Why dealer's sold on one-price, one-person

Editor's note: An earlier version of this story, which also appeared on Page 30 of the March 9 issue, should have said One Toyota of Oakland (Calif.) ranked No. 136 on the 2014 list of the top Toyota dealers in the U.S., up 35 spots from 2013.

When dealer Brian McCafferty launched his One Price, One Person no-haggle sales model at Avondale Toyota outside Phoenix 10 years ago, it was considered cutting edge.

"Sadly," he said, that's still pretty much the case, even though the model is more relevant today as Web-savvy, smartphone-toting consumers increasingly hunt simple, fast and transparent vehicle deals.

With One Price, One Person, a single sales employee handles a customer's entire vehicle transaction with no price haggling, including financing and the sale of ancillary F&I products, such as an extended service contract and guaranteed asset protection coverage.

Customers' loan interest rates, which are quoted upfront, are based on their credit scores; however, customers with similar scores get the same rate. All customers are charged the same price for F&I products. In fact, all aspects of the dealership are one-price, including service items and parts. McCafferty also uses the model at his other Toyota store, One Toyota of Oakland in California.

He said dealerships are starting to come around to the one-person, no-haggle notion, albeit slowly.

"We've had more dealers come see us in the last two or three years, and then go make some substantial changes in their stores, than we've had in the previous eight years," said McCafferty, who openly invites dealers from all over the country to see his sales model in action.

On a larger scale, Sonic Automotive Inc. began implementing a program it calls One Sonic-One Experience in August at dealerships in Charlotte, N.C. One salesperson, using an iPad, takes customers through the complete sales and F&I process.

Even so, getting retailers to change long-ingrained habits takes time, McCafferty said. "Most dealers are resistant to it," he said. "It's really taken a lot in the marketplace to get dealers to realize that the car business isn't where their customer wants to be. We need to make some changes."

McCafferty said he has never once second-guessed himself or his model. One reason? It gets results.

Avondale Toyota ranked No. 65 on the 2014 list of the top Toyota dealers in the country, and One Toyota ranked No. 136, up 35 spots from the previous year, McCafferty said. Over the past two years, net profit at One Toyota has increased 75 percent, he said.

There are 1,234 Toyota dealers nationwide, according to the automaker.

"People told us 10 years ago it would never work, then said it wouldn't work much longer. But in the past 10 years, we have gone through three major market disruptions -- a deep recession, the Jap-anese tsunami and the Toyota unintended-acceleration issue -- and we never changed our model once. Even in the toughest times, we have been successful."

Positive customer feedback is "overwhelming," he added. Almost half of business is repeat and referral business.

The One Price, One Person strategy "was really born out of doing the research of what the customer wants," McCafferty says in a video on Avondale Toyota's website, avondaletoyota.com. "There's a tremendous part of the market that doesn't enjoy haggling on a new car. ... We've given them our very best [price] right off the bat rather than making them work three or four hours for it."

But what really resonates with consumers is that they don't have to have a separate interaction with an F&I representative, which usually takes much longer than actually selecting and agreeing to buy the car.

"That is where our customers see the most value in our process," McCafferty said. "Customers do not understand why there are two separate transactions in an automotive deal, and they don't want it. Every other item that they buy does not have that type of inefficiency to it. We are really proud to offer it, and we're doing extremely well at it."

Forgoing the finance department also shaves a huge amount of time off the entire transaction. Once a customer agrees to buy a car, he or she usually can take delivery in less than 45 minutes.

"Everything is largely done already, so when the customer says yes, it's a matter of printing the documents, having the car washed and prepped for delivery," McCafferty said. "It's so much easier because you never have to wait for our F&I guy. It gives us a huge competitive advantage."

The process pays dividends for his sales personnel, too.

Salespeople earn the same flat fee for each vehicle they sell, whether it's an $80,000 Land Cruiser or a $20,000 Corolla. They get additional fees for other things, such as doing the financing paperwork and selling an ancillary F&I product.

The average compensation for salespeople is about $480 per car.

That ensures that customers get the same treatment no matter what kind of car they purchase or whether they're a first-time customer or a repeat buyer, McCafferty said.

"When our salespeople look at a customer, they're looking at a $480 deal," he said. "That allows them to focus on taking care of customers, finding the right vehicle that fits their needs and building a lifelong relationship. That gives the customer a much higher level of experience than the average salesperson provides."

McCafferty says his salespeople "are paid significantly higher" than those at other dealerships. The average sales associate at the Oakland dealership made $82,000 last year, with the top producers taking home more than $150,000.

The average sales associate at Avondale made $87,000, with top producers earning more than $160,000. According to the 2014 NADA Workforce Study, the national average pay for sales consultants was $65,050 in 2013.

McCafferty said turnover among his sales personnel is minimal. "The only time people tend to leave us is if they are not meeting our performance standards," he said. "Very few people walk away from what we do."

While McCafferty is surprised that more dealerships haven't yet converted to his sales model, he thinks more will have to as tech-savvy millennials become a bigger part of the customer base. "This sales model is more pertinent today than it was 10 years ago," he says.

For example, he said, more people shop online for a car before they enter a showroom, but "when they come into the dealership, they're faced with a person who speaks to them in a completely different language. It's very analog as opposed to digital. The customer feels a very big disconnect between those two experiences."

As a result, his dealerships are trying to overcome that separation. The Oakland dealership is beta testing a process in which showroom visitors fill in a deal profile on a tablet loaded with propriety software, then press print. The information flows into the store's dealership management system. Customers are receptive, McCafferty said. "We can do the transaction from A to Z on a handheld pad, and it mimics" their other consumer experiences, he said.

"This is the future," McCafferty said. "This is where customers want to be."