Byprodrive

iTrader: (1)

When I tried to sell Pontiac's in 1986, I was told they made more profit on finance & insurance than the Vehicle.

jallen4

In reality, 99% of people don't have any idea how dealers make money or how much. As a general rule they just know they make far too much and need to be stopped!

bitkahuna

iTrader: (20)

ha, probably true. but info isn't hard to find.

How Much Do Car Dealers Make? | OnlineAutoDealerEd

ArmyofOne

Great link bit, thanks!

mmarshall

So.......where do you draw the line? How much is too much or a dealership to make?

If you inherited a million dollars from one of your deceased relatives, would somebody from the dealership have the right to tell you that YOU are getting too much? I think you and I both know the answer to that one. In fact, IMO, dealerships, unless you are applying for a car-loan from them or the manufacturer, should not even be looking into one's personal finances, although some do anyway.

jallen4

I really don't know where that article came from but the numbers they use and the methodology they speak of is ridiculous. I spent forty years operating/owning multiple dealerships and can assure you I couldn't hire a mediocre sales manager or service manager for the salaries they attribute to an owner.

The average investment in a new car store today, not including real estate, is right at 11 million dollars. You really don't invest that kind of money to make $60,000 a year. The average salary in 2017 of all dealership employees...mechanics, sales, clerical...was $69,000. The average new car store did right at 60 million in gross sales. Well run dealerships will net, before taxes, 2-3% of gross sales. This makes them on par with grocery stores as one of the lowest margin retailers. The profit margins of other consumer goods retailers such as furniture or jewelry dwarf those margins.

No one with any knowledge is going to tell you dealerships as a whole are not lucrative. All the numbers quoted above are easily verifiable. The fact though is that money is not made simply by selling someone a new car and adding a couple of hundred for nitrogen in the tires. Car dealerships are most often a conglomeration of profit centers including new sales, used sales, wholesale, service, parts, body shop, finance, and a variety of other specialties dealers invest in. The average new car price today is roughly $38,000 which means the dealer is making around a 5% gross profit margin. Find me another main-line consumer product with those numbers.

bitkahuna

iTrader: (20)

do you mean numbers that high or low?

if you think 5% is high (good) then yeah, you're making too much money.
if you think 5% is low (not great) then i'd say well the sales items are highly priced so 5% is still a ton of money.

i mean 2 realtors splitting a sale might get 3% each but the size of the transactions are so large that it still is huge commissions.

SW17LS

I don't begrudge anybody the right to make a lot of money. I'm in a service business and I work hard and provide great service and value...and I make a lot of money. As was demonstrated, theres a lot of investment that goes into building and maintaining a dealership, and the person who invests that money should make as high a return as the market will bear.

MY issue with car dealerships, and I think the issue most people have is the way the purchase process is designed makes consumers feel taken advantage of, because in many instances they are. When you do the whole song and dance back and forth with the manager, are kept waiting for many many hours simply as a part of a sales game to wear you down, when dealerships constantly maniplulate the numbers to add profit and mark up money factors on leases and then in turn give the consumer the hard sell on a bunch of worthless 99% proifit crap in the finance office, like $900 for BS paint sealant...THATS what I have an issue with.

Make it straightforward. Negotiate in good faith, don't cook the numbers on the backend, don't give me the hard sell...make me leave feeling good about what I just did.

bitkahuna

iTrader: (20)

^^^ hear, hear!

i would have no objection to a dealer making lots of money if i didn't feel like i'd been raped with pine cones after buying a car.

jallen4

If the people are being taken advantage of most of the time, the dealers are really very poor at doing that! You would assume if you were taking advantage of folks you would make a lot more than 5% profit on a new car on average or 3% net before taxes on total sales.

The problem with forums like this is that people start with a long list of grievances they have heard of as if though every dealer everywhere does all of them consistently all the time. There are 17,000 new car dealers in the U.S. and everyone of them is different. There are 17 million or so new cars sold yearly and everyone of those buyers are not dissatisfied or feel taken advantage of. I will guarantee you I have been in and been involved in more car sales than anyone on this forum. I have seen a very large number of very satisfied consumers in a large number of stores. Seventy-percent of my sales in our Cadillac store were repeat customers and that just doesn't happen if they "all" hate the process.

