Auto Dealers Good Times
09-21-21, 10:45 AM
#1
Lexus Test Driver
Thread Starter
Auto Dealers Good Times
https://www.thedrive.com/news/41654/...ng-this-summer
Anyone notice dealerships making major renovations? I'm in northern NJ and I see numerous ones on my daily commute "pardon our appearance". Must be related to the rising profits these days.
Anyone notice dealerships making major renovations? I'm in northern NJ and I see numerous ones on my daily commute "pardon our appearance". Must be related to the rising profits these days.
09-21-21, 11:53 AM
#2
That story links to another story about used cars selling over new car MSRP's. Weirdly, several at the top of the list are mechanically ancient things: Tacoma, Challenger, Charger, to name a few.
09-21-21, 02:01 PM
#3
Lead Lap
This too shall pass... 
09-21-21, 02:09 PM
#4
Selling 1/3 as many cars at MSRP doesn't generate the profit that traditional volume sales
produce at discounts. Most of the dealership dollars are generated in the shop (down a bit
with less driving), Finance (way down with 1/3 volume) and various aftermarket sales. Can't
sell rustproofing without a car to apply it to, right. See above. Fixed costs (except floorplan)
stays the same. Are the stores that are making upgrades 1) adding additional points (brands)
such as Genesis? Storm damage repair? Change of management due to hardship or death?
produce at discounts. Most of the dealership dollars are generated in the shop (down a bit
with less driving), Finance (way down with 1/3 volume) and various aftermarket sales. Can't
sell rustproofing without a car to apply it to, right. See above. Fixed costs (except floorplan)
stays the same. Are the stores that are making upgrades 1) adding additional points (brands)
such as Genesis? Storm damage repair? Change of management due to hardship or death?
09-21-21, 02:22 PM
#5
Selling 1/3 as many cars at MSRP doesn't generate the profit that traditional volume sales
produce at discounts. Most of the dealership dollars are generated in the shop (down a bit
with less driving), Finance (way down with 1/3 volume) and various aftermarket sales. Can't
sell rustproofing without a car to apply it to, right. See above. Fixed costs (except floorplan)
stays the same. Are the stores that are making upgrades 1) adding additional points (brands)
such as Genesis? Storm damage repair? Change of management due to hardship or death?
produce at discounts. Most of the dealership dollars are generated in the shop (down a bit
with less driving), Finance (way down with 1/3 volume) and various aftermarket sales. Can't
sell rustproofing without a car to apply it to, right. See above. Fixed costs (except floorplan)
stays the same. Are the stores that are making upgrades 1) adding additional points (brands)
such as Genesis? Storm damage repair? Change of management due to hardship or death?
09-21-21, 02:26 PM
#6
Lexus Test Driver
Thread Starter
Selling 1/3 as many cars at MSRP doesn't generate the profit that traditional volume sales
produce at discounts. Most of the dealership dollars are generated in the shop (down a bit
with less driving), Finance (way down with 1/3 volume) and various aftermarket sales. Can't
sell rustproofing without a car to apply it to, right. See above. Fixed costs (except floorplan)
stays the same. Are the stores that are making upgrades 1) adding additional points (brands)
such as Genesis? Storm damage repair? Change of management due to hardship or death?
produce at discounts. Most of the dealership dollars are generated in the shop (down a bit
with less driving), Finance (way down with 1/3 volume) and various aftermarket sales. Can't
sell rustproofing without a car to apply it to, right. See above. Fixed costs (except floorplan)
stays the same. Are the stores that are making upgrades 1) adding additional points (brands)
such as Genesis? Storm damage repair? Change of management due to hardship or death?
09-21-21, 02:55 PM
#7
Lead Lap
The article linked to in the OP is a bit misleading because, when it talks about dealerships "making a killing", it isn't always making a clear distinction between large chain dealerships, individual traditional dealers, new car dealers, used car dealers, dealers specializing in selling via the internet, etc.
I have no question that those selling used cars, especially those like Carvana and Vroom, are doing very well. With the shortage of new cars, many buyers have been driven into the used car market. Carvana, Vroom, and the like operate on a business model of keeping overhead, especially labor, very low. With the increased demand for used cars, they can afford to pay premium prices to keep their inventories full, mark the prices of used cars up by a reasonable amount, and sell them quickly without a huge amount of overhead from the time they take possession of a car and the time when they sell it. And those operations can, if they are moving a large number of vehicles, make major profits from things like financing, extended warranties, etc.
