again paying too much for the car.
The Pre Approval sale is geared towards people with poor credit. The dealership hires an outside marketing company that will send thousands of letters out to people according to their beacon score. Your beacon score is your credit rating. Usually the beacon scores will be between 500 and 650. The letter will come to the consumer and will have a check attached to it saying the customer is pre approved for a loan amount of $19,995 for example, and they need to call ABC Motors immediately to lock in their loan approval. Sometimes there will be a hook involved in the letter such as a free gift for coming into the dealership.
These sales are also very profitable because the dealership personnel will totally control the customer and basically tell them what kind of car they can buy. They will stuff the customer in whatever car provides the dealer with the most profit as well as con the customer into thinking they have to buy the back end products like an extended service contract, life, accident and health insurance, etc.
This sale works the same for fresh bankruptcy customers. Bankruptcy is a matter of public record and dealerships love to target fresh bankruptcy customers. There are many companies who specialize in bankruptcy lists and sell them to the dealerships. These people just went through a bankruptcy and are most likely embarrassed, depressed, feeling completely inadequate and are desperate to start over and re-establish their credit. Car dealers love to take advantage of fresh bankruptcy customers. I will explain more about bankruptcy in a later chapter of this book as well as bad credit and what to do about it.
Let’s discuss one more type of sale and that is the Credit Union Sale. This sale is also very profitable because it involves a level of trust between the customer and his credit union. A dealership will approach a local credit union about using their customer list as a mailing list and do a combined sale. The dealer gets to mail to the credit union customers and the credit union gets all of the financed contracts from the sale. It’s a win win for both parties.
The credit union will send a letter out to their customer base explaining how they have teamed up with ABC Motors to do a sale. Usually the letter is written by the dealership but it is made to look like it came from the credit union branch president. It is signed by the branch president and gives the dealership strong credibility. In essence, the credit union is really endorsing the dealership and implying to the customer that they are safe to buy a car from the sale. Remember what I told you earlier: A sale is only a perception!
Trust to a seller is like gold bars! If your customers are predisposed to trust you, you can automatically make more money from them. This is why the credit union sale is also such a good sale for the dealer. Speaking of trust, there is another saying in the car business that goes like this, "If you can’t gross your friends and family who can you gross?"
The word "gross" in the business means profit. Therefore the saying means "If you can’t make money off of your friends and family then who can you?" It is much easier to make money off of friends and family because they naturally trust you to give them a good deal. I personally have never made money from my friends or relatives but I have seen lots of other people in the car business that made lots of profit from their family and friends. I think it is disgusting to rip off friends and family, or anyone for that matter, but I have personally seen people do it. Their greed overcomes them.
The Website $1,000 Free Gift Certificate Scam is one of the newest ones out there. You won’t even find these sales descriptions on any of the popular car sites because they don’t know about them. This one is where you will receive a post card or letter from the local car dealership that basically invites you to the dealership to look at their cars and just for coming in they will give you a gift certificate worth one thousand dollars in free merchandise.
You simply go to the website that is on the certificate they give you and you can choose from many different types of merchandise such as electronics, camping equipment, kitchen, sporting goods, etc. The scam is that the equipment is grossly overpriced along with the shipping charges. The actual shipping charges cost more than the product and that is how the website makes its profit. Of course the consumer thinks the products are free but they still have to pay the shipping charges. If you picked out one thousand dollars worth of products from the website it would cost you about three hundred dollars in shipping for the products that are really worth about $150-$200 in real money.
This scam brings in lots of people to the dealership but the fact is most of the people are those with bad or challenged credit and of course if they buy a vehicle they get taken advantage of the most.
Getting customers into the auto dealerships has become an art form in trickery, deceit and the latest techniques in psychological button pushing. It plays on peoples need for something for free. Auto dealers use televisions, bicycles, sporting goods, gift certificates, and anything else they think will get you into their showroom floor. Whatever they are giving away for free you are ultimately paying for in the car deal.
The bottom line is you don’t need to go to a special sale in order to get a good deal. Car sales are designed to rip you off, not give you a great deal. In this day and age no one should have to subject themselves to the psychological tricks, mind games, back and forth garbage, and take no prisoners attitude at most auto dealers.
*********************************************************************
Peter M. Humleker is a consumer advocate, consultant and author of the book, "Car Buying Scams, Auto Dealer Executive "Breaks Code of Silence!" He can be reached at www.carbuyingscams.com
This article © 2004 Peter M. Humleker Jr. All Rights Reserved
*********************************************************************
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