Automotive

Honda dealers - profit margin vs. fair offer. Are dealers being greedy???

  • Last Updated:
  • Mar 13th, 2012 8:27 am
Tags:
None
[OP]
Deal Addict
Jun 29, 2003
1470 posts
774 upvotes

Honda dealers - profit margin vs. fair offer. Are dealers being greedy???

I'm having difficulty negotiating a deal at Honda. I've tried at a couple of dealers.
I have the car cost canada invoice price.
My final offer has been 3% on top of invoice, this represents about $1000 in profit for the dealer. I've always stuck to this 3% rule in the past (with other brands) and it has worked well. I think it's more than fair. In fact, it's what Car Cost Canada recommends - http://carcostcanada.com/1/en/blog/inde ... ps-advice/

The dealers I spoke to want to take 6-7% or approx $2k+ on the car. I find that to be unreasonable and I walked away both times.
This is my first Honda purchase - am I being unreasonable or are the dealers just being greedy? Or perhaps it's a supply and demand issue as there aren't too many 2011 Odysseys left in stock.

Thanks for your input.
49 replies
Newbie
Dec 27, 2010
28 posts
1 upvote
Ottawa
jakemtl wrote:
Dec 28th, 2011 5:14 pm
I'm having difficulty negotiating a deal at Honda. I've tried at a couple of dealers.
I have the car cost canada invoice price.
My final offer has been 3% on top of invoice, this represents about $1000 in profit for the dealer. I've always stuck to this 3% rule in the past (with other brands) and it has worked well. I think it's more than fair. In fact, it's what Car Cost Canada recommends - http://carcostcanada.com/1/en/blog/inde ... ps-advice/

The dealers I spoke to want to take 6-7% or approx $2k+ on the car. I find that to be unreasonable and I walked away both times.
This is my first Honda purchase - am I being unreasonable or are the dealers just being greedy? Or perhaps it's a supply and demand issue as there aren't too many 2011 Odysseys left in stock.

Thanks for your input.
I personally always buy used HOnda . You can easily save 20-30% as most of the depreciation is in the first few years. I bought my 2000 crv used with 30K for about 8-9K lower then new one. The car is running perfectly with 260K on it. With used you have more choices ( ie private sales) and I find better ability to negotiate.
Deal Addict
Jan 19, 2011
2189 posts
426 upvotes
i would be interested in finding out what it actually costs to operate a dealership, in terms of margin required to post a profit. I find it a bit challanging to believe that a dealership can turn a profit and remain open for business selling automobiles at 3% over cost, regardless of the markup on repairs, parts, and higher value add on and accessory package sales.

Perhaps you are being too cheap?
"The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is."
Just a guy who dabbles in lots of stuff learning along the way. I do have opinions, and readily share them!
Deal Expert
User avatar
May 8, 2005
31842 posts
1295 upvotes
jakemtl wrote:
Dec 28th, 2011 5:14 pm
I'm having difficulty negotiating a deal at Honda. I've tried at a couple of dealers.
I have the car cost canada invoice price.
My final offer has been 3% on top of invoice, this represents about $1000 in profit for the dealer. I've always stuck to this 3% rule in the past (with other brands) and it has worked well. I think it's more than fair. In fact, it's what Car Cost Canada recommends - http://carcostcanada.com/1/en/blog/inde ... ps-advice/

The dealers I spoke to want to take 6-7% or approx $2k+ on the car. I find that to be unreasonable and I walked away both times.

This is my first Honda purchase - am I being unreasonable or are the dealers just being greedy? Or perhaps it's a supply and demand issue as there aren't too many 2011 Odysseys left in stock.

Thanks for your input.
You're being a bit unreasonable IMO ...the dealer can negotiate whatever price they like....just because it's a price you don't happen to agree with, does automatically make them greedy.

The relative scarcity of 2011 Odysseys ( I assume ) probably means the dealer has a pretty good idea on what they can get for one. The fact that they won't go as low as $300 over invoice on a year old 2011 model ( i.e it has almost a year's worth of deprecation on it ), perhaps speaks for itself in terms of it's value in the marketplace..

Why not bump your offer up to 5% over instead of 3% over ?

But, at the end of the day, if you don't like the price ...take your business elsewhere either to another dealer or to another manufacturer ...or... check out a 2012..

