Last Friday, my good friends Tom and Tina asked me to help them lease a new car. The plan was to turn in their leased 2010 Acura MDX with the tech entertainment package for a new Honda Odyssey Touring Elite to accommodate their growing family. Having been a sales manager for eight years at a top-100 dealership before starting Daily Gameplan, I agreed to tag along to make sure they were getting a good deal. This is what happened:
ABC Honda (not their real name) is a mega-store with five franchises. Right next door is their Acura dealership where Tom and Tina leased their MDX. It was in perfect condition with only 20,000 miles.
Because they had such a great experience at the Acura store a few years ago, Tom and Tina wanted to give the Honda dealership the opportunity to lease them an Odyssey. Carl (not his real name), was their salesperson. He was pleasant and did a good job with his presentation and follow-up. But this is ABC's deal compared with their competition, XYZ Honda, less than 15 miles down the road:
ABC Honda initially offered $30,000 for the MDX, but stepped it to $31,000 after a second visit and more negotiations. However, the monthly payments only dropped by $15. Obviously they were padding the payments. Carl conceded that $31,000 was the highest they could go on the trade because "the mileage is too low and they'd have to spend thousands to make it a CPO. It would be a different story if it had more miles." Then he tried to convince Tom and Tina that they had been low-balled by the other dealership.
This was obviously not the case, as Tom and Tina walked out of XYZ Honda the next day with an identical Honda Odyssey, but for $3,930 less.
The point of the story is this: Carl and ABC Honda lost a deal because they didn't know their market and weren't willing to give up the gross and finance padding, even though Tom and Tina gave them every opportunity to earn their business. And more than that, ABC Honda lost potential life-long customers in Tom and Tina as well as their referral business.