How Much Profit Should A Car Dealer Make?

Kirstie_H

Thank you. And quite often, we are even able to recognize spam when a member doesn't come in afterward and post "spam." (hint, hint)

joel0622

Everytime I see this thread title I think "How much wood could a wood chuck chuck if a wood chuck could chuck wood"

tidester

"How much wood could a wood chuck chuck if a wood chuck could chuck wood"

That should be "How much wood would a woodchuck chuck ..."

tidester, host
SUVs and Smart Shopper

joel0622

How much profit would a car dealer make if a car dealer could make profit

tidester

Who needs a profit when you have the taxpayer backing you? :shades:

tidester, host
SUVs and Smart Shopper

Kirstie_H

Purportedly, price predominates peoples' potential purchases; pursue profit proportionately.

dtownfb

Question for you Joel: What is a decent profit for a dealership on a used vehicle? I know there are many factors that determine the final on used car but what is the aiming point?

yes I do believe a dealer should make a profit.

euphonium

If your income is static in an adult day care job, you will try to limit the profit.

If your income is based on commission, you will support unlimited profit. (I do.)

jipster

Was sitting in the dealerships customer lounge today waiting for a trans flush. Picked up current copy of Motor Trend. They were comparing the Fusion and Accord. The Accord "eeked" out the win. Still, the favorable report should get a little bit more profit in yo pocket.

tidester

LoL! We could make a couple of fortune cookie fortunes out of that!

tidester, host
SUVs and Smart Shopper

joel0622

IMO a good profit is anywhere between $1500 and $3500. The most I every personaly made on a used car deal when I sold was $7300 on a used diesel truck.

A guy rolled in one day with this truck wanting to sell it. He said, I will take $xxx amount of dollars for this truck right now. We said OK. What he wanted was about $7K back of average the truck was nice and at the time used Power Stroke Diesels were bringing way out of the book. The guy selling probably left $15K on the table if he would have sold it himself. I picked up the phone called a customer and told him what he could buy it for. He gave me a $5K deposit over the phone to hold it till he got there.

dtownfb

Thanks Joel. I'm working with a friend of mine who is a sales manager to purchase a used car. i want to be fair.

newcarbuyer12

What about when a new car dealer sends a car to an auction? What type of returns do they expect to see? I realize that there are many factors that can influence profit such as if the dealer paid more for the car than they wanted to in order to close the deal, etc, but what is the average expectation?

jipster

i want to be fair.

What's "fair" got to do with anything? Did you read the part about joel's dealership paying $7k less than book for that trade in? The customer getting $15k less than he would have with a private sale. Is that "fair"??? If the dealership was in the business of being "fair" they would have called him an idiot and offered $7,000 more for his trade in.

It's business. The dealership wants you to pay the most possible for a used car. They want to pay the least possible for your trade in. You should try to pay the least possible. My experience with dealing with friends who are sales managers is that you will end up paying more. The friends definition of a "fair" profit is usually higher than a customers. But, if you are looking for a no hassle easy buying experience, and don't mind paying more, the friend method may be the way to go.

volvomax

Most of the time, you send cars to the auction that you aren't going to retail anyway, so you just hope to break even or take a small hit.
Some dealers are on a strict turn program. When the inventory hits 60 or 90 days, you send it to the auction and take your loss and move on.

joel0622

You left that part out lol. I make $500 over what I have in a car on close friends and $100 over on family members.

joel0622

My experience with dealing with friends who are sales managers is that you will end up paying more.

You don't have very nice friends

isellhondas

They didn't make the guy an offer. The guy selling the truck told them what he would take for it and they agreed.

If you looked at a used car that was priced well below the market, would you tell the seller that you would be happy to pay them more?

Don't think so.

kyfdx

In my experience, those who have family members or friends in the business get the worst deals...

No kidding.. :surprise:

jipster

You don't have very nice friends

Yeah I know... why you think I hang out here so much? :sick:

But, what I mean is, that while you may get a good(fair) and quick deal with a sales manager friend, you could probably do $400-$800 (or more) better haggling out a deal yourself.

jipster

If you looked at a used car that was priced well below the market, would you tell the seller that you would be happy to pay them more?

