You forgot the factory money that goes to the dealer after the sale…the dealer always makes out and rightly so. But lets not pretend that the dealer will lose money…the sales guy may be the loser or only make $100. and no spiffs for extra equipment/services but is that a concern for the buyer? Is it the buyers job to make sure the salesperson makes money? I don’t think so. Every sales person takes a job knowing exactly what they get paid for…some deals are lucrative …some aren’t…but that’s the job.
“When I know the dealer would make almost nothing on a deal”
Why did you make this comment?
That’s just not true. If you’re referring to holdback as factory money, there are plenty of times they will use that to make a sale. If you’re referring to factory money as bonus cash for selling x amount of cars, that’s not a guarantee, and will force a sales manager to lose $$$ on a car to try to chase a bonus. It’s been noted here time and time again by reputable sales people that a dealership will lose money 9x out of 10 on new car sales. They make it up on used cars, service + back end add ons. It is not unheard of for a dealership new car sales to be in the red, and happens quite often.
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the person looking for information that they can use to get the “best” deal they can negotiate doesn’t need to be concerned about “factory money/bonus cash et al” unless they can use it to leverage a better deal…for themselves…the dealers will always make out or they won’t be in business long.
Nobody is arguing the fact the dealership is making money as a whole. There’s a perception that dealerships make a windfall on new car sales, and that is definitely not the case.
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I’ve said it here multiple times but as long as I get the deal I want I really don’t care if the dealer makes $200 or $2,000. I don’t really understand why some people are so adamant a dealer should not make any profit whatsoever. Something’s got to pay to keep the lights on.
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Um because dealers make almost nothing on hackr deals and the deals that I make. Why do you think it’s so difficult to get them? Because dealers won’t accept less than a massive profit? Get real. It’s a low margin business. If you don’t think so, go open up a car dealership.
On every new car deal I’ve ever made, only one dealer takes the deal and I’ve got 15 or 20 other ones refusing and calling me crazy and saying it’s impossible. Why do you think that is? Apply logic and reason.
Agree. But I want them making money off someone else. That’s why I’m happy when I see “terrible deals” haha
I don’t recall seeing that.
Anyway the figures are available for the publicly traded dealers. New car sales could be ~25% of overall profit but it’s also a driver of FI products which are very profitable
Maybe it wasn’t this site, although I think there were some comments on it. The main money comes from used sales, back end adds in F+I and service though, not new cars.
As I said, we don’t have to go on what some salesperson or some manager at a random dealership said. Some of the largest chains such as Autonation, Lithia, Sonic, Penske, etc are public.
Eg 22% of gross profit at Lithia is from new car sales:
I had to chime in here, I have been a lurker on this site for a long time but signed up for an account to reply to this thread. I am an executive at one of the large public auto retail groups mentioned in your post. They are all franchises not chains. This might seem like semantics however it is very important for two reasons I will come back to this later in my post.
It is 100% accurate that new car dealers make next to nothing on new cars. We make most of our money on service. Of course F&I and used car sales pull far better margins. Using percentage of gross profit as a metric to prove that large profits are made on individual sales is misguided. The aggregate gross profit is what matters. This number is made by volume of sales, not large margin on individual sales. As an example, McDonald’s makes billions selling hamburgers, does that mean they are making a huge profit margin on each burger? Of course not, they make next to nothing however they sell so many that the aggregate profit is large.
Now back to why it is important to note that the dealerships are franchises and not chains. Chains such as Publix or Krogers, all the stores are owned and centrally managed by corporate. In a franchise model each store is responsible for their own profit and loss.
This is why deals vary so wildly based on what dealer you go to. It all depends are where they are at for the month with quota and OEM bonuses. Of course there are other factors such as aging inventory. The bottom line is that each location is responsible for their own P&L and if they do not produce they are usually sold. Dealerships change hands very frequently.
I am happy top answer any more questions that you may have.
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What’s your opinion on telling customer’s “It’s our corporate policy not to offer price-break down worksheets on car sales until you’re signing a contract.” ?
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move on to the next guy. If they won’t be upfront and transparent, don’t deal with them. Either the threat will make them open up, or you don’t want to do business with them anyways.
Turn it around on them…ask them if they would buy a major ticket item without knowing all the numbers.
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Definitely my sentiment.
I had that experience trying to lease my Stinger… the Finance manager had the audacity to say “Well, I thought that since you were working with us that we’d have your business…” when I told him that I was shopping around for best deals.
I’m confident that I didn’t get the BEST deal where I was, but I did not appreciate the “just come on in and we’ll talk about it and beat it” sales strategy. They wouldn’t discuss sales numbers and they wouldn’t stop trying to get me to walk in the door. I was 50 miles away from them, I wasn’t just going to pick up and go to them on a “we can beat it, just come in” statement.
I felt bad, I wanted to give the salesman the sale, but his finance manager really messed it up for him… Something tells me it’s not the first time that’s happened and it certainly won’t be the last.
I don’t appreciate being kept in the dark about a huge purchase like that.
I had a guy yesterday tell me it’s their policy that they can’t even quote a sale price through email. I told him to delete my email address then and stop emailing me 5 times a day asking “when can you come in?”.
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“It’s my policy to not deal with dealerships that aren’t transparent.”
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This is just bullshit. Anyone that signs before they see the details is naive
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I imagine that they’ll show your the price breakdown at time of signing once they work up the contract and then walk you through it. It’s a good tactic for folks who don’t what they’re doing because I think a lot of people will simply sit down and take it, thinking “Oh man, those are the numbers, I’m here now, I can’t just get up and leave and waste everyone’s time, may as well sign.”
I try to remain professional when ever a dealer plays back-handed tactics on me.
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