Profit margins at dealerships (split)

[corsvette]

Originally posted by Redlyne_mr2
I should add, my experience has been all luxury car and import stores, any domestic dealers here want to chime in? I know that if a Dodge dealer sells a truck at full price they make a huge amount of money not only in front end gross but in holdback (profit the manufacturer pays the dealer to sell the truck).

They do make pretty good on HD trucks, when I was at Ford the markup on a loaded Super Duty was ~$7,000 and holdback was around $2,250 (we're going way back to 99- 2000 here) When that body style was new and supply was limited we we're getting MSRP and then some. As they became more common and demand died down we'd take between 2-3K over. Dodge was usually about the same (not sure of their holdback though) We made very little on F150's, usually 5-800$ over, maybe more for a absolute full load unit.

Wish there were more guys like you Redline_mr2 in the business, would make it better for both buyers and dealership employees.

[xrayvsn]

Dealt with Redlyne on purchasing a Golf R, and it was the most refreshing car purchase experience I have ever had. I did it all by e-mail. He was honest up front and gave me the numbers, no games. I have no problem with him making some money on my trade in. He saves me the hassle of trying to sell my car privately and his trade in value was more than fair, and higher than I anticipated. It was so good, that I wanted to make sure he got the best price for the car in resale, so I had the car fully detailed with a single stage polish before I traded it in. From one Beyonder to another, even though I knew I didn't have to do it.

In the end, look over all the numbers, shop around and if you don't like the deal, then simply don't buy the car.

[Jonathanl10]

I remembered seeing a sheet when I worked at Chrysler. Like $6,000 markup on 1500s more or less depending on trim. Not sure about holdback but you constantly see Ram giving $8500 in consumer cash. Usually another $2500 if you qualify (if you work a trade or something) 0% for 72 months, first few payments waived. Tons of stuff on those. But then again, I drive Honda so I'd consider that lots because Honda doesn't do jack.

Jeep GCs don't need incentives and have about 3-7k from Laredo to SRT.

Chrysler 200s and Darts didn't care because they just whored them out on rentals.


I was lot guy though so take my shit with a grain of salt.

[blownz]

Originally posted by corsvette



They do make pretty good on HD trucks, when I was at Ford the markup on a loaded Super Duty was ~$7,000 and holdback was around $2,250 (we're going way back to 99- 2000 here) When that body style was new and supply was limited we we're getting MSRP and then some. As they became more common and demand died down we'd take between 2-3K over. Dodge was usually about the same (not sure of their holdback though) We made very little on F150's, usually 5-800$ over, maybe more for a absolute full load unit.

Wish there were more guys like you Redline_mr2 in the business, would make it better for both buyers and dealership employees.

Holdback with Ford is exactly 2% on every vehicle they sell (although it has been a while so I don't recall if it was 2% of MSRP or 2% of dealer invoice). I can confirm though. They also had a few other volume discounts that I assume most manufacturers have.

Last new Ford I bought they actually gave me dealer invoice, less holdback plus $500. And they still made more than $500.

[civic_stylez]

Originally posted by SOAB


its amazing how little you know about the automotive business although you try to sound like a know-it-all.

you actually believe that a dealer is making $6000 on a $21000 car?

THIS.

Most dealers are lucky to make 300 - 500.00 on an entry level car. Used cars are where the money is at but from my days in sales, a $1000.00 profit is RARE. Manufacturers are ruthless on dealerships as well. You pay the house first and then you have to pay the salesman (200/400.00 spiff). Most entry level cars, accents, versa, focus etc have almost no margin in them at all and are most sold to get people in them with the hopes that the come back in a few years and trade up to a more premium model. You can ask most dealers to show you the invoice pricing and most will show you. You would be very surprised how little there is to be made. Volume is the only thing that keeps dealers going.

[civic_stylez]

double post

[Strider]

Just had to laugh when I saw this article 5 minutes after reading all about how much used car dealers pour into reconditioning cars in this thread

Jalopnik - Car Dealer Reportedly Sold BMW With Duct Tape Covering Check Engine Light

[Mitsu3000gt]

Why are so many people are responding to the "$6000 profit" idea when not once in the entire thread was it ever mentioned. There seems to be a lot of confusion surrounding what the dealer pays (I.e. maybe $5-6K less on a car they eventually list for $21K), and what they make on the car after it sells (profit) which would be a lot less in most cases.

