I do not think I can stomach reading another article or blog post of how untrustworthy the automobile business is. Plastered on the internet and “consumer interest” magazines boast information of the “inside secrets” of dealerships or “how to negotiate your best deal.” What consumers do not realize is we read those articles too and I actually get quite a laugh. This is a myth-based business that the public really doesn’t know much about. People think you can walk in with a suitcase full of cash, make a ridiculous offer on a vehicle and the dealer will take it. Contrary to public opinion, the 8- 13% profit margin is very small when compared to other retail businesses.
The true kings of margin are furniture, jewelry, and owning a concession stand. Yes, that snow cone that is quenching your sun drenched thirst only has as much as a 97 % profit margin! Clothing has one of the biggest profit margins in the retail industry. Coach leather goods boast of a 78 % profit margin while Polo, Crocs, and True Religion hang around the 55% margin. That # 6 supersized value meal from McDonalds has a 39% margin! We all go to Wal-Mart to save a buck or two and believe it or not, they too make a profit. The Walton family did not earn Billionaire status by selling goods at a loss- they earned it by expertly creating a perception of being the low-price leader. The truth of the matter is they come in slightly less than the industry average of 24.8% versus 25.3%. By coming in ½ % less than the industry, customers perceive that they are getting the best deal possible. When is the last time you told the cashier to call the store manager and tell him that you would pay cash for the entire cart if they will throw in a box of Peanut Butter Cap’n Crunch? Heck, even the online auction Ebay makes a 32.9% profit margin repping goods for other people. Now that’s the American dream!
Who REALLY is making the money? I have yet to read a smear campaign of how to negotiate your best deal on a Polo shirt, True Religion Jeans, or a pair of lime green Crocs. Customers excuse the profit margin on other products because the perceived loss is less. (i.e. “It was only $9.95!”)
Unfortunately, a few bad dealers have shoved all of us “car salesmen” into the rip-off pool. There are many good dealers out there who really provide a service to their customers. As a matter of fact there are plenty of dealers who take advantage of their customers. You read that right; the dictionary defines advantage one way, “to be of service; benefit; to prove beneficial to.” So yes, great dealerships take advantage of their customers by providing benefits. They take advantage of them so well, that they have made a career on them coming back to become taken advantage of again and again. As a matter of fact, they send their closest friends, family members, and anyone else to get taken advantage of. Good dealers provide customers with dependable transportation and give them superior service after the sale.
Don’t you think it is time we stop defending ourselves for making a profit? As a sales professional, you provide a service and deserve to make a fair profit. Half of your commission is made when you sell the vehicle, the other half is made by providing them superior service for as long as they own your product (a $2000 profit spread over 5 years is only $33 per month-about the same price of a security monitoring service ).
I challenge you to negotiate from a position of strength by demonstrating the level of service you are willing to provide your customers- both today and for the future. Rest easy at night knowing that 1 out of every 10 jobs in America depends on the industry that you proudly represent. I'll see you next time on the blacktop!
*Originally printed in AutoSuccess Magazine