You’ve up-ended three weekends, trudged from car yard to car yard weeding the great from the not-so-great but finally signed on the dotted line for a shiny new set of wheels. It’s about now most people feel almost instant relief, the stress of getting a good deal on something so expensive is finally over.
Dealing with upselling
But it’s also about now that the upselling begins. Finance, insurance, rust and fabric protection are all on the list of extras that dealerships may offer their customers.
In some cases the dealer will make more money from those add-ons – which can add thousands to how much you’re shelling out – than they will on the car. They’re major profit centres in an era when the earn on the car alone could amount to a few hundred dollars.
“You’ve got to think about the negotiation of those elements just as much as you do with the car,” RMIT Associate Professor of Marketing, Dr Con Stavros says. “There’s no point saving yourself a couple of thousand on the car but then spend that on pure margin for the dealer.”
Do your research
The General Manager of Motoring, Gordon Oakley, says buyers need to put as much energy, research and thought into the extras as they do the purchase of the car.
“Buying a car is quite an exhausting process,” he says. “You research the hell out of the car, you’ve got the price you want then you let the guard down and relax. But that’s not the time to let your guard down and relax.”
Mr Oakley says finance, in particular, is one area buyers can be misled. Temptations of zero per cent interest may seem appealing, but throw in fees and other charges and the cost of the loan can easily escalate.
“It’s not the rate – it’s the monthly payments that are most important,” Mr Oakley says. “People can save themselves thousands [on finance] by shopping around.”
Simplify the process
Mr Oakley says buyers should negotiate on the car independently of the finance and other extras, all with the aim of simplifying the process.
Tackling people once they’ve decided on a car is part of the sales psychology employed by sales people generally, including car dealers.
“From a sales point of view you want to maximise the price people pay,” says Dr Stavros. “They’re going to try to see where the maximum is you’re going to pay and the consumer is trying to work out what the minimum they can get away with.”
Sales people will often concede some money on the price of the car only to make it up in some other part of the often-complex transaction that is purchasing a vehicle. It’s all part of the negotiation process.
“The art of negotiation is to create a win-win feeling,” Dr Stavros says. “Both parties want to walk away feeling they’ve got something positive out of it. Consumers have to feel like they’ve made some inroads or some kind of progress.”
But he says the rarity with which most people buy cars – generally years between purchases – and the differences in deals between makes, models, time of year, even a particular dealership can make a complex process even more difficult.
“I still think it’s [negotiating] a bit of a black box for most consumers; most don’t really understand how much they can ask for … so it’s a bit scary for a lot of consumers.”
He says much of the sales process involves forming a relationship and building on it in the relatively short time someone is in the dealership.
Build on relationships
“Fundamentally from a psychological perspective we like relationships,” Dr Stavros says. “A good sales person is able to develop a good rapport with their customers.”
He says the better sales people will have “some empathy and understanding for the consumer”.
“Being able to see things through the consumer’s eyes … responsiveness, being able to answer questions and anticipate what those needs are.”
Within that relationship, though, the sales tools are generally being used to maximum effect.
Scarcity is one of those tools. As with other areas of retail, car dealers like to make out a car is rare or a particular deal or limited edition will end soon. Sometimes it will, but other times it’s all about speeding up the sales process.
Accelerating the decision
“That’s a well known psychological concept in marketing,” Dr Stavros says. “If people think a deal is going to expire that forces them to make a decision … it’s an acceleration tool, it’s trying to bring it to a decision point.”
Dr Stavros says as with much of the sales process consumers can get in on the act.
“Consumers can play that same game as well, of course – you see it a lot in real estate,” he says, pointing out that many offers made on apartments or houses come with a use-by date.
Indeed consumers have more power than ever, mainly because of the transparency created by the internet.
Consumers get power back
“We live in an age when a lot of knowledge is available through other sources,” says Dr Stavros. “People can walk into any retail environment … and have a lot of information already. It does give the power back to the consumer … makes them feel more comfortable in the purchase.
“With a little bit of knowledge beforehand they probably know where the high and low points are.”
And, he says, “a good sales person is going to quickly establish what kind of information people have … and move past any stereotypical approaches.”
Speaking of which, are car dealers really as bad as the stereotypes suggest?
“That’s a bit of a hangover from the old days,” says Dr Stavros. “My perception is the good dealerships really want long term relationships.”
Story: Toby Hagon
NEW CAR BUYING MISTAKES
Getting a new car is exciting, but it can be easy to get caught up in the euphoria. Here are the new-car buying mistakes to avoid.
Not doing your homework
There’s a mountain of information, comparisons and reviews available at the click of a button, so doing your research is easy. Why wait for a salesman to tell you about a car’s features, when you can get impartial advice elsewhere?
Make a list of what you want and need and look for models that deliver.
Top tip: Determine your budget early and research the cars within that range before you visit the dealership.
Urgency puts the power into the dealer’s hands. Visit multiple dealerships so you can speak to more than one person about price and – even when you’ve found an offer you like – don’t be afraid to tell the salesperson you’ll think about it.
They may offer you a once-off deal to buy then and there, but removing yourself from the pressure and hype could help you see more clearly. Take a friend for support and for a dispassionate opinion. They may be able to give you a reality check if you get caught up in the excitement.
Top tip: Remember, you have the upper hand – there’ll always be cars on the market and people who want to sell them to you.