How Much Profit Should A Car Dealer Make?

greanpea68 · July 2007

How much actual work did you put in for that deal? Did you spend hours on end on the telephone or did you make a 5 minute call here and there and just waited for responses? How much paper work did you shuffle and how long did it take to do? An hour or less? For the amount of actual work and effort that you guys do, I think $150 in a day is plenty. You're not doctors. You're retail salespersons. Just because you sell expensive items doesn't make your occupation any more or less than a salesperson. Yet, somehow you guys think you're on some higher level than your customers. To us, you're just a stumbling block in the way of what we want to get. That's why we, as consumers, grind you guys. Why should you get $1000 commission when you don't do anywhere NEAR $1000 worth of work??

Concerning the tax write-off, that's a one time entry until the next purchase. She'd pay more on that extra $100/month she'd be giving you than what she saved with a $25,000 tax break. That $25K break is only saving her maybe $2K for that year after all is said and done, that is, of course, unless it dips her into a lower tax bracket altogether, which I doubt since they have a "multi-million dollar business."

Next, if LR "requires" those events then LR corporate should foot the bill, not the customers or the dealership. Also, you didn't "have" to have the vehicle trucked in. You could have just as easily handed the customer off to the other dealership. Instead, your dealership chose to truck it in and pass that (probably padded) cost on to the customer. Is it alright for the dealership to make $2500 on the deal? That's strictly up to individual opinion. In mine, no. A thousand? Yes. Twentyfive hundred? No.

Wow Tay? You sound pretty angry at the car folk :mad: I wonder if you come to this forum to bang on sales people or to learn about the business. Either way, with all respect, You don't have a clue what it takes for dealership to run. I wonder where someone took advantage of you on a vehicle purchase. Or did you do it to your self? You ask how much time he spent with his customer? Well he did sell her, her last car, Helped her with service over the last 2,3 years. Maybe with his experience he was able to get her the vehicle she was looking for and really wanted. There is talk about $100 cheaper at another dealer. I highly doubt they are talking apples to apples. I'm sure thay are not including something. Cap reduction, Tax, something. I wonder if she is talking to some internet person who doesn't know what he is talking about. Is that dealer going to work for her the way BR did? If I rember correctly he said he wworked on getting her car fro about 3 days. Yeah, Yeah , Yeah I know you think it is a hour and a half. Here is what you don't think about. He could had a commitment, made a deal than worked very hard to get her what she wanted. Too be continued

tayl0rd · July 2007

I'm not angry at the "car folk" at all. Just making some statements. It's not meant for anyone to take offense. This IS about sales stories, so why not expound on them? If you just skim on the top and don't give the details (like this is a typical sale), you can't get mad when people fill in the blanks on their own.

No malice is meant toward any salesperson here.

dino001 · July 2007

Actually, I don't see any anger in his post. A little resentment perhaps, but mostly due to mentality "large commission entitlement" that he thinks is present here.

Lets be honest - we all think we are not paid enough - it's a given. Now, it's a matter of opinion, how much a sales person should make. I agree with him that just because an item is expensive there is no automatic "entitlement" for large commission. I personally don't know if it should be $100, $1000 or $5000 - all depends on amount of effort put, type of product, type of service and also frequency of transactions.

lrguy44 · July 2007

Actually, our annual income depends on how good a salesperson one is. Product knowledge, sales skills, follow up etc. All I said is most professional salespeople would not work for 39k per year. And as been said before, a good salesperson will have mini deals, maxi deals, and some in between. Any professional sales job is not easy - try it.

dino001 · July 2007

I know it's not. That's why I'm an engineer.

oldfarmer50 · July 2007

"...That's really professional..."

I guess you've never heard how doctors and nurses talk about patients

user777 · July 2007

i agree with dino. there are many who realize that sales is not easy, and prefer to do engineering behind the scenes. i've dabbled in sales a bit, and prefer supporting the people doing the customer touch.

what i as an engineer (and i wager i'm not alone) don't like is when sales / marketing sell, promise, tout what doesn't exist yet to important customers. in a perfect world, engineers would get an opportunity to continuously refine a design to perfection before it is released.

that's impossible though. sales makes the engine (and engineer) go.

jipster · July 2007

I've thought the same thing. The market will determine the least amount a dealer will sell a car for. But, if the market price for vehicle X is $20,000 and the dealership ends up getting $24,500, that doesn't mean the market price for vehilce X has gone up $4,500 for the rest of the nation/world. Maybe, it raises the market price by a thousandths of a cent or something....whoopdeedoo.

jipster · July 2007

I don't care about average market price. Why should I?