There are good dealers and there are bad dealers. There are good customers and there are jerks. Dealer personnel sometimes do lie and very few customers always tell the truth. At the end of the day you never hear of any serious players in the industry who suggest changing the whole system. Tesla, who sells .7 of one percent of the cars sold in the world , is the only manufacturer not following the traditional model. They, for good reason, chose to own their own stores when trying to sell a revolutionary product. If they continue to grow and don't get run over by the traditional manufacturers entering their segment, will ultimately have independent dealers just like everyone else. Economics will force it.

SW17LS

The issue is all of the backhanded BS that dealers do. Your "5%" profit" doesnt take into account dealers marking up interest rates or money factors to hide profit, the profit made off of lowballing trade in values, the profit made off of rediculous add-ons like paint sealant and undercoating and VIN etching and interior protectants, or nitrogen in tires that have no value to the buyer, the games played such as the extraordinarily long process meant to wear buyers down. I mean hell, make 10% profit if I'm getting a fair deal and I don't have to be treated that way.

We're all pretty well to do here, and we have all bought a lot of cars in our lives. I have had maybe 2 positive experiences when buying a car (meaning experiences where I truly did not feel like the dealer tried to screw me in some way), and I myself have bought over 20 cars and have helped others buy probably over 100 cars. Thats pretty bad. If you talk to people, you will find most people don't have much better luck than I have. Just because buyers come back doesn't mean they like the process, it just means your process is the least bad.

Seriously trying to convince you that people don't like the process of buying cars feels like trying to convince someone that people need air to breathe...its just so commonly understood.

Because they can't in the US. Look overseas, you don't find the same independent dealer franchise system in other countries.

jallen4

​​​​​​​That is absolutely not true, on both topics. One of the more uninformed topics often discussed by people on forums who do not know better. Many manufacturers have owned dealerships in the U.S. I have actually bought a couple of them from the manufacturer.

​​​​​​​Google car dealers in England, China, and Australia just for starters and then come back and apologize to the forum for being so misinformed and actually posting it! You can start with Pendragon in the UK.

SW17LS

You make a profit when you sell the financing at the retail rate, you pad profit and hide it from the consumer when you inflate the interest rate or money factor and you do that because most consumers don't know how to get their hands on what the retail rates should be. Its all about hiding profit and giving as little transparency to the buyer as possible. I have only maybe twice been quoted a retail money factor upfront when negotiating a lease, for example.

HIDING profit, instead of being upfront about a deal is what is "backhanded BS"

And yes, a real ceramic coating from a professional detailer, or even installed yourself is an order of magnitude better than the terrible "sealant" you guys sell, which is nothing but a liquid synthetic wax with almost no durability.



I would say negotiating the purchase of 120 cars in ~ 20 years makes me an unusually experienced consumer.



And you are so in your own head as a dealership owner you have no idea what your consumers actually want and like.

9 out of 10 consumers would cheer if dealerships ceased to exist.

Here's an actual study on the subject:

https://www.prnewswire.com/news-rele...300301866.html

But we're just making this up.

Manufacturers cannot sell vehicles directly to consumers in the US, look at the hassle Tesla has gone through in order to be able to do so. It may have been possible many decades ago, but not during modern times.

https://www.caranddriver.com/news/a1...t-dealerships/

https://motorhills.com/why-cant-car-...l-to-consumers



I have nothing to apologize for, it is absolutely true that manufacturers can and do sell vehicles directly to consumers overseas. I didnt say only manufacturers do. The US is the only major market where it is basically impossible for them to do so.

DaveGS4

iTrader: (2)

jallen, you are starting up with the personal comments again. Last warning before you are kicked out of this thread.

you can disagree without doing that. Do it or stop posting.

examples

ArmyofOne

Apparently this is a pretty hot topic LOL