For traditional new car dealers, I'm sure that it is a very different story. As mcomer points out in his post, if a dealer doesn't have cars to sell, not only can it not make a profit from selling new cars at normal levels, but it is also not making a profit from the things that can normally be a major part of a traditional dealership's profits, including financing and selling car buyers extended warranties, pre-paid maintenance plans, wheel, and tire protection plans, etc.
While I have no question that this is a boom time Carvana, Vroom, and other chains, I suspect that it is a different story for many traditional dealerships. As mcomer states, even if a dealer adds a significant "market adjustment" to the price of the new cars it sells, that doesn't help their bottom line if they don't have new cars to sell.
I have no question that those selling used cars, especially those like Carvana and Vroom, are doing very well. With the shortage of new cars, many buyers have been driven into the used car market. Carvana, Vroom, and the like operate on a business model of keeping overhead, especially labor, very low. With the increased demand for used cars, they can afford to pay premium prices to keep their inventories full, mark the prices of used cars up by a reasonable amount, and sell them quickly without a huge amount of overhead from the time they take possession of a car and the time when they sell it. And those operations can, if they are moving a large number of vehicles, make major profits from things like financing, extended warranties, etc.
For traditional new car dealers, I'm sure that it is a very different story. As mcomer points out in his post, if a dealer doesn't have cars to sell, not only can it not make a profit from selling new cars at normal levels, but it is also not making a profit from the things that can normally be a major part of a traditional dealership's profits, including financing and selling car buyers extended warranties, pre-paid maintenance plans, wheel, and tire protection plans, etc.
While I have no question that this is a boom time Carvana, Vroom, and other chains, I suspect that it is a different story for many traditional dealerships. As mcomer states, even if a dealer adds a significant "market adjustment" to the price of the new cars it sells, that doesn't help their bottom line if they don't have new cars to sell.
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09-21-21, 03:01 PM
#8
Lexus Test Driver
Thread Starter
The article linked to in the OP is a bit misleading because, when it talks about dealerships "making a killing", it isn't always making a clear distinction between large chain dealerships, individual traditional dealers, new car dealers, used car dealers, dealers specializing in selling via the internet, etc.
I have no question that those selling used cars, especially those like Carvana and Vroom, are doing very well. With the shortage of new cars, many buyers have been driven into the used car market. Carvana, Vroom, and the like operate on a business model of keeping overhead, especially labor, very low. With the increased demand for used cars, they can afford to pay premium prices to keep their inventories full, mark the prices of used cars up by a reasonable amount, and sell them quickly without a huge amount of overhead from the time they take possession of a car and the time when they sell it. And those operations can, if they are moving a large number of vehicles, make major profits from things like financing, extended warranties, etc.
For traditional new car dealers, I'm sure that it is a very different story. As mcomer points out in his post, if a dealer doesn't have cars to sell, not only can it not make a profit from selling new cars at normal levels, but it is also not making a profit from the things that can normally be a major part of a traditional dealership's profits, including financing and selling car buyers extended warranties, pre-paid maintenance plans, wheel, and tire protection plans, etc.
While I have no question that this is a boom time Carvana, Vroom, and other chains, I suspect that it is a different story for many traditional dealerships. As mcomer states, even if a dealer adds a significant "market adjustment" to the price of the new cars it sells, that doesn't help their bottom line if they don't have new cars to sell.
I have no question that those selling used cars, especially those like Carvana and Vroom, are doing very well. With the shortage of new cars, many buyers have been driven into the used car market. Carvana, Vroom, and the like operate on a business model of keeping overhead, especially labor, very low. With the increased demand for used cars, they can afford to pay premium prices to keep their inventories full, mark the prices of used cars up by a reasonable amount, and sell them quickly without a huge amount of overhead from the time they take possession of a car and the time when they sell it. And those operations can, if they are moving a large number of vehicles, make major profits from things like financing, extended warranties, etc.
