On Friday, I bought a 2004 Nissan Maxima off a dealer lot.  It’s a nice looking car that filled my requirements – price, space, perceived reliability and safety.  While this is all fine and good, it doesn’t make for an interesting blog.  How the deal was made makes for a much more interesting story.

On Friday afternoon, I decided to move to the next step in the buying process.  I had done the research and test-drove the vehicles I wanted.  It was time to float some offers.

I had the search lowered to five vehicles and called in the order of personal preference.  I asked the first dealer (Bill*) to give me a cash price.  He told me that he wasn’t budging an inch on price, saying he had already reduced it and was getting ready to retire in 3 weeks.  He also sold another one just like it that day.  He was confident that he would get his price.  If I didn’t like it, tough.  So much for the first choice.

An artist's depiction of me car shopping.

The second choice was the same make and model, with fewer options and higher kms.  When I called the dealership, the salesman, Jake, turned out to be somebody I knew from years ago.  After some small talk, I gave him a cash offer for the car.  He told me he would run it past his manager and would call back.

The third call I made was to a dealer selling a model a year older than the previous two.  I made a cash offer, and like with the second car, Tom told me he would run it by his boss.

The Response

Jake called me back saying his boss accepted the offer but was adding a $250 inspection fee.    This was within my wiggle room so we made the deal.  About 20 minutes later, Tom called back and told me that his boss accepted my offer.  I told him that he was 20 minutes late, and thanked him for his assistance.  It turns out that I didn’t harm them because he had another buyer interested in the car.

Lessons

So what did I learn? Here’s what I took from the experience:

• I am an amateur car buyer and I was dealing with professional sales people.  If you call our interactions a battle, I’ll admit I was outgunned.  I tried to mitigate this disadvantage by dealing with as many dealers as was practical.
• I picked Friday afternoon to try to assert some pressure on the salesmen.  In Spin Selling, Neil Rackham explains how this pressure can push people to a buying decision.  I thought that the prospect of a cash sale on Friday afternoon could induce a better deal for me.  It’s hard to tell if it made a difference.
• For all the analysis I did on this purchase, it’s impossible to deny the psychological aspect in coming to a decision.  There were several things that got me into buying mode.  The first was sitting in the Maxima earlier in the week.  When Tony** was trying to scare me into buying a car with 130 air bags, I remember sitting inside the car and thinking, “this is really nice.”  The second came when Bill told me he wouldn’t budge on price and he just sold a car just like it.  This jolted me to get moving on some offers on cars I like.  Bill and Tony didn’t get the sale, but they pushed me down the line to a purchase.  In fact, I might have helped Tom sell his car by instilling some urgency in his alternate buyer.

In our professional practice, we tend to use our research, skills and experience to help our clients come to a rational business decision, be it buying or otherwise.  All of that can go out the window when a buyer’s lizard brain kicks in with fear, lust or greed.  If you think as your higher brain functions as an advisor, the limbic system, or lizard brain is definitely the boss.  The boss is the one who ultimately signs the cheque.

*Like last week, names have been changed.

**See Part 1.

Two weeks ago, my car was flooded in a flash rainstorm. It’s a 1998 Honda Accord with 280,000 km on it and I bought it new. That car is by far the best I ever owned and I was pretty sad to see it go. It was as inexpensive and reliable as it gets. Here’s my experience so far.

The day started with my visit to the insurance adjuster. When I first sat down, he appeared be pretty nervous. After the regular pleasantries, he went over what they were going to pay out. We made some adjustments based on some options they missed, but I could tell they used a rigorous process to determine the value of the car. I told him that it sounded fair and a look of relief washed over his face. He then told me about how a number of clients came in owing $30,000 on their vehicle and getting $22,000 in settlements. No wonder he was nervous about this.

Now with my cheque in hand, I went out looking at vehicles. I had spent the last couple of days looking online and had a fairly good idea of what I was looking for – 4 door family sedan, $10,000-$15,000, Japanese brands. I’m not anti-Detroit, I just put a lot of importance on reliability, and I know these brands have the best reputations.

Here's who I have been dealing with for the last couple of days.

The first place I went to was a brand new dealership. The “sales office” was a trailer and the salesman was as new as the dealership. It looked like he was happy to have a customer and took me through the vehicles that might interest me. He took down my information and promised to hunt around his network for what I was looking for.

Next I went around to a number of dealer lots in Saskatoon. Although these were firms in competition with each other, their sales tactics differed immensely. The first salesman, Jerry*, is a veteran of car sales and has sold every make and model of car over the years. I went there looking at a car that I found online. I took it for a test drive and when I came back, we had a very interesting conversation. When I told him why I wanted used, he started giving me the same story that the adjuster told me earlier – people are buying new cars and getting the most car they can afford based on the largest monthly payment they can withstand. He told me of how a number of his customers still owed several thousand more than their trade in allowance and stacked the debt on their new car loan.

The second salesman, Mike, was the manager of the used car lot for a very well established, large dealer. The car I went there to see had just been sold, so I decided to inquire about how business was and how motivated they were to make deals. I asked him if it was a slow time of the year for them. He replied “no, this is actually a very busy time for us.” Although I was the only person on the lot, his answer made it clear – “This isn’t my first rodeo. Don’t try to get cute with any lowball offers.” I went to a couple of other lots where nobody even came out to make contact with me. That seemed to imply that they weren’t appearing too eager. That, or their sales staff called in sick.

Finally, the one guy I thought did a poor job was Tony. When I told him what I was there to look at and why I was car shopping, he told me that it was a great time to buy because car safety was so much better. He showed me a car whose price was $3000 higher than the car I came to see. He tried to engage my lizard brain by painting a mental image of my family in a car accident, and how that difference was so small compared to the safety of my family. Tony also said that he would feel bad about selling me the other car. He said, “I don’t want you sitting in your new car looking at other cars thinking ‘Boy, that’s a nice car.’” He mistook me for somebody that puts a lot of self-esteem in the car that I drive. Although these tactics were a miss for me, I can see how this can get others in a buying mode.

So now I have looked at hundreds of vehicles online, test drove several, and have made a short list to make offers on. What has this experience left me with?

• None of the sales people I talked to buy new cars for themselves. Their business is to know the value of cars versus their price. Because of the huge depreciation of new cars, they make for a bad investment.
• These guys are adept at the psychological aspects of selling and negotiating deals. They want to ensure that they have the upper hand in the deal.
• There are a lot of ways to sell cars that will work. I saw three different approaches in one day. The one that appealed to me was the guy who was honest and generous with his time.

Now the fun begins when I start talking deals. I’ll see if I can make a good deal by being aware of the rules these guys follow.  Stay tuned for how I make out.

*All names have been changed to protect the innocent and guilty.