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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Dealing With Finances After the Breadwinner Passes Away
Priority one is deciding which member of the family will coordinate issues relating to the estate of the deceased
The very first priority will be assigning responsibility for coordinating all matters relating to the estate of the deceased. Normally the mantle falls on the surviving spouse. If the spouse also happens to be terminally ill or physically unable to discharge the role effectively the responsibility may fall on the younger generation, and in all probability the choice would be the senior-most among the siblings. At this point the family begins consultations with bankers, lawyers and creditors and a whole
Appoint an executor for the estate of the deceased and identify beneficiaries noted in the will or other documents
It is important to understand that financial firms only give credence to legal entities as defined by law. There will be an executor for the estate, a beneficiary in all the insurance policies, bank deposits, stocks, bonds and savings accounts, the question of joint ownership of bank accounts, the power of attorney holder for a checking account, the co-signer of a safe deposit locker or a guarantor to a loan; all these legal signatories will be carefully listed when the estate of the deceased is on the table for legal scrutiny. Only these signatories will have the power to unlock the proceeds of individual accounts or assets. If, for example, the spouse is not the co-signer on a safe deposit article, he or she will have to produce a court order to access the asset.
Procure the death certificate for releasing various benefits to legal heirs and other beneficiaries
The death certificate is the final document that seals the fate of social security, pension and any other life benefit the deceased has bequeathed. Such certificates are normally issued by the coroner, attending physician, or medical examiner, or in some instances by the justice of the peace. You will need a number of copies of the death certificate because it virtually becomes the passport to access various deceased accounts. Banks will insist on them to close bank accounts and pay their balances to the legal heirs, insurance companies will need them to pay claims, and properties or any other type of asset can't be transferred in your name unless you present proof of
Release the notice of death in the print media and set the timeframe for initiation of claims
The moment that a person is appointed as the executor of the estate it becomes his duty to collate all assets and liabilities and arrange to pay every outstanding debt to each of the creditors, and then to disperse the balance outstanding to the beneficiaries that are mentioned in the will, or to the beneficiaries that are specifically mentioned in bank and company records. As per Federal and state law a notice has to be published in a local paper announcing the death and giving a specific time to members of the public to raise claims against the estate, and once this is exhausted there is no further legal remedy available to the public.
Claim the Life insurance benefits and make arrangements for securing company and workers compensation
Life insurance is simpler and claims are usually settled and released within a fortnight of the death. Usually these payments are sufficient to cover funeral expenses, mortgage payments, and utilities.
If the deceased was a company worker or manager at the time of his death and he had an individual life insurance policy, there could be a company benefit attached. If the death occurred in the performance of duties such as in an industrial accident there will be company benefits in addition to the insurance company payout and that must be confirmed from the company HR department. Many companies maintain a Flexible Spending Account (FSA), and retirement funds that can be claimed by the surviving spouse.
Consider the tax implications prior to claiming spouse's IRA benefits
Taking over an Individual Retirement account like the 401k may not be as straight forward as it may seem. If the surviving spouse rolls out her husband's 401k and merges it with her own retirement fund that could be a monumental mistake. By allowing the fund to remain in her husband's name (like an emergency fund) the lady could postpone payment of a big withdrawal penalty.
Important lesson: Never leave your family in the dark regarding any aspect of your estate
It would be a tragedy beyond all reckoning if your surviving spouse and children have to ferret out the details of your estate from the mountains of paper that you will leave behind. The situation worsens if you die intestate (without creating a will listing the beneficiaries) and leave your estate to be bitterly contested by your children or outsiders looking for lucre. In any case, if you happen to be the surviving spouse your first duty will be to check your husband's personal belongings and the home thoroughly to ascertain that no crucial document goes undetected. An informal discussion with legal luminaries known to your husband may also uncover any will or testament or trust deed that he may have entrusted before death.
Confirm whether there is any written record or diary listing assets information
Many people love to maintain a diary or black book detailing all their assets and financial transactions to be used as a ready reckoner in case of need, a sort of one stop reference manual to turn to in an emergency. It will list all types of personal information, business details, and contact numbers of their attorney, personal physician, consulting medical specialist, friends and business associates. There could be one section devoted exclusively to credit cards and bank accounts and stock market shares and other money market instruments. It could also act as a checklist informing where insurance policies, car title papers, personal identification documents, and property deeds are stored, and the name and number of the bank safe deposit locker where gold or other valuables are stored. Like the famous black box (or flight data recorder) that helps the airline retrieve information after a mishap, your spouse's black diary could be your ultimate source of confidential family information, and it pays rich dividends to locate it (assuming such a book is available) as soon as possible before the estate planners get to work.
What to do if the deceased has a running business concern that needs new leadership
This presents a dicey situation and it can't wait even for the funeral to be over. A running business concern is a living breathing entity and it won't work on life support or auto pilot. You have to immediately lay your hands on the Memorandum & Articles of association and company bye-laws, power of attorney documents, buy-and-sell or lease agreements, balance sheet and profit and loss statements, bank account statements and net worth appraisals so that you can smoothly implement the instructions recorded in the will document, if that is available.
Many of these crucial decisions need to be taken in the hours or days or weeks following the death when you will also be busy arranging the funeral and many other ceremonies organized by your husband's friends, company workers and well-wishers. It's a depressing and fearful time for the bereaved family members and it takes a lot of grit and determination to emerge from the shadow of the deceased and carve out their place in the sun.
You can pay funeral and legal expenses with timely help from an auto collateral loan
What catches the family unawares is the suddenness of the death of its beloved one and its circumstances that leave them facing a short period of uncertainty and fear. There will be a funeral ceremony to coordinate, lawyers to be consulted, creditors to be satisfied and business associates clamoring for your attention and advice, and your spouse's estate to be organized. This is the time when money will be desperately needed to fund domestic, funeral and legal expenses.
This is the time to unravel the power of the loan for vehicle title. The pink slip loan approves 60% of the equity in your car, at very short notice without onerous formalities, and without probing your bad credit record.
The pawn car title loan can be availed simply by submitting your car title documents as collateral. The interest will be affordable at 25% APR. If you desire you can request extended repayment terms to reduce the strain on your existing income.