Regarding dealer markups, I realize that, from an economic perspective, they are to be expected for scarce items. Thus, the outrageous markups on the first shipments of the Miata. From the dealer's perspective, why should they sell for $X to you, when they can sell it very easily to someone else for $X+Y.

But that doesn't take into account individual salespeople. If Salesperson A says no to your offer of MSRP, while the dealer is almost sure to sell the car anyway, that car sale (and the resulting commission) may go to Salesperson B. Thus, while it is in the dealer's interest to sell for as high a cost as possible, it is not in the Salesperson's best interest to let a sale fall through to someone else.

Thus, I have a few questions:
1) How are salespeople compensated? I believe it is a commission, but how much?
2) How is the above scenario (Salesperson A looking out for his own best interest instead of the Dealership's) prevented? I would assume some kind of incentive based on total vehicles sold, but that doesn't fully solve the problem.

Edmunds has a interesting feature article where they paid someone to be a mole and work at two different dealerships. One was a high pressure dealership and another was a "no haggle" dealership. These may not be representative of all salesmen or dealerships but it is interesting if you have the time to read through it all.

http://www.edmunds.com/advice/buying/articles/42962/article.html?tid=edmunds.a.landing.buying..4.*

Originally posted by Buger
Edmunds has a interesting feature article where they paid someone to be a mole and work at two different dealerships. One was a high pressure dealership and another was a "no haggle" dealership. These may not be representative of all salesmen or dealerships but it is interesting if you have the time to read through it all.Thanks for the info. I was a long read, but weel worth the time.

-Bryan

Originally posted by gusmahler
Regarding dealer markups, I realize that, from an economic perspective, they are to be expected for scarce items. Thus, the outrageous markups on the first shipments of the Miata. From the dealer's perspective, why should they sell for $X to you, when they can sell it very easily to someone else for $X+Y.

But that doesn't take into account individual salespeople. If Salesperson A says no to your offer of MSRP, while the dealer is almost sure to sell the car anyway, that car sale (and the resulting commission) may go to Salesperson B. Thus, while it is in the dealer's interest to sell for as high a cost as possible, it is not in the Salesperson's best interest to let a sale fall through to someone else.

Thus, I have a few questions:
1) How are salespeople compensated? I believe it is a commission, but how much?
2) How is the above scenario (Salesperson A looking out for his own best interest instead of the Dealership's) prevented? I would assume some kind of incentive based on total vehicles sold, but that doesn't fully solve the problem.



A salesperson's commission varies depending on dealership. A salesperson gets paid up to 30% of the PG (payable gross is anything over invoice). Some people think salesman get payed a % of the entire car. This is futher from the truth. Also sales managers (not salesman) determine the sale price of autos. As far as a sale falling to someone else, some dealerships have curtain steps in place to help prevent this. Its called an "UP" log. "UP" meaning: A: customers comming on the lot, B: customers calling in asking questions. The "UP" log does only one thing, it keeps track of the salesman and the customers they talk to. Now because people don't understand a salesman's payplan(remember most salsman only get paid by commission), this "UP" log is very beneficial when it comes to which salesman gets paid the commisson(especially if a salesman doesn't close a sale on first contact). I'll give you an example! Salesperson A gets a custmer and does a complete demo. Salesperson A is unable to close the sale that day for whatever reason(customer just looking). Salesperson A logs customers info on the "UP" log. A couple days go by and the customer decides they are ready to buy. Customer goes back to the same dealership to buy but doesn't ask for the saleperson that originally helped them(salesperson A either off that day or with another customer). Customer gets help from salesperson B and salesperson B sells the vehicle. Now because salsperson A logged the customers info on the "UP" log(which for some dealerships, the info is only good for 3 to 7 days), salesperson A will still get half the car credit and half the commission from salesperson B. Its only fair because salesperson B would have never gotten the sale in the first place if salesperson A hadn't demoed the customer and gotten them exited enough to come back and buy. Hope that answers your questions!

Originally posted by Buger
Edmunds has a interesting feature article where they paid someone to be a mole and work at two different dealerships. One was a high pressure dealership and another was a "no haggle" dealership. These may not be representative of all salesmen or dealerships but it is interesting if you have the time to read through it all.

http://www.edmunds.com/advice/buying/articles/42962/article.html?tid=edmunds.a.landing.buying..4.*

Thanks for the article. I can't believe they still do some of those things. The story that got me was the guy trying to buy a minivan. They offered him $4000 for the trade and a good price on the car. He went home to pick up his wife so they could sign the papers. The dealer "mysteriously" lost the $4000 quote and refused to give it to him. The guy ended up leaving without buying the car. I can't believe a dealer would actually let a buyer slip out like that.

