By Craig Lawson, Regional Sales Director, Naked Lime Marketing

In this time of record profits per deal, it may be hard to believe there can still be hidden financial land mines for dealerships. But think for a second about how our industry has conditioned car buyers to expect big discounts and incentives on new vehicles.
I understand what’s happening because I’m in the business, but my wife is not. She needs a new car, as our 16-year-old will be taking hers soon. As she set out on her buying journey, I watched how she shops and how dealers respond and follow up.

It became clear very quickly that MSRP on a proposal was standard. One sales manager said, “You don’t haggle at Best Buy, do you?” Well, no, but Best Buy has not advertised for years that “It’s truck month, and you can take $12,850 off NOW!”

In the end, MSRP proposals made my wife say we should wait. The entire experience has put this purchase on hold, but it did not have to be that way.

For years, we have been incentive-based buyers. We purchase when trucks are $12,850 off because that’s how retailers have conditioned us. That’s our normal. For a buyer, the seller who presents MSRP becomes a mortal enemy. They are characterized as a rip-off artist and the like. But from the seller’s perspective, in a market where four other people will pay MSRP without blinking, they would be stupid to give the car away undervalue, especially if inventory shortages mean they don’t know when the next one will arrive.

You can avoid this entire situation by explaining to your customers that inventory is in such short supply that the factories cannot offer the deep discounts that they once did. We’re not sure when the supply issues will be resolved. The same deal you would have been happy to make a year ago would be a loss for you now.

For your loyal customers, look at their last deal and see if you should offer the advice upfront. How you handle the situation has more impact on the outcome than the price you can offer. If the customer feels that you are being greedy or dishonest and walks away now, they will not come to you next time.

Relatedly, I’ve also noticed a recent uptick in bad dealership reviews. Reasons range from people upset with the value placed on their trade to people complaining about the monthly payments on MSRP deals. One recent reviewer was unhappy because he saw a post on the salesperson’s personal Facebook page that read: “Never thought I would see the day where grosses on SUVs would be this great!” Can you imagine what that customer must have thought?

It’s great (and necessary) to make money, and profit is not a dirty word. But be smart and take your victory lap in private. Set new expectations now with your loyal customers because when you discuss MSRP improperly, those customers will become loyal to someone else. Your business is built on people, process, and technology, in that order. The good news is “people” problems can be an easy fix. Have these conversations today with your team so you can avoid this problem altogether.