One of my great joys in life is buying cars.
That may sound odd, since most people don’t like the car buying experience all that much. But I’ve always enjoyed it because you get to see some basic manipulation techniques pushed by hungry, eager salesmen, which is always cute to watch. But what most people don’t realize is that there is a much more subtle manipulation going on behind the scenes of every dealer in the US: the salesmen try to manipulate the customers with crude tools, but the dealer owners are also manipulating both salesmen and customers at the same time. That’s the fun part to watch, frankly.
Car salesmen have a bad reputation, so almost everyone who walks into a dealer assumes that he will be ripped off, cheater, and manipulated. And yet they need a car, so in they come…
Most car dealer manipulations are fairly standard. Greet customers, establish a bond, smile a lot, and get the customer in for a test drive. Those are less manipulation than front-line sales techniques. The real manipulations start once the customer sits down to talk about the car. For example, the grand-daddy of car salesman manipulation is the four-square technique:
This is a classic manipulation trick. Basically, the salesman writes down the make of the car, and the price, then adds the trade-in value, and then the down payment, and finally the monthly payment that the customer wants. Then the negotiations happen mostly around the page, moving numbers back and forth. Note a few things:
- The salesman will always get the customer to sign the line that says ‘I will buy today if the numbers are right’ or something like that, since that is a partial commitment – it breaks the ice and gets the customer half-way to a deal. Of course, it has no legal value whatsoever, but the customer often feels somewhat bound by it. And, it allows the salesman to screen out and not waste time on the folks who are so cautious that they will not even sign a pretend agreement.
- The price of the car is always written in large, bold letters, and the salesman will try everything to avoid talking about the price itself. Almost all of the negotiations will be around the payment per month, not the price.
- The trade-in value is almost always a big win for the dealer. Most customers are focused on buying a new car, not negotiating the price of their old one, so trade-ins are one of the most profitable areas of a dealership. A car dealership may make $800 or so on a new sale, but they can easily make $2K on a used-car trade in because they quickly move the focus on the page to the bottom two squares.
- The ‘down-payment’ square and the ‘monthly payment’ square are where the true action is. Most people do not buy a car cash, they finance it. Most salesmen ask leading questions, like “How much do you want to pay per month?”, and then, when the customer answers “$500”, they’ll add: “$500, great. And up to?” or something similar, to try and push the monthly payment as much as they can.
The beauty of the 4-square method is that the salesman can easily manipulate the discussion using it. A dealer will typically open with very large numbers in the bottom square, and put the customer on the defensive, and then, when the customer screams bloody murder, the salesman will smoothly play around with the bottom two squares (often, the old-timers even fold the paper to hide the top squares) to try and get a deal. If the customer complains about the down payment, for example, the down payment comes down immediately, but, of course, the monthly payment goes up (“that’s just logic, says the salesman). The salesman can also play with the duration of the loan (“You can pay $467 a month – we’ll just extent the loan from a 3-year term to a 4-year term”), the interest rate. the options on the car… several Youtube videos can show you how this is done.
The 4-square method is still around, despite several how-to on how not to get caught into it, because it works. Most customers need financing, and so are focused more on monthly payments than on total price or trade-in value, and the 4-square is just one technique to help the salesman exploit this. But there are many others.
One of the most common tricks is to “sell up“. If a customer wants a car with certain features, show him a cheap car with many, but not all, the features that he wants. That has several benefits: the customer is initially happy at the lower price; he is usually the one who will ask to see an upgrade, since the cheaper model will usually not have all of the features that he wants. And finally, it’s easier to get a customer to upgrade than to downgrade – people want to feel good about their cars, even if they overpay, and downgrading makes them feel bad. From the salesman angle, moving a customer in a higher-class vehicle makes a lot of sense, because it’s easier to get larger commissions on expensive vehicles than cheap ones. This is why high-pressure dealers will almost always show a car that is almost, but not quite what you want, before introducing, almost apologetically, the higher price model.
There are a lot of other techniques that salesmen use, many of which are not intuitive: buying used cars, for example. Several dealerships call prospective clients and explain that they lack quality used cars, and would like to buy theirs – would they consider coming in for a free appraisal? It’s only when the customer comes in, happy that he‘s selling something to the dealer for a change, that he realizes that he’ll need a new car once he sold his… Other salesmen will draw out a sale for as long as they can, because of a simple fact: the longer someone has invested in a sales process, the more unlikely they are to walk away. If you have spent two hours already on the lot and negotiating, you are less likely to walk away than if you had gotten to the same point after 10 minutes. Hence, some of the best salesmen will actually draw out a sale rather than target a quick close – by using everything from “we’re looking for the keys” to the “manager just stepped out” type of excuses.
