2009 Honda Accord Sdn EX
Actually, the second buyer will get the better deal. The key reason is timing. By buying early in the month before the dealer starts to get edgy about not making his sales quota, as well as salesmen getting edgy about not making their quotas theres no reason for urgency and theres no reason to drop the price further than needed to make a deal and, since our first buyer wanted to show his new vehicle off to his friends and neighbors, he purchased at an early stage of the negotiation. This means the dealership made more profit and the salesmans commission was likely to be higher.
The second buyer received the better deal because of the following:
- The dealership is nearing the end of the month and may be many cars away from its sales quota (dealerships have sales targets that determine how many cars they get and the model mix of those cars so a missed month could mean that not only will they receive fewer cars, but the ones they receive will not be top-sellers). Because of this fact, alone, the dealership will go as far as they can to make a deal, including going well below invoice on the vehicle.
- The dealership is also trying to make its own sales quotas for internal accounting purposes, or, to put this another way, the dealership may have posted its internal quota at 135 vehicles and it may have based its financials on this number of sales. Lets say the dealership is below 100 sales for the month, with just a few sales days left before month-end close. In order to make its own internal numbers, the dealership will go as far as it can to make extra deals will happen. (Having seen sales managers go to the general sales manager to see if they can get a few more dollars in order to make a deal, we know this to be the way things happen.)
- Since it is the end of the month, and salesmen, who live today on their bonuses because commission deals tend to be very small, will also push to make deals on the last weekend of the month in order to make their bonus (having done this ourselves, we know its also true). Putting this into perspective, todays consumers know pretty much what a dealership pays for a vehicle as they walk through the front door and they also know what the average sales pricing will be in their area just by looking at AutoTrader.Com or Cars.Com and looking around at dealer sales for similar vehicles within 100 miles of the dealership they intend to give their business. With this knowledge, the salesman cant start negotiating at anything other than invoice (the amount the dealer pays for the vehicle) and then has to go down from there. By the time the negotiation is finished, the salesman may find the deal is as much as 7 percent below invoice. This means the deal will likely be a mini commission and thats usually around $50. Lets face it; it takes a lot of minis to make a living. However, dealers also give their salespeople sales targets or bonus levels so that if a salesperson sells 10 cars, he may be given an extra $500 in his check and if he his 12 he may find another $250. If he hits 15 cars, the bonus may be $1,000 and 20 cars may mean another $500 to $1,000, so although the salesperson may be making a mini, it is the number of cars that he moves that will determine his living so he is encouraged to squeeze as much as he can from his sales manager to make a deal happen.
- And, theres another interesting feature that this time of year presents. With December in the offing, dealers are trying to get people to buy 2009 vehicles so they are buying new cars, not last years models. As soon as the clock ticks 12:01 on Jan 1, 2010, any 2009 cars that are still on the lot are suddenly last years models and that means many people will pass them up and go for the 2010 new cars they see. It makes these vehicles harder to move, so dealers will use this time of month even December, too to move as many 09s off their lot as possible.
So, now you know about the secrets that dealers actually want you to know.