If I was worried about being "fair" I would... which I'm not. But, the original poster wrote about wanting to be fair. If the dealership wanted to be "fair" they would have given him more for the trade-in... despite the customers ignorance.

kepi71

salesmen are like vultures, I don't understand why they don't give you [non-permissible content removed] for your trade in but they want the biggest buck for their used car! I for once would like to drive out of a dealerships parking lot with a big smile on my face knowing I got a great deal and they didn't take me for a ride! But, I doubt that ever happens, most people drive off in that new to them used car with a look of I got screwed and I guess I better get happy about it, I'll be paying on this for the next 4 or 5 years!

any suggestions, getting ready to trade in and start haggling with the vultures soon? :confuse:

tidester

You're not obligated to trade in your car and you might want to sell it on your own.

tidester, host
SUVs and Smart Shopper

jipster

I believe you meant some salesmen are like vultures. Most of the salesmen I have met were fairly nice guys... a few sleaseballs in there.

Haggling is fun. I think you should either haggle with a good attitude, or sell your car privately.

mikefm58

any suggestions, getting ready to trade in and start haggling with the vultures soon

My first suggestion, lose the attitude, there are folks in the biz here that have been very helpful. It gets you nothing and probably shows when you negotiate.

Go to "Real world trade in values" here and get exactly that. Or even take it to Carmax for a free appraisal. You will then know what your trade in is really worth and not what some online guide says it is. The online guides can sometimes be way off.

isellhondas

As someone else already said, you really need to lose the attitude.

With an attitude like yours you really should sell your car yourself and maybe look for a used car from a private party.

Nice first post, by the way!

euphonium

I think I know several of your ex wives. :P

dtownfb

That's even better. I do have nice friends and plenty of them since I try to treat people fairly.

volvomax

First of all, your attitude isn't going to help.
This is business,not personal. Salesmen do their jobs, you should do yours.

Get a bid from Carmax for your trade before you go in. Settle on what kind of car you want to buy before you leave the house. See what that car is going for in your area. Look at the ads, read them carefully. Look at Edmunds,but take it with a grain of salt.
If you feel you got screwed, thats a YOU problem. No one held a gun to your head to make you buy a car. DON'T buy one until you are fully satisfied but be realistic in your goals.
We had a guy who said he already walked out of 5 dealerships, he made us RIDICULOUS offers for our car. This was the kind of guy you could tell had no clue what he was doing. Guess what? We let him walk too. Couple days later he came back and paid what we wanted. Does he think he got screwed? Probably,but I really don't give a rats [non-permissible content removed]. This guy did no homework at all. He just thought that because the news babes said car sales were bad that we all were having going out of business sales. The MARKET let him know he was dead wrong.
So, quit whining and do some research.

fonefixer

Most people don't realize that no matter what "book" or "on line service" is consulted, YOUR particular vehicle will have a totally different value in the real world. Every car has a different condition, miles, options and color scheme. Do you maintain a 3 ring binder with all the books/receipts ? Less than 5% of all cars come with full records.

What is the big surprise about dealer's "low ball" offer for a trade? Exactly right, it is nothing personal, just business, no different than any other field where trade ins are considered. I agree, to get the best price, take the time /trouble and sell the vehicle yourself!

thefullmonty

The original question of "how much profit should a dealer make" for me is none. There should be an option to buy direct from the manufacturer. Not once has a dealer EVER added value to the purchase of a vehicle in my case; and I have friends and relatives in the trade. I usually work it out to where I can get the vehicle right off the truck. I do all the work to get it ready to roll (including removing protective polyolefin, clearing codes, topping fluids, etc). Truly, no need for a dealer.
Having said that, 99.9% of the people out there are not like me. They need their hand held, things explained to them, someone to walk them through the process. For them, a dealer should make the value they add to the equation. But, I think a flat rate would be more deserving than a percentage. State that flat-rate up front and you'll have people flock to the dealership. In other words - just be upfront and honest, sell on volume, and stop trying to squeeze every nickel out of the deal (talking to dealers here). Same with consumers, the car costs X, there's $500 (made up profit number) for the dealer, your car is worth X (no negotiating, take it or leave it or sell it on your own); done deal. Too bad people are greedy and it'll never happen.

ingvar

The original question of "how much profit should a dealer make" for me is none. +1. I need a car, I don't need "trainings and explanations".

