This is a follow-up on my previous posts and the basic underlying concepts of suing car dealerships. Previously, I addressed the concerns with regard to insurance and whether or not to file a case. Once you decide to file a case, you need to understand how a car dealership works to fully understand the concept of the fraud or the deceptive practice. In order to examine this, the best thing to do is to start from the bottom and work your way to the top. This means that you need to examine the workings of the salesmen, how their compensation and pay plan works, how their job works, how they interact with their superiors – which would be the finance and insurance managers and sales managers – and then how this upper-level management, finance and insurance managers and sales managers, deal with the ownership and the general manager.
You need to understand that the salesmen are paid solely on the profit on the vehicle. This means that if the auto dealership acquires a vehicle for $5,000 and it sells for $6,000, the salesman receives profit on the $1,000 difference. Usually, this is a 20% to 25% commission rate. This sounds simple, but it is not. These salesmen are usually nickel-and-dimed by the upper management, forcing them to implement these deceptive practices. Hypothetically, if a dealer were to acquire a vehicle for $3,000 at auction but felt it was worth $5,000 and had to put money into this vehicle to recondition it even though the dealership acquired it for $3,000, it might go on the books at $6,000 or $7,000. This makes the salesman’s job that much more difficult to make an honest living and an honest profit. Many times sales representatives only make a “flat” (set fee) for selling a vehicle. This means that there is no or little profit and they get a set amount for a car which ranges from $100 to $200. This is one of the reasons for the turnover in the industry and the reason that salesmen are not particularly concerned with the method by which they use to sell these cars. Since they have a good idea they are not going to be around at the same dealership long enough, they are just mostly concerned with maximizing the number of cars they sell, regardless of the method they use.