Dealer Profits - time to end the confusion
Posting this to end any confusion about dealer profit margins/deals/negotiation etc.
New car dealers operate on approximately 2% margin after all expenses for a big box style store that may carry an operating expense of close to $20 million thats a pretty slim $400,000 return on a pretty hefty investment. In fact most New Car Departments operate at a loss to ensure that the pre-owned department and the service and parts department have cars to be traded in eventually and parts and service to be profitable with.
That being said there is this fabulous misconception that dealers make ungodly profits on the sale of new cars and I think I know where it stems from. The Big 3, Ford, GM, and Chrysler (or at least they used to be) liked to advertise 10,000 cash back on TV, Radio and Newspaper giving consumers the perception that there must be at least, more than $10,000 of margin to sell the vehicle at the advertised price and stay in business. Pretty logical. Except for one thing. These "discounts", "rebates" what ever you want to call them come from the Manufacturer on top the profit margin the vehicle offers the selling dealer. No secret there. Most people know this. But with this misconception in hand I see people walk in and ask for 10-25% off the price of a $25,000 car when there is typically 5-9% profit margin before rebates available for both profit and discounts and people think that asking for 25% off isnt bad because the dealer is still going to make money.
Look at the advertising today from GM or Dodge on their pickups. "Up to 10,000 in factory incentives" if you buy a certain model a certain way and the cow jumps over the moon. Why not just price the vehicle $10,000 cheaper and make that the actual selling price. It would help your vehicle keep more value for the future I will tell you that much.
The fact is Car Dealerships are businesses just like any other and are entitled to profit. The notion that dealers are crooks/con artists/cheats etc. must have some truth to it or the stereotype wouldnt exist. My advice try your best not to be fooled by these types of people. Just remember though ever profession has its crooks/con artists and cheats some that reap more profit than car dealers so stay away from those people too.
If you rob a dealer or salesperson of every dollar from a car deal how could ever expect them to have any resouces or even the willingness to help you should you ever need their assistance for anything. My best clients allow me to make a profit and in return I ensure they get a good deal. Not all people work this way and not all dealers work this way. But I can tell you this, when one of my good clients needs me for anything I will do everything in my power to assist them anyway I can. Having a good car person in your corner is worth its weight in gold.
Now judging by the subject matter of this forum most people are here only for a good deal with regards to price. A recent study by the National Auto Dealers Associate of the United States and the Canadian Auto Dealers Association stated that price was the 7th most important factor of their car deal and Trustworthiness, Likeability, Location, Transparency, Availability and Customer Service were all ahead of that.
How important is price compared to the rest of those factors combined?
New car dealers operate on approximately 2% margin after all expenses for a big box style store that may carry an operating expense of close to $20 million thats a pretty slim $400,000 return on a pretty hefty investment. In fact most New Car Departments operate at a loss to ensure that the pre-owned department and the service and parts department have cars to be traded in eventually and parts and service to be profitable with.
That being said there is this fabulous misconception that dealers make ungodly profits on the sale of new cars and I think I know where it stems from. The Big 3, Ford, GM, and Chrysler (or at least they used to be) liked to advertise 10,000 cash back on TV, Radio and Newspaper giving consumers the perception that there must be at least, more than $10,000 of margin to sell the vehicle at the advertised price and stay in business. Pretty logical. Except for one thing. These "discounts", "rebates" what ever you want to call them come from the Manufacturer on top the profit margin the vehicle offers the selling dealer. No secret there. Most people know this. But with this misconception in hand I see people walk in and ask for 10-25% off the price of a $25,000 car when there is typically 5-9% profit margin before rebates available for both profit and discounts and people think that asking for 25% off isnt bad because the dealer is still going to make money.
Look at the advertising today from GM or Dodge on their pickups. "Up to 10,000 in factory incentives" if you buy a certain model a certain way and the cow jumps over the moon. Why not just price the vehicle $10,000 cheaper and make that the actual selling price. It would help your vehicle keep more value for the future I will tell you that much.
The fact is Car Dealerships are businesses just like any other and are entitled to profit. The notion that dealers are crooks/con artists/cheats etc. must have some truth to it or the stereotype wouldnt exist. My advice try your best not to be fooled by these types of people. Just remember though ever profession has its crooks/con artists and cheats some that reap more profit than car dealers so stay away from those people too.
If you rob a dealer or salesperson of every dollar from a car deal how could ever expect them to have any resouces or even the willingness to help you should you ever need their assistance for anything. My best clients allow me to make a profit and in return I ensure they get a good deal. Not all people work this way and not all dealers work this way. But I can tell you this, when one of my good clients needs me for anything I will do everything in my power to assist them anyway I can. Having a good car person in your corner is worth its weight in gold.
Now judging by the subject matter of this forum most people are here only for a good deal with regards to price. A recent study by the National Auto Dealers Associate of the United States and the Canadian Auto Dealers Association stated that price was the 7th most important factor of their car deal and Trustworthiness, Likeability, Location, Transparency, Availability and Customer Service were all ahead of that.
How important is price compared to the rest of those factors combined?