Automotive

Locked: Dealer Profits - time to end the confusion

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  • Sep 4th, 2015 3:31 pm
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Banned
Aug 31, 2015
87 posts
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GTA

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?
147 replies
Newbie
Mar 13, 2014
78 posts
20 upvotes
Windsor
We are in RFD....deals.....
Means money...
Deal Fanatic
May 5, 2008
6315 posts
3092 upvotes
Manitoba
Do toyota dealers all work together?
Banned
Aug 31, 2015
87 posts
20 upvotes
GTA
airmail wrote: Do toyota dealers all work together?

no the do not. no dealers from any brand work together with regards to daily business operations.
Banned
Aug 31, 2015
87 posts
20 upvotes
GTA
1818588 wrote: We are in RFD....deals.....
Means money...

I get it and I love a good deal too but this is a relationship product/service and in any good relationship there has to be give and take on both parties.
Deal Addict
User avatar
Nov 9, 2008
4465 posts
426 upvotes
Toronto
How much can you hook the RFD squad up with on Toyotas?
Buy Bell, and you go to HELL! :-0
Deal Fanatic
User avatar
Aug 29, 2011
5259 posts
3660 upvotes
Westmount (Montreal)
My uncle is a Toyota car dealer in Quebec.

He's a multimillionaires.

Leave those cars dealers alone.
Sr. Member
Sep 29, 2007
747 posts
345 upvotes
Ontario
TOYOTASALESMANAGER wrote:
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.
If the 'finance guy' gets to try to rob me of everything (bullsh1t cash cows like warranties, vin etching, etc) why should I give a damn what anybody in that dealership wants.

What am I going to need your assistance for after the fact, exactly? Are you gonna squeegie my windows on demand or something?
Sr. Member
User avatar
Jul 1, 2005
976 posts
30 upvotes
TOYOTASALESMANAGER wrote: 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?

This is a joke right?
Deal Guru
Aug 15, 2015
10483 posts
7614 upvotes
ON
Millstone wrote: If the 'finance guy' gets to try to rob me of everything (bullsh1t cash cows like warranties, vin etching, etc) why should I give a damn what anybody in that dealership wants.

What am I going to need your assistance for after the fact, exactly? Are you gonna squeegie my windows on demand or something?
AMEN !!!! I would be willing to treat them with more respect if they do the same and don't pickpocket every unsuspecting customer that walks through the door. All sort of hidden fees and shady tactics and now I'm supposed to feel bad for trying to keep my hard earned money ??
Deal Addict
User avatar
Oct 26, 2012
3524 posts
15859 upvotes
Halifax
When I'm buying a car, the last thing I care about is whether my salesperson makes a profit. And they could care less about customer service after they make the sale, no matter what you pay.

Salespeople don't stay with dealerships long enough for me to get to know any of them, at least not long enough to my next purchase.

I don't get exactly what the argument is? That we should be paying more for cars? Wrong place for that argument. Lol
Newbie
Mar 13, 2014
78 posts
20 upvotes
Windsor
TOYOTASALESMANAGER wrote: I get it and I love a good deal too but this is a relationship product/service and in any good relationship there has to be give and take on both parties.

well.... problems are here..

1.dealers are move around too much specially GTA area.. I saw him 1year ago at Honda, today at Toyota , next year ????
What can I expect relationship with like a that dealers.... some are not. but mostly yes.
2.why everytime buy new car dealers put me into chaos. buy warranty, buy etching, buy this that....... it's annoying...
3.problem with warranty or car fix.. my dealers are never helpful....
4.lying.. specially for female buyer. like a my wife :( .about warranty or simple oil change things... they try to dump ***** on.
5... and a lot....
Deal Fanatic
Aug 29, 2011
9924 posts
7088 upvotes
Mississauga
The OP can pontificate all he/she wants but there is a reason negotiating the purchase of a new car is right up there with some of the least pleasant experiences a person can endure. If dealerships want to really make a difference they need to get their collective act together, stop trying to push sketchy deals to unsuspecting customers and make the buying experience as transparent as possible. Potential buyers shouldn't have to prepare for war every time they step foot on a showroom floor.

I get it that everyone needs to eat. But the way many dealerships go about doing it is shameful.
Deal Addict
User avatar
Apr 18, 2009
3991 posts
1127 upvotes
Toronto
troll thread
Banned
Aug 31, 2015
87 posts
20 upvotes
GTA
I agree with most of what the replies state but unfortunately I work in an industry full of people who arent' the most educated in the world and most rely on the one off deal and on to the next mentality. For myself I have been with the same dealer group for more than 10 years and have great relationships with most of my clients and give what I believe to be superior service to all of them. The reason you may need a dealer in your corner is very simple and let me give an example. Today a client walked in with a cracked windsheild and they had purchased a protection package from one of the finance guys that you mentioned. His package did not include the replacement of that windsheild but he was led to believe by the finance guy (it was actually a girl) that it was. What did I do. Stepped up and stepped in and took care of the cost of his $300 windsheild from the New Car Department. Why because good client services costs money sometimes and if we dont make any then there is none to help out with. I made that guy smile today and he has trust and confidence in us to do the job right and when and if we screw up cause we will (were human too) we stand up to it and own up to it. Now let me toot my own horn here for a minute. I am unique. Not all dealers I have worked with/for do this but its the right thing to do and I dont want to be so typical I want to be unique and thats why I get 25-30 referrals a month and price is rarely discussed with any of those people its about Trustworthiness, Likeability, Location, Transparency, Availability and Customer Service or is none of that important to anyone here.
Banned
Aug 31, 2015
87 posts
20 upvotes
GTA
chroma_cg wrote: troll thread
not a troll thread. I actually care and dont like the way some dealers treat their clients.
Banned
Aug 31, 2015
87 posts
20 upvotes
GTA
1818588 wrote: well.... problems are here..

1.dealers are move around too much specially GTA area.. I saw him 1year ago at Honda, today at Toyota , next year ????
What can I expect relationship with like a that dealers.... some are not. but mostly yes.
2.why everytime buy new car dealers put me into chaos. buy warranty, buy etching, buy this that....... it's annoying...
3.problem with warranty or car fix.. my dealers are never helpful....
4.lying.. specially for female buyer. like a my wife :( .about warranty or simple oil change things... they try to dump ***** on.
5... and a lot....
1. agree 100%
2. cause thats where the money is made. Something are worth it somethings are not
3. switch dealers
4. can happen with a realtor/lawyer etc. this is not unique to the automotive business
Deal Fanatic
May 5, 2008
6315 posts
3092 upvotes
Manitoba
TOYOTASALESMANAGER wrote: no the do not. no dealers from any brand work together with regards to daily business operations.
ok..someone told me a few weeks back that all the toyota dealers are in cahoots with each other
Banned
Aug 31, 2015
87 posts
20 upvotes
GTA
Tracydeanne wrote: When I'm buying a car, the last thing I care about is whether my salesperson makes a profit. And they could care less about customer service after they make the sale, no matter what you pay.

Salespeople don't stay with dealerships long enough for me to get to know any of them, at least not long enough to my next purchase.

I don't get exactly what the argument is? That we should be paying more for cars? Wrong place for that argument. Lol
thats not the argument. there is no argument on my part. my was just insider pespective from a true automotive professional who does a great job for his clients and of course expects to be compensated for it.
Banned
Aug 31, 2015
87 posts
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GTA
Nook wrote: How much can you hook the RFD squad up with on Toyotas?
happy to hook up everyone with a deal. If its an easy deal im good with 300-500 over on almost any car depending on availability. On a highlander though very few around doesnt make good business sense to give them away.

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