Many car and insurance salesman argued that (prospective) clients should not request for a commission rebate. It is unfair to request a portion of one’s salary when they work for you. Sounds correct?
In a way, yes. But in my way, NO.
I personally have experience buying insurance and cars. I too ask for commission rebates in CASH, rather than vouchers, sports rims, solar film, sound proofing and other non-cash items.
Am I being unfair to them? After all, they derive their main income from their sale of cars and insurance. Essentially, customers who buy from them, pay them their salary. If everyone were to request rebates from them, they might end up robbing the banks to make ends meet. (Thus some unscrupulous agents resort to just robbing you, if you know what I mean).
Customers who purchase the cars or policies also exercise authority, decisions (to purchase) based on the recommendations/ advice of the sales agent. WOW, sounds like my boss.
My boss decides my salary. If I am not willing to do the job at his stipulated salary, someone else would. By the same token, if the sales agent is not willing to give me cash rebates to make my purchase cheaper, I will look for someone else. Somebody out there wanting to make just a little from my sales is more than willing to give me a $1,000 rebate for my car purchase; a 40% rebate on my life policy.
Wait wait. Will they starve? Let’s take a look at one car agent’s and one insurance agent’s sales commission. The below illustrations were given by my agents:
Car Agent Rob working in Brother Motors, sells 15 cars per month.
Basic pay: $500 monthly
Commission for selling a normal sedan: $500
Insurance: 12% of motor insurance
Loan: 0.5%-2% of loan amount, depending on loan amount and tenure.
Trade-in vehicle: Depending on make, modal, age: $0-$1000.
John bought a car from Rob, trading in his 3 year old car for a new one.
His insurance premium is $1500 and his loan tenure is $50,000 for 7 years.
Rob earns: $500 (Bro Co. commission) + $180 (insurance commission) + $ 1% of $50,000+ $200 (trade in car commission) = $1380.
How accurate is the figure? Rob is my university classmate. I am quite sure he did not lie to me. The figure should at least 80% correct. It can be less, but it can be MORE as well.
How much did Rob gave John in cash rebate? John asked for $1,000 cash back and he gave him, happily.
Even earning $380 per car will yield him $5,700 monthly before his basic salary. The paperwork he has to do is simple.
In reality, only 30% of his customers “squeeze” him. Most of them are just happy with few hundred dollars worth of paint protection, rims or solar film.
No wonder he has 2 condominiums.
From John’s and my perspective, we choose the person who can lower our purchase price to the minimum, stretching our hard earned dollar.
As for commissioned insurance agents, selling a life policy will yield them 50% of premium paid for the first year (assuming a traditional whole life). My policy cost me $3000 annually. A rebate of $1,500 was given to me.
This is because for the 2nd, 3rd and up to the 6th year, the agent will still able to derive a percentage of your premium as his income. If I am not wrong, it goes something like this:
Year 2: 30%
Year 3; 20%
Year 4: 10%
Year 5: 6%
Year 6: 5%
Again, the figure might not be 100% accurate, but it is at least 70% correct. ILPs also allocate a similar percentage of premiums (as commission) to the financial advisor. No prizes to guess why agents are pushing such products aggressively.
My agent earned nothing for Year 1, but for the next 5 years, he has a recurring income from my policy. My agent, a primary school friend, earns $8,000 a month.
My car and insurance agent will not starve at all. In fact, I am more likely to starve than they are!
The point I am coming from is not to say that since they earn a high salary, hence we should get something back from them. My point is both parties should aspire to be in a win-win situation. I choose the product and pay the price I want.
Of course there are intangible benefits like sales and customer service. However for me, I rarely look beyond dollars and cents when it comes to purchasing commercial products.
Disclaimer: The purpose of writing this entry is not to encourage prospective clients to ask for cash rebates. You should work something out with your agent to acheive a win-win situation. The figures illustrated may not be 100% accurate.