SOAB misread something and everyone is jumping all over it haha.

[FullFledgedYYC]

Originally posted by Strider
Just had to laugh when I saw this article 5 minutes after reading all about how much used car dealers pour into reconditioning cars in this thread

Jalopnik - Car Dealer Reportedly Sold BMW With Duct Tape Covering Check Engine Light

And this is exactly why I said I believe in Certified Pre Owned through a dealer so strongly. If a brand dealership pulled this stunt they would be in some deep shit.

What do you expect from a shady ass used car lot?

[962 kid]

Originally posted by Mitsu3000gt
Why are so many people are responding to the "$6000 profit" idea when not once in the entire thread was it ever mentioned. There seems to be a lot of confusion surrounding what the dealer pays (I.e. maybe $5-6K less on a car they eventually list for $21K), and what they make on the car after it sells (profit) which would be a lot less in most cases.

SOAB misread something and everyone is jumping all over it haha.

Perhaps you should clarify your post. I don't think anyone misread what you said:

"There's at least a couple grand of wiggle room in a $21,000 car in my experience, probably more. The dealer probably paid $15K for it, possibly even less."

That pretty implicitly states that you believe there are huge margins on used cars

[SKR]

Originally posted by Mitsu3000gt
Why are so many people are responding to the "$6000 profit" idea when not once in the entire thread was it ever mentioned. There seems to be a lot of confusion surrounding what the dealer pays (I.e. maybe $5-6K less on a car they eventually list for $21K), and what they make on the car after it sells (profit) which would be a lot less in most cases.

SOAB misread something and everyone is jumping all over it haha.

I understood what you meant. I don't know why everyone else is struggling with it.

[Maxt]

Originally posted by blownz

My brother traded a 2008 BMW 135 in to a MB dealership last year and got $16K for it. It was up on the autotrader a few days later at $22,9XX. About a month later the price was down to $19,9XX and I stopped by with my brother to take a look at it. It had an extra 1000km on it and looked like it hadn't been cleaned since they took it from him. So funny listening to the sales guy talk about the "good loyal customer that traded it in who had babied it from new, blah, blah, blah..." My brother was the second owner, drove the shit out of it (went through a set of rear tires ever summer), had it chipped for almost 40,000km. Sales guy even told us it was never winter driven. That is when my brother called him out and called him a lying sack of shit, rather fun to watch. lol

I've had the loyal elderly return customer trade in story on every used car I have looked at. They should change it from sales tactic #2 to #12 and give it a break for a while, its worn out.

[JohnnyHockey]

Lol sales bros gon' sales bro.

[HiTempguy1]

Originally posted by SKR


I understood what you meant. I don't know why everyone else is struggling with it.

How are you going to win internet points without twisting someone's words to suit your unrelated counterpoint? Duh! Actually talking about what someone acrually said is for chumps!

[FullFledgedYYC]

Originally posted by Maxt


I've had the loyal elderly return customer trade in story on every used car I have looked at. They should change it from sales tactic #2 to #12 and give it a break for a while, its worn out.

Sigh...... I don't know where you people go, but I never used that crap. If someone asked "do you know who traded it in?" If I didn't I would straight up say "No clue unfortunately, but it's been inspected"

Sometimes they would get mad... "you have NO idea?"

That's probably why so many guys bullshit about it.

[zhao]

Originally posted by carson blocks


It's really obvious you have no idea how the car business works. The dealership has separate business units like preowned, new sales, service, and even detail is sometimes separate.

So, Joe buys a new car and trades in his beater. The new sales makes the deal, but the trade price is often set by the used car manager or his delegate. The car then goes to service where the service department treats it like a normal car and recommends 9000 things that the car needs just like when you bring your car in. Not every little thing will get done, but all major systems have to be operational and there can be no safety defects as no-one wants the liability. The used car manager is usually convinced that service is bending him over, but he isn't going to say no to a safety related item for said liability reasons. [Sidenote: If the car is too bad, it gets sent to auction, sometimes at a loss, and this has to be factored in to the low trade in prices they offer.] After the car is mechanically fine, it gets sent to detail and even if the detail jobs you've seen aren't that impressive looking, you can bet the service manager or detail manager is still sending a $200-$500 bill to the used car manager for it.

