Finance and Insurance - The Profit Center I would like to make myself clear on a few items of interest before I get too deep into the sales processes at any dealership, including: automobile, recreational vehicles, boats, motorcycle, and even furniture or other big ticket items. A business has to turn a fair profit in order to stay in business. I believe that they should make this profit and use it to pay better quality employees a premium wage in order to serve you better. The financial strengths or weaknesses of any business can definitely have a dramatic effect on your customer service and satisfaction. I do not, in any shape or form, wish to hurt a dealerships profitability, as it is essential for his survival. I merely want to advise people how to negotiate a little better in order to make the profit center more balanced. Let's get right down to this! Every dealership has a finance and insurance department. This department is a huge profit center in any dealership. In some cases, it earns more money than the sale of the automobile itself. Profits are made from many things that most buyers do not understand. You as a consumer should understand the "flow" of the sales process to understand the profit centers that are ahead of you. Most negotiating from the consumer seems to stop after the original price is negotiated and agreed upon. Let's examine just a small portion of what leads up to that point. The first thing that every consumer should understand is that when you go to a dealership several things come into play. One of the most important things that I could point out to you is that you are dealing with a business that has been trained to get the most amount of money from you as they can. They are trained and they practice these tactics everyday, day after day, week after week, month after month, and year after year. Let me point out a couple of important facts that I have said in this paragraph. First, you'll notice that I said a dealership and not a salesman and secondly, I emphasized times of day after day, week after week, etc. etc. This was done to let you know that the salesman is working very closely with the sales managers in order to make as much money as he can. Your interests are really not their objective in most cases. One tactic that is used heavily in the business is that the salesman says he is new to the business. This may be true or not, however; keep in mind that he does not work alone. He is working with store management, who gives him advice on what to say and when to say it. These guys or gals are very well trained on how to overcome every objection that you may have to buying from them. They have been trained in the psychology of the buyer and how to tell what your "hot buttons" are. They listen to things in your conversation that you may say to one another as well as to the salesman. They are trained to tell their desk managers everything that you say and then the desk manager is trained to tell the salesman exactly what and how to answer you. A seasoned salesman does not need as much advice from his desk and may negotiate a little more with you directly without going back and forth. The process of negotiation begins the moment that you walk into the front door or step foot out of your car and begin to look at vehicles. Different stores display inventory in different ways. This is done for crowd control or more commonly known as "up control". Control is the first step in negotiating with a customer. Ever who asks the questions controls the situation. Let me give you an example: A salesman walks up to you and says "Welcome to ABC motors, my name is Joe, and what is yours?" The salesman has just asked the first question- you answer "My name is George." He then asks you what you are looking for today, or; the famous "Can I help You?" As you can see, step after step, question after question, he leads you down a path that he is trained to do. Many times a well trained salesperson will not answer your questions directly. In some cases, they only respond to questions with other questions in order to avert the loss of control. An example of this could be something like you asking the salesman if he has this same car with an automatic rather than a stick shift. Two responses could come back to you. One would be yes or no, the other could very well be something along the lines of: 'don't you know how to drive a stick shift?" In the second response the salesman gained more information from you in order to close you. Closing means to overcome every objection and give your customer no way out other than where do I sign. The art of selling truly is a science of well scripted roll playing and rehearsal. We have established that the negotiating process begins with a series of questions. These questions serve as two main elements of the sales process. First and foremost is to establish rapport and control. The more information that you are willing to share with you salesman in the first few minutes gives him a greater control of the sales process. He has gathered mental notes on our ability to purchase such as whether you have a trade in or not, if you have a down payment, how much can you afford, are you the only decision maker (is there a spouse?), how is your credit, or do you have a payoff on your trade in? These are one of many pieces of information that they collect immediately. Secondly, this information is used to begin a conversation with store management about who the salesman is with, what are they looking for, and what is their ability to purchase. Generally, a sales manager then directs the sales process from his seat in the "tower". A seat that generally overlooks the sales floor or the sales lot. He is kind of like a conductor of an orchestra, seeing all, and hearing all. I cannot describe the entire sales process with you as this varies from dealer to dealer, however; the basic principals of the sale do not vary too much. Most dealerships get started after a demo or test drive. Usually a salesman gets a sheet of paper out that is called a four square. The four square is normally used to find the customer's "hot points". The four corners of the sheet have the following items