Negotiating Vehicle Trade-Ins Touchy Business

When I first started selling cars, I knew little about the business, yet had an excellent first two months in my new career. I did whatever sales management asked, but was clueless in a lot of ways.

If customers asked me what the monthly payments would be, I had no idea. If they asked the best price, I really did not know. I had no knowledge about a potential trade-in’s worth.

Eventually I thought it would be better to provide more information, if only to speed up the selling process. If they wanted to know what their car was worth, I would give them an estimate. I would give them what they wanted. You might think this would get me more sales. Wrong. It tended to gum things up.

Who does vehicle appraisals at your dealership? If your answer is anyone beyond the sales-management team, your dealership may have a problem.

Why? Salespeople are hired to sell cars, not appraise them.

Salespeople estimating the customer’s trade-in appraisal may expose themselves to problems.

Say the real trade value of a customer’s vehicle is $5,000. But in an accidental (or deliberate) high-ball situation, a salesperson tells the customer the vehicle is worth about $8,000. That’s just what the customer wants to hear.

But as negotiations start, the customer will expect your high evaluation to be factored in. When you present the manager’s actual appraisal, the customer is upset and thinks you lied. Your credibility is shot. Almost always, this ends up in no sale or a low gross-profit deal.

Then there’s the accidental low-ball scenario. The sales person tells the customer the potential trade-in vehicle is worth about $3,000. Despite your good intentions of erring on the conservative side, the customer thinks you are taking advantage. It usually dooms chances of a sale.

In either case, the customer usually leaves, doesn’t return and spreads the bad word about you.

Customers think their trade-ins are worth more than they are. So when do you break the news and how do we diplomatically refute their perceptions? Timing is everything.

Here are word tracks you can use or modify to your own style:

The customer asks, “What will you give me for my car?”

Ask about the make, model, year, maintenance information and such, then say, “I don’t know exactly how much it’s worth, right now. Would it be OK if you tell me what you are looking for in a new vehicle first and then I’ll get our vehicle appraiser to do a professional appraisal on your vehicle?”

Don’t argue if the customer persists by saying, “I want my car appraisal before I look at any vehicles on your lot” or “I need to know what you are going to give me for my car before I can decide on what car I can afford.”

Your response is, “OK, no problem. Can I have your car keys? I’ll also need your ownership, exact mileage, maintenance records, and has the vehicle ever been in an accident? And where is it parked?”

Take this information to your manager and explain the situation. The objective is to get back to your customer quickly and continue with the vehicle selection and test drive. Your manager may not do the appraisal until you have landed the customer on a vehicle and bring in a completed worksheet.

When you return to your customer, say: “We are getting your vehicle appraised. It is going to take 10 to 15 minutes. So while we wait, tell me what features are you looking for in your new vehicle?”

This will give you the opportunity to find the appropriate vehicle for the customer and then continue with your selling process. Do not short-cut anything.

Remember, we do not want to fight or argue with customers during the trade-in process; we want to help them. Work with them, not against them. When you have found a new vehicle they want and completed a demonstration drive, bring them into your office and ask for the sale, fill in a worksheet and start your trade negotiation. Expect variables and different directions the customer might take.

There are a couple of ways to talk about the customer’s vehicle. One is to devalue it. Another is to ignore it and focus only on the difference figure. I prefer focusing on the difference. What they will end up paying is more important to the customer.

Settling on trade-in value and how that value plays a role in the negotiations for the new vehicle is a tricky matter.

Say the vehicle price is $30,000 and the trade-in value $5,000.

Show the customer the numbers and say: “It brings the total to $25,000. All you have to do is approve this, and I’ll get the new vehicle ready for you as soon as possible.”

Customers will react. If they overreact because they think the trade value is too low, and most likely they will think that, remind them of your position at the dealership, saying: “My job is to assist people in selecting a new vehicle, so please let’s see what I can do about the difference figure. What different number were you thinking you could get the new vehicle for?”

The customer says: “We want more for our vehicle. We only want to pay $22,000 difference. That’s it, or we have to go.”

Of course, the customer’s number always will be different. Sometimes, you’ll be so far apart there is almost no chance of a sale.

When the customer counteroffers, be creative with your response. Never write down the first or second number the customer says; that gives an impression of finality. Instead, say, “Can you tell me how you come up with a number like that?”

Listen to their explanation. It most likely will be about how much they have invested in their vehicle; what they paid for it; what vehicles they saw like it listed for more money on the Internet; what another dealership said about it; and so on.

You and your sales manager will need this information to know how to proceed with the negotiation. The customer’s response to this question will get them right to the point.

Tell the customer you can take off $500, bringing the price down to $24,500. Ask if they approve of that.

Work from small increments, without writing numbers discussed on your worksheet because you want to get another number from the customer.

If you do not go down on your number slowly, the customer will not move up on theirs.

If they are not moving on their number or not enough, say, “You are going to have to help me out a bit here. If you can be a little more flexible, I’m sure the dealership can be too.”

When the customer has given you their third or fourth verbal difference offer, write it down, get it initialed and secure it with a financial commitment such as a check or credit card.

Then say, “If we agree on a figure, can we use this money towards a deposit on your new vehicle?”

The reason you have to say this is to clarify with them that they are about to buy a car. An actual deposit is required only when there is an agreement on a final number.

Fill in your sales manager, who can assist in closing the sale or a tweaking of the proposed deal.

Everyone has a preconceived notion of what their car is worth. The key to having customers leave the dealership happy and in a newly purchased vehicle is to work with them and make sure the trade negotiation is done professionally.

(Darin George is the founder of Automotive Sales College. He is at [email protected].)