For traditional new car dealers, I'm sure that it is a very different story. As mcomer points out in his post, if a dealer doesn't have cars to sell, not only can it not make a profit from selling new cars at normal levels, but it is also not making a profit from the things that can normally be a major part of a traditional dealership's profits, including financing and selling car buyers extended warranties, pre-paid maintenance plans, wheel, and tire protection plans, etc.
While I have no question that this is a boom time Carvana, Vroom, and other chains, I suspect that it is a different story for many traditional dealerships. As mcomer states, even if a dealer adds a significant "market adjustment" to the price of the new cars it sells, that doesn't help their bottom line if they don't have new cars to sell.
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bc6152 (09-21-21)
09-21-21, 03:09 PM
#9
Lead Lap
Just read an article regarding Ford dealers adding a $5k or $10k "market adjustment" charge over MSRP to those people who ordered the new Ford Bronco's a year or more ago...
This despite Ford Motor Co. assurance that the price originally quoted would be charged. Complaints get a "take it or leave it" response. Point is: Dealers are snakes and they will survive just fine, finding innovative ways to screw their customers...
This despite Ford Motor Co. assurance that the price originally quoted would be charged. Complaints get a "take it or leave it" response. Point is: Dealers are snakes and they will survive just fine, finding innovative ways to screw their customers...
09-21-21, 03:43 PM
#10
Instructor
Higher gross profit per car doesn’t mean there will be any record high, gross monthly profit numbers. The drop in volume is hard to replace. Most likely the dealerships are simply doing the renovations now while they don’t have as much going on to get in the way. While people are driving less than 2 years ago, the lack of new cars has forced people to do more service work to keep their older car in reliable condition. So auto repair shops have been busier now, than ever before. I stopped at the Toyota dealership last week to get the battery checked in my ‘20 Camry. The service writer said I would need to make an appointment and they were booked for the next 30 days. The car needed to be jumped several times that day and was under warranty but I had to buy one at Autozone because no Toyota dealer could look at it in a reasonable amount of time.
09-21-21, 05:31 PM
#11
Lexus Test Driver
Thread Starter
Higher gross profit per car doesn’t mean there will be any record high, gross monthly profit numbers. The drop in volume is hard to replace. Most likely the dealerships are simply doing the renovations now while they don’t have as much going on to get in the way. While people are driving less than 2 years ago, the lack of new cars has forced people to do more service work to keep their older car in reliable condition. So auto repair shops have been busier now, than ever before. I stopped at the Toyota dealership last week to get the battery checked in my ‘20 Camry. The service writer said I would need to make an appointment and they were booked for the next 30 days. The car needed to be jumped several times that day and was under warranty but I had to buy one at Autozone because no Toyota dealer could look at it in a reasonable amount of time.
09-21-21, 06:44 PM
#12
09-22-21, 04:24 AM
#13
Pole Position
My area one of the largest metro area has two Lexus dealers own by the same family. A year ago they expanded their used car department building a structure as large as the original new used and service department in the adjoining parcel. They now have only 43 used Lexus vehicles listed on their web site for sale.
09-22-21, 06:46 AM
#14
Instructor
Toyota learned a valuable lesson after the Fukushima disaster crippled their production capabilities a decade ago. They couldn’t source several key components for a long time period and began a policy to stockpile any key components with minimal suppliers available. This policy meant that Toyota’s Japanese factories were still operating at full capacity while many other manufacturers were stockpiling unsalable cars needing chips. I think Hyundai was the only other manufacturer not to miss a beat. So the Toyota lots have been empty but they have been getting truck loads of cars delivered and they were really killing it until a month ago. The American manufacturers Toyota’s didn’t practice this new policy and they only turned out a small percentage of the trucks and suvs they usually do.
09-22-21, 08:53 AM
#15
Pole Position
Just read an article regarding Ford dealers adding a $5k or $10k "market adjustment" charge over MSRP to those people who ordered the new Ford Bronco's a year or more ago...
This despite Ford Motor Co. assurance that the price originally quoted would be charged. Complaints get a "take it or leave it" response. Point is: Dealers are snakes and they will survive just fine, finding innovative ways to screw their customers...
This despite Ford Motor Co. assurance that the price originally quoted would be charged. Complaints get a "take it or leave it" response. Point is: Dealers are snakes and they will survive just fine, finding innovative ways to screw their customers...