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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How to Take Control of Your Personal Finances, Do You Have What It Takes? What does it take to be in control of your personal finances? To do this you must own and operate your own business. So what does that take? You need to be a self-starter, a person who demonstrates uncompromising discipline; exhibits rock solid work ethics, with continuing effort that is beyond and above the norm; a readiness to fall down and pull yourself back up; and a willingness to spend personal time, money, and energy over and over again until you succeed. This requires sacrifice, the ability to take criticism and you may be ridiculed for your extraordinary efforts. First you will need to put your business success a head of pleasure. This does not mean that you will allow your relationship or family priorities to suffer, what it means is that once those have been taken care of, your business is second to nothing else. It also means that you may lose some sleep, because when your family is sleeping you just might need to take care of some important business matters. As you do not want to allow them to interrupt the normal process of family life. Are you willing to do this? This is what successful business owners do. With that being said are you ready to tackle your own business. If you are willing to do this, you will become successful and you clearly have what it takes. If not there is no reason to read the rest of this article. So for those who want to know more about this, let's get started... The first thing you need to do, is sit down with your spouse or partner if you have one and discuss your plans on this matter. You need to clear away any potential obstacles before starting any business venture. While your partner or spouse may not be willing to go with you the extra mile to be successful. You need to make sure that they will not be a road block. Getting their approval and support up front is extremely important. This will give you the freedom to do what you need to do. The second thing you need to do is to get your mind really wrapped around what you are going to embark upon. This is real work and will be tiring at times, you need to mentally be ready for the challenge. If you are not ready or prepared, you will fail. You need to find an accountability partner that will encourage you and will remind you of your commitment when you get discouraged and need a pick me up. Then you personally need to sit down and decide how much effort and personal resources you are willing to invest in your business. In quantities of time, money and energy. You also need to determine what you are willing to sacrifice to be successful, yes sacrifice. No pain no gain. There will be occasions when you are not able to attend personal functions because your business must come first. If you always put these special occasions first you will fail. You also need to determine how to schedule your weekly activities identifying the time needed to complete income generating functions. The important thing is to clearly understand what activities need to be completed each week to build and advance your business; and at all costs each week you must complete these tasks. Remember this is not a hobby. Hobbies cost money they do not make money. If this is a hobby for you, then I recommend you quit before you get started. The key to your business success is, only do the tasks that lead to sells, revenue, or income. This is the life blood of your business. The next thing is finding a business that you can be comfortable with and that you are excited about putting your soul, heart, mind, and energy into. You need to have passion about it and it has to be more than a pay check. If money is the only motivator, you will quickly lose your enthusiasm and interest and it will become a job and you will fail. So find something that you can wrap yourself around and then go sell it to the world. Remember owning your own business means that you are going to sell a product or a service or both to an end customer for their betterment and profit. It is a win-win proposition, they get something they want or need and in return, you receive payment for providing a needed or wanted item. Now, let's take a look on how to set up a successful business, utilizing leverage to multiply your time, money, and efforts. In any business start up; there are two factors that come into play. You need to have a product or service that millions of people want or need. And you need to have a method that enables the consumer to find you to order this product or service from you. The best businesses to get involved with do not require you to stock merchandise and have to ship a service or product to the end customer. This is costly and time consuming and takes away from your most productive efforts which is getting the product or service in front of the customer and getting them to purchase it. You also do not want to have to lease a building or office space as these costs create unnecessary overhead and immediately take away from your profits. If you can do this, the best situation is to run your business out of your home, creating a small office space somewhere in your home. So you want the manufacturing company to stock and ship the products for you and you really only want to be the middle man is primarily the customer liaison or interface. This is the most difficult part of owning a business, making the sell once a customer has seen your advertisement or is at your website. Another key element is clearly defining a warm market to present your product or service to. When going into business your warm market is not a friend or a relative. A warm market is a person who is looking for the product or service that you are selling. They are in need of a product that you are selling and when presented to them they will genuinely check it out to see if it can and will meet their needs. This is truly the only warm market that a sells representative has. So what is the best way to find and identify your warm market for your services or products? The best way is advertising. That would be on TV, radio, the Internet, news paper, magazines, and word of mouth. All of these cost a substantial amount of money, but this is the cost of doing business. Recently I discovered a new method on how to combine these warm market generators at a substantially low-cost and it is call Cooperative Marketing. It provides ads on TV, radio, and the Internet, and is getting tons of word of mouth advertising through this co-op program. What it does is exposes its product line to thousands of people weekly using media, TV, radio, and the Internet to introduce products that customers are wanting and needing. Then they give business minded people like you the ability the right to purchase the life time acquisition of these paying customers who called into the program to purchase their products. This process offsets the companies advertising costs, along with yours and you receive a life time customer. This is not a warm customer, this is a hot customer because they have already purchased the product and are wanting to use it to meet their needs. The exciting thing about this process is that these products are products that will be used over and over month after month for a life time. So if you have the ability to build a solid customer relationship, you can create a customer base, based upon these Cooperative Marketing hot leads. The key skill that you need to develop is your ability to build personal relationships with customers that you acquire, showing them that you care, and want them to have the best product experience possible. If you can do this, then owning and running a business has never been simpler. This takes all the guess-work out of the advertising equation; as ready-made customers call in order products, and as a business person you acquire these customers and you build long-term relationships with them. All of the heavy lifting such as servicing the customer is done by the manufacturer, as they take the orders over the phone, ship the products; deal with customer issues, and service refunds or returns. The company also sends out magazines and monthly articles about other products and special deals, and up and coming new releases. So why is a company like this willing to share the profits with a business person like you? Because they know that long term business relationships are built on trust and loyalty. To get trust and loyalty they need people willing to call and nurture the relationships. The company opens the door and you are the connecting point for the customer. When a customer calls the order line they do not get a relationship person, they get a person whose job is to take an order just as if you were at Burger King or McDonald's. They are courteous, but their main go is to take the order and then go on to the next customer. Your responsibility is to build strong relationships with these customers, introduce them to new products when they come to market, and help them to assimilate these products into their daily habits. And you get paid very handsomely for doing so. These broadcasts are occurring 7 x 24 hours, 365 days every year throughout North America. So if you can get behind these products, then your business success has been reduced down to; purchasing co-op customers, making phone calls, helping each customer have the best product experience available, showing that you care about their personal results, and introducing them to more of the same type of products they are already purchasing and enjoying. And to help them refer others who can benefit from these products. Cooperative Marketing is a unique way of doing business and few companies have figured out how to implement or have the ability to carry out this. As a business person this makes complete since. It is a mixture of Franchising, as it provides name recognition, direct sells, because it provides one on one contact with the customer, MLM benefits because it allows people to recruit business partners and sharing in the total group volume generated monthly, and it allows one to run their business from the home because 90% of the work is done via the telephone and on your personal computer. So owning and operating your own Cooperative Marketing business has never been easier. However, it takes commitment and every quality that was listed in the beginning of this article. If you do not have these desires and skills you will not succeed in any business venture you attempt. If you want to learn more about this unique opportunity then give me a call or go to my website. The sky is the limit as this business is in a market segment that generates over 50 billion dollars of revenue yearly and is growing; and it is only going to get better. And the best news is; this manufacture is setting the stage to go international in 2011. So give me a chance to help teach and integrate you into the world of Cooperative Marketing. Your business success is really only a phone call away.




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