“Buckle Up: Navigating Auto Sales and Financing” — What You Need to Know

by Zach Shefska | Last updated Apr 25, 2023 | Dealership Operations

The Federal Trade Commission recently released a report highlighting the struggles consumers encounter when trying to buy a car. The report, titled, “Buckle Up: Navigating Auto Sales and Financing,” is a 13 page Staff Report produced by the Bureau of Consumer protection.

There is an accompanying 48 page report entitled, “The Auto Buyer Study: Lessons from In-Depth Consumer Interviews and Related Research,” which goes even more in depth into the consumer interviews the FTC conducted for their research.

Both reports are dense, and take a long time to read. Here at CarEdge, we feel responsible to distill reports like these for you. So, that’s exactly what we did. Click on the table of contents below to jump to a section, or enjoy the accompanying YouTube video that goes in depth on why you shouldn’t negotiate based off of a monthly payment.

If you find this content helpful, please consider sharing it with a friend or colleague.

Let’s dive in.

Automotive advertising is a bunch of … B.S.

It should come as no surprise that the FTC found that automotive advertisements are generally full of misleading information. The report reads, “Advertisements with misleading financing terms (as well as those with deceptive price and discount offers) remain a concern.”

The report goes on to suggest that dealers should, “make only accurate and non-misleading advertising claims to consumers, advertise terms that are actually available, and clearly and conspicuously disclose material qualifications or limitations on any advertised deal.” This is a novel concept. Let’s hope it catches on.

As we’ve discussed before, there are many ways to find which car dealership you should go to, and our recommendation is to follow these steps:

What the heck is the actual price of the vehicle?

Another key finding from the FTC’s research is that consumers are generally confused about what the price of a vehicle is, and what is and isn’t negotiable. You would have hoped that with the advent of websites like TrueCar, AutoTrader, and more, that consumers would have an advantage in understanding what the true cost to purchase a vehicle would be, but that couldn’t be further from the truth. Unfortunately websites like the ones we listed above simply perpetuate the “smoke and mirrors” that comes with automotive pricing.

The study repeatedly discusses the importance of negotiating the “out-the-door” price. As far as we know, our Out-the-Door Price Estimator is the only such tool on the internet that is designed to help you estimate what your total OTD price will be when purchasing a vehicle. Please use the tool! It is FREE!

The study goes on to report that consumers that do negotiate on the out-the-door price still run into trouble, “As some study participants explained, after negotiating what they thought was an agreed price for a vehicle with sales personnel, they faced negotiating again during the dealer’s financing process, which they found frustrating and time-consuming. The introduction of add-ons during financing discussions caused several participants’ total sale price to balloon from the cash price, and for two participants, negative equity for trade-ins caused the amount financed to increase.”

Be sure to watch this video to better understand how you can be prepared for this situation, should you encounter it:

Consumers get screwed in the F&I office

I spent at least 20 minutes trying to think of a more appropriate title for this section of the article, and candidly, I couldn’t think of anything else that accurately sums up what the FTC uncovered in their report.

As a car buyer, it is important that you know that you can negotiate nearly everything at the dealership, and that includes finance options, insurance products, and more.

The FTC report reads like a horror novel, “Several participants did not recall learning the length of the financing or the APR before agreeing to financing. Several participants were surprised to learn about these terms when they reviewed their paperwork during the FTC’s qualitative study.”

If you do not feel comfortable with something that is going on in the F&I office, ask the F&I Manager to slow down, and ask questions. More on how to handle being in the F&I office here:

Dealer add-ons are confusing and dumb

The FTC report brings to light how confusing and frustrating the dealership practice of adding ancillary products and services to vehicles really is. If you’re unfamiliar with this concept, it is when a dealership sells you a car with additional products installed that you did not request. For example window etch, or LoJack, among many others.

The FTC report highlights the many challenges consumers face when confronted with dealer add-ons, including but not limited to:

• Never discussing add-ons, but including them in the selling price of the vehicle;
• Consumers are confused and think the add-ons are free;
• Consumers are under the impression that the add-ons are mandatory;
• And more.

The future of car buying and ownership should be different

Here at CarEdge we are determined to change the way car buying and ownership works in the United States. Buckle Up: Navigating Auto Sales and Financing from the FTC is a great reminder as to why it is so necessary to evolve the way we buy and own vehicles.

If you’re interested in being a part of that change, please consider being an early tester of the CarEdge platform.

What really happens when a car salesperson goes to ‘talk to the manager’?

by Ray Shefska | Last updated Feb 1, 2024 | Dealership Operations

Trust is at the crux of any human interaction. Whether you’re navigating the aisles at the grocery store, having a conversation with your significant other, or interacting with your boss at work, trust plays a critical role in how we approach each and every aspect of our life. Seemingly, there is no trust in a car dealership (not between the customer and the salesperson, and not even between the salesperson and the sales manager). For decades now, car salespeople have constantly gone to “talk my manager” for permission to negotiate during the sales process.

