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Buying a Car: Selling Price Versus Monthly Payments



When I was Internet Manager for a major car dealer, the customers who got the best deals almost always focused on the selling price of the car, and not the monthly payments. Why? Let’s take the example of Stan, who is trading in a large SUV on a fuel efficient sedan that he believes will meet both his downsized requirements and his dwindling budget.

Stan tells his salesperson that he has to get the monthly payment down to $300 a month from his current $475. It's one reason why he is trading his gas-guzzling SUV. This way, he says, he’ll be able to meet his other monthly obligations. The best the dealership can do on the car Stand wants to buy--even after taking into account the trade value--is $360 per month. Stan gets upset and proclaims that won’t make the deal at this price, that the payment had to be reduced to $300 or he’ll take his business elsewhere.

A Different Perspective

Stan was laying down the law: “Make the payment $300 per month or I walk out and you lose me as customer.”  He knew exactly what he wanted, and Stan was ready to walk out if he didn’t get it. It turns out that Stan only thought he was in control of the situation.

Let’s switch sides and look at things from the salesperson’s perspective. In truth, the salesperson has Stan right where he wants him. Why? Because 1) Stan is committed to getting this car, and 2) he is fixated on the monthly payment rather than the selling price and terms of the loan.

This was the setup for a crucial question that every salesperson in the car industry is trained to ask. If Stan answers yes, the salesperson knows they not only have a deal, but they have a deal that could be classified in the industry as a “home-run” for the dealership, or one that makes a significant amount of profit.

And The Question Is…

After hearing Stan’s ultimatum, the salesperson looks directly in Stan’s eyes and asks, “If I can get your payment down to $300 per month, do we have a deal and you drive this car home today?”

Stan answers yes. Is this bad for him? Of course it's bad for him. The reason why in tomorrow’s post.

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