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because throwing your $125 into the mix while paying the salesman AND taking a loss on the car is not good business. 2 out of those 3 is ok...but not all 3.
With holdback in the equation explain to me how one takes a loss? And why would you sell a vehicle in the first place at a loss unless supply was high and demand was very low.
The dealer can afford all three! If he couldn't most of them wouldn't be building million dollar lots and they sure wouldn't be spending so much on advertisments. Where I am from it seems like every other commercial on TV is a car ad. A salesman on the other hand well that could be a different story because now we have dipped into his profit simply by a buyer using the auction.
Please bowke don't tell me I am full of bull. You know this is true.
This belongs in Inconsiderate Buyers, but I'm reminded of something.
I once had a customer buy a new Accord. He was a big time grinder and miserable to deal with from the beginning to the long, drawn out end.
He inspected his new car in GREAT detail using his wife and two bratty kids. He must have spent at least a half hour. When I asked him to finally sign the form, he got scared and started his inspection process again. Finally, one of the kids whooped with joy! He had spotted a tiny, and I mean TINY 1/4 " scratch BELOW the rear bumper. It was nothing and I would have ignored it if it were my car. Of course, he demanded I fix it...no problem. I carefully noted the size and location of the scratch on our form and made him sign it. We set up an appointment the next week with our bumper guy.
Next week, I get a call from our Service Manager...Can I meet him in our service drive?
There was my customer with his car. It seems his wife (?)had scraped the hell out of the side of the car...I mean BAD. Probably 1500.00 worth of damage. The customer thought I was off that day and had somehow forgotten how to speak english.
Oh, and this fussy guy? His trade in was a ROACH! An old Corolla with overfilled ashtrays, filled with trash and food wrappers, so much cigarette smoke caked on the insides of the windows. I literally gagged when I went to park it!
I do have to hand it to you, you have a chin stronger than Holyfield's, just keep getting up and coming back for more....
do we need to go into a lesson about the financial mechanics of dealer holdback and floorplan interest?
Bill has all of answers and has no use for our input. Heck, for wll we know, he could be a shill put in here to liven up these sluggish forums?
I'm starting to think we've been had. Not the first time either!
If so you guys can really give up the notion that you will ever be in the position to demand sticker on units ever again UNLESS the unit is unique, new, just released, supply is low and demand is very high. Then I can see it. But if I see just one sitting on your lot and you can't show a list of people waiting to buy that car well then expect to sell it below MSRP because if you don't I will move on to someone who will.
Selling a car at $200 over invoice and keeping holdback plus any other incentives a manufacture has gave to you in my book is not a loss. Even if I did have overhead to pay unless my overhead was just out of control. If thats the case well then maybe you should look at downsizing! And if its such a loss why is it you guys will sell at these prices at the drop of a hat? Is business that bad?
You're not really going to get into explaining holdback, are you? What are you, a masochist or something? Heh,heh...what the heck, it's your nickle.
-Dan-
Bill
Oops...said too much!
Explain it to me. If I am wrong let me know. Maybe it will shine a whole different light in my direction. Why so secretive about hold back. Its all over the web. Its not like no one knows about it.
but i suspect you wont want to understand holdback. it will put a big kink in your pipe (dream).
its not very often that i get to be right so often.
;-)
Everyone in here complains that there is no money to be made in a new car deal. And if you do make any well then its only a few hundred bucks.
I just don't believe it. What is the purpose of spending thousands of dollars for a unit only to make a couple hundred dollars off of it once you do sell it. That is why I say the salesmen may only be making pennies but the dealer would not stand to make just a couple hundred off a unit. Now I understand that there is times when a unit must be sold or lossed but the way you guys talk you only sell new cars so you can afford to pay the guy outside to wash your windows. You guys state most of your money comes from the service department or the mechanical departments. Which I don't disagree with. Alot of money to be made in these departments not to mention the extreme mark up on used units.
For example, I'm currently looking to buy a new SLK230. Went to one of the many local dealers and talked with a reasonably non-slimy guy who took me for a spin. Now, they have a LOT of 2004s left in their warehouse. They also have a new 2003 there in one of the more unusual colors. The 2005s are a completely new model and scheduled to ship in August/September.
All of these SLK230s have the exact same options and all the 2004s are in standard colors. My sales guy tells me that he's asking $44,900 for the 2004 models and $44,795 for the 2003. When I asked him what price we're really talking about, he replied that they might be able to come down "a couple thousand."
When he asked which I was more interested in, I responded that with a $105 difference, I'd be a fool to go for the 2003. He suggested that there "might be more wiggle room for the 2003."