Kirstie_H

That strategy didn't exactly work miracles for Saturn.

I prefer the personalization of the dealership experience. Last time I went vehicle shopping, my salesperson showed me a vehicle I hadn't previously considered, and it ended up representing a better value for me and a better long-term fit for my needs. Your method is great for people who know exactly what they want, but most people don't right off the bat.

Also, greedy? I think that most people, if they are honest, want to make the most money in their jobs that they can, and most people want to save the most on purchases that they can. There's nothing wrong with that - it's only bad when the conflict of those two goals turns into hostility and unrealistic expectations from either party.

Kirstie_H

I should add that the incentives to make a sale and profit were what made my last deal. Once I'd decided on the car & we'd agreed on a price, I told the salesperson that if (and ONLY if) they could get me through the entire process in an hour, they had a deal. We both got what we wanted - I'm sure she made a nice commission, and I got out of there in time to meet my deadline. I am doubtful that a manufacturer would have done the same.

Plus, who under this scenario gives the test drives? You'd still have to have people working in a customer service/sales capacity at manufacturer-owned shops. Someone has to provide test drives and answer questions for those who don't already know everything about every vehicle they're considering.

isellhondas

So, do you go out in a field and dig up your own vegtables?

Do you take your eggs out of the nest?

I can't believe any dealer would let you detail your own car and pull it into the shop so that you can do your own Pre Delievery Inspection.

A car dealership is no different than any other business and profit isn't a dirty work.

fonefixer

I'm assuming that when your new vehicle needs repair or breaks down you will do the repairs yourself? Basically, yes, for a lower price, many, but not all buyers would purchase the car "off the truck" so to speak. If a car never needed repair or maintenance this could work out fine. As long as cars need repair, there will always be a need for the dealer. The manufacturer isn't set up to meet the needs of the car buying public ..(from selecting/purchasing/licensing/repairs,etc.) in a retail environment w/o the dealer association. Just the perception/reputation (many times deserved) of the average car dealer over the decades has made buying a new car like going to the casino . The "house" has all the advantages, and usually wins!

jipster

I told the salesperson that if (and ONLY if) they could get me through the entire process in an hour,

I would advise against buying an automobile under such time constraints. It's too easy for the dealership, or yourself, to overlook, or make a mistake, that could cost you $$$.

boomchek

I also find it hard to believe that a dealership will let you do your own PDI and detail on a car you're buying. Either way, you still need a dealer to use their resources (shop, tools, etc) to do your own PDI.

And are you saying that you never sit in a vehicle or test drive it before buying it? You need a dealer for that too.

A car dealer is just like any other business. I assume you work in a business that tries to maximize it's profits so that they can pay you a salary.

euphonium

So, you're the guy, down the road, who pumped his own septic tank & left a s---y, stinking mess for his neighbors. :mad:

Kirstie_H

Nah, mine was simple - no trade, already had financing. There's no good reason why the F&I process, from that point, should take more than an hour. The hour included the F&I guy automatically packing out the deal with tire warranty, gap insurance, and extended warranty, which I made him remove.

Three years later, I'm still sure I didn't miss anything.

I'm not advising that process for every buyer, of course; I'm simply pointing out that the salesperson can be of value in the process depending on individual buyers' circumstances.

joel0622

If you buy direct from the factory who is there to [non-permissible content removed] at when you crawl under you car 8 months after you pick it up and find a small scratch on the frame that you are sure was there when you picked it up but have just not had time bring it in.???

isellhondas

I love the people who insist on driving three different cars, take long and creative test drives, ask countless questions and then spend two hours grinding out a deal.

