Running a car dealership - how hard can it be?

"BaconSandwich is tasty." (baconsandwich) 04/29/2014 at 13:45 • Filed to: None

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This story got me thinking about car dealerships and salespeople.

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Far too often I hear horror stories of people receiving terrible service or being gouged by dealerships and/or car salespeople. This got me thinking: How hard can it be?

I know there's probably a lot that I don't understand/am not familiar with, but it did get me thinking about what dealerships really ought to be doing:

1. Offer reasonable prices.

Anyone can find out the MSRP of a car by looking online. From what I understand, there's a gap between what the dealer pays and what MSRP is. When selling a car, this is where their profit comes from (among other places). If they offer the car for too low of a price, they don't make any money. If they don't price things low enough, they don't sell. There's got to be a happy medium in there somewhere. What the dealership could say is "We will offer the car at at the price we pay plus 50% of the difference between what we pay and MSRP. For example, suppose a dealership pays $20k, and MSRP is $25k. The standard price for the car at that dealership would then be $22.5k. This would eliminate the "Oh, I'll need to go check with my boss to see if he can let it go at that price" syndrome. Would this cut into the dealership's bottom line? Yes. Would having consistently reasonable pricing be attractive? Yes. This would also potentially eliminate haggling. If rules were set in stone, your customers would know exactly what they can expect to pay.

2. Don't tack on extra service fees. Be honest with the price.

Everyone has to charge for freight/delivery. That's a given. What isn't given is the 'extra warranties', undercoating, and whatever other crap extras the dealership can bolt on. Again, yes, dealerships make a lot of money here - but they also anger a lot of customers. If you want a repeat customer, you treat them well and be honest with them. If they didn't ask for it, offer it, don't force it down their throat. You'll never find the waiter at a fancy cocktail party stuffing h'orderves down guests throats like they were geese fit for fois gras in an attempt to get a tip.

3. Have good service.

This is absolutely critical. Not just good service - but good service to everyone. I know it's hard, but you can't judge someone by how they look. I once had a chance to do some business with an interesting looking character. He was in his 30's, had long scraggly looking hair and worn out jeans. He started a successful recycling business, which he sold for seven figures. You'd never guess it by looking at him.

If little Jimmy comes in just to take a look at the latest Mustang, let him look. Better yet, let him sit in it, and send him home with a brochure or two with some cool pictures in it. Sure, he might not even be old enough to drive, but he's going to grow up. Also, little Jimmy has parents who might eventually get him a car when he goes off to college. You can bet that if he (and his parents) are treated right - even when they aren't buying a car, they'll be coming back.

4. Have knowledgeable staff

You expect a surgeon to know about medical things. You expect a computer repair shop to know about computers. Is it so difficult to expect that a car salesman should know about cars? I know there's a ton of different makes/models/trim combinations out there, but when you hear stories about car salespeople telling obvious lies, that's a red flag. They are selling cars. They ought to know about cars - and not even necessarily just about cars being sold at that dealership. I know it's likely difficult to find people who are enthusiastic and knowledgeable about cars that are also good at sales - but they are out there. I'd say catch them when they are young - get a few recent college graduates who car enthusiasts. Enthusiasm can't be faked.

5. Be involved in the community.

This one is perhaps a bit trickier to nail down than the others. My wife likes running. In the past year to two, she's taken it up as a leisure activity. There's a locally owned running store (Runner's Soul) that runs evening classes on various topics - everything from learning how to run to training for a marathon. They've even done a few fun things, like a chili cook-off and brought in some interesting guest speakers. They've done a very good job of being involved in the community. As a result, they've won over two customers - my wife and myself. I wouldn't normally spend $80 (or more!) on a pair of running shoes, but because they do such an awesome job I have no qualms about spending a bit more money there.

A car dealership really could so something similar. Offer free classes on how to do an oil change or change a spare tire. Sponsor the local autocross group. Heck, you could even go as crazy as offering performance or defensive driving courses. Raise money for a local cause. It shows that you are a good community member, at it helps shed the image of being a bunch of greasy, dishonest car salesmen.

I'll share a brief story about my first car-buying experience. I was getting ready to graduate university, and was going to be needing a car. I didn't want anything new, so I did some looking around and found a used Nissan Sentra at a local Ford dealership for quite a reasonable price. I went in, talked to one of the sales staff, and took it out for a test drive. I wanted to think about it overnight, told the sales staff that, and came back in the next day. As it turns out, the next day when I came in, another couple had taken it out for a test drive and ended up buying it. I was ok with this, as they had told me that this was a possibility. That being said, the price was reasonable, the staff were friendly, and seemed fairly competent. Although I didn't buy a car from them then, you can bet that I have strongly considered buying a new car from them now - a deal on which they'll likely make much more money than what they would have brought in with the used Sentra. The end result is that they left me with a fairly positive impression - and that impression has stuck.

I'm sure there's a few other points that I'm missing. What sort of positive experiences have you guys/gals had with dealerships? What, to you, would make for a better dealership?

Tom McParland > BaconSandwich is tasty. 04/29/2014 at 13:50

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The type of post I would love to share to carbuying.Jalopnik.com (if given the opportunity)

To answer your question. Yeah it isn't rocket science but too many dealerships are stuck in the mindset of get as much money as possible from every customer regardless on whether or not they have a good experience. In time most of those dealers will change or perish...but it will take time.