Now, I understand that the 2003 is a totally new car (80 miles on it) and that the dealership paid thier invoice based on the 2003 new car value (probably 18 months ago or so) which is not really any different from invoice on the 2004s. However, how can a dealer really expect someone to pay invoice or higher on a car that will soon not only be 2 years old (even if it's never been sold), and add to that the new body style coming in a few months?
If I bought the 2003 for essentially the same cost of the 2004, I'd be essentially losing a few thousand when I sold it after a few years. Don't even get me started on the fact that if I traded it in to the same dealer 3-4 years from now, they'd only allow for a 2003, even though it wasn't sold until the end of the 2004 model year. What is the dealer going to do? Wait until mid-2008 until some dope is so dying for a MB convertible that he'll pay $44K?
I am not looking to beat up on any dealer. I really don't even want to grind anyone for 2-3 hours for that extra $250 off a car. But I would like some rational pricing, you know?
Anyone who can explain this situation beyond, "Well the dealer paid full invoice in 2003 and he/she needs to recoup this investment," it would be greatly appreciated.
you say...."The dealer can afford all three! If he couldn't most of them wouldn't be building million dollar lots and they sure wouldn't be spending so much on advertisements"
do you realize that a huge portion of new car dealer advertising is mfg. co-op advertising? the dealer is paying for a portion not all, as long as it meets co-op guidlines...so a $5000 ad on a Saturday may only cost me $500.
the national average gross profit on a new car sale is apx $1200-1400...out of that perhaps $100-300 makes it to the bottom line after paying the expenses. The way dealers can survive by selling cars for $100 over invoice is not holdback.. its because alot of people pay alot more than the avg. Those million dollar lots are paid for because of used car sales which work on a much higher margin than new cars and the service, parts department and finance departments. Not just a single one time no profit sale that the dealer chased for a week.....a long time industry executive said it best..."the reason we are in business, which is new car sales, has become out loss leader"
go back over the past few years and take a look at all the tens millions of dollars that have been lost trying to figure out how to do essentially what you want to do. There have been some major players who failed for one big reason...they didnt figure in the fact the dealer needs to make a profit and gain a local customer.....you seem to forget without the help of alot of dealers your idea will be doomed from the start. Unless there is something really in it for us (dealers) your just another flash in the pan....the track record before you is going to make your efforts very very difficult. Even the best email leads from our manufacturers direct web site with pre-approved credit only cost us $4.00-8.00 per lead. And they only quote MSRP....so I keep going back to one thing....what's in it for the dealer?
the point is to have a customer for life. they service their cars, repair their cars here, and refer friends and family.
new cars are there to attract business...not support one.
actually, the retail side of car sales isnt all that profitable. can you make a living? probably...but these multi-million dollar dealerships arent being built from new car sales. they are being financed. the money comes from fixed ops. not sales.
Bowke addressed the holdback issue, and you seem to want to drop it, so we'll move on.
You state that you simply don't believe that dealers usually make little profit on new car sales. You can believe what you like, but it's the simple truth. There is not some hidden money pile that no one knows about but the dealers. As you mentioned, service and parts are a HUGE part of the typical dealer profit. But since most people get service where they buy their car, it makes sense to sell new cars for what the market will bear. And these days, it's usually not much.
There is much more to a successful relationship between a dealer and a customer than simply selling for lower profit than anyone else. For the most part, anyone selling prefers the repeat customer and the referred customer. It's cheaper and more effective than all the advertising in the world. For longterm success, and that's what many dealers work for, the in-person sale works much better than just tossing numbers around a computer screen. Internet sales may be the wave of the future for many items, but the complexity of auto sales, with the variations for trade-ins, limits the desire of anyone looking to stay in business from spending more time being "just another number" than they have to.
And in case you're curious, I'm in sales of large ticket items, but I don't sell cars. Sales are sales, afterall, just the product is different.
-Dan-
As you can see, there is a big difference in acme paying $25 toward me vs. $125 toward your system. You've been given several good suggestions to alter your plan and make it more appealing to the sellers to participate. Your best bet is to forget a home run and think about getting on base.
Don't charge the seller at all. You said it will be local market. You aren't providing them anyone they can't/won't get anyway. Charge the buyer a fee of $19.95 to submit one inquiry. If it only costs time the sellers may all participate. This will make it work out well for the potential buyer and your 1/10/30 word of mouth system will work to get you more buyers. If 100 people a month try it that's a nice supplemental paycheck. If 1000 people a month try it that's a decent income.
