Handling Trade-in Allowances
by Hal Slater

Dear Readers:
I recently engaged in an email discussion with one of my book readers who sells automobiles on the East Coast. Although I sold cars over 25 years ago here on the West Coast, his questions had a remarkably familiar ring to them. I thought those of you who must deal with trade-ins might find this discussion thread interesting. It is an important element to Showroom Selling.
Initial Question:
If you have a minute I'd like to ask a question. I've heard all types of responses to this question and I just haven't settled into one I'm really comfortable with. When you were selling Buicks and someone asked you: "What's your best price or bottom dollar or lowest discount on this vehicle?" (Before you had the opportunity to build any value). The question usually happens right away on the lot at the window sticker or during a phone in conversation. What did you say? Would it be different if they asked you about interest rates, payments or trade allowance?
Reply:
Memorize this, it works: "First, let's find the right car because, if it isn't the right car, it isn't worth $5, right? I will promise you this, I do want your business and I am mostly concerned with your long term happiness, so let's find the right car and I will make it worth your while." You may substitute $5 with whatever the issue would be.
Regarding questions about trade ins. Refuse to talk retail, discount or trade in. Insist on negotiating the "difference" by pointing out that that number eliminates any shenanigans with low balls and high balls, etc.
Response:
I appreciate your thoughts. I have memorized the response to price, payments, etc. There is one more question I have in regards to explaining figures to the customer. When we write up a deal, we give the MSRP then over allow on the trade allowance. How do you explain what you're doing there? The customers first response is usually, "You're not taking anything off your vehicle and just taking my car in at this figure." Do you share what the "ACV" is and that you're taking the discount from the MSRP to overallow? Any suggestions?
Reply:
As I wrote before, be up front about the fact that you are talking "difference", simply to eliminate game playing. DO NOT let them know what the actual allowance is. When they see the wholesale value of their trade, they think they have to sell it themselves to do right. It is very hard to explain the fact that you must buy wholesale and sell retail, they just don't "get it".
In the end, they don't retail their trade, they just go to enough dealers to tire themselves out. That is no way to buy a car! YOU make the decision that you are the best place to buy a car and you have the best plan for selecting the right car, and that is more important than any amount of money any dealer can discount. BELIEVE IT!
Response:
I do see where you're coming from, but it still doesn't eliminate the reflex objection, "You're not discounting YOURS!" Since it's written up at MSRP, then discounted to over allow on theirs, they automatically think that you're not giving them a good deal. What do you say here?
Another situation: When someone comes in and just wants to know what you'll give them for their car, what do you do? In other words, they won't select anything until they know what you'll buy theirs for. Any suggestions?
Reply:
I found that the explanation, "I can do retail for retail, or wholesale for wholesale; but I cannot sell at wholesale and buy at retail and stay in business." worked pretty well. Ultimately, you have to be a responsible business person, right? Get them to understand that it is in their interests that your business survive to support them. Read the book chapter I wrote for buyers, titled: BuyItRight and inspire your prospects to be 'artful buyers' instead of mooches. By the way, NOTHING works every time. I had a 40% close rate over 22 years of pool building, which is exceptional. It still meant that I did NOT get 60%.
When someone wants the trade value first Be honest, they are. If they are here to sell their car, that is not the best way to get top dollar for it. If they are interested in trading it in, you have to evaluate the deal in its totality. How much will they let you make? PROFIT is not a dirty word! They NEED you to make a profit, to be here for them when they need you. Communicate that.
Response:
I like the "retail to retail" line. I also really enjoyed your article on buying things right. I look forward to the rest of the book, too.
When you were selling cars, what kind of questions did you ask out on the lot after you greeted and welcomed the customer? In other words, how did you go about understanding the customers wants, needs, budget and expectation, but still selling the CAR?
Did you use a trial close before or after you came inside? How did you word it?
Reply:
Glad you liked the chapter. Regarding asking questions: Asking is selling more than telling. People listen to their own internal dialog much more closely than they listen to your words. When you ask questions, they believe their answers. So, the question is: what can you ask them that will get them to tell you that they need what ONLY YOU can offer/deliver, today?
Ruminate on that and memorize the questions you come up with. Just keep probing and let them conclude that they need you. Hold off on offering solutions and answers as long as possible. Spend your time talking about the reasons they need what they determine they need (that only you can deliver).
There is only one close, at the moment of the sale. The trial close, to me, is the last probe before instructing them to sign. Word it in the form of an alternate choice between minor points. "Would you want that title in both of your names or just yours?" etc. This is covered well in the book. Just make sure that 'no' is not a declination of the sale, just a request for more options.
Response:
OK. I'm getting out there and selling, but have one more question for you. I get a lot of customers who ask me what kind of interest rate they can get for used vehicles. Do you mention that it depends on their credit or put it back on the business manager's job or something else? And lastly, when it comes to price and they want to keep beating you up on taking off a little more or adding some accessory at no charge, what do you say to retain your credibility and not "give away the farm"?
Reply:
All of the above. My policy on this topic is that the only person who can say anything is the person lending the money, and I don't do that. I simply gather and transmit information.
And lastly, when it comes to, “... price and they want to keep beating you up on taking off a little more or adding some accessory at no charge, what do you say to retain your credibility and not "give away the farm?”
"That will be a great addition to your car, Mr. Jones, and it's only $X.xx, a good deal. Of course, I will have to charge for it since you pretty much got everything I have to give already."
Response:
Our used car manager does all the appraisals on trade ins, so when someone asks me, "What can you give me for my car? Ballpark (they always say that)?" , how do you respond? I don't want to come across as hiding something or unwilling to help, so is there a good phrase to put it in perspective?
Reply:
Here is my response to "What will you give me for my trade (RV, car, motorcycle, boat, _____)?":
"Less than you want... The best way to get the best price is to tell them what it is going to take to get your business. Let's sit down and see what kind of a difference we come up with and YOU tell me what seems fair.
I can promise you this, our used car appraiser/manager is only human and, like most people, he will reach much farther if there is a real offer on the table. So, let's put together an offer that will make him sweat a little, OK?"
Position yourself as their ally AND NEVER BETRAY THEM. You are their knowledgeable friend that will help them buy a car, properly... artfully. Remember, they aren't afraid of you making a profit, they just don't want to get screwed