Car Buying Learning Center
My first day on the job started with signing about 50 different forms. Most of these were for specific purposes to show that I understood I wasn't supposed to take dealership car keys home, drive under the influence or sexually harass my co-workers. But one form was of particular interest. It showed the breakdown of the commission structure.
Commissions were based on the "payable gross" to the dealership and were applied in three tiers. If the payable gross was from $0 to $749, our commission was 20 percent of the profit, from $750 to $1249 the commission was 25 percent of the profit. Above $1250 the commission was 30 percent of the profit. In other words, the higher the profit for the dealership, the higher the commission I would earn. Obviously, this motivated salespeople to build profit into the deal so they could hit that magic mark and get into the 30 percent bracket.
When I was interviewed for the job, the dealership was vague about how I would be paid. On the one hand they promised I could make serious money through commissions maybe four or five grand my first month. On the other hand, they alluded to an hourly wage to begin with. Now I found that I was, in fact, working on straight commission. If I sold cars I made money. If I didn't sell, I didn't make a penny. Maybe that's why there were so many salespeople working here (about 85 in new and used cars). It didn't cost the dealership extra to have a big staff.
When I was done signing forms I was turned over to Michael, my assistant sales manager (ASM). He told me I would be working with five other guys on the "A Team." They were just arriving for work still straightening their ties, combing their hair and he introduced me to them as they showed up. There was Oscar, a barrel-chested young guy with a gang tattoo on the back of his hand; Richard, a 6-foot-3-inch weightlifter from Hungary; Tino, who had a quiet dignity that made me think of him as a restaurant maitre d'; Jimmy, a mustachioed soccer fanatic and Juan, six months out of the U.S. Marine Corps.
These were my team members, Michael said. They would be like family, like my brothers. If I couldn't make a deal with a customer, I was to turn them over to someone on my team. Then, if that customer bought the car we'd split the commission. This practice of "turning" customers was stressed repeatedly. I was working in what is known in the business as a "turnover house."
We had a brief meeting in one of the sales cubicles and then the rest of the team went out front to look for "ups." Ups are customers who walk onto the lot. This name comes from the way customers are handled by whichever salesman or woman is "up." The salespeople are always asking, "Who's up next?" The "up system," the order in which customers are taken by the sales staff, is very serious business.
Michael began explaining how the dealership was run. We sold new cars on our side of the building, and used cars were on the other side. In each of the front corners of the building were the new and used car "towers." These glassed-in offices were restricted to employees. Inside was a raised platform where the sales managers sat. When you went into one of the towers, you found yourself behind a high counter, looking up at your bosses, like being in a courtroom or a police station. The sales managers are sometimes referred to as "the desk." Salespeople would say, "You have to clear that deal with the desk." Or, "Who's on the desk today?"
The next step in my training involved the use of the "4-square work sheet." Michael told me the 4-square was my friend, it was the salesman's tool for getting "maximum gross profit." As the name implies, the sheet is divided into four sections. When you have a prospect "in the box" (in the sales cubicle) you pull out a 4-square and go to work.
The information about the customer is written along the top together with the make, model and serial number of the car they want to buy. Then the salesman writes the sticker price of the car in large numbers in the upper right square on the worksheet. Michael stressed that the price of the car should be written in large clear numbers to give it a feeling of authority. He added that we should always write "+ fees" next to the price of the car (This includes license fees and sales tax.).
"Good penmanship is essential," he said. "This makes it harder for them to negotiate. "You're saying, 'Mr. Customer, if you want our beautiful new car, this is the price you're going to have to pay.'"
The other boxes on the 4-square are for the price of the trade-in, the amount of the customer's down payment, and the amount of the customer's monthly payment.
"When you negotiate, this sheet should be covered with numbers," Michael said. "It should be like a battleground. And I don't want to see the price dropping five hundred dollars at a pop. Come down slowly, slowly. Here I'll show you how."
The process begins by asking the customer how much they want for a monthly payment. Usually, they say, about $300. "Then, you just say, '$300... up to?' And they'll say, 'Well, $350.' Now they've just bumped themselves $50 a month. That's huge." You then fill in $350 under the monthly payment box.
Michael said you could use the "up to" trick with the down payment too. "If Mr. Customer says he wants to put down $2000, you say, "Up to?" And he'll probably bump himself up to $2500." Michael then wrote $2,500 in the down payment box of the 4-square worksheet.
I later found out this little phrase "Up to?" was a joke around the dealership. When salesmen or women passed each other in the hallways, they would say, "Up to?" and break out laughing.
