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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Inilah Tips Mengesan Kamera Tersembunyi Dalam Bilik Hotel Anda Yang Ramai Tak Tahu!











Personal Finance Management - A Practical System to Managing Your Money Do you save your money? If you do, how many bank accounts do you put your money in? If you're like most people, you probably have just one single account or two at the most. Personally, I have a total of seven bank accounts - four savings accounts, two current accounts and one fixed deposit account. You may think I'm crazy or you may think it's too tedious to manage that many accounts. But I can assure you this is the best way to manage your money and it's definitely worth every ounce of the effort. The reason I have my money in so many accounts is to ensure I'm not spending more than I should, that I'm able to pay my credit card bills on time, that I'm putting enough money aside for rainy days, and that I have surplus to invest. However, I'm not saying you should have seven different accounts like me. What I'm saying is you should decide the number of accounts based on your own needs, with each account catered for a specific purpose. All I'm doing is to give you an example to follow. In Singapore, banks will usually charge you a monthly service fee (usually S$2) if your daily average balance falls below a minimum amount. But I'm more than happy to pay this fee because the advantages I gain from properly managing my money more than offset the small amount of fee I need to pay. Having said that, I still choose more savings accounts than current accounts because the required daily average balance for savings accounts is much lower than current accounts, which is easier to meet. And the reason for having current accounts is because I need to issue cheques at times for both my business and personal purposes. So remember to check with your banks the minimum balance required and the service fee they charge. Now let me explain how I manage my money with my multiple accounts. 1. Central & Business Account (Current Account) Currently, I have only one source of income, which is the commission I receive from brokering real estate deals as a real estate agent. Every month, all my commission income will be deposited into this account before I distribute them to other accounts accordingly. But before I do that, I'd save between 15 to 20 percent of the amount in this account as my real estate business monthly expenses. After which I'd transfer the remaining amount to other accounts through Internet banking. For this account, I'd usually be able to avoid the service fee because my balance in this account would usually meet the minimum requirement, except occasionally. 2. Personal Expenses Account (Savings Account) As a self-employed, you're essentially your own boss. Nevertheless, you still need to pay yourself a fixed monthly salary. This fixed amount is mainly to control your monthly expenditures so that you won't overspend. The key is to allocate an amount that's enough to cover your basic necessities and perhaps a little extra for some leisure activities. You may need some discipline to stick to only spending the amount available in this account because there is definitely temptation to spend the money in your other accounts when the money in this account runs out. The way to counter this is to have just one ATM card. You should destroy all the other accounts' ATM cards or simply tell the banks not to issue you one. I understand there's also the credit card temptation. So let's move on to the next account. 3. Credit Card Payment Account (Savings Account) You may already know by now that credit card can be a dangerous financial tool. But that is only true if you abuse it. On the contrary, it can be a great wealth enhancement tool if used properly because you can accumulate bonus points with your purchases. And you can use these points to redeem for free products and services like shopping vouchers, dining vouchers, extra flyer miles, petrol vouchers, etc. I have since accumulated a few hundred dollars worth of petrol and this helps me to save even more money! The money in this account is to pay for all my credit card bills. This is a very important account because it ensures that I have the money to clear my credit card bills on time so I don't have to pay exorbitant interests to the issuing banks. This is how I make sure I'd have money in this account to pay for the bills on time. Whenever I make a payment using one of my credit cards, I'd transfer the payment amount from one of my other accounts to this account the moment I reach home. If the item I bought were for personal use, I'd transfer the exact amount from my personal expenses account to this account. In doing so, the amount in that account would have been reduced and in such case, I won't overspend because I now have less money in the expenses account for my disposal. If the item were for business purpose, then I'd simply transfer the money from my Central & Business account to this account. Never delay transferring the money or you'll forget about it. That could be dangerous. Always transfer the money once you get home. If not, do it the next day at the latest. Remember... it is extremely important to clear your credit card bills on time because this habit can make or break you. And also to always stick to spending only whatever you have in your personal expenses account for the month. 