Well you should. How are you going to know if a deal is "good for you" if you don't know the market price, or average selling price?

But, lets not go off on a tangent. The original question dealt with the market setting the price. My response is yes, it sets the price... but only the bottom level. That for which the dealership would sell no lower. The top end at which they can sell supposedly can go through the roof, meaning paying much more than what the market calls for. In other words, the market does not set the price for those who are uninformed and/or ignorant, or those how just want a clean no hassle deal.

joe131 · July 2007

I don't need the average market price to determine if I got a good deal. What I need is the lowest prices people are paying for similar cars. If I get mine for a whole lot less than those, it was a good deal.
Averages are useless to me.

97 minutes ago (a few before this one) I posted the definition of market price.

tidester · July 2007

What I need is the lowest prices people are paying for similar cars.

What you need is the lowest YOU can get, period! Both sides in a negotiation will use "average prices" or purchases of "similar cars" strictly for leverage in trying to convince the other side to come closer to their own desired purchase price.

tidester, host
SUVs and Smart Shopper

jipster · July 2007

post #520What I need is the lowest prices people are paying

post #523 I always settle for an acceptable price, not really knowing what the lowest price could have been

You seem to be contradicting yourself here joe. Which is it? You need the lowest price people are paying or you don't? Either way you're hooking into market price.... the generally accepted definition, not yours.

Kirstie_H · July 2007

isn't the subject of this discussion. We have several other topics in which members can talk about how to get the best deal & discuss negotiation strategies.

qbrozen · July 2007

Like I said, if you spend 8 to 12 hours of face time with a customer, YES, you deserve some scratch. Whether or not that's worth $1K is a matter of opinion.

I think you are really missing the mark here. You don't seriously think $1k profit on a new vehicle means $1k in the salesperson's pocket, do you??

joe131 · July 2007

I don't care what the dealer's profit is.
No contradiction.
I want to offer less than the lowest prices other people paid. If my offer is accepted, I buy it. But maybe if I'd offered $1.00 less I could have saved a dollar. I'll never know since I already bought it.

bristol2 · July 2007

I want to offer less than the lowest prices other people paid
What others pay is irrelevant to you. Value to you is the only calculation worth making.

Dealer's Invoice should be the only number that you need to figure out what you are willing to pay. It gives you a baseline from which to figure out what constitutes value.

joe131 · July 2007

"... market price.... the generally accepted definition..."

And how would you define that?

joe131 · July 2007

hooking into market price

What do you mean by that?

qbrozen · July 2007

What do you mean by what do mean by that?

;b

joe131 · July 2007

"hooking into the market" has no meaning to me

I've never heard the terms used together and the dictionary does not help me understand. If he is trying to communicate an idea, it is not working.

oldfarmer50 · July 2007

I base this statement on an episode of "The Simpsons" I saw several years ago. In this episode Homer's long lost brother owns a car company. At one point he admits to Homer that "we only got $40 worth of steel invested in these cars". Therefore, I estimate that the dealer must be making $19960 on each $20K car. That doesn't even include the "double secret handshake" money that I hear about.

Now I'm sure some salesman will try to tell you that the Simpsons has nothing to do with real life (yea, right) but I know that next time I shop for a car I'll start my offer at $50. A 20% profit should be plenty.

qbrozen · July 2007

LOL!

But you forgot to add the cost for the speed hole package! That's an extra $3 easy.

jipster · July 2007

Posts of yours on "The market" have been eradicated. I feel Kristie lurking nearby with her Delete-O-Matic 8500 series. No more "market" posts, so you'll have to just scratch your head like everybody else does when they read my postings.