There are many other techniques that salesmen use, from “low balling” (offering a too low price for a car and encouraging the customer to look around at other dealers, only to explain when he’s back that the promotion / special or whatever it was is now over, but for only $700 more they can get the car today), to “puppy dogging” – giving the car to the customer for a day or two to let him get used to it before finalizing the deal, to “spraying“, basically calling the customer after the salesman lost a sale and telling the customer, after the customer bought a car somewhere else, “I hope you didn’t pay more than X for it”, where X is a ridiculously low number. It doesn’t save the sale, but it makes the customer really unhappy that he got robbed at the other dealer, and more likely that he’ll return to the salesman for his next car.
No wonder that car salesmen are universally reviled, right?
But, as I said before, salesmen themselves are often being manipulated by the dealers themselves.
First off, most car salesmen are not career salesmen. Most are refugees from other professions looking to make money in the car industry. They typically have little education, few options, and are desperate for a job that can pay the bills. This means that the dealer owners can dictate pretty much every action of the salesmen, and manipulate them as they try to manipulate the customers.
Owners manipulate salesmen in several ways. Edmunds.com has a nice piece about an undercover journalist that was sent into a dealer here, and there are many others, but there are several techniques that owners can use.
First amongst there is humiliation. Every dealer maintains some kind of public scoreboard for the salesmen – everyone can see who sold cars, how many cars they sold, and, most importantly, who’s on the shit list: those salesmen that haven’t sold cars in three days. The pressure of being on the bottom of that list puts tremendous pressure on the weaker salesmen, but dealers often add more humiliation for missing sales targets – everything from wearing the mascot outfits to being forced to park further and further away from the dealership, or cleaning the more successful salesman’s car.
But since humiliation can only go so far, dealer owners and managers use more focused manipulation techniques. The most powerful one is calling in support. Once a salesman has a customer hooked (i.e. sitting down in the dealership), he simply is not allowed to lose him without passing him on to at least one other salesman / manager. If a customer hesitates, or decides to leave, the salesman is instructed to call in a closer or a more senior salesman – failure to do so can get him fired. This is key to the maintaining control in a dealership, since it allows the managers to make sure they get two bites at the apple, and to fix a sale that may be going sideways at the manager level. To enforce this, salesmen can’t actually close any deals – they have to work with a manager to close a sale, and often they can’t even discount a car beyond a very small amount without the approval of a sales manager. This is one reason why dealers can hire relatively inexperienced salesmen and fire them at will – the real work is often done by the sales closer or manager, with the salesman taking the brunt of the early part of the sales – greetings, test drive, etc… – while the sales manager does the final, value-creating steps.
Even the 4 square method cuts two ways. Yes, it can be used to manipulate customers, but it’s also a very good way to keep an eye on the salesman – many managers require the salesman to show them the 4 square on each sale, to see how they negotiated, how they moved the discounts, how they focused the customer and played off the different squares. So it’s both a manipulation technique and a compliance mechanism.
Car dealer owners are also responsible for the largest-scale manipulation of car buying in general. Since most customers find buying a car at a dealer just slightly less painful than a root canal, why don’t more people buy them online? Well, it turns out that it’s essentially a felony to sell new cars to anyone but a car dealer. Since the day that Reagan signed a car dealer franchise law (thanks partly to a car dealer who had sold him a car and who was part of his kitchen cabinet), and to George Bush, who, as governor of Texas, in 1999 threatened Ford with $10,000 fine per day if it sold cars directly to the public, car dealer owners have managed to maintain the dealer model even as the Internet has revolutionized other industries. Today, in the US, you still can’t buy a car online, and that it mostly thanks to the tireless efforts of lobbyists for the car dealer industry.
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This is what makes going into a dealership to buy a car so interesting to me. Salesmen get a lot of flak for manipulating customers, and they don’t rank high on the trust scale:
But almost everything that a car salesman does is driven by the car dealer owner and managers, and yet their image is not particularly negative. This is, to me, one of the most interesting meta-manipulations – that car dealers have successfully structured their business in such a way that customers hate their salesman, find them unreliable, are constantly manipulated by them, but have no choice but to use them anyhow, and in the process managed to keep an image that is order of magnitude better than their employees. Hats off, gentlemen!