The Science of Negotiation: Best Practices for Handling Negotiations at Your Dealership


Negotiation is a word that causes excitement in some and dread in others. To many, negotiations may seem like an unnecessary part of doing business, but in most industries—including automotive dealerships—negotiation is a regular part of life. The ultimate goal should be to ensure a beneficial outcome that not only satisfies what you are looking for but that also doesn’t diminish your reputation with your customers or your employees. From negotiating with suppliers to finding that sweet spot with a customer, there are numerous opportunities for pitfalls. So, before you again step into the negotiating chair, take a look at these tips and best practices for handling negotiations at your dealership.negotiations

Tip #1: Use Discounts to Put Yourself in A Favorable Bargaining Position with Suppliers

As a dealership owner, it is likely that you work with a variety of suppliers and vendors. From ordering car parts to finding the right CRM solution, negotiating the price with vendors can save your dealership much money. The key is to understand what is vital to your suppliers and offer that up. Remember what is significant to both of you.

While you may want a lower price on the product, they are likely taking a look at their accounts receivable and want to be sure they are receiving the funds they need in a timely matter. So, increase your bargaining power by offering to large deposit. This way they can trust they will receive at least 50 percent up front. This situation gives you leverage to negotiate a lower overall price.

Tip #2: For Salary Negotiations, Be an Active Listener and Respect Their Research

According to a 2015 National Automobile Dealers Association’s (NADA) Dealership Workforce Study, the annual turnover rate for all dealership positions is 39.4 percent. The numbers get even higher for sales consultants at 71.9 percent. Training new employees is a drain on time and money. So, one of the best ways to attract top candidates or keep ones that are loyal and talented is through productive salary negotiations.

Today, workers have many options at their disposal when it comes to where they choose to work. So, recognize this by ensuring that you are hearing them out regarding the compensation they are seeking. Be an active listener, do your research in the industry to see if you can comply, and then honestly tell them what you can do according to your budget. Hearing them out shows you respect their research and allows you to come back with an offer that is beneficial to both of you.

Tip #3: Understand the Individual’s Motive for Negotiating

Whether you are participating in negotiations with employees, customers, vendors, or anyone else, the key is to understand how they look at negotiations and what their motives are. Knowing this can help you figure out who is being honest, and what they actually may be after. A study by researchers from Northwestern University and the University of North Carolina, Greensboro revealed that regardless of gender, if individuals thought of negotiation as a game or a competition, they were more likely to lie to get what they wanted. So, take the time to gain some insight into the person you are negotiating with. What is their personality like? Are they typically competitive and out to win even if cost you? Knowing this can help you protect yourself and bargain from a position that elevates your wants and needs.

Tip #4 Build a Relationship with Car Buyers and Take Note of What They Need

When it comes to buying a car, many consumers are not looking forward to the negotiation process. Those on staff handling car sales have to balance making a profit while ensuring customers do not feel “taken.” One of the best ways to ensure your dealership gets the gain it needs while also providing a satisfactory customer experience is building a relationship with the customer. From the moment, they walk in the door, the goal should be to make them feel as if you have their best interest at heart, and in a way, you should.

Take time to engage in small talk, and steer the conversation into understanding why they need a car. Ask them what characteristics they consider a priority, and what their budget can allow. Asking questions shows the consumer that you care and will enable you to put them in a car they can afford. Write down everything, and always include all participants in the process (spouses, partners, or other family members) so everyone feels thought of during the negotiation.

Final Thoughts

Even for experienced negotiators, the process of finding a mutually beneficial outcome can be challenging and daunting. However, it doesn’t always have to be unpleasant. The key is finding what matters to the other individual and negotiate from a place finding the best possible outcome that fits both people. Will it always be successful? No. However, keeping motives in mind will always help you to think ahead which puts you in the position to come out on top.