When I was a Honda dealership manager I was paid a salary, plus commissions on cars/finance I sold, and a small bite out of every car deal. But at the end of every month, I also shared in the monthly profit, if there was profit.
And that was usually a pretty nice bonus check every month, or at least, most months. We were a small store, with four salespeople and me. We sold around seventy cars a month. And I typically made a thousand dollars profit bonus every month. I made decent money, but that made it good money, at the time.
One month we sold an average number of cars, but not many used cars and many of the new cars sales were small profit deals. We had a lot of cash deals where we didn’t make anything on the back end and not even one big deal.
I didn’t get my bonus. Nothing. I had a little meeting with the store owner and he showed me the numbers. It was easy to see when looking at the numbers where my concentration needed to be in order for the store to show a profit and for me to get a bonus. More money from somewhere. In fact, just a hundred dollars per deal would have put us in the black and allowed me to get a bonus check for at least a few hundred dollars.
One hundred dollars per deal on an average deal of maybe eighteen thousand dollars seems like chump change and it is. I controlled how much we sold the cars for, and the profit in each deal. All I needed was one hundred more on every deal.
That’s why car deals go through the negotiation crap…salesmen gonna go ask “the boss” if we can do it for that much. The salesman has no idea what it takes to make a deal today. The store may have to contribute to the deal for special financing or a lower interest rate. There may be factory incentives for each sold car for that day, or maybe the incentive you had the day before is no longer available. There are a lot of things that can change day to day, and a business that has been operated with a “negotiated price” way of doing business is going work that way.
So my pencils to the customer always ended with a two hundred dollar bump. No matter how big or small the deal, try and get two hundred more. If you get it, give a hundred back to the customer to make him feel special. If you don’t get it, you still try and split the difference for the extra hundred. If it’s a monthly payment issue with a financed deal, it’s just pennies a day in monthly payment to make the extra hundred. Go for two hundred and then let them win one. And if the store’s already in profit then it’s all gravy.
Capitalism at it’s finest