We have used car lot on new car dealer row. We get all kinds of customers but most of them usually have credit issues but sometimes we get customers who do have good credit. So the problem is if we don't price are cars, the good credit and cash buyers won't stop unless the car is priced.

On the other hand when the subprime customer comes to pick up his car he sees that the price is much higher than the posted price. What do you tell this customer? If we were to use the price that is posted on the car we can't make any money, we would actually lose money because the way these subprime companies do their"calculations".

A lawyer could easily make a case and sue the dealer and the finance company. Because it is illegal to raise the price just because the customer has bad credit,isn't it?  Especially if the prices are posted. I am very concerned with this. It seems to me the only way around this is not to post prices. Is there anyone out there that has encounter this problem?

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Wow I can't even believe this discussion is taking place.  The number one reason used cars aren't priced on most lots is because the dealer is "Trowling for a sucker fish"!  Someone that can be taken advantage of.  How would you feel if you went to a retail place of business and none of their products were priced?  Heck even Walmart has price checkers throughout the store!  It's topics and attitudes like this that perpetuate the cancerous attitude consumers have toward their automotive retail purchase.  My calendar says it's 2011 soon to be 2012.  Last time I checked the movie Used Cars was produced in 1980!  Whatever happened to the art of selling?

The reason this topic is important to discuss is because of the finance companies that have their internal system of scoring a customer to a car based on minimal gross profit.

I am vested like many dealers in this program and if you price the cars like you state on the lot they would have to be priced considerably higher than one would  normally do because you would not be able to make any profit with theses programs.

In today's awful state of economical flux, more and more customers are finding that they can't get approved via conventional banks. So how dare you compare us to that movie of "Used Cars"? I am insulted by your insinuation  and stereo typing of dealers being crooks. Maybe, you sell cars like that or maybe you don't deal with the subprime market but I would be more professional than accusing dealers as bottom feeders.  Please enlighten us with your ability to sell cars as I guess I haven't been able to master this "art" in 30 years!!

Years ago, we used what was termed "Flex-Pricing" wherein the vehicle carried a Stock Tag that had among other things, a code that was based on the following; H=1, O=2, R=3, S=4, E=5, B=6, L=7, A=8, C=9, K=0.

 

With the use "Flex-Pricing" the vehicle was coded with the lowest price that the vehicle could be negotiated down to. 

 

"Flex-Pricing" allowed the salesperson to price (Yes, the salesperson; you must cede a bit of control to gain a large advantage) the vehicle based on the information that he had received from the customer, at that time; generally, in the way of a trade-in, the reality of the trade-in price that the customer desired for his trade-in, and any other possible issues, and it gave a good salesperson more confidence in structuring and making his deal.

 

If a vehicle had a code of CLEK ($9750.) the salesperson knew that $9750.00 was the very lowest price and most minimum gross profit that would be accepted on the vehicle and if the customer wanted $1.000.00 more that his car was worth wholesale, the vehicle would have to be priced at $10,995.00 to achieve a gross profit of $245.00 over the minimum price that was available and he could price much higher if he saw fit.

 

Is this legal today?  I don't know; however, it worked like a charm for a good many years and I believe that it would certainly worth asking someone with an astute knowledge of the law for a sound opinion in order to find an answer to your problem.

 

If you are offended by the suggestion and the methodology, stick with your current method.  If you feel that it really is doing a consumers a favor by getting them in to the vehicle that they want, whether they are paying cash or they are sub-prime buyers, then it is at least worth a thought.



Yes, and they'd better be priced the same as Internet prices if you have an Internet presence.  Dodd Frank and the FTC Consumer Protection Commission is into this issue fewer options available.  There was considerable conversation about these kinds of issues at the recent F&I conference which also included "Special Finance."  I believe Tom Hudson and Michael Benoit conducted workshops on these issues.  Hudson Cook is the "go to" source for the last word on these kinds of issues.  AND the book is still being written.

 

Imagine your customer is NOT a credit challenged consumer but is in fact a mystery shopper from the FTC.  If you don't, and your number comes up, you'll be hung out to dry. 

 

@ Brent - Special finance is a special game.  Those who are engaged in it are serving a different type of consumer.  If these consumers didn't have special finance or buy here pay here dealers to go to, their last option would be Tony and Guido, the knee cappers.  If Dodd Frank isn't careful, they'll put Tony and Guido back in business.

Agreed David.

Tony and Guido will be back in business if the consumer protection agencies go to far.  

It is mind-boggling how these consumer protection agencies are always looking out for the consumer...who is looking out for the business owner?  They are humans...they pay taxes...they provide jobs!  But when they try to make too much profit the red flag is raised and some protection agency says, "Wait a minute there buster..."

The government is more interested in protecting someone that has destroyed their own credit and living off entitlements, than the business owner that takes risks, provides jobs, pays taxes, and lays awake at night trying to figure out how to get better at what they do...meanwhile the protected consumer watches 21 hours of television per week...