You're getting the money from every participant, not just the ones where a sale takes place. Although it's less money it's greater numbers. If only 1 in 10 actually buy you are making more money this way than under your system, i.e. 1 @ $125 vs. 10 @ 19.95.
Reread the suggestions you got for changes and consider these as well. Good luck.
And...
Isell is still right.
Bowke is still right.
DBgindy is still right.
I'm still right.
Butch is still right.
I hope I didn't leave anyone out who is still right - if I did, I'm sorry.
And Bill is still wrong. He's so far out in left field he's in foul territory - good thing it's baseball season, because at least his field position has something to do with something that's currently going on (baseball season).
We were talking about baseball, weren't we? Maybe he understands baseball - he certainly doesn't understand the car business.
The other big thing ( among several little ones:-) is the trade in. More specifically when people don't want to be told their ride is worth much less then they think or as posted on these boards all the time the staggeringly high number of people who trade when they are upside down.
You say you want to educate the folks to separate this and that's great but they are for the most part very intertwined and can't be separated.
The other thing I feel compelled to mention is from what I've read ( I have no firsthand knowledge since I'm not in the biz) the internet salespeople in most stores are on a pay schedule of number of units moved not the straight commission ( car pros please correct me if I'm wrong:-). Therefore they can work on much smaller margins because they do it on volume. With what you are proposing ( them paying $125 for a lead not a sale) their thin margin for themselves and the dealership just went up in smoke.
How about this to take LD's idea a little farther. Charge consumers $39.95 for the service. If they buy from the dealer it fully refunded to them ( and the dealer pays you the $39.95). If they don't buy you and the lowest bidding dealer split the $39.95.
This would keep it to serious buyers and the dealership and yourself would make money one way or another. Of course there need to be tweaks to that but it's just a thought and it might make it more palatable to the dealerships.
Just my .02
Duncan
Duncan
Duncan
Duncan
Terry.
I recently stopped at a new car dealer to look at their used cars - need something cheap for my kid to learn on. Found a '90 that was overpriced by $600 (perfect condition) to $1,200 (some mechanical issues) compared to KBB & even more over priced by Edmunds TMV. There's a similar car at a used car dealer across town for almost $1,800 less, but because the new car dealer had a service shop, I thought this car might be better mechanically.
Salesperson wouldn't believe me when I said it was over priced, so I had them check KBB at the dealership & he verified the exceptionally high price. Salesperson said only 'reconditioning' they had done was to check for major leaks/noise (guess the fact that they have a service shop didn't mean much after all). Salesperson also said that they don't check the title history - couldn't even tell me if the car was a rebuilt salvage unit. At that point I suggested that the lower KBB price to be more reasonable (since the dealer had done no mechanical work on the vehicle, offered no warranty, and had no sense of title history).
I offered to pay cash on the spot with no trade-in if the car was priced reasonably & asked what they considered to be a fair price, considering all that had been discussed so far. Salesperson said that while original price was negotiable, he could not set an asking price. Asked him who could & he wouldn't give me a straight answer. We finally decided that the discussion was going nowhere and broke it off.
So why mark up the price so much higher than book value? Why not be willing to set a no trade-in price? And why be so much higher than the competition across town? I don't understand the rational behind this at all and the salesperson could not explain it. And if the salesperson can't negotiate price, what value does he bring to the bargaining table? Who should I have been talking to, if not the salesperson?
I've never enjoyed the negotiations (aka bickering or grinding) associated with car buying and the older I get, the less patience I have with situations like this.
How about: this one is a 99 blue Taurus SE with 48k, it needed tires and was asking xxxx, and the one across the street was a 98 green Concorde LX with 62k, nice with new tires and was asking xxxx ... ya know, kinda like that "once upon a time thing" .............
Terry.
During the day, I jump on Edmunds after each report I do in order to clear my head - sometimes it doesn't work, especially when reading 200 posts about reverse auctions.
I knew you'd ask me next...
I do my research at NADA, KBB, & Edmunds before hand and don't begrudge paying closer to retail price if mechanical repairs have been made. I always have an independent mechanic check the car & I get a CARFAX report (unless buying from a dealer who uses CARFAX). But I don't even go for a test drive, let alone start to spend money for these checks, until the price is reasonable to begin with.
I usually buy from one of two dealers & service the vehicle at the dealer where I buy. But this time around I want a cheaper car than what they normally sell, so I'm looking at other options. I've been very surprised by the number of dealers and private sellers who are apparently overpricing their cars by a significant amount. I guess they think that the number of suckers has increased significantly.
I study the ones that will have the vehicles I want in "mass", then I do a background check to clear the vehicles that I need before I even "think" of going, that makes my decision easy on what auction I will go to ~ or not ..