I will say this about how much profit I let a dealer make off me. I try to look at the average selling price and the lowest selling price. The average selling price at Edmunds is called True Market Value(TMV) This is used as a reference and not a goal. I'll start out at the lowest price I think the dealer will accept and not think a joke. Try to hold onto that as long as possible, then let the dealer bump me once or twice. I have no problem with letting a dealership/salesmen make a couple hundred bucks off me... maybe more for all I know(hold-back?). I have an amount coming in that I will not pay over. As long as my price is below that number I'm gold. :shades:

Very easy to get a good price on a new car... easy peasy as gg would say. The used car market is much trickier.

mackabee · July 2007

Why do you think the majority of dealerships pay commissions versus hourly or salary? High price ticket items such as automobiles don't fly off the shelves as some would lead you to believe. Not every "up" buys a car, and not everyone that buys a car pays full sticker on new or asking price for used. The salesperson's job is to persuade the prospect into buying the product by telling the prospect about the features and benefits of such product. Unfortunately in this profession if it can be called that, there are a lot of "unprofessional" salespersons whose only goal in life is to take the prospects money and run no matter how they do it be it lying, cheating, or both. I detect from the tone of your posts that you have more than likely experienced this type of behavior in your vehicle purchases and thereby feel the way you do about how we get paid. The only way to counter that is by educating yourself about all the facets of the transaction. We love informed buyers. They are an easy sale. And I mean this in a good way. These sales take no more than an hour of our time and it's on to the next one. Good luck with your next purchase.

Mackabee

mikefm58 · July 2007

Well said Mack. I'm on the consumer side of the table and have learned much from these fora. My last purchase, an 06 Tundra bought in January, was the easiest and I feel I got a great deal. The salesman was experienced and I could see how he treated me and talked to me when he realized I was somewhat educated. Now I can see a green pea keep trying games with an educated customer, but he's gonna lose a sale real quick.

joel0622 · July 2007

Now I can see a green pea keep trying games with an educated customer, but he's gonna lose a sale real quick.

It is really not so much the Green Peas you have to watch out for. If they are trying to play the slick willy card then you probably need to leave that dealership. The reason being is that if he is trying all the old BS with you that means he was trained that way by one of the Managers, probably the one who is going to be working your deal. A smart GP will play the "I don't know, I am new here card"

The guys you have to watch out for are the old Prima Donna's who have refused to move there mind set out of 80's and still try to play the same old games they were using in 1984 when this business was doing everything it could to self destruct its self from a consumer relations stand point.

Those are the guys that go straight for "If i could, would you" close, are still out putting wouldyatakes on windshields, don't know crap about the new technology, that there jokes and smile are going to close the deal, and think the internet is just a fad that will pass with time.

The industry passed them by like they were standing still.

british_rover · July 2007

Those are the guys that go straight for "If i could, would you" close, are still out putting wouldyatakes on windshields, don't know crap about the new technology, that there jokes and smile are going to close the deal, and think the internet is just a fad that will pass with time.

Oh man you just described someone I know with an eery accuracy.

madmanmoo · July 2007

You guys talking about me again? Yuck, yuck.

:P

You guys hear the one about the rabbi and terrorist? But seriously, you interested in buying today? If I could get your payments under $800 on an 84 month lease balloon, you think we could do business today?

Mhhmm....

-Moo

mikefm58 · July 2007

You are correct Joel. I should have said "green pea or old school". I feel the internet and all the information available has drastically changed car sales as well as the travel industry.

Now if silly realtors would also realize that, we wouldn't have to pay $30K to them to simply sell a house and in some markets last year that was 1-2 days work.

mikefm58 · July 2007

If I could get your payments under $800 on an 84 month lease balloon, you think we could do business today?

You're way too nice Moo, all you need to say is the monthly payment, no need to mess with worthless details like "84 month lease balloon".

oldfarmer50 · July 2007

...Should a car dealer make? All that he can.

Your job is to make sure he doesn't make it off of YOU.

cobraboy1 · July 2007

...Should a car dealer make? All that he can.

Exactly, everbody is in business to make money. Every kind of buisness, regardless of what you do. Whether you sell TVs, cars, houses, vaccum cleaners. Or even if you don't sell anything: Pluming, carpentry, Asphalt, Employee Benefit Programs (Dad). And scolding someone just because they are trying to make the best living that they can is just plain sinful. If you make a good living designing houses, then what is the problem letting me try to make a good living selling cars? By trying to make as much money as I can on you, you, you, or anyone?