This tactic, paired with countless other dealer antics is very frustrating for customers. If you’re unfamiliar with your salesperson saying “let me go check with my manager,” you’re lucky! If you’re not, it means you’ve certainly spent countless hours at a dealership before being frustrated and disappointed that the process is so drawn out.

Today I wanted to provide some insight into why salespeople have to go talk to their managers to ask them questions when negotiating with a customer, and what really happens behind the scenes. If you prefer to watch instead, consider clicking on the video above.

It starts with trust

It’s important to recognize that car dealerships have been operating in a similar manner for nearly one hundred years. The manufacturer to dealership model has been in place since before you were born, and the tactics and strategies dealers deploy to maximize profits are ingrained in dealership culture.

Traditional dealership culture is anti-consumer — that is to say most dealerships operate in a way that isn’t transparent, friendly, or buyer oriented. Dealers are tasked with one primary goal: maximize profits, and in that quest, a lot of antiquated practices have become the reality of the car buying process.

The way dealerships are structured from a staff perspective is worth noting. There is an owner (either a mom and pop owner, or a big corporation), and then below them are the staff. There is a General Manager, a New Car Sales Manager, and a Used Car Sales Manager, and below them are the salespeople.

The structure may be different depending on each organization, but generally speaking, this is the typical formation of a dealership’s sales staff.

If you’re thinking about buying a car, you might enjoy this article: Buy or Lease: How to Decide For Your Next Automobile

The New Car Sales Manager is responsible for (and their pay is tied to) how much gross profit the dealership makes in any given month off of new car sales. That means that the managers goal is to work with their salespeople to get the most profit out of every new car deal.

Now that you know that, it should be clear how the “let me go talk to my manager” tactic came to be. Managers don’t trust their salespeople to maximize profits. Instead, they fear that salespeople will jump right to the bottom line number right after shaking hands (or I guess elbow bumping) their prospective customer.

Most sales managers operate out of fear. Their compensation is directly tied to how much gross profit the dealership generates on any given month, and the idea of giving up “control” to salespeople to be able to make their own independent decisions during the negotiation process is a foreign concept to them. Instead, sales managers typically try to retain as much control over the process as possible, and that’s why you see salespeople frequently doting to the sales managers office.

Most customers prefer to deal directly with a decision maker

This control dynamic is ironic, however. Car buyers don’t want to be dragged into some strange power struggle between a salesperson and a sales manager. Instead, they simply want to deal with the actual decision maker from the start.

This makes sense considering most buyers research their purchase for 14 hours or more. To then be stuck at a dealership negotiating with a salesperson who really can’t make a final decision, only to drag on the process even more … It’s no wonder that buying a car can be a tiring event.

The construct of “let me go ask my manager” also allows sales managers to mitigate their fear of becoming irrelevant. As many car dealerships pivot towards one price selling, sales managers fear that they won’t be able to retain their roles within the dealership.

Car salespeople are trained “whoever has control wins”

Everything in life starts with trust, but in the car dealership it also starts with control. Antiquated training has led to salespeople and sales management staff being reliant on the concept of “whoever has control wins.” This “us” versus “them” mentality is not pleasant for anyone involved, but as a car buyer it is important you understand just how deeply it is rooted within the dealership.

For example:

• Salespeople don’t want to give up control to the customer
• The sales manager doesn’t want to give up control to the salesperson
• The finance manager doesn’t want to give up control to the sales manager
• The owner doesn’t want to give up control to … anyone!

As you can see, trust is lacking across the board, and when that’s the case, getting anything done at a dealership comes to a standstill.

The sales manager is trying to think two or three steps ahead to try and get the deal done

So what really happens when the salesperson goes to talk to the sales manager? The sales manager quizzes the salesperson to better understand how likely the customer is to make their purchase today.

If it’s likely they can close the deal today, the sales manager will work the salesperson to retain as much margin in the deal as possible. If the deal feels shaky, the sales manager might coach the salesperson to negotiate a slightly lower price to see if they can move the needle.

At the end of the day in the sales manager’s office the word they are most concerned about is “now”. “How likely are they to make the deal now?” Everything is about getting the deal done today, and it’s not only the sales managers responsibility to coach the salesperson to get the deal done now, but also with the most gross profit possible.

So there you have it, that’s what really happens when the salesperson goes to “talk to the manager.” Is it frustrating and annoying when it happens? Absolutely. Do you now understand why it happens? I hope so. Patterns of behavior that have been in place for decades will take time to erode. Let’s hope that this one goes away in the not too distant future.