Yesterday I wrote about helping a friend of mine buy a car at her local car dealership. We made it through the vehicle selection process and price negotiations unscathed. My friend asked me to help her negotiate the price because I used to be Internet Manager for a major car dealer. We were able to get selling price well below the vehicle’s Kelly Blue Book value and probably close to the dealer’s cost. However, getting such a good price on the “front-end” set her up for a more difficult time with the Finance Manager, who was responsible for “saving the deal” by selling products on the “back-end.”
Working with your salesperson, deciding which car to get, negotiating price, and completing the initial paperwork is all referred to as the “front-end” of the deal in the car business. It’s important to discriminate the front-end from the back when talking about a car deal. Why? Because most car buyers are so exhausted after what can often be described as a nerve-racking marathon of finally saying yes to the car and selling price, they go to sleep at the very time they need to be alert for more of the dealer’s profit points coming their way.
Beware the “Back-end”
The deal is done and you find yourself sitting around and waiting before you can head into the business office to complete the last of the paperwork. Your salesperson reminds you that the Finance Manager you’ll be working with even completes the paperwork for the DMV, saving you the trip. That makes you happy. You’re relaxed, content, and pleased with yourself for not just concluding a difficult process, but making such a great deal.
What you don’t realize is that getting such a good deal on the selling price means the Finance Manager is under pressure to sell you something—from an extended warranty, vehicle alarm, security system, car care products, and so on—to bring the profit on the deal back up to a respectable level. This system allows a dealer to sell a new or used car for their cost—or even at a loss—yet end up making thousands of dollars on the deal after the Finance Manager does their thing.
My friend knew all of this going in. I not only helped negotiate the price, but prepared her for the final step in the process. Yet, she still became upset and irritated while sitting in the business office with a burly and imposing Finance Manager. The specific point at which my friend became upset was when the Finance Manager kept coming back to the extended warranty he was trying to sell. Like a dog with a bone, he wouldn’t let go of trying to “close” her on the extended warranty even though she kept saying “no” to his offer.
A Big Fan
I’m actually a big fan of extended warranties. However, these are a significant profit point for most car dealers, meaning they tend to make a lot of money from each one they sell. I often recommend that my friends purchase them, but only after the price has been discounted.
Some Finance Managers are trained to illicit two or three “no” responses from customers before they give up on trying to sell any given product. They will often drop the price each time they ask, hoping the customer buys and they make at least some profit. Although not true for every dealership, this means it can work in your favor to always say “no,” even to something you want to buy. In fact, keep saying “no” until the Finance Manager moves on. Then, you return to it by saying, “I’ve reconsidered the extended warranty. Are you sure that’s the best price you can offer?” At this point the price has probably been discounted a few times, so no matter what the Finance Manager says, say “yes.” It’s a win-win situation: the Finance Manager sold a product, the dealership made a profit, and you got a much better deal compared to the first price offered.