Now, the car is ready for sale and on the front lines. They do use kijiji, but a paid service, not the free one you use. Also, they advertise in the trade magazines, auto trader, and all those other places no-one actually looks for a car. It sits there, holding up dealership money, needing periodic rewashing etc. until you show up, and now the dealership has to have a commission structure generous enough to keep decent talent on the floor, and motivated to babysit you for 2-4 hours , holding your hand while you humm and haww and kick the tires on this beater. If you buy, they need to pay a finance or business manager to do up the contract, arrange financing, etc, and these fees are often passed on in the form of a 'doc fee', a practice which I personally despise, but that's neither here nor there.

You see how the costs on the used car are adding up already? And we haven't even talked about the massive overhead of the actual business operations of a dealership. An easy $2000 hit for a curber is often a break-even car for a dealer, as the curber pays 0 advertising, spends $20 at the car wash making it look good enough, and only fixes what is glaringly wrong. The curber either fixes things himself, or has a guy, using cheap parts. The dealership has to pay a tech at a decent rate, and usually uses OEM parts if the trade is the same brand. You see the difference and how a dealer can easily piss away a couple thousand bucks on your trade now?

I don't work in the car business anymore, so some of my numbers might be dated, but hopefully this gives you some insight in to the fact that it's more than a $10/hr detail, a handful of rockauto parts, and on the front lines ready to sell. It might work this way at some of the tiniest fly-by-night shops, but any reputable dealership has an overhead that would make you laugh and shake your head.

I've skimmed this thread and this is the only post I fully agree with.

As someone who was in the dealership game (Worked for dealerships and owned my own) here is my experience:

First off, 6g profit on a 21g car is possible. The biggest profit I personally have seen on 'your average used car' was 17g on a car that sold 3 days after it was traded in. Traded in for 19xxx, sold for 36xxx. zero in the shop. One dealership I worked at unofficially called itself the home of the 10 pay, because we had so many cars that sold for 10g+ profit, and pretty much everything on that dealership's lot was in the 20-40g range. I remember an a6 we got once from auction that originally was from PEI, and we paid 20g when it should of went for high 20s because for some damn reason no one was bidding on cars that day; a car that at the time retailed for mid to high 30s.

Now when I owned a dealership, I pretty much stuck to selling cars in the 10-15g category, and yes, I literally doubled my money on some of them, so the odd car i was into for 7g i'd be selling for 13-14. Now those weren't the norm by any means, but they did exist. I also reconditioned them better than the big dealerships I worked at. filters/oil changes/brake jobs, good brand name tires, not hacking body repairs with spot repairs at maaco, proper details not hack shows, etc.

Now I've personally taken a bath on cars selling them at a loss, but it's extremely rare to see that at a big dealership. Usually selling a car at a loss at a big dealership involves a call to the owner who tells the sales manager 9/10 times that he can't sell it for a loss. That's my experience anyway.

As someone who has worked in a dealership, I laugh at the guy who says there is always thousands to negotiate on cars. Used cars routinely gets fucked by every other department. One dealership I worked at we would get charged retail + 25% at service, so the average guy walking into the dealreship for a brake job was paying far less then the actual used car department was lol. CPO's depend on the manufacturer but they generally require certain things that are $$$. Oem parts can be rape, services too. heck, if it's something high end even tires could be thousands. I just bought a CPO BMW (cheaper than private btw oddly, wtf is wrong with private sellers when a dealership can sell one cheaper lol) and i had to delay picking it up because they HAD to replace the runflats. I was willing to say F that noise i can deal with tires myself, but it wasn't even an option.

Also, my advice is if you're not getting a back and forth price from the salesmanager you are likely paying too much. If the salesman is negotiating by himself with you, it is probably because he inflated the price (can't believe that still works and I couldn't believe it still worked 5+ yaers ago, but I know it's still attempted and catches people). One of the best salesman I ever worked with would routinely up the price by 3g and do all the negotiating himself because even if he came down 3g he was still selling at full pop.