addressed, not necessarily in this order. Number one is sales price, number two is trade value, number three is down payment, and number four is monthly payments. The idea here is to reduce three out of the four items and focus on YOUR hot button. Every person settles in on something different. The idea for the salesman is to get you to focus and commit to one or two of the hot buttons without even addressing the other two or three items. When you do settle in on one of the items on the four square, the process of closing you becomes much easier. One thing to keep in mind is that all four items are usually negotiable and are usually submitted to you the first time in a manner as to maximize the profit that the dealer earns on the deal. Usually the MSRP is listed unless there is a sales price that is advertised (in may cases the vehicle is advertised, but; you are not aware). The trade value is usually first submitted to you as wholesale value. Most dealers request 25-33% down payment. Most monthly payments are inflated using maximum rate. What this all boils down to is that the price is usually always negotiable, the trade in is definitely negotiable, the down payment may be what you choose, and the monthly payment and interest rates are most certainly negotiable. If you do your homework prior to a dealership visit you can go into the negotiation process better armed. You still need to keep two things in mind through this process. The first item is that you are dealing with a sales TEAM that is usually highly skilled and money motivated. The more you pay the more they earn. The second item to remember is that you may have done your homework and think that you are getting a great deal and the dealer is still making a lot of money. The latter part of this statement goes back to the fact that it is essential for a dealer to make a "fair" profit in order to serve you better. Once your negotiations are somewhat settled, you are then taken to the business or finance department to finalize your paperwork. Keep in mind that this too is another negotiating process. In fact, the finance manager is usually one of the top trained sales associates that definitely knows all the ins and outs of maximizing the dealerships profit. It is in the finance department that many dealers actually earn more than they earned by selling the car, boat, RV, or other large ticket item to you. We will break these profit centers down for you and enlighten you as to how the process usually works. Remember that finance people are more often than not a superior skilled negotiator that is still representing the dealership. It may seem that he or she has your best interests at heart, but; they are still profit centered. The real problem with finance departments are that the average consumer has just put his or her guard down. They have just negotiated hard for what is assumed to be a good deal. They have taken this deal at full faced value and assume that all negotiations are done. The average consumer doesn't even have an understanding of finances or how the finance department functions. The average consumer nearly "lays down" for anything that the finance manager says. The interest rate is one of the largest profit centers in the finance department. For example, the dealership buys the interest rate from the bank the same way that he buys the car from the manufacturer. He may only have to pay 6% to the bank for a $25,000 loan. He can then charge you 8% for that same $25,000. The dealer is paid on the difference. If this is a five year loan that amount could very well be $2,000. So the dealer makes an additional $2,000 profit on the sale when the bank funds the loan. This is called a rate spread or "reserves". In mortgages, this is disclosed at time of closing on the HUD-1 statement as Yield Spread Premium. This may also be disclosed on the Good Faith Estimate or GFE. You can see why it becomes important to understand bank rates and financing. Many finance managers use a menu to sell aftermarket products to you. This process is very similar to the four square process that I discussed in the beginning. There are usually items like gap insurance, extended service contracts, paint and fabric guard, as well as many other after market products available from this dealer. The menu again is usually stacked up to be presented to the consumer in a way that the dealer maximizes his profitability if you take the best plan available. The presentation is usually given in a manner in which the dealer wins no matter what options are chosen. With the additional items being pitched to you at closing, your mind becomes less entrenched on the rates and terms and your focus then turns to the after market products. Each aftermarket item can very well make the dealer up to 300-400% over what he pays for these items. Gap coverage for example may cost the dealer $195.00 and is sold to the consumer for $895.00. The $700.00 is pure profit to the dealer and is very rarely negotiated down during this process. The service contract may only cost a dealer $650.00 and is being sold for $2000.00. The difference in these items are pure profit to the dealer. You see, if you only paid $995.00 for the same contract, the dealer still earns $345.00 profit from you and you still have the same coverage that you would have had if you had paid the $2000.00. The same is true for the gap coverage. You are covered the same if you paid $395.00 or $895.00 if the dealers costs are only $195.00. The only difference is the amount of profit that you paid to the dealer. Another huge profit center is paint and fabric protector. In most cases the costs to apply the product are minimal (around $125.00 on average). In many cases the dealer charges you $1200-$1800 for this paint and fabric guard. As you can see, these products sold in the finance department are huge profit centers and are negotiable. I also have to recommend the value of most all products sold in a finance department. It is in your best interest to get the best coverage possible at the best price possible. Always remember this: The dealer has to make a fair profit to stay in business. It just doesn't have to be all out of your pocket.
