This week in 1988: Taming the Import Jungle

7/28/2019 This week in 1988: Taming the Import Jungle

1/3

A former import car salesman lets you in on insiders' secretsthat will save you money on the next car you buyBy JamesUnderwood

I six yean of selling import cars. I'vemade a number of observations. Somewill probably surprise you. Some mayeven make you angry. n any case. a gooddeal of the information I'm about to shamwith you has never k e n in print befox. forreasons you'll find fairly obvious. Disclos-ing this information might make it diffi-cult, if not impossible for me ever to workin th e business agrun--dealer principals ingeneral having a poor sense of humor aboutsuch things. This information will, how-ever, open your eyes and help you become as W r , better-informed buyer.To benin with. most ~ e o ~ l c .ven veteranI import &I buyers, don't h ize that thereare fundamend differences between how anmwr( dEa~eIShi~nd a domestic dealers hi^wdrk. Or, if th& do, they haven't come tbthe realization that these differences call f achanges in buying smtegy. One of the mostfundamental differences is in how the twotypes of dealerships get their inventory.Domestic dealers, if they aren't too par-ticular about their model mix, have far lesstrouble getting more cars to sell than almostany major import. To the impon dealer thedistributor's greafest "catrd' is somethingcalled the allocation. And that allocation islinked, in many cases. to what is called"the turn to e a m " 4 e more you sell. themore you get to sell.

What does the allocation system of distri-bution mean to you?It's the end of the month. You drive intoa Ford dealership and notice 400 cars ininventory with a vanspotter circling theblock with more to unload. Th e normalassumption would be that you had found avolume or discount dealer an d that youcould expect him to give you a minimumpmfit deal a lot easier than a dealer with asmall inventory. At a domestic dealership inmost cases you would be right, but in animport dealership you've most likely fwndthe dealer who sells his cars at higher pricesthan his competition. There's a saying in theimpon business: "He who has, gets more."And this is how it works.If bee import dealers in a region have asimilar allocation, perhaps 50cars a month.

At an mpotl dulerohlp. a full lot Ismand even a small number of people com-parison shop, who do you suppose will selltheir c a n fmt? The dealer who gives thek t rices, of course. And because he can'tget more c a n from the distributor due to theconstraints of the allocation system. you canseehow his lot might lookway bare by theend of the month. At the same time, thedealer who holds his cars will have plenty ofcars to sell. And, of course, this is the ratio-nale. Because the hold-out dealer will havecars available fa elivery at a time whenhis cornpetitas don't, he'll be able to sellthem for a substantial amount mare to th epeople who need a car right away.

So, if this linle game works so well, whydon't all dealers hold their cars until the endof the month? It's a simple matter ofmoney. Most dealers don't have enoughmoney to warehouse a large number of carswithout borrowing money from the bank todo it. You've heard this term before; it'scalled "floor plan." Bankers love it .Dealers hate to pay it. And so each dealerstrikes a balance between how many c a nhe ha s on hand to sell an d how muchcash flow he needs week to week to keepeverything functioning. Holding cars, there-fore. is a game for the stmng only, anotherreason why it works.But don't feel sorry for the small dealer.There's a game he can play, and it's nearlyas good. It's called warehousing buyers. It'sa variation on the same rheme, and also

I Y .I"#,I I- p .w IUU Idimfly relaled to the allocation system.

Each year, th e manufacturers decideahead of time bow many of what modelthey're going to build and in what colors.Tben the distributor decides how many eachindividual dealer is going to receive. Itcomes down to a definite number. If an in-dividual dealer is slated to receive 600 carsover the model year. number 601 is nearlyimpossible for him to obtain.So it stands to reason that if a dealer t&smore deposits on cars than he has in totalallocation, someone is going lo get lofl out.Who most often gets the short shaw? Thosehuyers with the smallest gross profits intheiu deals. Ironically. the same ones whowerc otherwise the best negotiatm.Now, of cciuse, what I've done here isput you into a newin situation, haven't I?Please realize that nol all dealers play gameslike these with their huyers. The point I'mtrying to malte is that some do , and youneed to know how to protect yourself.Let's talk about the origins of your newca~. don't mean the country in which itwas supposedly built, even though that's aninleresting story .in itself since some Ger-man cars are built in Brazil, some Swedishcars are built in Caoada, and some Japanesecars come from the U.S., of all places.What I'm talking about is this. Now thatyou've "ordered" your new car, how is thedealer going to till your order? You have anghl to ask this question. In fact, as a mat-