William Byrd > BaconSandwich is tasty. 04/29/2014 at 13:55

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Good stuff. I would add "expedite the process". I swear these people get paid more for the deal taking the better part of the day. Likely it's just inefficiency. When I come in, I want my trade assessed while I'm test driving the car I'm interested in. I don't want to sit around waiting for the used car manager to drive it around the block. I swear most times I have to request efficiency or it just doesn't happen.

One of my best deals was done virtually. I found a car I wanted, he provided a very good price, I sent him the VIN #s of my tradeS (I had two) and he provided sight-unseen offers which were generous. I was honest about the condition, we both agreed that we had the right to bail on the deal if we misrepresented something. But neither of us did. This all took place on email. I showed up with one car, signed the papers which were already printed because I had filled out the credit app online, then I drove a porter home with me in the new car to pick up the 2nd trade. In and out in 30 minutes.

That was Infiniti if you were curious, I noticed higher end dealers tend to work online easier. Others just want to get you in a seat at the dealership, and apparently keep you there all day. I guess they figure if you invest a lot of time you are more likely to buy. I've walked out after 5 hours of dealership time b/c it wasn't what I wanted or what they promised.

BaconSandwich is tasty. > William Byrd 04/29/2014 at 13:59

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Definitely a very valid point. Ideally, you want the entire process to go as smoothly as possible. Maybe I'm wrong on this, but I think people are more likely to remember an unpleasant experience than a pleasant one.

BaconSandwich is tasty. > Tom McParland 04/29/2014 at 14:00

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It's strange how that works, isn't it? You'd think they'd be all over an opportunity to make money. I guess they are thinking short term, rather than long term.

Clown Shoe Pilot > William Byrd 04/29/2014 at 14:07

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I had a nearly as easy experience at a Hyundai dealership. Apparently this is VERY rare. I might have been helped by my telling the sales guy right up front that I didn't NEED a new car, but I sort of wanted one and that it was his sale to lose.

Once the expectations were set, I think I was in and out in 45 minutes. After everything was signed they sent a guy over to another dealership WAY across town to get my car and I picked it up the next day at lunch. That was a 10 minute visit.

GTI MkVII > BaconSandwich is tasty. 04/29/2014 at 14:11

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Nope definitely wrong. Good experiences are generally less memorable because its how you expected things to go. I don't go to a nice restaurant excepting shitty service or cold food, so why would I pat them on the back when everything goes as it should?

Joe_Limon > BaconSandwich is tasty. 04/29/2014 at 14:17

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One of the common issues of car salesmen that I have found is that they tend to be short term employees who never wanted to be salesmen (for no comission sales). Or in the case of comission sales, there is little incentive for the sales person to make a long time customer.

If running a dealership, I would ask customers to fill out a survey for an extra $100 about their experience. The results of that survey would determine the amount of comissions the salesperson gets.

BaconSandwich is tasty. > Joe_Limon 04/29/2014 at 14:22

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I like it!

GTI MkVII > GTI MkVII 04/29/2014 at 14:30

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Meant to say definitely NOT wrong.

I am Jack's complete lack of compassion > BaconSandwich is tasty. 04/29/2014 at 15:50

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I would LOVE to run a used car dealership... I'm afraid I wouldn't succeed because I wouldn't buy uninteresting cars.

BaconSandwich is tasty. > I am Jack's complete lack of compassion 04/29/2014 at 16:09

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What worries me more is the manufacturers stuffing cars down my throat. Like "Oh crap, we produced too many Beigemobiles! Here, you deal with the problem! Have fun selling them!"

Cajun Ginger > BaconSandwich is tasty. 04/29/2014 at 18:47

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I've hit that point where my expectations are really low. Honestly all I want is to be acknowledged and recognized as a human being. When that happens it turns into an awesome car buying experience. It's very rare though.

I guess I'd also like it to take less time to process paperwork. It's like here's my check, give me my car! I wish.

un-hipster > BaconSandwich is tasty. 04/29/2014 at 19:23

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5 easy steps! Like almost anything worthwhile, much easier said than done.

1 and 2: makes it super easy to eliminate the dealers fond of adding the notorious second (or third) window sticker; you know the ones, DEALER MARKUP-$XXXX for example. You're starting out $1000's behind when trying to deal with these guys.

3 & 4: If the dealer's sales force is mostly "sharks" by design, unlikely they will spare any time with prospects that don't have that SUCKER WITH MONEY look. Run, don't walk!

5: Very few dealers will spend a dime on goodwill community efforts, but instead shovel mountains of money for obnoxious TV ads and celebrity endorsements.

As you might suspect, buying a car is an experience that I dread, and therefore hang on to cars a bit longer than the average.

Stephen the Canuck > BaconSandwich is tasty. 05/01/2014 at 15:12

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Host track days at local tracks for people who have bought cars or are interested in buying a car from the dealership, charge as little as possible for this.

Hand out some gift cards for gas they will use. Allow them to bring friends/family. Bring out some of the more interesting models they sell for test drives with instructors. Have a BBQ/lunch. Have a Q&A. Give people passenger rides with instructors driving. Maybe throw in a car show with this. Left people poke around the cars and sit in them. Have an entertainment/baby sitting area for the kids.

Have discounts of say $1000 if they give their name to a salesperson at the event to come in and talk about getting a car.

greenagain > Joe_Limon 05/20/2014 at 22:22

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There are so many other people within a dealership that have a chance to drop the ball; the DMV clerk, the guy that cleans the car, the tech that misses something in the PDI, etc that the salesman often takes the heat for.

silverturbobrick > William Byrd 06/14/2014 at 14:33

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I am at an Infiniti retailer and your experience sounds exactly like it should at our dealerships. Efficient, simple and transparent. Glad it worked for you.