Originally posted by T-von

Salesperson A gets a custmer and does a complete demo. Salesperson A is unable to close the sale that day for whatever reason(customer just looking). Salesperson A logs customers info on the "UP" log. A couple days go by and the customer decides they are ready to buy. Customer goes back to the same dealership to buy but doesn't ask for the saleperson that originally helped them(salesperson A either off that day or with another customer). Customer gets help from salesperson B and salesperson B sells the vehicle. Now because salsperson A logged the customers info on the "UP" log(which for some dealerships, the info is only good for 3 to 7 days), salesperson A will still get half the car credit and half the commission from salesperson B. Its only fair because salesperson B would have never gotten the sale in the first place if salesperson A hadn't demoed the customer and gotten them exited enough to come back and buy. Hope that answers your questions!

Thanks for the explanation. I can see why that would help. But the question I have was slightly different.

Customer A speaks to Salesperson X, but refuses to pay more than MSRP and leaves. Subsequently, Customer B speaks to Salesperson Y and buys the car. Salesperson X gets nothing for the sale and Salesperson Y gets all the commission. What benefit is it for Salesperson X to refuse to sell for MSRP? By losing Customer A (possibly to another Mazda dealer or to a Nissan dealer), Salesperson X gets zip, zero, zilch.

Interesting read. Maybe I should be calling the Fleet Manager at Mazda wiht Invoice in hand to make my deal. The times I have tried to get an idea of the price of a car over the phone, I have always been told that I had to come down to the dealer. They would never talk with me seriously about a purhcase over the phone.

It took me 7 hours to buy my last car at the dealer. I kept telling them that if they walked away from the table, I would leave but the sales person I dealt with had a couple of "really good" reasons he needed to confer with whomever at "the desk" and would get back to me. I really hated the whole experience and having to talk with a "closer" after getting near the price I wanted with the regular sales person.

I am not looking forward to repeating this experience. I have heard of people mailing several dealers letters with the price they wanted to pay for the car, stating that the first dealer to accept would get his business. I wonder if that actually works.

I bought my Trooper basically over the phone and using the internet. I printed out a bunch of pricing info from Edmunds, made sure dealers knew that I knew about all of theire costs and the incentives. I then pit one local dealership against one in Austin. Price from Austin (via email) was exactly what I said I would pay. I drove up on a Friday afternoon and was out of there in less than 2 hours. Zero hassle. All you have to do is be prepared - know about invoice, incentives, holdback, etc. Once they realize they can't snow you, you're set.

I bought my wife's Tribute at less than MSRP the first year it came out.

We went to the dealership late in the evening on the last day of the month. We mentioned my wife's Trooper as a possible trade in and the low quote for what they would give us probably helped us get a lower price on the new Tribute.

I ended up not trading in the Trooper, putting 7K down (which went to a 0% credit card that is paid off now) and the rest was financed at 0% by Mazda for 3.5 years. :)

Originally posted by mjgc0

It took me 7 hours to buy my last car at the dealer. I kept telling them that if they walked away from the table, I would leave but the sales person I dealt with had a couple of "really good" reasons he needed to confer with whomever at "the desk" and would get back to me. I really hated the whole experience and having to talk with a "closer" after getting near the price I wanted with the regular sales person.

Even buying services aren't perfect. I tried to buy my first car through a buying service. The buying service requires the dealer to tell you the price of the car. After going down to the dealer and test driving the car, the salesperson kept refusing to tell me the buying service price. I finally left. I called another salesperson the next day and asked for the price, he wouldn't tell it to me either, only saying "mid 14s". After calling the buying service and applying more pressure, I was finally able to get them to tell me the price.

Of course, because of the terrible service, I didn't buy it from that dealer. I went to another dealer, told them the price and asked them to match. They refused and I left. I went to another dealer told them how much I was willing to pay, and they gave it to me. Funny thing is, the second dealer called me later in the week to tell me they got a new shipment in and were willing to work with me. He was shocked that I found a dealer willing to sell at the price I wanted.

For my next car, I used Carpoint.com, and it was completely smooth. The price was listed on the web page and the dealer matched without fighting. The portion from the article badmouthing such services is funny. Carsdirect is also supposed to be pretty good.

Originally posted by gusmahler


Thanks for the explanation. I can see why that would help. But the question I have was slightly different.

Customer A speaks to Salesperson X, but refuses to pay more than MSRP and leaves. Subsequently, Customer B speaks to Salesperson Y and buys the car. Salesperson X gets nothing for the sale and Salesperson Y gets all the commission. What benefit is it for Salesperson X to refuse to sell for MSRP? By losing Customer A (possibly to another Mazda dealer or to a Nissan dealer), Salesperson X gets zip, zero, zilch.




You acually answered your own question. If salesperson X losses a sale to another salesperson and a completely differant customer, salesperson X gets nothing. It wouldn't matter if it was the same exact car. Now if salesperson X continued to loss customers that salesperson would either A: get payed minimum hourly wage or B: have to find another job. At my dealer, I am instructed to accept any offer( no matter how ridiculous it may be).