The final box on the 4-square was for the trade-in. This was where the most profit could be made. Buyers are so eager to get out of their old car and into a new one, they overlook the true value of the trade-in. The dealership is well aware of this weakness and exploits it.
The opening numbers were now in place on the 4-square. At a glance, Michael said, you could see the significant numbers of this deal purchase price of the car, trade-in, down payment and the monthly payments. As you negotiated you could move from box to box, making progress as you went. It allowed you to sell a car in different ways. For example, if the customer was determined to get full value for his trade-in, you could take extra profit elsewhere in the purchase price or maybe even in financing.
The first numbers that go on the 4-square come from the customer. The down payment and the monthly payment are only what they would like to pay. Now, it's time to get the numbers that the dealership would like the customer to pay. These numbers are called the "first pencil" and they come from a sales manager in the tower. Michael said that the first pencil was the dealership's starting position. "You have to hit them high," Michael explained. "You have to break them inside make them understand that if they want our beautiful new car, they're going to have to pay for it."
Here's how we were supposed to get the first pencil from the tower. After the customer test-drove the car we brought them into a sales office and offered them coffee or a Coke to relax them. Then we filled in the information about the car on the 4-square. We then picked up the phone and called the tower. Michael held his hand like a phone receiver with his thumb and little finger sticking out. "You say, 'Yes sir. I have the Jones family here with me and they have just driven a beautiful new whatever model, stock number blah blah blah.' Then you say, 'Is it still available?' Of course you know it is. But you want to create a sense of urgency. So you pause, then say to the customer, 'Great news! The car's still available!' Then the tower will give you the first pencil. Write it in each of the boxes."
I later found out that the first pencil is arrived at by the dealership in a very unscientific way. For every $10,000 that is financed, the down payment they try to get is $3,000 and the monthly payment they try for is $250. In this way, a $20,000 family sedan would require about $6,000 down and a $500 a month payment. (These payments are based on very high interest rates calculated on five-year loans. These numbers are so inflated that a manager I later worked with laughingly called them, "stupid high numbers.")
"But here's the beauty of this system," Michael said, "these numbers aren't coming from you you're still the good guy. They're coming from someone on the other end of the phone. The enemy."
Michael returned to his scenario. "OK, so when you give these numbers to the customer you say, 'Here's a pretty good deal for you.' But Mr. Customer says, 'Oh man! Michael, I told you I can only put down $3,000.' So you cross out the $6,000 you wrote and put down $5,750. You say to the customer, 'Is that more what you had in mind?' And you nod as you say this. Try to get them agreeing with you."
This reminded Michael of something and he laughed. "Here's another thing. Never give the customer even numbers. Then it looks like you just made them up. So don't say their monthly payment is going to be $400. Say it will be $427. Or, if you want to have some fun, say it will be $427.33."
While Michael was training me, he didn't ever say, "Here's how to cheat the customer," or, "This is how we inflate the prices." In fact, he stressed that I was supposed to treat customers with respect to build a strong C.S.I. (Customer Satisfaction Index). But manipulation and overpricing was inherent in everything he said. The reason for this was simple without overpricing we couldn't make a living. What we were selling was profit. Or, as Michael put it, "This is money for you money for your family."
At times Michael became very excited as he thought of new things to teach me. At one point he said, "Oh! This is a good one! This is how you steal the trade-in." He looked around quickly to make sure no one overheard him. "When you're getting the numbers from the desk, they'll ask if the customer has a trade-in. Say it's a '95 Ford Taurus. And say you took it to the used car manager and he evaluated it and said he would pay four grand for it. If you can get the trade for only three, that's a grand extra in profit.
"So what you do is this," Michael pretended to pick up the phone again, "you ask the desk, 'What did we get for the last three Tauruses at auction?' Then they'll give you some figures they'll say, $1,923, $2,197 and $1,309. You don't have to say anything to the customer. But he sees you writing this down! And he's going, 'Holy crap! I thought my trade was worth $6,000.' Now it's easy to get it for $3,000. That's a grand extra in profit. And it's front-end money too!" (I later learned that front-end money was what our commissions were based on. Back-end money was made on interest, holdbacks and other elements of the deal.)
We talked for almost two hours before Michael finally ran out of gas. He told me that for the next two days I should get to know the inventory and watch the other salespeople. Then I could learn how to "meet and greet." He invited me to check out some keys and test-drive the cars.
"Product knowledge," he said, tapping his forehead. "Very important. You need to get to know these cars inside and out."
I walked outside and surveyed the car lot. The new cars were on our side of the lot the used cars to my right. Across the street was another dealership, also selling Japanese cars, and up and down the street were still more dealerships. Most of the manufacturers were represented here. Then, in the distance, was the freeway, a solid river of cars. Cars were everywhere.