Capitalism 101. ;)
" The placebo effect is the most powerful supplement of all "
" The pain of discipline weighs ounces, the pain of neglect weighs tons "
" The best training in the world can't overcome a lousy diet "
TRAIN HARD !!!!
Banned
Sep 22, 2008
8322 posts
528 upvotes
there is a demand for honda vehicles so the dealers know this as well.
why not try a few more dealers to see who wants your business?
usually as you go farther out of the city the dealerships out in the boonies will usually be more soft
Deal Fanatic
User avatar
Oct 6, 2010
6452 posts
1052 upvotes
Toronto
packardbell wrote:
Dec 28th, 2011 5:59 pm
there is a demand for honda vehicles so the dealers know this as well.
why not try a few more dealers to see who wants your business?
usually as you go farther out of the city the dealerships out in the boonies will usually be more soft

OP, I would go with this advice. I 'questioned' the prices of used Honda's in another thread and was ridiculed based on my knowledge of apples and oranges. Go figure.
Otherwise, pick up something else with a little more flex room if a dealer is willing to push to stay in business. Normally, the boonies. GL!
Deal Expert
User avatar
May 10, 2005
25442 posts
2675 upvotes
Ottawa
fieldhousehandyman wrote:
Dec 28th, 2011 5:32 pm
i would be interested in finding out what it actually costs to operate a dealership, in terms of margin required to post a profit. I find it a bit challanging to believe that a dealership can turn a profit and remain open for business selling automobiles at 3% over cost, regardless of the markup on repairs, parts, and higher value add on and accessory package sales.

Perhaps you are being too cheap?
+1
Far too many people seem to think that a retailer is in business to give their product away to the deserving public. It costs a lot to run a business and a dealership has huge costs to cover long before it can even hope for a profit. For instance, a medium sized dealer is paying $15K plus per month just for insurance. Yes, it is a business expense but, you gotta sell a lot of cars to cover just that expense alone. Paying the employees is huge, it also comes out of that so called unreasonable (and sometimes imagined) profit margin.
Lastly, no business is in business to lose money and as a businessman, the objective is for you to make money. A small business can't do that on 2 or 3% margin.
"some people's idea of free speech is that they are free to say what they like, but if anyone else says anything back, that is an outrage.” Winston Churchill
Jr. Member
User avatar
May 26, 2010
121 posts
8 upvotes
jakemtl wrote:
Dec 28th, 2011 5:14 pm
I'm having difficulty negotiating a deal at Honda. I've tried at a couple of dealers.
I have the car cost canada invoice price.
My final offer has been 3% on top of invoice, this represents about $1000 in profit for the dealer. I've always stuck to this 3% rule in the past (with other brands) and it has worked well. I think it's more than fair. In fact, it's what Car Cost Canada recommends - http://carcostcanada.com/1/en/blog/inde ... ps-advice/

The dealers I spoke to want to take 6-7% or approx $2k+ on the car. I find that to be unreasonable and I walked away both times.
This is my first Honda purchase - am I being unreasonable or are the dealers just being greedy? Or perhaps it's a supply and demand issue as there aren't too many 2011 Odysseys left in stock.

Thanks for your input.
CarCostCanada actually suggests a fair dealer profit margin of anywhere from 3% to 6% per vehicle sold. $1000 Profit on a $30000 Vehicle is not huge, or greedy by any stretch of the imagination...
Marty Anderson manderson@erindodge.com Chrysler Dodge Jeep RAM Consultant... Ask Me Anything Former Car Rental Guru... Ask Me Anything About The Car Rental Business
Jr. Member
User avatar
May 26, 2010
121 posts
8 upvotes
Pete_Coach wrote:
Dec 28th, 2011 6:32 pm
+1
Far too many people seem to think that a retailer is in business to give their product away to the deserving public. It costs a lot to run a business and a dealership has huge costs to cover long before it can even hope for a profit. For instance, a medium sized dealer is paying $15K plus per month just for insurance. Yes, it is a business expense but, you gotta sell a lot of cars to cover just that expense alone. Paying the employees is huge, it also comes out of that so called unreasonable (and sometimes imagined) profit margin.
Lastly, no business is in business to lose money and as a businessman, the objective is for you to make money. A small business can't do that on 2 or 3% margin.
Well Stated!!!
Marty Anderson manderson@erindodge.com Chrysler Dodge Jeep RAM Consultant... Ask Me Anything Former Car Rental Guru... Ask Me Anything About The Car Rental Business
Deal Addict
Dec 25, 2004
2168 posts
211 upvotes
Hondas are overpriced because of so many media outlets and consumers saying they are the best. They are NOT. My GFs Honda was a POS. Buy a Ford or Toyota.
[OP]
Deal Addict
Jun 29, 2003
1470 posts
774 upvotes
i would be interested in finding out what it actually costs to operate a dealership, in terms of margin required to post a profit. I find it a bit challanging to believe that a dealership can turn a profit and remain open for business selling automobiles at 3% over cost, regardless of the markup on repairs, parts, and higher value add on and accessory package sales.
That's pure speculation on your part and overly simplistic. There's a lot more that goes into profit than straight margin on a cash sale

Let's not forget that the dealerships generate $ and profit in other areas too - notably volume and holdback.

Plus, on cash deals they get all the money up front, and that is worth something. On leasing and financing the company earns interest.

