Automotive

How are dealerships making money on used car in Covid environment?

  • Last Updated:
  • Apr 23rd, 2020 10:04 pm
[OP]
Newbie
Dec 28, 2018
16 posts
10 upvotes

How are dealerships making money on used car in Covid environment?

Been looking for a used car lately and all dealerships have different rules (not complaining)

-some allow you to test the car without a sales rep.
-some have sales rep and others don't reply at all.
-they have full refunds, but other dont.
-sales reps don't seem eager to sell at all.
-most sales are online for USED vehicles.

Wondering how they make money on used vehicles right now or are they ?
88 replies
Deal Expert
Aug 22, 2011
35536 posts
21595 upvotes
Center of Universe
They're simply riding out the wave like every other business.
Dealerships that are not creative or flexible, will likely go under.
Deal Expert
User avatar
Jul 30, 2007
28962 posts
14547 upvotes
Toronto
They will still make money on each used one sold, just matter of how much margin they must / want to make.
Banned
Apr 27, 2019
406 posts
287 upvotes
Are you looking for a car? Try and form a human connection with the sales person and see what they can do for you.

If I was able to buy, I would focus more on the condition and not the price. However, hard to check in these times (which is why refund is available?).
Deal Addict
User avatar
Jul 5, 2011
1690 posts
1573 upvotes
Toronto
Short answer: they aren't

Longer answer:

Every single dealership in the country is bleeding money in a bad way - the same situation as restaurants, hair dressers, etc. The used car market has been volatile, and while some dealers may likely be making some money on individual used vehicle sales I would say on the whole most are losing money on the majority.

Typically when you buy a car to sell at a dealership, you're taking a snapshot of the market at that time and using different factors to make your decision (expected reconditioning, market days supply - which means how often the model sells and how many are in the market, sensitivity to an equivalent new car, etc. All these snapshots that were taken 2 weeks ago, a month ago, or 3 months ago are all worthless at this point. Sales have declined somewhere near 90%, so the market days supply has skyrocketed - some dealers use an automated pricing system that has been adjusting down to match the market.

With respect to the current market, any vehicle appraisal that is more than a week old is expired. That includes inventory at dealers and trades for customers. Dealers that have inventory that was purchased in a competitive environment any more than a week ago are probably losing money at their adjusted to market asking price.

Personally I've only been able to guarantee my appraisals for 48 hours since late March. Even then I'll get burned badly on a few things that are just not possible to sell at the moment. Unfortunately what's happening is that for the small number of people looking to buy and trade their car, dealers have to be paying much less than even 2 weeks ago which makes it even more difficult to purchase a car right now.

The new market is more or less flat but without the volatility.. it will just be a period of selling almost nothing and then graduate over time back to normal.
2013 Wins - $1320 - Woohoo!
Sr. Member
Sep 15, 2017
523 posts
536 upvotes
Can't wait for the car salesmen to come in and tell us that vehicles going to hold their value because something something.
Deal Expert
Aug 22, 2011
35536 posts
21595 upvotes
Center of Universe
oilerfan89 wrote: Can't wait for the car salesmen to come in and tell us that vehicles going to hold their value because something something.
I can't wait for the dealerships to throw them all to the curb and keep the current online business model.
Deal Guru
User avatar
Mar 9, 2007
13866 posts
8931 upvotes
Think of the Childre…
Most money are made in servicing cars not car sales believe it or not.

WOULD SOMEBODY THINK OF THE CHILDREN!!!
Member
Feb 13, 2007
270 posts
56 upvotes
vkizzle wrote: I can't wait for the dealerships to throw them all to the curb and keep the current online business model.
The online model works if you're a "typical" buyer well enough.

But if you need extra help when purchasing a car, the online setup is a big fail.

I'm a prime example, I need a vehicle modified in order to drive it (and this is a legal requirement, non-negotiable)

Online is useless in my situation.

NefCanuck
Deal Expert
Aug 22, 2011
35536 posts
21595 upvotes
Center of Universe
NefCanuck wrote: The online model works if you're a "typical" buyer well enough.

But if you need extra help when purchasing a car, the online setup is a big fail.

I'm a prime example, I need a vehicle modified in order to drive it (and this is a legal requirement, non-negotiable)

Online is useless in my situation.

NefCanuck
How many dealerships can provide you this specific modification requirement?
Prior to Covid-19, were you able to walk into any dealership, pick out a vehicle and request for the modification?
Sr. Member
Sep 15, 2017
523 posts
536 upvotes
vkizzle wrote: I can't wait for the dealerships to throw them all to the curb and keep the current online business model.
Yup, there's absolutely no reason in this day and age they can't train sales managers and financial managers to answer basic questions about cars, take you on a test drive and do up all the paperwork. Salesmen are beyond archaic, they can't do anything for you without "asking the manager". Besides, in recent shopping, my wife who knew absolutely nothing about cars knew more than the poor sales guys just from the online research she had done beforehand. The poor sales guy was useless beyond fetching us the keys.
[OP]
Newbie
Dec 28, 2018
16 posts
10 upvotes
It's just weird times right now, they are so inconsistent and inflexible with their terms. A few dealerships don't seem like they have the drove to sell you a car even if I'm looking for one. They aren't budging on the price either.

