What numbers are car salesmen running when they leave you waiting in a dealership?: originally appeared on Quora: The best answer to any question. Ask a question, get a great answer. Learn from experts and access insider knowledge. You can follow Quora on Twitter, Facebook, and Google+.
As a sales manager for a good part of my 10 year dealership career, I'll tell you what I did during this time:
1. I kept my salesperson calm. Salespeople who are about to make a sale are often worried they're going to lose a sale, so their tendency is to say yes to whatever the customer asks. Obviously, that's not a profitable response, so a sales manager's job is to counsel the salesperson and keep them in the right frame of mind.
In all honesty, this was the least enjoyable part of my job, as the typical car salesperson can be very difficult to work with, especially when they're panicked.
2. I took a minute to think. Part of making a deal is understanding what's going on from at least three perspectives:
- Management's perspective - Are we making money? Is this a car I need to sell, or can I afford to wait for another customer? How many have we sold today? Can I make money on some other part of this deal (like financing or the trade)? Etc.
- Salesperson's perspective - What is their frame of mind? Are they feeling confident or desperate? Do they have a good bond with the customer? Have they done a good job of building value? Do they have "control," meaning that they have enough credibility with the customer to ask them for more money, for patience, etc.?
- Customer's perspective - Why are they trying to buy this car - do they love it, or is it just a car to them? Are they a good negotiator? Are they temperamental? How much longer will they tolerate this process? What's their personality - what's going to work best to get them to buy?
Finally, if you have a "3rd baseman," i.e. a husband or wife, a parent, a close friend that's involved in the negotiation, you have to look at things from their perspective too.
3. Running the numbers isn't always simple. In Colorado, every community has their own sales tax rate that we must calculate, so in order to run a payment I had to look-up the customer's sales tax rate using the state's official website.
Once taxes were figured, I had to know what the trade was worth (trade appraisals take time) and find out what the vehicle payoff was within a few dollars.
Now that taxes and trade are figured out, it's time to determine what interest rate we're going to get. You look at the buyer's credit score, debt and payment to income ratios, and vehicle loan to value.
If the buyer has any credit blemishes, you usually want to sit down with the finance manager and ask a couple of questions, and you may need to sit down with the customer and interview them as well.
Finally, you check everything (because mistakes are very, very costly) and then send the salesperson out with the numbers.
While it's true that the numbers are easier to figure on the 2nd and 3rd pass, there are curve balls...
- The buyer can volunteer to put more cash down, or we can find out the cash down they offered isn't "real" (meaning they don't have it today), so the financing terms can change.
- The buyer can find a co-signer with a better credit score, changing credit terms.
- The trade appraisal can be revised after the used car manager realizes he over or under-bid the trade.
- The salesperson can tell you that they don't have a commitment, which dramatically effects your strategy.
Is psychology a part of this? Sometimes, but it's not that big of a factor. Contrary to popular belief, making people wait for numbers is usually counter-productive, as it tends to either upset them or foster uncertainty. You're better off going as fast as you can.
In my heyday, I think I could do all of the above in 2 minutes or less. Now, I'd guess I would need 5-10 minutes to do it correctly. The longest part is usually holding the salesperon's hand.
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