Finally a deal is struck, we shake hands and all of a sudden they look at their watch and tell me they HAVE to be out of there in a half hour!

boomchek

True, not even 5 minutes to finish up paperwork or get a receipt for the deposit. :confuse:

joel0622

One of my favorites are the folks who are credit challenged and basically beg you to get them financed. After you work on it for 3 days, pull in two favors, have the owner call the bank and get them approved on a new car with no $$ down at 6.9% they turn in to Billy Bad [non-permissible content removed] and start shopping you against other dealers telling you that abc Ford can beat your price by $150. Match it or we buy there. :mad:
That aggrevates me more then anything.

hondaluvcrv09

A dealer should charge the highest price that a buyer is willing to pay under no duress. Plain and simple. Allow the laws of supply and demand dicate the price of the vehicle. As far as talking out the middle man (dealerships), that's simply not how the market for automobiles works. BTW if you could purchase direct from the manufacturer for a discount, who in their right mind would buy from the dealership? And if all of the dealerships are out of business, how is that a discount?

mako1a

BTW if you could purchase direct from the manufacturer for a discount, who in their right mind would buy from the dealership? And if all of the dealerships are out of business, how is that a discount?

You just answered your own question. Mfr sells to public for what dealers pay. Same profit to Mfr.

I would like to know when Mustangs became so expensive. I looked at TMV and saw a V8 Mustang a/t,a/c whatever for $36k. That is supposed to be the car anybody with a decent job can afford. At least that is what I grew up believing. I was 14 in 1964 and saw the first one unveiled by Lee Iacoca in April 1964. It cost less than $2k. What happened? Even figuring in all the techno/safety adds that is way more than price adjustment. Profit is out of hand on those puppies. Sure I can find a guy in trouble after 4 or 5 payments and step in with cash, but the dummies usually have the title tied up with some extravagant amount of over profit causing me to wish him lotsa luck.

That's my new word...OverProfit. A vehicle has 2 values. Wholesale and retail. Assign wholesale and add a reasonable profit and you have retail. The way dealers have it set up it's not fair to anyone and may be their undoing.

I will use an anti-salesman next time. A big boy like Steven Segal to voice my offers to the salesman. After he drags the SM out from behind the secret curtain by his necktie we'll find a sale (or not).

isellhondas

This has nothing to do with "fair". If that 36,000 Mustang represents a good value to someone, they can buy it. If not, buy something else.

The 1965 Mustang's that were introduced in April of 1964 were the result of Iacocca's marketing genius.

All they were was a cheap Falcon in reality.

The ones that were under 2000.00 were pretty austere. 170 cubic inch six cylinder with a three speed manual transmission. No power steering or anything else.

Today, it seems, people have to have EVERYTHING on the cars they buy! Can you imagine someone buying a car with crank windows?

Nope, we have to have it all and the federal mandated safety equipment and emission controls add to the price.

Then we have had this little thing called inflation. Back in 1964, if a person made 10,000 a year, they were doing pretty well.

boomchek

Profit is out of hand on those puppies

So do you think because the price is $36k on a Mustand that you saw, that most if the money goes to profit?

The way dealers have it set up it's not fair to anyone

Well they have it set up exactly like you want them to: wholesale plus profit = retail.

joel0622

I am suprised a guy who uses the internet is so out of touch with reality when it comes to profit margins on new cars.

mako1a

I'm very aware of profit margins. Salespeople say it's very low on new cars. I believe that. What I'm saying is Ford is charging you too much for their product.

Henry wanted his workers to be able to buy the cars they built. At these prices ($36,000 for a Mustang) even Ford's UAW workers are going to be driving Kias.

Don't forget that the $30/hr guys are mostly gone at Ford. They were replaced by $14/hr workers a few years back. That's why Ford didn't need bailout money?

People in general aren't making what they once did. It's everywhere. Even Dearborn and may get to Nashville...eventually. Car prices will come down.