I've already made every imaginable mistake so that you don't have to.

First Pencil

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Napkin Versus Computer Printout

Whether scribbled on the back of a napkin or delivered warm from a laser printer, the initial offer presented to the customer by the salesperson is called the First Pencil.

  1. With significant luck, the first pencil could be a competitive offer on the vehicle you wish to purchase equipped as you want it.
  2. There is also a very substantial chance that the first pencil could be an uncompetitive offer on the vehicle that you wish to buy.
  3. Finally, there is even a meaningful chance that the first pencil will be an uncompetitive offer on a vehicle far different than that which you wish to buy.
    While I did say "finally", there may be a greater chance of scenario three than scenario one.

Buyer's Level of Preparation

The more prepared you are before entering the dealership, the greater your chance of scenario one, but even then it is absolutely not guaranteed.
I once went into one car dealership well prepared with a stack of competing offers for various configurations for the dealership to eventually beat, should the initial offer even prove to be at all competitive.
However, that dealership's initial offer proved to be MSRP minus the rebate that the manufacturer was offering.
While superficially it might seem tempting to call out that dealership and shame them, from the perspective of that dealership it would not be shaming them at all.
The strategy of some dealerships is to make a small profit on a large volume of cars.
The strategy of other dealerships is to emphasize gross profit per vehicle over volume.
Regardless of how prepared I was, I was simply sitting in the wrong dealership if I wanted the absolute lowest price.
While their offer was thousands of dollars more than what an informed consumer would pay, from the dealership's sales manager's perspective how would he know I would not agree to pay his above-market price if he did not submit it to me?

Asking Out The Captain Of The Cheerleading Team

From the perspective of an automotive salesperson and the sales manager that he or she reports to, the first pencil may be somewhat like asking out the captain of the cheerleading team or the football team's quarterback.
No guarantee that the customer will say yes, but oooooohhh wouldn't it be wonderful for the salesperson if the answer were in fact yes!!
I did say merely somewhat like because there are some important differences between the first pencil and asking out the captain of either the football or cheerleading teams:

  1. With enough times at bat some customers will actually say yes to the first pencil!
  2. Even if a customer says no to the first pencil, the salesperson may get to try again with an offer that actually might be competitive.
  3. Maybe the customer gets passed to a closer whose job is to convince the customer that the first pencil is a good offer.
    Free car wash with every service!!!

Spoiler Alert

Oral representations such as a free car wash may or may not actually be honored after the sale, and even if they are, their value is quite small relative to the price of even a car that is not merely used but is very used.

My Takeaway

Whether the first pencil was hand written or delivered on a crisp laser print out is not what makes a first pencil competitive.
You might have a laser printer at home.
If so, then you are free to use it to print out The Moon is made of Swiss cheese, but that would not make it so.
Whether the customer chooses to respond with ...

  1. A simple direct no,
  2. "I'd love to but we have the big game with state that day" or
  3. "Wish I could but I have a hair appointment that day"

... it is not merely OK to say no to the first pencil, but barring a competitive offer, it may in fact be expected.

I would love to close this page by saying having once been handed an offer of MSRP for a vehicle, I have now seen everything and nothing new can ever surprise me.
   However, such a naive statement would only suggest that I have even more to learn than I think I do.