 

Kenny

Kenny,

Thank you for saying that!!

After owning a new car dealership and working for big automotive groups I am shocked of how much we the dealer will bend backwards to help customers! You never here in the news "Customer mishandled because at ACME Electronics  his Plasma doesn't work properly" I mean dealers are treated by the media, government and consumers like if we were the worse in the World! That is an another topic for another time but the real fault here is the customer that ruined their credit and all that reputable dealers are doing is trying to sell them a car... There is also a lot of work involved in getting a bad credit customer deliverd. Take out a deal folder of a conventional customer with good credit and compare it to a subprime deal. You will see it a book compared to the regular deal!!  We are not the bad guys!! Remember this.

Maybe you could arrange your lot and price your cars in groups.  Under $10,000 - Under $15,000 - Under $20,000 - ETC.

Gentlemen, I must admit I have enjoyed reading this article so far. Brent, your right this industry has been tainted by unscrupulos individuals, and I love that move "Used cars" . However when your dealing with a subprime buyer the lenders are the blood suckers in the equasion. Their up front charges and maximum payouts are set in stone. They're not really lenders but collection agency's. We as auto dealers provide a service to our customers / clients finding them an affordable payment and safe sound transportation for them to utliize.We as business owners must decide what our profit structure should be like any other retailer. Gouging the public is where we bear the stereo typic conotation, individually warrented or not. I'm not sure if your sate has different consumer protection laws or follow federal guidelines. I see on TV offers from GM etc with a disclamer " With proper credit approval" This may be a grey area you may want to explore, Grey area credit doesn't not qualify. We price our vehicles all the same in our blue collar neighborhood. Moderately not the maximum it keeps us in the ball park, with the internet on their hand held and car fax telling them what to pay there are no secrets. Unfortuneately what we pay on the block is much higher than whats in the book for good inventory.

    I am also a licensed Real Estate Broker in Massachusetts and New Hampshire, we do not sell houses cheaper for cash. You are obligated by a code of ethics to represent your seller client for the higest and best price. The Seller is the one who dictates the final price for a property. However like in the auto industry the banks (now thats surprising and sounds familiar) appraisal dictates how much they are willing to lend.....

Lets all provide a service to our community and have a sucessfull year!

I find this entire conversation very distasteful, but Sheldon does have a point!

Couldn't the folks who operate in this 'environment' simply say :  "Available for sale to the 'highest & best offer O.A.C"; and salvage a smidgeon of dignity and credibility in doing so?

Just a thought after stewing on this a couple of days...

There are two forces at work that dictate whether or not to price vehicles.

The first is online competition for customers.  Eight in ten (80%) of used vehicle shoppers are choosing which car to consider based on Internet research.  This is probably a bit lower for BHPH customers who may not have access to the Internet at home or at work.  If you don't price your cars online, you miss 80% of your potential customers.  If you do price your cars online, and they are not priced competitively within your trade area, you also miss 80% of your potential customers.  To paraphrase something Dale Pollak might say, "are you a car dealer or a car collector?"  or "are you running a car lot or a parking lot?"  The days of cost+ pricing are long gone.  The books aren't keeping up, so you have to know what your inventory is going to be competing with at retail before you value a trade or raise you hand at auction.

The second is regulatory compliance.  When you price your vehicles online to capture the 80% of potential customers, you have to honor that price.  Even more reason to know what the retail value of a vehicle is before you buy it wholesale.  If your financing partners are inhibiting your ability to make a profit while remaining compliant with state and federal law, then shop for a different partner. 

Phillip:

I really don't understand what you are saying here?  When you say "competitively within your trade area" what are you referring to as far as being competitive?  Who is your competition; the new car store, the conventional independent sales operation, the secondary market, or the B/H-P/H?  Is it possible to reach all of them or must you try to reach only one large market at the expense of abandoning another large market?   

Its a matter of selling to all customers in your market but knowing who they are generally before they come in the store. Are most customers coming in needing financing or do they have cash falling from their pockets. I think most Dealers, if being brutally honest, would say 85%+ customers are finance customers.The next question you have to answer is "Who are my customers? Good Credit or Bad Credit?" IF you have 70% ++ with bad credit you need to be less aggressive with pricing. BUT you must also get better at servicing your better credit and cash customer with indentifying questions before you get into asking them are you paying cash or financing? That is the WORST question you could ask ANY customer on your lot.

Unfortunately that is the 1st quesiton that almost always comes out of a sales persons mouth as soon as the customer asks "whats the price."This is a very common issue with ALL dealers in todays market.

Training of sales and owners has gone out the window as we all look to decrease costs. However, there is a definable process that can be followed that will allow you to sell to ALL customers without breaking laws.

It isn't an either/or case as most think BUT you have to be on the smae page top to bottom in the Dealership and train and manage that expectation.The training process WORKS

Chris

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