Your job is to make sure he doesn't make it off of YOU.

Why? Prepared people are the easiest to sell to... I love them because they come in knowing what they want and what they want to pay. They have scoped out our inventory and are ready. They tend to be OTD very quickly. Sorry that didn't respond to well.

Anyway. Why? If you try to come in on our ZO6 and try to offer us invoice so that we don't make any money I'll send you right down the road.

Sorry again, umm... Nobody gets ripped off in the car business. Except for the few salesman that are left that just don't care and will lie their way to any kind of result for them. But in general there really is no way to be ripped off with an honest salesperson. Why? Because everything is being laid out in front of you when you are "closed". And then it is laid out and explained to you in F&I. When a vehicle is purchased at a certain price and payment it is agreed upon by ALL parties. So can you really claim that you were ripped off. YOU agreed too it, usually twice, once in the showroom, second in F&I.

tidester · July 2007

Want to make a lasting impression? Set up your own carspace.com blog! It's easy. Just go to Create My Blog. Mine is at Tide's Rides. Have fun!

tidester, host
SUVs and Smart Shopper

isellhondas · July 2007

So, how do you know what other people REALLY paid?

Prices Paid forums?

A lot of those so called "prices paid" never happened.

qbrozen · July 2007

bah! who needs a forum?!
my neighbor says he paid $22k OTD for a new 328xi, and dammit he would NEVER lie!

kyfdx · July 2007

I guess we could ask a dealer what we should pay.. That would be an unbiased source of information, right?

I'll take the volume of info that we get in the Prices Paid forums.. I can extrapolate a reasonable price from those posts, with a little work. Of course, you have to weed out the posts from the salespeople masquerading as customers. Funny how those are always the highest prices... :surprise:

regards,
kyfdx
Host-Prices Paid Forums

dino001 · July 2007

Nooooooo.... They would never do that!

isellhondas · July 2007

You take a reasonble approach.

Some people will ferret out the absoulute lowest "price paid", pritnt that out and wave it in my face.

A price that never happened.

dino001 · July 2007

Tell them to pay that guy $100 and ask him to buy that car again for them

isellhondas · July 2007

I told a poster that our store would be happy to write a check for every Honda they would sell us for that same price and we would pay to ship them.

Think I got a reply?

dino001 · July 2007

I think some of those funny prices did happen as they may have been really be put on purchase order. But it was before "customary" (in SE States anyway) $499-$750 fee (as I understand you guys charge about hundred). When you add it, you'll see may be able to beat or match third of those low-ball prices right off the bat.

Then add those posters who convenietly ommit their trade-in, financing and add-ons they bought with that great "price". Now it remains perhaps 20% of those lowballs that were for real - you know, old unit, funny color/config, end of the quarter, really skilled buyer, really unskilled salesman, etc.

joel0622 · July 2007

Want to make a lasting impression? Set up your own carspace.com blog! It's easy. Just go to Create My Blog. Mine is at Tide's Rides. Have fun!

tidester, host
SUVs and Smart Shopper

Quit spamming these boards.

tidester · July 2007

Hey, Joel, we're all waiting to see YOUR carspace.com blog!

tidester, host
SUVs and Smart Shopper

joel0622 · July 2007

If I start blogging my colorful language would get me kicked off the site after the grammar police got done with me

Though I have asked several of our internet buyers in the last week or so to join the site and rate our dealership.

joel0622 · July 2007

OK Tidester you talked me into it. We are off to a slow start this morning so I had nothing better to do.

Joels Blog

snakeweasel · July 2007

$185 to clear out your blog? Either your plumber is cheap or that your blog wasn't that bad. :P

madmanmoo · July 2007

Lol, excellent post, Joel. I'm sure this can only get better.

-Moo

tidester · July 2007

Way to go, Joel! Now you need to fill it with pictures and "editorials!" Of course, everyone else [hint hint] here will have to take up the challenge to do as well as you did with your blogged drains!

tidester, host
SUVs and Smart Shopper

joel0622 · July 2007

fill it with pictures

Those would be some pretty "crappy" pictures wouldn't they? hardee har har har

kyfdx · July 2007

Only four friends? Send me a request.. I'll be your friend!!

How Much Profit Should A Car Dealer Make?

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