"What were you selling before?"
I turned to find Oscar, one of my teammates. He had a broad friendly face to match his incredibly stocky build. Later, I found out he was a high school football star. I couldn't imagine trying to knock him off his feet.
"I used to sell videos," I told him.
"Like X-rated videos?" he asked eagerly.
"Naw. Training materials. Stuff for companies to train the people that work there."
"Oh yeah. We got some like that here." He popped his knuckles. I tried to read the tattoo on the back of his hand. "Michael show you around the lot?"
"No. He was explaining the 4-square."
"You never sold cars before?" he asked.
"No. This is the first time."
"It's easy, man. You'll do good. Hey, I'll show you around." He ducked into the sales office and came back with a set of car keys. "Let's take a ride."
We walked through the line of new cars, each gleaming with water droplets from being washed that morning. Oscar showed me how the lot was arranged with the high-end cars facing the street, the SUVs, minivans and trucks along one side and the mid-sized sedans near the dealership entrance. He told me there was also a back lot with more inventory and even more cars in a rear fenced parking area. As we talked, a car carrier pulled up and more cars began rolling down the ramp.
Oscar opened the door of a high-end sedan in a sport trim. It had a big V6, leather bucket seats, a sunroof and alloy wheels. The sticker showed a total price of $28,576. A second dealer's sticker showed an extra $236 for the custom wheels.
"You're walking through the lot with Mr. Customer and he's eyeballing all these cars," Oscar said. "He stops next to this one and bam! that's the one you're gonna sell him. You pull it out of the row, open the doors and ask him to see how good the seats feel. When he sits down you slam the door and take off."
"You mean, you ask him if he wants to demo the car?" I asked.
"Hell no. They never go for a demo if you ask them. 'Cause they know they're weak. If they drive it they'll buy it. The feel of the wheel will seal the deal, my friend. So you got to kidnap them, man. Just slam the door and take off. Come on, let's go."
We got into the car and he palmed the wheel, backing up, then pulling out onto the street. A block later we hit a light. When it turned green Oscar punched it and I felt the G's pressing me back into the leather.
"Whoa," I said. "Great torque."
"Strong," he agreed, checking the rearview mirror. We made a right, then another right into a shopping center parking lot. We got out.
"Now you got them away from the dealership, you can relax a little, show 'em how awesome this car is. What you want to do is open all the doors and windows, the hood and the trunk. Then you do your walk around. You start at the driver's door and you point stuff out as you go. 'Mr. Customer, this car's got the highest safety rating because it's got front crumple zones and breakaway engine mounts. It's got a 170-horsepower V6 with four valves per cylinder and blah, blah, blah.' See, it doesn't really matter what you say most people don't even know what the hell you're talking about - but the important thing is to keep talking: 'Here's the headlights, here's the gas cap. Here's the trunk. Here are the tires.' Anything! Understand?"
"Got it," I nodded.
"Good. Now you drive."
"Yeah. You be Mr. Customer. You get behind the wheel. See, you got to be in control on the demo. Because when you get back to the lot, you got to get them in the box and make a deal."
I slid into the driver's seat and closed the door. Oscar sat beside me, buckling up.
"Make a right here," he said. "See, the test drive route is just a bunch of right turns. If you want to go a little farther, go straight there."
"I want to go a little farther," I said, wondering if he was trying to control me. Besides, driving this car felt great. What was it Oscar said about the feel of the wheel? We came up on a railroad crossing. The tracks rumbled under my wheels, distant and muffled.
"Point out stuff on the route," Oscar said. "Like those tracks. Like this turn. Like the way it brakes. Everything. Just keep talking and building confidence in the product."
I looked over at Oscar wearing his white shirt and silk tie. He had slipped on a pair of wrap-arounds and with his black hair combed back he looked very smooth. Later I learned that he came out of a gang-infested area of the city. A job like this allowed him to drive brand-new cars, handle money deals, wear a tie and act like a big shot.
"Thanks for your help, man," I said when we got back to the lot and put the car away.
"No problem, bro." He shook my hand. "You're gonna do good here."
Over the next few days I noticed that car salesmen shook hands with each other a lot. I shook hands with each of my team members when I arrived in the morning; we shook hands before we left the dealership at night. We might shake hands with each other two or three more times during the day. If I happened to be standing on the curb and if another salesman walked up I shook hands with him. It was like we were all staying loose, practicing on each other, for that moment when we would greet Mr. Customer and needed to use a good handshake that's going to seal the deal.