2/3

agttement.) he minuk you start t a l ~ i n g

t e ~f selfdefense, it's nsessary for you to st& (with lbe exaption of heavy shipmntask this question. petiods early in the model nm when manyYou see, in the Detmit scnse of the word. dealers have large inventories on hand). Thcthem is w such thing as an ordered car advantages have to & with knowing thatwbcn you are dealing with the majority of you have a finalized deal. Knowing thatthe imports. If the car you're buying isn't your price will not change overnight he-rtual ly "in stock," then it's eithu "in- cause of sudden p r ia changes (a valid con-coming" or it's to be "located." Nobody eem given tlucluations in exchange rates asever even so much as calls the factory o n well as"d'rioc h*cs). KnoWyour behalf; it wouldn't accomplish a thing. wbcn you can take delivery. Knowing thatLa 's look closely, then. at some of the pros your Jalespemou isn't going to call you in aand cons of each of thcsc the ategories. few weeks and tell you that your car arrivedIn Stock. ' l l ~ r e rc a number of advan- with more equipment than you expected, atages to buying a ca r that's immediately that you are now subjat to a mmufactuer'savailabk, very few of whkh are nlsted to price increase. (Thm is no such thing asprice. In fact as we've already discussed, pria p teCt ion on an ordered car, and ifyou're apt to pay mae f a a car that's in you doubt this, Md tbe back of y m nlcsAUTOWEU( n L Y 18, 1988

sboutacarinanymyothaearegory&sidcsinstock, to some extent you're rolling thed i a . Som pcoph would h e r deal in aknownwmmcdity then gamble umrcauar-ily. You may be ooe of lbcse pecrpk.lmwnlng.Thisisacartha(mthetimcofpmchsseisMuaUysbowiDgmthedaldsnext monthly alloclton. In most case8 arwhose scrial number is available to youupon signing your purchpse contrst. Typi-caUy an import sakspmon w& heavilyfrom this ineomiag a l l d o n . When busi-ness is strong, it isn't umnnmon to havemost of this gmq s old he f m t k y eve rarrive at the dealemhip. You'll most likelymaLcyourbes tdu lononeo fmesc ,butremember you are h y i n g somclhing sightunseen and there's always a ar(ain amountof risk involved.M o gel dnmaged inshipping, and in some rare cases thcy ac-tually do disappear from a l M w . Thepr ia could slso change.L a a t e o r D a k T n & T h i s i s a c othat the dealer sells you litaplly m mC "ifcome." It isn't in stock. It isn't in his nextallocat ion. He may have a l d y old outhisallocation of this r n u l a r model.He taLesyw r deposit in hopes that he can come upwith the car. Locate cars cause the mostproblems for buyers and for dealers alike.This doesn't mean, however, that youshoulddrain From buying a carthisway. Ifyou do, there is a fairly simple safeguard

31


3/3

you should employ, namly a time imit onyour &. If the dealcr hasn't found it intwo weeks, then chances are k W t oingt o , o o d y w c a n p s s u m y w ' v e ~ ~bowed. Thc trick here is to be tk buymthey're af raid they're going to lorc. A timelimit f o r m pedonnaweand dtCICBDesyourrisk of s i ~ ~r ia inauses.s o c b c nm c s e a r c t h e v a r i w s o I i ~ 0 fnew cars at tk level that affm you--tbe

; delivery level. By knowing how your dealer

plans to obtain tk car you've ordered, yougain a rraligtic pichm of what you can ex-pect. Yw ave a better c k f avoidingthe wareh ou sig p a& : ~ n n i n g t of timwhilc waiting for an imaginary car to wmin and then being formd to buy one from ahold-out dealer at a premium pdce, or get-ting adl rom your dealer telling you youronla bas been moved fo~wardo the nextmodel year. Mcaniog armc back in aod wewi l l megotiate your price and the allow-

