The person who came up with the idea of asking for additional money over the vehicle’s sticker price was a genius. The problem was no one knew why we were asking for the money. If you can train your sales managers and salespeople to use an upfront pricing system, you will see an increase in your gross profit. 
 
I recently read a survey about what consumers thought a dealership should make on a $40,000 vehicle. Needless to say, I was surprised at the results. Seventeen percent of consumers thought a dealership should make over $2,500, while 18 percent thought up to $2,500. Another 21 percent were willing to let go of $2,000; 16 percent said $1,500; 17 percent said $1,000; and just 11 percent stated $500.

Consumers are just scared of the unknown and are actually willing to allow a dealer to make money. Shocking, I know! If you tell consumers exactly what you are asking for in dealer profit, you just may get it. Keep in mind this goes back to building value in your vehicle early on in the sales process. Retraining management and salespeople will guarantee success with an upfront pricing system.

Here is an example of penciling a new car deal:

MSRP:  $23,243
Dealer Profit:  $995

Pinstripe:  $149   (Dealer add-ons)
List Price:  $24,387
 
Incentive:  $1,500
Sale Price: $22,887 (plus taxes, tags, and $99 processing fee)

You can preach about getting back to basics, but you actually have to make the effort to get there. It seems much harder because we have strayed so far from the basics. The bottom line is we have adjusted to an information-based selling strategy. The idea of just providing information and nothing else is what is costing us money. When you go to a fast-paced, information-based system, you take the human element out of selling. We adopted this trend when we should have continued to build relationships with customers.

In order for an upfront pricing system to properly work, it is imperative that you retrain your staff to focus on what I like to call the Three S's of Selling.

1. Sell Your Service. Believe it or not, people will pay more for your service than they will to help pay your bills.

2. Sell Yourself. This philosophy has never changed in the business. People want to do business with someone they feel comfortable with.

3. Sell the SIZZLE, baby. Price is certainly a factor when purchasing a vehicle, but people still buy due to emotion. They are buying the way the vehicle is going to make them feel. I know this sounds elementary; however, we lose sight of this when we are constantly comparing figures and results.

All in all, when sales managers and salespeople apply these simple techniques, they can then use the upfront pricing system to increase gross profit in their dealerships. A “good” deal is a state of mind. With 89 percent of consumers willing to allow a dealership to make $1,000 or more, it’s fair to say consumers appreciate the need for dealerships to make money.