I remember it like it was yesterday, the first time a car was discounted to make a deal. It was 1932, in Midtown Manhattan, New York City. Big Red Ewing accepted $1,450 “out the door” for a brand new 1933 Studebaker Dictator that stickered for $1,466 Plus TTL. Now, whether or not that’s true, I cannot say. But I’m sure it went down just like that.
Let me start by saying I’ve never charged sticker for a car. I’ve never (not) offered a courtesy discount right out of the gate. I also never packed a payment or presold F&I products. I believe every part of a deal stands on its own merits. Front, back, products, etc. It’s also the LEGAL way to do it.
So, when I say we need to stay at MSRP, I mean it. There are innumerable reasons why and I’ll touch on some of them. But whether I’m buying a shirt, a watch, or a tank of gas, There’s no negotiation. Here’s a fun exercise, try offering the waiter $35 for a $50 steak and see what he says. The back-and-forth bickering seems to be most enjoyed by those individuals that don’t value their own time or that of their “adversary.”
Discounting is easy, it’s too easy. It’s impersonal and doesn’t allow for the product/service/salesman to stand on their own merits. It creates an excuse for buying rather than a reason. Let me say that again, it creates an excuse for buying rather than a reason. If there’s not enough profit in a deal then you simply cannot afford to take care of your customer the way they’ve become accustomed to or the way you’d like. Plus, only the most skilled sales pros avoid discounts today, right? *Tongue in cheek
If you were on trial for murder, would you go with the best attorney or the cheapest? If you were having open-heart surgery, would you go with the best surgeon or the lowest-priced?
Price negotiation is the most difficult piece for sales professionals (and customers) to grasp. Whether it’s on the phone, in person, or online. We’ve all wanted to get that part of the deal over with as soon as possible. What’s worse, the customer is absolutely deplorable at this piece and usually resorts to lying in order to avoid substantiating their price position. Over allows, under allows, etc. are all just mathematical trickery. Any dealers (all dealers) using valuation tools in a dealer group know exactly what I’m talking about. “XYZ Dealer told me they’d give me $20,000” when in fact we can see they only ACV’d it at $18,000…
Look, I’ve read, watched, and listened to all the “gurus” in the auto vendor space, and after I’m done laughing my a$$ off it all boils down to the exact same things when discussing “how” to hold gross and avoid discounts… “you need to build value” and “you need to differentiate yourself” and “you need to sell yourself” blah blah blah. This is something we actually are all in together and the fact of the matter is this: if you build tremendous value in your car and really do a heck of a job selling me on it but I can save $500 down the street at Down The Road Motors, guess what? I’m going there… $500 is $500. It’s not personal, it’s strictly business. You just wasted all of your time closing me for the other guy. And that’s exactly how customers work. If they “say” they have a better deal but can’t prove it, substantiate it and we all know MSRP is MSRP then we have to be willing to walk away.
Rebates, subvented rates, dealer cash, stair steps, etc. are all a form of discounts and thus should be switched to front margin gross and left as is indefinitely. “One Price” is still a discount unless that one price is the one printed on the window sticker.
Don’t mistake what I’m saying, I don’t agree with “Market Condition” addendums or “Protection Package” addendums to artificially increase the price either. Those are just a marginally legal way of product packing and I think it’s ridiculous.
We need to give honest feedback to the manufacturers – they need to produce better inventory and we need to order better inventory. Honest trade values are no longer a wildcard as we have valuation tools that literally do our jobs for us which makes used car prices as easy as new car prices. I remember the days of faxing in the week’s numbers to my manufacturer rep and always lowballing them (like all of us did) because we thought if they didn’t know we had 100 ups that week and 200 phone calls we’d get better and more aggressive incentives. The real issue is that was no different than “fudging” the ad source in CRM. How do we know where to spend more if the information is inaccurate? We’re only hurting ourselves.
Jewelry has, on average, a 300% markup. Furniture, mattresses, carpet, appliances, etc. all have more margin as a percentage of sales price than cars do. I wish cars did have more because I’d proudly drive a $20,000 Yugo! We’re selling the second largest purchase 80% of Americans will make and operate with the same percentage margin as a loaf of bread. Discounts are unnecessary, discounts are for the weak and discounts need to never rear their ugly head again.
Do you agree or disagree?
As the COO | Partner of Phone Ninjas, Chris delivers leadership, coaching, and mentorship to 55 team members providing software sales and phone skills coaching. He fosters powerful partnerships and collaborations with leaders across various business sectors, establishing expectations, communicating vision, and escalating performance to maximize productivity and effectiveness.
Chris is an innovation-driven business executive with over 25 years of experience delivering leadership to teams of up to 75 overseeing development, launch, and sale of website lead acquisition, reconditioning process software systems, and technology that support automotive dealerships across the U.S., Canada, and Europe.
