To Automotive Dealerships: Why the "Buy Here, Pay Here" Guys are hurting your business.

Posted by Christopher Pinto,
Creative Director

If you have a major dealership moving 100+ new units plus pre-owned each month, it's easy to ignore the little guy on the corner pushing $1500 rides on Craigslist. But have you considered the damage many of these small, used-only lots are causing to your business?

Recently I started looking for a cheap car for a friend's kid to run around in. I was surprised at what was out there in the $1000 to $3000 range: A lot of junk, with an occasional good car in between. And a lot of lies, from small-time car dealers.

After researching, calling, and visiting several "mom and pop" used car dealers in my area, here's what I found:

• Every one of these 'dealers' advertised cars that looked great online, but where absolute junk when I saw them in person.

• Every one of them had excessive dealer fees, anywhere from $299 to $899...remember, this is on a $1500 car.

• All of them had a mechanic shop on site, but none of them seemed to know if the cars had any mechanical problems.

One ad read "Absolutely perfect cosmetically and mechanically. Mechanic's special. $899". Yeah, there's a little bit of a contradiction with that one, huh? As soon as I walked up to the car in question, the salesman came from across the lot, practically yelling, "That car's no good!" He went on to explain it had a blown head gasket, a job that he admitted would cost him between $1500 and $2500 to fix, depending on which part of the conversation he was in. He said he'd sell it to someone who understood what that meant, as the car books for $2500 retail, tops.

Another guy tried to sell me a $300 used car warranty over the phone on a car I hadn't even seen (It was an eBay auction, and I couldn't see the car before the auction close because he was in Key West on vacation...yeah...sure.)

The worst place was basically a junk yard with a used car sign in front. The vehicle was a 1996 Cadillac DeVille. The ad for this car showed it being in great condition, and said it looked and ran perfectly. It was advertised on Craigslist for $1999. I found the same car advertised on Cars.com for $995. When I got there, I found out why: It was a wreck. Cracked windshield, dents down the side, two bad tires, hood wouldn't shut right. Car had 180k miles on it. There was a screwdriver where the gearshift was supposed to be. When I opened it up, it had the distinct smell of a car that had been sitting shut up in a scrapyard for a lonnng time, with an air freshener in it. It started, and sounded like "Christine" from the movie when the car is all beat to hell and in sad shape. This car had all the earmarks of being pulled out of a junk yard and given a fake title. AND...for this $995 car, there was a dealer free of $899. That's right. So, out the door, with tax and tag, the guy would "let it go" for $2000.

Yeah, right.

Now you're thinking, "We would never do that at our dealership." Of course you wouldn't. You know that your reputation in the community is what keeps your business going and growing. Your mechanics check out your cars carefully, you recon them, and price them fairly. Many of you don't even have dealer fees on pre-owned, and if you do, you post it clearly on the car and in your ads. People at your dealership know exactly what they are getting.

Don't they?

Consider this: Millions of people out there start out in life with little or no equity. They go to school, start a job, try to build credit and go from there. Most college kids drive junkers...if they're lucky, they get a hand-me-down car from the family. If not, they have to buy something cheap and reliable. Most major dealers won't bother with cheap used cars (except as price leaders) so where do people like this go for cars? Private sellers, and mom and pop shops. So basically, their first impression of car dealers comes from these shady characters. Hence, the stigma of the stereotypical "Used Car Salesman".

If someone gets burned buying a $1100 car for $2200 and it breaks down in two months, forever will they never trust anyone in the car business again. These are the people who will go through life buying cars cash, or getting loans from their bank to buy cars through private sellers. What does this mean? It means you can be losing thousands of potential customers through no fault of your own.

Mad, aren't you? Appalled that someone so dishonest would be in the same line of business that you've worked so hard to make successful. You've played by the rules, you're more than fair with your pricing, and offer good used cars with a warranty. So what can you do? Is there any way for you to off-set this destructive behavior?

There is. Some of it you're already doing now. Some of it will need some time, effort, a little money, and the right message. Getting that message out to the right people – that's where we come in.

THE MESSAGE: Ask any car dealer in the country what customers want when buying a used vehicle, and you will get the same answers: Honesty, integrity, no hidden fees, warranty, no hidden flaws, vehicle in better than expected condition for the price, and the greatest value possible (or, in other words, the lowest price possible on the nicest car you have).

This is the message that you need to communicate. You back that message up with price points that match or are slightly below market value. You monitor your competitor's pricing and adjust as necessary. You only sell good quality cars, and back it up with at least a 90 day warranty. If you have any "As-Is" cars, you throw them in a Bargain Corral and make it clear that these cars are 'what you see is what you get'...and still give your customers a 10-day warranty. Scrap the dealer fees on anything under a predetermined price (ie, $3000) and proudly post it. Get testimonials from satisfied buyers as proof you are men and women of your word. Then broadcast it to the world.

COMMUNICATING:

Too many dealers today try to stuff their advertising with inventory, offers and price points. This works in some markets, but eventually it's all going to be a worthless waste of your advertising money. Anyone can sit down at a computer and find the car they want, in the color they want for a decent price. Those who don't are the ones who will get hoodwinked and swindled into paying $2000 for that $500 Ford Escort. You need to use a good section of your advertising to communicate that message of honesty and value to all of your potential customers.

DISTANCE YOURSELF FROM THE SHADY "DEALERS"

This is particularly important if your business is in an area saturated with junk-shop car lots. Communicate to the public that you don't need to use any bait-and-switch tactics to get people on your lot, because your quality of inventory and reputation are enough. Go as far as to say "Buyer Beware" of hidden fees and poor quality in other dealerships (you'll of course run it by your lawyers to make sure you're not crossing any lines or breaking any laws in your state).

BARGAIN CORRAL

Rope off a corner of the used car lot for a Bargain Corral. This is an old trick that still works today, and is being used successfully by most of our clients. Keep this area stocked with at least ten to twenty vehicles priced under $10,000, the cheaper the better. Offer a short-term warranty, Carfax, and inspection to show you have nothing to hide. Drop any dealer fees so you have a bottom-line price posted, and make a big fuss about "no hidden fees". Even if buyers aren't aware of big fees at other dealers, they'll know it must be an issue if you're advertising no fees.

STAND BY YOUR CARS

Never sell a car that is questionable. Stand behind your quality. If something simple breaks three weeks after they buy the 10-day warranty car, fix it. Fix it for free, and make a big deal about it. Make the buyer write you a letter and post on your social media sites how great you are. You can get hundreds or even thousands of dollars worth of positive publicity by occasionally replacing a $300 part.

KEEP THEM HAPPY, AND MAKE THEM TELL THE WORLD

Similarly, whenever you sell any vehicle, get your customer to give you some form of positive feedback, whether online, through a customer survey, or letter. Take a photo of each new customer smiling with their new purchase, and post them on a wall in the dealership for potential customers to see. Ask them to be your friend on facebook and follow you on twitter, and follow up with them in a few months to see how they are enjoying their car. If they bought a $3000 car from you in May, by November they may be ready to trade up to a $10,000 car.

I hope this post opened your eyes to (or at least reminded you of) one of the difficulties in trying to sell quality used cars. If you'd like to discuss possibilities on promoting these ideas, give us a call at 954-927-2886. We'd be happy to talk turkey.

*If any buy-here-pay-here dealership owners are reading this, and you think I'm being unfair, I'd like to hear your input. If you're an honest company, you face the same challenges the big dealerships do.

Visit our automotive advertising website at www.epadv.com