It seems that people think any deal is hiding a lie if it requires a computer to tally. My love of gadgetry wants to dismiss that notion as simple minded, but I'm starting to wonder.
There was a time when dealers made money by selling cars with a pad and pen and maybe an adding machine. The math was simple enough that a sales person could calculate a deal with a 10-key adding machine the size of a phone book. An honest profit could be made without up-sells, trade-ins, factory incentives, lender reserves, service, so forth and so on.
Dealers actually asked more for the car than they paid for it and earned the profit with customer service. Buyer's orders, bank contracts and credit applications were done by hand and called in by phone to live bankers (yes they were called bankers or credit managers, not “analysts”).
Customers put real money down and owned their trades because they kept them longer than the bank loan lasted. The sizzle was the car more than the deal and customers weren't afraid of their neighborhood dealer.
“On line” meant on the phone line, and there was no caller ID to screen calls. Without email and faxes sales people actually developed a personal relationship with customers.
Same with bankers who wrote information down and called salespersons back with a credit decision — every time — no finance and insurance managers “rehashing” the deal. It wasn't unusual for a banker to actually know the neighborhood where a loan applicant lived.
A new car's invoice was the source document for what a car cost. Many manufacturers hadn't yet adopted “holdback” as a plot to hoodwink sales people and the public into thinking cars cost more than they do and to coax dealers into giving them an interest-free loan.
Most importantly, profits on car sales did not demand a sophisticated calculation of how many cars might be sold during the remainder of this quarter. Tiered incentives meant trips, gifts, or a plaque on a salesman's desk.
Profitability was a one deal at a time thing, just like making friends with a customer. Back then, you didn't need a CPA and a consultant to know which way your business was heading.
A big turning point came with profits made possible by extended service policies, after-sale, and payment schemes.
All of the sudden, dealers, banks, and independent warranty companies found an ocean of profit in the final 15 minutes of the delivery process. Dealers were thrilled by newfound wealth.
On the rising tide of complexity, manufacturers, administrative companies, CPAs and consultants salivated over their opportunity to take a piece of the increased profits showing up on dealer's financial statements. The temptation for them was overwhelming.
In a heartbeat, auto makers were in the extended-service policy business, accountants were selling advice and banks were developing new ways to buy deep.
In the blink of an eye dealers yielded lost new-car profits to outsiders, and, a minute after that, all that was left were service and used cars, and soon, even less.
No one noticed the deeper consequence of lost consumer confidence. Wall Street was jubilant with doubling prices and sales volumes soaring past 16-million units.
Crimped customer service was brushed aside with the metrics of customer satisfaction surveys designed to give the appearance of industry concern.
Customer loyalty was ignored by manufacturers hoping that some day the product would be so good that lost dealer reputations could be brushed off as a bygone issue along with dealers themselves.
We're now living the result of all that, with our domestic manufacturers in a death spiral and dealers starving.
History likely will document the terrible truth that it's wasn't the economy, car quality, or the exotic call of an import that crippled the American car business. It was unnecessary complexity and lack of responsibility; shell games hiding the profit of a car deal under something other than the hood of that actual car.
Peter Brandow is a veteran dealer in Pennsylvania and New Jersey.
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