Negotiation tactics t h t will work at any dealershI

I T bm is a specific way you oecd go abouc the dealership at a latercomparison shopping in orda o get ac- 5) Make surecuratc-and u n i i i b l e infomiation.and in& o maintain contml. CenPinI b g s o say to get away from your spks-pasoo w k n you're ready. Ways to put avaluc on tk various "packages" that arcoffered from dealer to duler. Let megive you nine important idcap:1) N e v a talk pricc on the fmt visit tothe dealership. Tell tkm hat you're goingto shop cars fmt and $en price, onceI vou've been sold on the o m ~ u c t . e firmw m t , r c + k & y o " r o n g i n s l ~k or she hap alrrady made an invtsmrntm you. State clearly that you an goingtocanprismsbop.Remmba..Thcmxcl k y ~ ~ ~ m o l p s r i s m ~ ~tklesscompecitivetheyknowlkym.3)Whm yau've got enough price datato indicate to you what thc market is onyour car, make your offer slightly lower1 and t b e( t k m "workm you up to tklower cnd of the muLetmge. SalcJpoo-p k and sales managers .rc compulsivew i n m s - 4 ~k m win. but on vour terms.

w e heir full energies on you.7) Never lie to a

eommunily, awl aaway the fax you haven'vnifation dasn't pay.8) h ' t deal with "L.%thcmappraiseyour&. Beto eliminate the c h a m s of a "low ball.9) Always do exactly what youyou'll do. This will make it much as'canc and go witbolu a lot of himion'1I b c y ' U also believe you wben youyour fd ffer.'Ibis is by no maos a wmplehowtobuyyournextimpoRcar4rlowest pmsibk price. I've kfi outdeal of veq useful information, a nof the nuts and lmlts. But hoafi~llv

ance on your wade as well. Theso callsmn ' t any fun to make or m eiv e, believeme, but a bunch of them are made at the codof d m o d c l yuu.You can a h x* that your best aego-tiated price will be slightly different de-pcndingontkspecificoriginsofthewinquestion. A far in stock is a known wm-modity for th e dealer as well. He b o w s it'sUICIC and in good condition. and that f youdon't buy it, gomwne will after you leave.An incaning car c a t s me dcaler abwlutelyI lochinginf lmrplani fkcandel ivai t tkmoment it arrives, meaning hccan make thes lmmn c y o r n c a d y s o o o d g i v e y o u amm ttractive price. Thc locate car is tkjoker in tk deck for all concanod. It canpay off for the dealer, and it can work forthe buyer as wcll, if hc or she is smaaenough to use a tim imit.Now la's move from the fundamntol tothe speffic. How do you go about gettingmOtaStpriceinthcfustplace,andhowdoyou know for surc when you've got it?Fm f all you need to thmw out al l ofy o u r p r i e e g U i d e s a n d ~ t h a t r e l Wto tk dealer's markup on the car of yourchoice. Thc dealer isn't p i n g to allow youto dinate to him what his pmfit should be.He's not going to change the way he dasthings, just because you hnppcn to Lrww tothe d o h how much pmfit he's going tomakc on your sale. H d ords but factual.And don't be angry at tk dcalm for hisattitude. He's only a businessm sn who'saware of tk markethis pfcduct enjoys.Thc marlet his product enjoys ...thinLfbout that idea for a moment. .hpm camnn subject to a marlet. More accurately amarkelrange.Wbaryoucandoismakesurcyou buy your ear for a price in the l o wportion of that market range. What youcan't do is buy a carbelow i ts m a h t p r i a .The gimmicks won't w o k These dealersonly get so many cars to sell. When theysell onc for the wrong price, it huM tkmdl year long.This lwvw you with the c h a lh g c offiadiog out what thatmarLu is, and the onlyway you'll do that is to wmpnrison shop(see idebar).Remember this final thought: Thcrc is nosubstilute for having tk right infolmoth.I f you lsLcthet iwtokamwhutkM l l r c tprice is for the car of your choice, tbm isno sales gimmick or super close that canmaLe you pay more.It's really just as simple as that.

J m s U n d c n m S s book. Th lmprm CnBuya's Suwival Guide (E.P. Durton, paper.bock, $10.95). i s & n Avgvn Md m m~ a d j r m , k ~ ~ h lmYpmdmnu, la r r indmdphlpoyrw* r .U M o l r o w r i r c s m s , m -b d n hdr-misi.7~sidmmufmn i, ~ o r sa r r m b n p w f c o r s o L ~ .

Documents

This week in 1988: Taming the Import Jungle