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Netizen Persoalkan Fathia Latiff Sholat Dalam Kereta Yang Sedang Bergerak




Experiences from 'The Flow' (7) - Living Well? Farangs and Finance - The Myth "To us Farangs (Thai: foreigners), living in Thailand can be financially challenging. But according to most of the locals, ALL FARANGS MUST BE RICH!" "Prosperity: The eternal flow of all that's good in life..." *Below is the seventh episode in a series of real life events experienced by the author. The only deviations from the truth may be the names of people and places. - The Myth of Farang Finances - There is an unwritten rule about the cost of anything in Thailand: There is a Thai price and a Farang price. Since Thai people believe that "all Farangs are rich," the Farang price of everything is much higher (sometimes triple!). Of course, this is a myth. But why do Thai people believe all Farangs are rich (including the "poor" Farang English teachers)? Many reasons. But all of them can be placed into three broad areas: Tourism, Currency, and Standard of Living. - The Tourist Syndrome - Like most of Asia, Thailand attracts tourists from around the world. Prospective vacationers plan and save all year for their holidays in the tropics. The warm, sunny weather; lush, green landscapes; exotic cultures, and beautiful, friendly people are but a few of the many reasons why millions of tourists flock to Thailand. While on vacation, most of the tourists, out of ignorance OR intention, willingly spend what the local Thai people consider "small fortunes." Wallets and pocketbooks are opened more freely when on holiday. Consequently, especially in the big, major cities and tourist hotspots of Thailand, most Thai people believe that Farangs are rich because all they see are free-spending tourists. What the Thai people don't realize is that the majority of the "rich" Farangs work like dogs all year 'round in order to spend a lot of money during their short visits in their country; having a great time playing out their individual, celebrity fantasies. - "A Farang in Thai's Clothing" (The Double-Edged Sword) - Tourists and ex-pats alike enjoy the overshadowing strength of their home currency against the Thai baht. For example, one USD = 33-35 Thai Baht. This situation makes things seem ridiculously cheap. Food, accommodations, and all vices known to man are easily obtained for obscenely low prices. And, of course, the longer a Farang stays in Thailand, the more he/she learns how to buy things that are closer to the local Thai price. Case in point: I've been in Thailand for about two years now. I take advantage of my Asian appearance as much as possible by keeping my mouth shut and letting my Thai friends do all the haggling. All vendors assume that I am a local Thai (until I begin speaking). I don't say a word until the transactions are complete. This "mum's the word," habit of silence normally saves me between 30-50% at all the local markets, restaurants, pubs, hotels, tourists attractions etc. It's frustrating to my non-Asian, Farang friends (especially the ones who have been in Thailand longer than me AND speak fluent Thai) whenever we're out together. Everyone, from the hotel receptionist to the taxi driver, speaks to me in Thai and assumes that I will translate what they say for them. And of course, prices for me are automatically lower. When we're out bar hopping or singing karaoke, the women we meet see me as a rare catch, indeed; a "double bonus" - not only am I a "rich" Farang, my Thai appearance is easily presentable to friends and family; something supremely important in Thailand. Don't get me wrong. Yes, there are many advantages to being a Farang AND looking Thai; but there are disadvantages too. It's a double-edged sword cutting both ways. For example, I'm an English teacher. English teachers in Thailand are supposed to look like Farangs (i.e., white skin, tall, brown or blond hair, light colored eyes, etc.). Many times during my stay in Thailand I've been turned down for a job because I "look too Thai." Once I applied for a teaching position at an International School where a lot of my Farang friends worked. They had bachelor degrees. I have a master's degree and was enthusiastically welcomed by the Hiring Director. But then a co-owner of the school saw me and instantly told the Hiring Director to offer me a position WITH HALF THE NORMAL FARANG SALARY! In other words, even though I had more education, qualifications, and experience than my co-Farang friends, the co-owner thought I "looked too Thai" to garner the normal Farang pay. I don't blame the co-owner. You see, the parents of English students pay a premium for English classes and want "Real Farangs" teaching the class! If the parents don't like any teacher, only one of two things can happen: 1) The teacher is excused (which is the norm) or 2) The parent takes the student elsewhere for English classes taught by "Real Farang" teachers (which doesn't happen often). - Culture Shock and Living Comfortably: Farang Style - Let's face it, visiting a place for a vacation versus living in that place are two very different things. In spite of having an Asian heritage and passing for a local in any Asian country, I (like all ex-pats) still suffered a severe culture shock when I decided to live in Asia. Anyone who has ever lived in Asia can empathize. Things are rarely on time. Asians, with a seemingly perverse delight, are