- Author: Terry Greenhut, Business Editor
- Subject: Selling
- Issue: Price Objection
Handling the price objection. It’s very important that we learn how to handle price objections because pretty much every objection we get to closing the sale stems from price. If you want to prove it just offer to fix everyone’s car for free and watch all of their objections evaporate. So, it isn’t ever that they don’t want the car fixed. They wouldn’t have brought it in at all if that were the case. They just don’t want to pay any more for it than they have to so they will try everything they can think of to get a better price.
When customers tell you that they won’t have it fixed at all, that’s just another form of the “That’s too much money,” or, “your price is too high” objection. They are trying to get you to lower your price by scaring you into believing that if you don’t, they won’t have it fixed at all. Don’t fall for it. All it should do is bring you to your next logical question which would be: “Then what will you do for transportation if you don’t have it fixed?” That question forces the next answer out of them whether or not they want to give it to you.
The answer they give is usually one of three possibilities. Customers might say that they will just trade it in for a new car and some actually will if they are tired of this car or if they’ve already sunk a lot of money into it or if they anticipate having to spend even more on it in the near future. One major determining factor will be if they want to or can afford to be strapped down to five or so years of payments for a new car, especially if theirs is already paid off.
An important point to remember is that when people bring cars to repair shops, they aren’t really thinking about replacing the cars with new ones. They bring them to be fixed so they can prolong their lives and not have to buy new ones.
We need to help them decide to keep what they are driving and spend a lot less than it would cost to trade or sell a broken car, which won’t bring very much on a trade-in and then commit to paying for a brand new one with everything that entails like sales tax, car loan interest and added insurance premiums for insuring a new car with collision and comprehensive coverage on a value of $20,000 to $40,000 as opposed to what they are driving now, which the insurance company won’t value too highly because they know that if it gets totaled they will only be out a few thousand dollars as opposed to the price of replacing something new.
Some customers will tell you they will go and lease a new car instead of fixing theirs or buying a new one because they have been seeing advertisements for what seem to be very low-cost lease rates. That is an alternative, but not always a good one and that can easily be pointed out to the customer. You see, a lease is basically a loan with a start and end date. The difference between it and a car loan is that at the end date you don’t get to keep the car. You have to turn it in and then decide what to do next, so it is basically a long-term rental. Most leases require a down payment just like a loan would, but they give it a spiffier name like “Cap (Capitalized) Cost Reduction.” Leases all have mileage restrictions which determine monthly payments so they will be a better alternative for a customer who only drives less than 10,000 miles a year than for one who requires a lot more miles or isn’t certain how many miles they will need.
A lease with a low monthly payment may look attractive to someone who has just been given the news that their transmission needs to be rebuilt and will cost $4,000 or $5,000. What they often don’t consider is that they still have to do something with the broken car they now own to get any value out of it, especially if they still owe money on it. Trying to trade it in might not even bring enough money to finish paying off the loan. In that case the dealer will have to tack on whatever they owe to the new lease payment making that formerly attractive lease payment not so attractive anymore. In fact, in many cases biting the bullet and paying for the transmission repair can actually save money by allowing for a few more years of service from the vehicle for considerably less than a new replacement vehicle would cost, or it will increase the value of their trade in.
As you can see, there is no “Free Lunch.” It’s like the old oil change commercial where the spokesperson said, “You can pay me now or you can pay me later, but you are going to pay me.” No dealer or manufacturer is giving away anything. They will get their money either by knocking down your trade in value, requiring a large down payment to bring the lease price up to where they want it, requiring a lease initiation fee up front and a vehicle turn in fee on the back end if you don’t immediately lease another car from them and the one I love; a bank fee. Don’t even try. Nobody can figure out what or why it is. You probably can’t even find a banker who can explain it to you because they don’t know what it means. It’s just a way of making that low lease payment into something the bank can live with and they obviously don’t care what the customer can live with.
Another alternative the customer might give you is that they will trade it for another used car. My favorite answer to that one is, “You’re already driving a used car, but we’ve thoroughly checked yours out and are confident that this repair will give you many thousands of trouble free miles. Most people don’t trade in cars that are problem free, so do you think you might get one that has the same or possibly a worse problem than you are now facing? After all, you know what you have; you really don’t know what you might get. Why don’t you go ahead and let us fix it right so we can save you some money and give you the peace of mind you really want?”
They might tell you that they will just park it; that it’s an extra car anyway. That’s a lie they will tell to get away from you so they can go shop for a lower price somewhere else. If it were true there would be junk cars in a lot more driveways than there are, but to break that lie you will need to find out who normally drives this vehicle because men will rarely, if ever, threaten to park their own car and not have it fixed. It is probably the car that the wife or one of the children drive. You will also need to find out what the car is used for. Does the wife need it to run errands, to get to work, or get the kids to school? Do the kids use it to get themselves to school and other activities that would mean that without the car someone would have to drive them and pick them up? If they bought the car because they didn’t want to have to chauffer the kids around anymore, they probably won’t want to take a step backwards and have to start doing that again, so pointing that out might help you close the sale.
One of the reasons for going over the repair order with the customer in detail is so that if they question or try to get you to lower the price you have the documentation to show why you can’t. If, for example, you have a posted labor rate of $100 per hour and the number of hours charged out is five then the labor cost obviously is $500. If that number shows up on a computer screen or is printed on a repair order it is very difficult for a customer to argue.
I do realize that many of you don’t like to post your labor rate and won’t do it unless your state regulations force you to. Some of you think posting it will scare off customers, but it doesn’t because it’s a meaningless number until it is multiplied by the number of hours being charged out. On the other side of the coin it is a great number to refer to when you are trying to show how you got to your price and why you need to get that amount. I always posted my labor rates right where the customers had to see them and mine were not low. I used the rate as a qualifier. If the customer saw it and was still standing there, I knew I had someone who was probably going to agree to the final price; that there wasn’t going to be too much, if any, of a price objection for me to handle. If the customer started complaining about the labor rate right from the get-go, I knew it was going to be a tough sale or that this wasn’t really the type of customer who should be in my shop.
I was always steadfast about maintaining my price because I knew that I was using real numbers to determine it. When you aren’t just pulling numbers out of the air it makes you fight harder to get your price. You can’t think, “I guess it’s okay to negotiate to a lower price and hope that I still make some money on this sale,” because you know you won’t.
Don’t sell out of desperation. Customers can smell fear. You have to act more like you are doing them a big favor by fixing their cars because you are the best at what you do without being too cocky about it. You are not there to exchange dollars. That doesn’t get you anywhere. In fact, if all you keep doing is breaking even on each sale inflation or comebacks will eventually pull you under. Your costs will keep rising but your prices probably won’t because if you had the nerve to ask for what you really need you would have been making a profit all along.
Shop owners in general are afraid to raise prices when they need to. They think they are going to lose all their customers. They won’t. If anything, they might lose the one’s they didn’t want or need in the first place; the ones who wouldn’t let them make money. You aren’t there for them. You are there for the customers who want their cars fixed right and are willing to pay a fair price for it. Keeping that in mind can keep you in business and profitable for a long time.