So when I get there I'm looking at maybe 60/80 vehicles, when they pass my inspection ( because I'm there an hour or so before it even starts and that list might get shortened because of flaws) thats when I will bid on them when they run ~ or not ... see my work is All done waaay before the auction even starts, when all the stud boys roll in from Atlanta or Philly at 8:50am their flipping through the auction reports, spilling coffee and running from lane to lane like ants and guessing on what "might" be at a 3,000 vehicle auction .....
Me, I'm sitting and watching the screens and following the run #'s -- then it's either Buy, no Buy or Goodbye .. I don't sit there til 2:00pm waiting to see if I can get a deal, by that time I'm usually on the 3rd or 4th hole .. 4/5 hrs of computer time a week, gives me 20+hrs a week of play time, of course there is that time I'm online with Edmunds and talking to refrigerator salesman like yourself ................
Terry.
Then we have this Bill100 or whatever it is....who jumps in and *thinks* he knows all. Reverse auctions? Um, hasn't that been tried like 5000 times?? Personally if I want to buy a car I go to the dealership, talk to a living breathing salesman and buy the car I want. No muss no fuss, why on earth would I want to complicate it with some fly by night reverse auction (auto broker)?
Did I get it right? I slept through most of the past 1200 posts. Can we move on now?
***Yawn***
As a piece of advice the worst possible thing you could do is to try and nit-pick Terry or question his bona fides. He's been around these boards a lot longer then either one of us, is legitimate and has helped literally thousands of people. If you mess with Terry all your credibility will be lost.
On people taking the time to post I believe most of them are like me. To take a quick mental break from their high pressure jobs they hop on these boards for a few minutes. They do what they can to help people ( or read for amusement). Then they go back to the long hours they put in at their jobs.
I think simply in your case you believe in your product ( which is great as well as necessary:-). The car pros and non car pros ( like myself) at first thought they were doing you a favor by pointing out what they see as flaws to your idea. Then the communication problems started with your almost evangelistic zeal and their derision when you wouldn't come up with answers to their "objections" for lack of a better term.
Your original stated purpose was to get feedback on your idea which you have ( unfortunately almost all negative). My question is why are you continuing to ask for conflict? You are not going to convince them it's a good idea and they are not going to convince you to drop it. I mean it's great for myself and other readers as amusement to watch the volleys go back and forth but isn't it kind of fruitless at this point?
Just my .02
Duncan
I post here because I thoroughly enjoy talking with other car biz people and helping consumers - your idea just happened to me the topic of discussion, so don't feel flattered - my presence had nothing to do with the "draw" of your topic.
Your auction idea is NOT important, to me, or it appears, to anyone else here. It is viewed, and rightfully so, as a shot in the dark - a repeated, proven unsuccessful shot in the dark. A repeat of an idea that has been tried by the best and has failed.
I wish you luck, and like Craig (isellhondas), if you're still in this business in a year and can prove success, and I'll up the ante from Craig's gracious offer of lunch at a nice restaurant - I'll pay for your flight from wherever you are to Philly for a cheesesteak on South Street.
I've been wrong before, and I'll admit when I am, but I don't think I'm wrong on this one - I'm willing to bet a $500-600 plane ticket and an $8 sandwich on it.
Car_man
Host
Smart Shoppers / FWI Message Boards
You jumping on him doesn't do anything for you or this thread.
You're new here - you've caused a huge stur and argued nearly to the death over an idea that car pros and consumers alike say won't work.
Then, you call the hosts out and talk trash to them? Chill out, Bill. Your manners and credibility are certainly in question here - behave, or we'll have to quit telling you what a great idea you have.
.....would have been out of business shortly thereafter by 1998/1999/2000.
Geez, drift, you should give me credit just for not having this argument with you! :-) Anyway, I'd like to think I'm right just because I see Bill never responded to my post about WHY grammar is important (even if he thinks it's ok) and he's still making the same mistakes.
"With what you are proposing ( them paying $125 for a lead not a sale) their thin margin for themselves and the dealership just went up in smoke."
Duncan, as much as hate it, I have to admit that in this case, Bill is "right" because he made it clear to me that the $125 fee was only charged once a sale was completed, rather than per lead. It was an idea I thought actually had merit in this whole scheme. Maybe. But, then again, since the idea itself practically guarantees every sale will be a near-invoice deal, I'm not sure how the $125 would be paid...
What is your opinion, MSRP $48500.00, Selling price is $43833.00, Invoice is $43336.00
Thanks
JDINNJ