Ask for best price ? Best was about 3 to 4% off. With not much commission coming in, if I was a salesman I'd take someone who's calling and interested. Must be something from the top management holding back the price.
Deal Expert
User avatar
Oct 26, 2003
35042 posts
4288 upvotes
Winnipeg
NefCanuck wrote: The online model works if you're a "typical" buyer well enough.

But if you need extra help when purchasing a car, the online setup is a big fail.

I'm a prime example, I need a vehicle modified in order to drive it (and this is a legal requirement, non-negotiable)

Online is useless in my situation.

NefCanuck
I want to order online and amazon prime it to my door. It's 2020 and I expect stuff to be shipped to me.
Deal Expert
User avatar
Feb 11, 2007
16019 posts
17271 upvotes
Oakville
oilerfan89 wrote: Yup, there's absolutely no reason in this day and age they can't train sales managers and financial managers to answer basic questions about cars, take you on a test drive and do up all the paperwork. Salesmen are beyond archaic, they can't do anything for you without "asking the manager". Besides, in recent shopping, my wife who knew absolutely nothing about cars knew more than the poor sales guys just from the online research she had done beforehand. The poor sales guy was useless beyond fetching us the keys.
The hard part to train someone to be a salesperson is the sleezyness and and lack of morals.
Sr. Member
Sep 15, 2017
523 posts
536 upvotes
engineered wrote: The hard part to train someone to be a salesperson is the sleezyness and and lack of morals.
Very true.
Deal Addict
Jan 5, 2004
3755 posts
343 upvotes
Toronto
New car dealers are ****. Used car, probably not. Financing is cheap, carrying cost for a $20k car say 4% loan is $800/yr, or $67/month. (Just using simple math to establish cost). Now say they carry 50 cars at $67/car, that's $3350 a month in interest. And this is assuming everything is done through financing. But most dealers do some creative accounting and actually buy the car with cash and not financed. So I mean yeah, there are some costs, but probably not that crazy.


And if they can ride through this wave, the used car market will probably pick up a lot quicker than new car sales.
Deal Expert
User avatar
Apr 21, 2004
54622 posts
19420 upvotes
So buy a new car because of 0% 84 months offer vs buy used at 5% no longer works for the time being?

Even Toyota is offering six months payment deferrals. Like Mike said countless of times, adjudication standards/criteria will definitely have been upped several notches.
Member
Feb 13, 2007
270 posts
56 upvotes
vkizzle wrote: How many dealerships can provide you this specific modification requirement?
Prior to Covid-19, were you able to walk into any dealership, pick out a vehicle and request for the modification?
Well, in terms of them paying for it, Ford, GM, Chrysler and Kia have "Mobility Programs" wherein the automaker will pay for the modifications I need up to a set amount on a new vehicle purchase. When I bought my Fusion in 2008, the Ford dealer I used also arranged the modifications to be done so I could literally "sign and drive" which I assume they'd be able to do in 2020 again and probably now be even legally required to do under the AODA (Accessibility for Ontarians with Disabilities Act)

It means that buying a vehicle involves extra steps (and leaves out many vehicles because they can't be modified to fit my needs)

NefCanuck
Member
Feb 13, 2007
270 posts
56 upvotes
divx wrote: I want to order online and amazon prime it to my door. It's 2020 and I expect stuff to be shipped to me.
Right now even Amazon Prime isn't all that great Smiling Face With Open Mouth And Smiling Eyes

Due to the pandemic they're picking and choosing what they'll ship expeditiously and so I'm waiting on a set of specialized batteries that I can't get anywhere else Confused Face

NefCanuck
Deal Addict
Mar 21, 2013
3350 posts
4493 upvotes
Edmonton
oilerfan89 wrote: Yup, there's absolutely no reason in this day and age they can't train sales managers and financial managers to answer basic questions about cars, take you on a test drive and do up all the paperwork. Salesmen are beyond archaic, they can't do anything for you without "asking the manager". Besides, in recent shopping, my wife who knew absolutely nothing about cars knew more than the poor sales guys just from the online research she had done beforehand. The poor sales guy was useless beyond fetching us the keys.
I actually don't think I've ever met a car salesman who knew more about the car I was interested in than me. As someone who does some work in sales (real estate, a bit different where you have actual fiduciary obligations to your clients) I find it appalling.

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