How did the car business get so screwed up? There’s nothing else in our society that is sold with the consumer so conspicuously unprepared.

And it’s true. Car buying is one of the most stressful consumer experiences. But it doesn’t have to be this way. After reading this extensive piece on Edmunds.com, I learned more about the business than I’ve ever had before. The author of the piece was a writer for Edmunds who went working undercover at two dealerships: a high-volume, high-pressure dealership and a no-haggle dealership:

The editor explained that they wanted me to write a series of articles describing the business from the inside. Of course I would learn the tricks of the trade, and that would better prepare me to write advice for Edmunds.com. But the benefits of the project would be greater than just information. I would live the life of a car salesman for three months. That would give me an insight and perspective that couldn’t be gained by reading books or articles or interviewing former car salesmen.

What he learned over those three months is incredible:

So, you think I’m romanticizing car salesmen? Trying to clean them up and excuse their evil ways? And, you might ask, if the salesmen aren’t the bad guys, who is?

Having been a salesman myself, I began to view the managers and dealership owners as the real culprits. While salesmen play people games with the customer, the guys in the tower work the numbers with computers, their eyes fixed on the bottom line. They can see at a glance what kind of profit they are taking from the customer and they do it any way. Furthermore, they bully the sales staff, encouraging them to manipulate, control and intimidate customers while they take the lion’s share of the profit.

Sometimes, the profit a salesman generates is not even pocketed by them. One salesman told me the F&I people can work their magic to rob a salesman of his commission. They move front-end profit to the back end where it evaporates from the salesman’s voucher and returns, over the years, to the dealer in the form of high interest and steady payouts.

There’s so much gold in the piece, but I picked out the highlights below. The piece is broken into nine parts: 1) Going Undercover, 2) Getting Hired, 3) Meeting, Greeting and Dealing, 4) Life on the Lot, 5) A Tale of Two Deals 6) Learning from the Pros, 7) No-Haggle Selling, 8) Parting Shots, and 9) Lessons from the Lot. The whole piece reads like a mini-novel, but if you’re in a hurry, at least check out the last section, in which the author provides specific recommendations on what you can do to get the best deal on a used or new car:

Concept 3: Profit Equals Commission

I never really thought of this until I sold cars but… Car salespeople earn their living by inflating the price of the car you are buying. The more they inflate the price, the bigger their commission. This might seem very obvious, but we tend to lose sight of it when the smiling salesperson greets us on the car lot. They make us think they have our best interests in mind. The good salespeople do have our interests in mind. The unscrupulous salespeople are thinking how your purchase increases their commission. One of the dealerships I worked at had a sliding scale for commissions. The higher the profit, the higher the commission. Naturally, the salespeople tried to hit that point where the commission was bumped to the higher percentage. That might mean moving you into a higher level vehicle. It might mean increasing the profit by financing sleight of hand. In both cases, this smiling salesperson, with the personable air, didn’t have your best interests in mind. I believe in paying a dealer a profit for his car. I also believe in rewarding the salesperson for their expert help. But I don’t think this justifies making an unfair profit at my expense.

On humor being an effective way to get closer to the customer:

Many salespeople find that humor is a good way to overcome objections. If a customer says they’re “only looking,” the salesperson might answer, “Last time I was only looking I wound up married.” If a customer objects to being hurried into buying the car, the salesperson might say, “The only pressure on this lot is in the tires.” These prepackaged lines were exchanged between car salesmen in the slow times with the feeling that the right joke at the right moment could be the ticket to a sale.

The most interesting parts of the piece, to me, were the psychological lessons that they were taught as salespeople. For example:

At one point, during a sales seminar, I was actually taught how to shake hands. The instructor, a veteran car salesman said: “Thumb to thumb. Pump one, two, three, and out.” Another vet told me to combine the handshake with a slight pulling motion. This is the beginning of your control over the customer. This would prepare the “up” to be moved into the dealership where the negotiation would begin. The car lot handshake is sometimes combined with the confident demand, “Follow me!” If you employ this method you turn and begin walking into the dealership. Do not look back to see if they are following you. Most people feel the obligation to do what they are told and they will follow you, if only to plead, “But I’m only looking!”

The author made a strong point that the salesman wasn’t the customer’s enemy; rather, the enemy was the person who the customer doesn’t see (the manager). This is a key takeaway, I think:

What the customer didn’t realize was that the poor car salesman or woman was not really the enemy. The real enemy was the manager sitting in the sales tower cracking the whip. Suppose for a moment a customer told us they were “only looking,” and we said, “fine, take your time,” and went back into the sales tower. Now we find ourselves looking up into the steely eyes of the sales manager.

“That’s your customer out there,” the manager would say.

“But they said they’re only looking,” I would answer.

“Only looking? You’re going to take that for an answer?” Foam was beginning to form at the corners of the sales manager’s mouth. “What the hell kind of salesman are you? Of course they’re looking! They’re all only looking until they buy. You want them to go across the street and buy a car over there? Because they havereal salesmen over there. Now go back out there and sell those people a car. And don’t let them leave until they buy or until you turn them over to your closer.”

Again, this is a fascinating piece and well worth the read in its entirety. And while the piece is dated (circa 2001, when there weren’t as many people who realized that “The Internet is your friend”), there’s also an update for 2009.

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For the hat tip, I thank longform.org.

Questions for the reader: What has been your best/worst experience shopping for a used or new car? Feel free to share in the comments. Did you find any of the advice in the piece at Edmunds.com useful/interesting?