4. Car Expenses Account (Current Account) Apparently, you need this account only if you own a car. If you do not own a car, then just include your monthly transport expenses in your personal expenses account. I separate my car expenses from my personal expenses because if I combine the two expenses in one account, I may spend more than I should on my personal consumption like entertainment or new clothes, and leaving little money to pay off my car loan, insurance, etc, at the end of the day. There's always temptation to spend more when you have more money at your disposal. The principle to having this account is the same as having the credit card payment account, which is: CLEAR YOUR DEBT ON TIME! Put the money for anything you're paying that is related to your car - petrol, grooming, road tax, servicing, etc - into this account. You have to estimate how much you're paying for each of the listed items on a monthly basis and simply put that amount into this account every month. For example, if your yearly insurance premium is $1,200, then simply save $100 in this account every month so that you'll have the money ready when the time comes for renewal. For other car expenses that do not have a fixed sum, like petrol or car servicing, you just have to make an estimation and save the amount according to your estimation. Initially, you may under-save or over-save for these expenses, but it's ok. Over time, you'll have a more accurate estimation. To be safe than sorry, choose to over-save. 5. Miscellaneous Account (Savings Account) Life is not just about work and saving for the future. We all need to pamper our loved ones and ourselves from time to time. Just don't overdo it and you'll be fine. Whatever my income is for the month, I'll put 10 per cent of it into this account. You can choose whatever amount you're comfortable with, but I'd suggest no more than 20 per cent of your income for this account. If you need to go below 10 per cent, do it! You can use the money in this account for travelling, buying a new tv, new clothes, new bags, new shoes, etc. I'd also use this money to buy gifts for birthdays, weddings, anniversaries, Valentine's Day, and during the festive seasons. A lot of people tend to give priority to pampering themselves because human beings have a great penchant for instant gratifications. So the purpose of this account is to control over pampering yourself. UNDER NO CIRCUMSTANCES should you use the money in other accounts for what this account is intended for. If the money in this account runs out, then just STOP pampering yourself until it's been topped up. And DO NOT succumb to the desire to put more money than you should into this account. Otherwise that would defeat the purpose. 6. Emergency Fund Account (Fixed Deposit) Many personal finance gurus advocate the setting up of this fund and I absolutely agree with it. By far, this is the most important account because we are living in a world full of uncertainties and we have to always be prepared for the unexpected. And since this is the most important account, always allocate a portion of your income into this account first before any other accounts until you've reached your target. While some experts say you should keep aside enough money to sustain for at least 6 months should you unexpectedly lose your job, I personally prefer to keep aside enough money to sustain myself for 12 months. I'm not there yet, but I'm steadily accumulating it. Some experts also say that the amount should be the multiplication of your monthly income rather than expenses, but I think a multiplication of your monthly expenses is good enough. For example, if your income is $3,000/month and your monthly expenses are $2,000, an emergency fund of $24,000 (12 months of expenses) is good enough. And saving $24,000 is easier than saving $36,000 (12 months of income), although it's still pretty challenging. Nevertheless, it's not mission impossible. Keeping aside 12 months of expenses is just my preference. You may choose a figure you're more comfortable with. But the recommended minimum is 6 months of expenses. There are investors who keep their emergency fund in investment instruments like bonds, stocks, money market funds, etc, but personally, I prefer to keep it in cash. So you have to decide which is the best instrument to safe-keep your emergency fund. Take note, the keyword here is safe. 7. Investment Account (Savings Account) This is a must-have account because if you don't set aside money to grow your nest, you'll forever be struggling financially. But why is this not the most important account? Because you should invest only with money that you can afford to lose. As a matter of fact, this will become the most important account once your emergency fund account is fully funded. You should start investing only after you've accumulated at least 6 months worth of expenses in your emergency fund account. Before that happens, save money in this account simply for your insurance. You can use the money in this account to pay for your insurance premiums, as insurance should be part of your overall investment plan. However, when you're ready to invest, do your due diligence to research thoroughly the kind of investments that suit your financial appetite before you commit to any investments. Do it like how you would before you buy your first car. Never make the mistake of putting your money into something you do not understand 100 per cent. You may need some time to conduct the research and analyse all your available choices of investment instruments, so it's good to build your investment arsenal while you carry out your due diligence so that when you've identified the right investment opportunity, you can grab it right away. So there you have it. This is the system I use to efficiently manage my money. It has served me very well so far. As mentioned earlier, you may not need as many accounts as I do, or perhaps you may need more! Whichever the case, there are four accounts you must surely have. They are the Personal Expenses Account, Credit Card Payment Account, Emergency Fund Account, and the Investment Account. With these four accounts in place, I'm sure you'll do well in managing your money, unless you start losing your discipline. Start implementing the system right away and you'll see the positive effects it'll bring to your financial health. Cheers~




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