Why Is It So Hard to Sell a Used Car?

The used-car salesperson’s problem is that he or she has all the advantages.  Not only that, but he knows your name, your address and your credit history.  Now normally, you’d think that that’s an advantage, not a problem, but consider this: Is it easy for the salesperson to sell a used car to you in this situation?  

 

What happens frequently is that you walk away, or you go home and think about it, or you shop some more and then finally come back to make the sale.  Probably the salesperson will have to keep dropping the price until he compensates for what you perceive as a risk -- that he has important information that you don’t have.  

 

This situation is called “asymmetrical information”, where one side of the transaction knows more than the other side.  Often, there are two or three consequences of this imbalance of information:

 

Another good example of this principle at work is the fractiousness and glacial pace of labor-management negotiations.  In classic union negotiations, labor never feels that management is presenting a true picture of the health of the company.  They suspect that the company has greater resources than management is disclosing about its ability to offer more benefits or higher wages.  Consequently, negotiations drag on and on -- sometimes for years -- and from time to time labor walks away from the table completely.

 

By being aware of this principle and turning it to our advantage, one of my clients and I reduced from three weeks to three hours the time it took one of his clients to make a decision to use his services.

 

 

 

 

Robin Johnstone Consulting, LLC

Offices in Albuquerque and Santa Fe