What does buying a car, house, dishwasher, television, and insurance policy have in common?

Give up?

Commissions…

There is a very good chance that the salesperson who sold you one of these things made a commission from the sale. Commissions are commonly a small percentage of the total sale or a larger percentage of what you pay over the sellers’ cost of the item.

The bottom line is that when you pay more, the salesperson makes more money.

Now I want to describe how Carsala makes their commission. I can’t find anything on the internet like Carsala, so I am going to call it a “reverse commission” and have high hopes that Webster picks up the term some day. In a reverse commission, Carsala makes a better commission when you spend less. If you’re confused like 95% of my friends when I say this, then keep reading.

Start by thinking about how a typical car salesperson makes money. Imagine that you bought a car for $20,000. If the dealer bought the car for $18,000, then the salesperson just made a $2,000 commission from the sale ($20,000-$18,000). If you spend $21,000, then the salesperson made $3,000. When you spend more, the salesperson makes more money. There are even more ways car salespeople make money from you, but that’s for a future blog.

With a reverse commission, Carsala takes a percentage of the savings you get off Blue Book. In Scenario 1 below, the Blue Book is $20,000 and Carsala has negotiated a price of $16,000. The commission is $600 (15% of $4,000). In Scenario 2, the Blue Book is still $20,000 but the negotiated price is $14,000. The commission is $900 (15% of $6,000), which is greater than $600 because Carsala saved you more money. Consider this: it is in Carsala’s best interests to help you save more money because when you save, Carsala’s commission is better. Lucky for us that Carsala’s actual performance as a result of analyzing car listings and using their negotiation tactics results in savings that are closer to Scenario 2!

For fun, let’s imagine what would happen if other industries used reverse commissions.

• Realtors might spend a lot more time finding hidden gem houses instead of asking to you to bid up a house price to make sure you have the winning bid.
• Insurance sales people would really try to only sell you the policy you need instead of a policy loaded with a bunch of features you will never use.
• That television salesperson might convince you to buy a 20 inch TV instead of a 60 inch TV so you will stop watching four hours of TV each day.

What a different world we would live in!

It is with great pleasure that I begin Carsala’s official blog about cars and car buying. At the age of 16, I had a very tight budget and big hopes for my first car. In a stroke of juvenile genius, I bought my first car at an auction through a friend’s dad. I didn’t buy the 1985 Mazda RX-7 I was pining for… I bought the ever so unsexy 1989 Toyota Tercel Coupe for way below Blue Book. Just when I thought I was the world’s smartest car buyer, I took it to a dealer and they told me it had $2000 worth of damage to the steering system. My total cost was suddenly well above what any sane person would pay for this car.

So I was done learning about buying cars, right? Wrong. I have since spent another 17 years buying more cars (7 total) from private parties, relatives, and dealers. I learned something new each time. My learning also continued in an entirely different capacity when I worked in the auto industry for five years as a supplier. In this job, I gained some amazing insights into how car makers come to decisions.

Most recently I bought a 2007 Honda Civic using Carsala and loved the savings and ease of buying a car (more on this topic later). Previous to buying the Civic using Carsala, I spent a month analyzing eBay, Craigslist, and newspaper listings. With Carsala, when I bought the car in three days for a price I didn’t think was possible, you can imagine how happy I was. My wife was even happier!

I became such an advocate of Carsala’s offering that when Carsala’s founders Tyler Elliston and Raif Barbaros approached me to become the chief writer of their blog, I could not resist.

So where does this blog fit in with my experiences? From what I can tell, a great blog that discusses all the ins and outs of cars would be a wonderful resource for a lot of people. If you follow this blog, you’ll hear me rant and rave about car buying, dealers, negotiations, insurance, maintenance, companies, internet sites, safety, laws, quality, culture, and more. Some posts will be based on an original analysis (I’m notorious for putting together huge spread sheets for analyzing just about anything). Other posts will be pure personal opinion (I quasi-famously wrote my boss’s boss a 2 page letter explaining in detail why he was a chump). More posts will be about auto news and recent events. I hope you will enjoy this blog, and be sure to leave some comments about your own trials, failure, and successes with cars!