At one point, during a sales seminar, I was actually taught how to shake hands. The instructor, a veteran car salesman said: "Thumb to thumb. Pump one, two, three, and out." Another vet told me to combine the handshake with a slight pulling motion. This is the beginning of your control over the customer. This would prepare the "up" to be moved into the dealership where the negotiation would begin. The car lot handshake is sometimes combined with the confident demand, "Follow me!" If you employ this method you turn and begin walking into the dealership. Do not look back to see if they are following you. Most people feel the obligation to do what they are told and they will follow you, if only to plead, "But I'm only looking!"
Besides hand shaking there's also a lot of high-fiving, fist-bumping, back-slapping and arm-squeezing going on among the salespeople. Furthermore, there's a certain amount of tie-pulling, wrestling and shadow-boxing during the slow periods.
Later that first day, I was standing on the curb outside the sales offices waiting for ups when a voice boomed over the intercom, "All new and used car salesmen report to the sales towers."
I went into the new car tower while the used car guys went into their tower. It was my first time actually going into this cramped room. There was only a small space around the perimeter of the desk where the salesmen stood, all of us looking up at the three sales managers who loomed above. On that shift, the sales staff was made up of all men. In fact, out of the 85 salespeople, there was only one woman working on the floor selling cars. There were, however, several women in the fleet department and working in the finance and insurance department.
Behind the sales manager's desk were three large white boards. The first listed the names of all the new car sales people. Beside the names was a blue box for each car they sold. Since I started near the end of the month, some of the salesmen had a long row of blue boxes showing they sold as many as 35 cars. Others had only two boxes. This board enabled everyone to see who was doing well, and who was falling behind. The next board showed the number of cars sold by the entire dealership. And the final board listed the names of the salespeople who hadn't sold any cars for three days.
"How ya doin' guys?" Ben asked, looking down at us. He was in his mid-forties with graying hair combed back. His face was thin, his nose pointed, giving him a fox-like appearance.
"Doin' good, boss," the salesmen muttered.
"You lose some weight, Ben?" one of the salesmen asked.
"A few pounds maybe," Ben said, slapping his gut.
"They didn't feed you much in prison?" the salesman said. Everyone broke up.
Ben's face got red. "Will you quit telling everyone that?"
It was an odd response. He wasn't denying that he had been in prison. So I had to assume it was true.
"OK guys. Listen up. It is slow. Slowwwww. You need to start working the phones, get some customers in here. Who's got an appointment today?"
A few hands were raised.
"Here's the deal. No appointments, no ups. You guys each have to have one shown appointment or you don't get to take any ups."
I found out that a shown appointment was one where the customer actually showed up. This prevented salesmen from putting down a fake name just to fulfill this requirement.
"No shown appointment, no ups," Ben repeated. "Is that clear?"
"It's clear, boss," a salesman mumbled.
"OK. Now here's the other thing," Ben said, looking down at the assembled masses. "The guys in used cars think we're a bunch of wimps. They're going around telling everyone they can sell more cars than us. So I bet dinner, for each guy here, that we can outsell them over the next four days. What do you say about that?"
We all cheered.
Ben looked through the glass and across the dealership at the used cars tower. All the salesmen were in there meeting with their managers, just like we were meeting with ours.
Ben picked up the phone. "Now I'm going to call used cars and we're gonna show them who we are." He dialed the extension for the used cars department. When they answered he yelled to us, "What do we think of used cars?!" He then held up the phone so we could collectively yell into it. We shouted, "Used cars sucks!"
Then Ben asked us, "Who's strong?"
We yelled, "New cars!!!"
Meanwhile, of course, we could see the guys in used cars were yelling and screaming at us, telling us we were a bunch of wimps. The receptionist, who sat between the two towers, looked like she would die of embarrassment.
"All right guys," Ben said. "Get out there and sell cars. Let's rock."
The meeting broke up. The salesmen went outside and stood around grumbling. Then, one by one, they went inside and hit the phones.
I was told I was exempt from this no appointment/no ups rule, so I stayed outside. I was left virtually alone, which was unusual. At most times, there were from four to 15 salesmen waiting for ups.
A car pulled onto the lot and a young man and woman got out. No one was there to help them. I looked around. Michael was watching me through the plate glass window. He nodded and pointed at the couple. "Go ahead," he seemed to be saying, "Take them."
"Well, here goes," I thought. "My first customer."
As I moved toward them, my mind was crowded with all I had been taught that day. The couple heard me coming and turned. I don't think I'll ever forget the look on their faces.
Read Confessions of a Car Salesman Part 4: Life on the Lot
Car Buying Learning Center