How to use discounts to protect profit

Donna Harris covers automotive retailing for Automotive News

Matt Sisson, the finance manager for Bill Pierre Auto Centers in Seattle, knows something about profits. He grosses an average of $1,800 per deal.

How does he do it?

First, he assumes customers want every F&I product the dealership has to offer. He bundles the products in a package and shows the customer the monthly payment with and without the extras.

Customers sign a form acknowledging the products they agreed to buy and write their initials by each one.

During his presentation, though, if the customer balks at any of the products or at the payment, Sisson starts deleting products from the deal.

But he doesn't start discounting prices willy-nilly. He has a strategy.

Sisson asks customers if they belong to any of the big discount buying clubs such as Sam's Club, Costco or AAA. Most customers belong to at least one of them.

When they tell Sisson about their membership, he says he can offer them a 15 percent discount on their service contract.

Sisson says this keeps them from chipping away at the dealership profit with price negotiations.

"You are giving them justified reasons why you can lower the price," he explains. "It's not a matter of how low can you go."

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