Now it's been a long time since i've been in the game, but I doubt too much has changed. Honestly, no one, not even the salesman knows wtf they're making off a car. They are all completely different, and usually the worst deals are the ones that have been on the lot the longest, because of depreciation, so sometimes you negotiate 500 off and the dealership is taking a bath, and sometimes u negotiate 5000 off, and the dealership is still laughing all the way to the bank. It's a complete crapshoot, so anyone that says they 'know' a dealership can discount a used car for XXXX just told the salesman he doesn't know wtf he's talking about and can be taken advantage of, or should be blown out the door.

New cars are completely different though. they are a bit more predictable, and IMO it's easier to negotiate on because there is unlimited stock. The worst i've ever negotiated off was 7% on a 60g bmw. the best I ever negotiated off was $4500 on a 29300msrp acura. I just negotiated on my mom's rdx a couple years ago and out the door after tax and everything she ended up paying over 2g under MSRP. I don't buy demos either...

A rule of thumb is german cars are hard as shit to negotiate on unless that model year has been out for awhile or is selling like shit, and if it's been out for a while if you get anywhere near 6-7% off you're probably near their limit is my guess in this day and age. I was working at VW when the MK6 GTI's came out, and the best I could do for one of my brothers friends was $500 off, and even that was a stretch. I personally love negotiating on acura's (not for myself, I find them boring, but for other people) because while Honda doesn't like to budge, acura will slash prices like crazy, and even at full price they're better value than a honda imo).

Anyway, that's some of the stuff I know, and I have no dog in this fight anymore so I have no cause for deceiving.

... still loling at the guy saying he 'knows' what they paid

[r3ccOs]

my co-worker is a BA Economics Hons grad and did the "business office" job for a few years, until he just found the hours onerous and the "upsales" unscrupulous.
The margins aren't in each unit, its about the "number" of units moved and the long term financing.

Its not volume based pricing neither, its the fact the better you perform, the more incentives you receive, and the better allocation you get.

He told me that go buy a car towards the end of the month, as they have year based monthly calendars, and if they are trying to hit a target of say (250 units) they can easily afford to give you a substantial below "invoice" discount in order to get to that bracket of sales/kickbacks.

So long story short, its like a commission based sales at the dealer level, and the Manufacturer is the one paying the comp.

[HiTempguy1]

Originally posted by zhao


I've skimmed this thread and this is the only post I fully agree with.

Even though you then go on to agree with everything everyone else is saying.

While I haven't owned a dealership, I've sold privately over 50 cars in my life. Its not "hard" to make money selling cars, and as you even demonstrated, there is a f*&kton of cash in it at times.

[Canmorite]

Originally posted by xrayvsn
Dealt with Redlyne on purchasing a Golf R, and it was the most refreshing car purchase experience I have ever had. I did it all by e-mail. He was honest up front and gave me the numbers, no games. I have no problem with him making some money on my trade in. He saves me the hassle of trying to sell my car privately and his trade in value was more than fair, and higher than I anticipated. It was so good, that I wanted to make sure he got the best price for the car in resale, so I had the car fully detailed with a single stage polish before I traded it in. From one Beyonder to another, even though I knew I didn't have to do it.

In the end, look over all the numbers, shop around and if you don't like the deal, then simply don't buy the car.

I agree, I think it matters more who you deal with than which dealership it is. Some sales people are straight up and to the point, some like to bullshit and mess around. I've dealt with both.

I bought a used GTi from Redlyne just recently, sight unseen. All over the phone as well. He was upfront about everything and still answers any questions I have.

Cole's notes: find a trusted sales person with a great reputation!

[Zhao Kan]

Originally posted by HiTempguy1


Even though you then go on to agree with everything everyone else is saying.

While I haven't owned a dealership, I've sold privately over 50 cars in my life. Its not "hard" to make money selling cars, and as you even demonstrated, there is a f*&kton of cash in it at times.

Correct me if I'm wrong but Pretty much everyone is saying 6g profit on a 20g car doesn't exist. I disagree with anyone saying that