On warranty work, repairs, service, etc. they make even more.

mgdanderson wrote:
Dec 28th, 2011 7:52 pm
CarCostCanada actually suggests a fair dealer profit margin of anywhere from 3% to 6% per vehicle sold. $1000 Profit on a $30000 Vehicle is not huge, or greedy by any stretch of the imagination...

I'm happy to give $1k profit (3%) on invoice. THe range however has been $2-2.5k.

Do I want to be fair? Absolutely. Do I want to save as much money of my hard earned money as I can? Without a doubt.

I'll try out in the boonies and see if I fare any better.
Jr. Member
User avatar
May 26, 2010
121 posts
8 upvotes
jakemtl wrote:
Dec 28th, 2011 8:05 pm
That's pure speculation on your part and overly simplistic. There's a lot more that goes into profit than straight margin on a cash sale (see below).




I'm happy to give $1k profit (3%) on invoice. THe range however has been $2-2.5k.

Let's not forget that the dealerships generate $ and profit in other areas too - notably volume and holdback.

Plus, on cash deals they get all the money up front, and that is worth something. On leasing and financing the company earns interest.

On warranty work, repairs, service, etc. they make even more.

Do I want to be fair? Absolutely. Do I want to save as much money of my hard earned money as I can? Without a doubt.

I'll try out in the boonies and see if I fare any better.
Does the dealership want to make money? Of course? Does the consumer want to save money? Absolutely!!!
A dealership does not make money on volume, because they are most likely selling vehicles at 3% mark-up or lower... :(

However, if you have went to a few dealership and none of them are willing to sell you a vehicle at your perceived profit allowance, then you may need to re-adjust your thought process regarding a fair profit for the dealership.

I would assume that the farther you travel (ie the boonies) the less willing a dealership would be to lose profit as there is not nearly as much competition.

Of course dealerships make money on warranty work, repairs, service etc. However, dealerships also have huge costs to keep these service departments operating.

All I am saying, yes there is a fair profit on any goods or service. However, at the end of the day, the merchant who is selling those goods or services has the final say in what they sell their products for... and obviously no Honda dealership thinks that a 1% profit on a $30000 vehicle is a fair profit for them to make...
Marty Anderson manderson@erindodge.com Chrysler Dodge Jeep RAM Consultant... Ask Me Anything Former Car Rental Guru... Ask Me Anything About The Car Rental Business
[OP]
Deal Addict
Jun 29, 2003
1470 posts
774 upvotes
mgdanderson wrote:
Dec 28th, 2011 8:22 pm
Does the dealership want to make money? Of course? Does the consumer want to save money? Absolutely!!!
A dealership does not make money on volume, because they are most likely selling vehicles at 3% mark-up or lower... :(

However, if you have went to a few dealership and none of them are willing to sell you a vehicle at your perceived profit allowance, then you may need to re-adjust your thought process regarding a fair profit for the dealership.

I would assume that the farther you travel (ie the boonies) the less willing a dealership would be to lose profit as there is not nearly as much competition.

Of course dealerships make money on warranty work, repairs, service etc. However, dealerships also have huge costs to keep these service departments operating.

All I am saying, yes there is a fair profit on any goods or service. However, at the end of the day, the merchant who is selling those goods or services has the final say in what they sell their products for... and obviously no Honda dealership thinks that a 1% profit on a $30000 vehicle is a fair profit for them to make...

All good comments.
No one said anything about 1% profit - that would generally be unreasonable.
I may go back to the drawing board - import a Sienna from the US.
Deal Addict
Jan 19, 2011
2189 posts
426 upvotes
jakemtl wrote:
Dec 28th, 2011 8:32 pm
All good comments.
No one said anything about 1% profit - that would generally be unreasonable.
I may go back to the drawing board - import a Sienna from the US.
Depends also how much you value your time, as well as a myriad of other considerations...

i bought a new windstar years ago from a salesperson who presented me a reasonable deal on a last of the previous years model, secured 0% financing (was supposed to be 2.9 on last years, zero on current years) and a few other little spiffs that i never dickered over. Had it seven years and close to 400k before a repair didn't justify it being fixed.

After that, about five years ago, he found me a great deal on a used Freestar, two years old with 50k, about two grand less than anything comparable... problem was one purchaser bought all five available... A week later, the other purchaser found out only four were available, and i drove the other off the lot. still have it now, with just over 300k now, and running just fine.

Sure i never bothered saving $590 off of retail... oops, my bad
"The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is."
Just a guy who dabbles in lots of stuff learning along the way. I do have opinions, and readily share them!
Deal Addict
Dec 25, 2004
2168 posts
211 upvotes
I would definitely consider other brands. Hondas are overpriced and their customer service is terrible. Especially when one of their genuine Honda timing belt fails.
× < >

Top