notorious for keeping Farangs waiting; or worse, not showing up at all. No advance notice of cancellation. No remorse if you should happen to bump into them afterwards. There is a saying amongst us Farangs in Thailand, "If you and an Asian agree in the morning to meet at 4:00 PM, the next question should be: What week?" And what Westerners consider as "basic and normal" is considered "luxurious" by most Asians. Clean, continuous water is not a guarantee. I've lived in many places in Asia where the water spouts go dry for hours everyday. The smart thing to do is to keep a large trash bin full of water at all times in the bathroom. That way, even if the running water runs out, one can flush the toilet (a Western, seated-style toilet or an Asian, squatting style porcelain "foot bowl") and at least take a bath. Uninterrupted, non-spiking electricity is rare. "Brown Outs" happen frequently. Every household is equipped with candles and flashlights for such occasions. The locals just take it in stride and entertain themselves with the old art of conversation; or, if one is lucky, the even older (and more fun) art of sex. But most Farangs are "forced" to "relax" and go with the flow - even if hours of computer work have just vaporized into ether! When brownouts occur, people scramble to turn all appliances off (in preparation for the power surges that occur when the power is finally restored). Televisions, computers, and stereos routinely become irreparably damaged from such surges. These "little annoyances" tend to accumulate. Finding real napkins vice toilet paper at restaurants becomes a treat. Some semblance of sanitary conditions in restaurants and other public places (meaning: food minus the flies or the smell of sewage - "Ahhh...the mist of piss and the aroma of dog excrement") makes one feel like a VIP! Good roads, roads that don't threaten to fling you off your motorcycle with every pothole, makes the "driving war" a little more tolerable. Honest (or at least semi-honest) businessmen and policemen would also be nice now and then - and the list goes on and on... All the above reasons steer most Farangs towards obtaining a standard of living they consider "normal" by Western standards; but is nonetheless, a standard that appears quite lavish to the local Thai people. Naturally gravitating to living areas that more closely match their usual standard of living; Farangs look for cleanliness, convenience, and comfort. This translates into apartments, condominiums, and townhouses that can cost triple the normal Thai person's monthly salary. Luckily, since qualified Farangs are in short supply, Farang salaries in Thailand tend to be just enough to support a somewhat "tolerable" standard of living for a Farang; a living standard that seems totally extravagant by Thai standards. Not accustomed to (or unwilling to acclimate to) the heat, Farangs seek out places that have air-conditioning. Most locals cannot (or will not) "waste" their money on expensive aircon units and their accompanying high electricity bills; perfectly satisfied with one or two electric fans. Farangs routinely enjoy eating at restaurants, especially restaurants that are clean and offer a variety of Thai and foreign cuisines. Local Thai's either cook at home or eat at one of the many street food stands; thinking that eating at a restaurant is another extravagance reserved only for special occasions. As soon as a Farang can afford it, he/she buys a car (or at least a motorcycle); whereas the bulk of Thai people use cheap, public transportation (bus, train, subway, or motorbike taxis). Traveling by taxi is considered expensive and used mostly by Farangs and richer Thai's. All of this (free-spending tourists, currency power, and luxurious living) reinforces the Thai myth that ALL FARANGS MUST BE RICH! ...Continued in "Experiences from 'The Flow' (8) - Living Well? Farangs and Finance: The Reality, Stupidity, and Hard Knocks." "Until next time, find 'The Flow' and jump in!" Your Friend in this Intrepid Journey called Life, Carl "J.C." Pantejo Note: If you want to read more about overcoming heartbreak, unconditional love, exorcising past personal demons, and the Illusive Secret of Happiness, please read the following articles: "Experiences from 'The Flow': From Heartbreak to Happiness" "Experiences from 'The Flow' (2): Coincidence or Synchronicity: FROM RELAPSE TO MIRACLES..." "Experiences from 'The Flow' (3): LOST AND FOUND - Kindred Spirits and Mistakes made in Haste." "Experiences from 'The Flow' (4): LOST AND FOUND - Meant to Be?" "Experiences from 'The Flow' (5): "The Stray" "Experiences from 'The Flow' (6): "New Beginnings, Old Endings" "How Dare She! Out of Desperation I Learned How to Forgive" "Remember Who You Are!" "Need to Heal Your Broken Heart? Read on. Overcome Heartbreak and Learn the Illusive Secret of Happiness." By Carl "J.C." Pantejo, Copyright January 2008 He is a retired U.S. Military veteran. Believing that school was too boring, he dropped out of High School early; only to earn an A.A., B.S., and MBA in less than 4 years much later in life - while working full-time as a Navy/Marine Corps Medic. In spite of a fear of heights and deep water, he free-fall parachuted out of airplanes and performed diving ops in very deep, open ocean water. He went to Thailand 2 years ago for a week's vacation, fell into a teaching job, and has never left!




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