If a car costs £100 retail (just assume), how much is usually manufacturing cost, manfuactuer's profit, dealer's profit etc?
Well, it would differ a lot between Lamborgini and Ford but just inquisitive for an overall picture.
Thanx
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i work in a main ford dealer, in the used stock there is approx £1000 - £1500 on each car.
My friend works at jag and they have approx £1500 - £2000 on say an s-type and up to £8000 on an Xk
The bottom really has dropped out of the market from speaking to some collegues that have been there years. Gone are the days of making large amounts everyone is clued up these days with the internet and loan rates etc
thanks
dave
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Do the Ford dealers make more on the ex-renters cars?, some say the renters get back the amount paid for them, so have a year 'free' to charge the earth for?
Looking at Motorhomes, the margins seem enormous, many £000s- so get into that trade?
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I think its difficult to disentangle exactly what people make on a particular sale because of the number of parameters involved. Taken overall, the franchised dealer model is not looking too healthy at the moment. I think most dealers are looking at profitability around 2% overall and would be very happy with 4%.
Increasingly the sale of the vehicle is just a means to sell F&I, GAP, paintwork protection etc. Many dealers look to used car sales are a major source of profit. Sale-trade in price on a £7k used motor might be £1500, but strip out prep, warranty etc and that leaves of profit of some hundreds.
Rental schemes, demo sales and so on are a good way of pumping nearly new cars into the market without the 'shame' of heavy discounting, so unsurprisingly the manfrs push this.
Many of the big dealers have been pushed (by manfrs) into multimillion investments in premises - its difficult to see how some of these will ever make a sensible return in the light of rising interest rates. The cost of servicing some of the big loans involved has risen by 10% over the last year. I do wonder if we will see some more vertical integration (along the lines of MB) in the next few years. Certainly BMW have pushed their dealers very hard, and when it comes to franchise contract renewal time it would be easy for BMW to step in and take over the dealerships in the way that MB did.
I think I can safely say that the new car trade is probably the last place to invest money right now.
The situation for the small independent trader is totally different of course.
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I think I can safely say that the new car trade is probably the last place to invest money right now. The situation for the small independent trader is totally different of course.
Interesting... care to elaborate ?
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>> Interesting... care to elaborate ?
Well, simple really. The VM's are increasingly pulling the strings of the franchisee's to the extent that many are not really in control of their own business any more. The VM's dictate what are known as 'dealer standards' - which cover everything from what diagnostic kit is in the workshop, to how many sqare feet of showroom, opening hours, how many staff etc etc. And of course they many insist on new showroom build etc. Thus the dealer is not really in control of the business and not much chance to cut costs. If your local BMW wants an allocation of 30 of that very desirable and easy to sell new 3-something-or-other model, then he'll also have to sign up for 100 of those hard to shift 116's. Meanwhile the VM who has imposed all this then goes and disposes of excess stock to supermarkets and brokers at prices that are below those available to the dealer!
The small independent, on the other hand, is in full control of his business and can specialise in types/brands of cars and build up a local niche market with some customer loyalty. If the market changes then he can quickly respond by changing the types of cars he stocks. There is still a profit to be made in the motor trade, but not necessarily in the franchise network.
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The answer to this question is "not as much as people seem to think". : ) Certainly not as much as "financial advisors" and the other charlatans who steal our cash.
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Do the Ford dealers make more on the ex-renters cars? some say the renters get back the amount paid for them so have a year 'free' to charge the earth for?
In Answer... Yes had a Vauxhall Vectra Co Car for a while and it was changed every 8,500 miles or 9 months the reason was threefold firstl it was seen as a "ex demo" hardly any mileage easy to sell.. secondly it didn't need a service or RFL or tyres etc. Thirdly there is this point where retail it was £17000 Avis paid £12,000 and they would get £13,000 on the forecourt plus loan fees etc.
Looking at Motorhomes the margins seem enormous many £000s- so get into that trade?
Motorhomes and Caravans is a different business model Customer pays £40000K for example a third pay cash the rest on a long term loan 7-10 years..period of ownership is longer and it's unlikely that service will be done at the dealership most are based on Fiat Chassis and they require it to do to van specialist. So apart from the loan arangement fees there is no other revenue streams.
Paul
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had a Vauxhall Vectra Co Car for a while and it was changed every 8 500 miles
One of my neighbours works for a big company who have the same sort of deal with Renault - they have to return the cars with under 10K on them, so he has a new car every few mths.
In partial reply to the original question, the actual manufacturing cost of a car is reckoned to be around 50% of its pre-tax list price. It's a bit difficult to relate that to £100, but on a typical £15000 list price car that means a manufacturing cost of around £6500.
OF course, R&D is a hugh cost, but one surprisingly (to me) large cost for many manufactures is marketing - I read that volume manufacturers are typically spending £1000 in advertising / sponsorship etc for every car sold.
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>>In partial reply to the original question, the actual manufacturing cost of a car is reckoned to be around 50% of its pre-tax list price. It's a bit difficult to relate that to £100, but on a typical £15000 list price car that means a manufacturing cost of around £6500.
If that is the case then how come there is such a difference in prices across the globe? Speaking to a colleague in Canada the price of a car is about 50-75% of what we would pay overhere. Are we Europeans subsidising the cousins across the pond?
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Do remember they have lower VAT rates and often car dealers and adverts quote prices ex vat, ex delivery ex quite a few things...
I think as ever there is that bizarre "higher costs in the UK" thing/less aggressive market/Whatever Rip off Britain is now being called..." thing that always means everything is cheaper stateside (+Canada).
Certainly one of the things you notice stateside is that models will routinely be made only with the largest petrol engine available eg a Corolla starts with a 1.8 125bhp engine stateside rather than a 1.4, something that would cost much more here....so base model compared to base model makes a US/Canadian car look immediately better value never mind the afformentioned general lower price env...
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It's the old, old story of someone begrudging any one else making a profit, no matter how large or small.
Yet they almost certainly wouldn't be prepared to tolerate a similar approach in their own line of business.
Hypocrisy is the apt word.
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What\'s for you won\'t pass you by
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I think as ever there is that bizarre "higher costs in the UK" thing/less aggressive market/Whatever Rip off Britain is now being called..." thing that always means everything is cheaper stateside (+Canada).
Having just returned from Canada one I can tell you that you're very much mistaken, prices overall are about the same as the UK, somethings are cheaper, some a lot more expensive., Small cars are no cheaper, the larger ones and MPV's are however. Tax depends on where you go but once both GST and PST are added is around 14% so not a huge difference to the UK.
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I'm not familiar with Canadian pricing, but pricing in the US is always quoted without tax, registration etc etc. But those things only add between about $2500 and $5000 the price of the car.
As others have pointed out, if you compare like for like - say BMW or Mercedes models - then the US versions start at a higher entry point. Neither will offer 4cyl engine in the US. The entry level 3 series is the 328i (3 litre engine) and its base price is $33,000 (oh, and that includes all maintenance for 4 yrs too). Comparing the UK price and spec, the US one is significantly cheaper. They tend to be somewhat better equipped too, although I think that's as much to do with limiting choice so the dealers can carry stock without it being the wrong model. US buyers expect cars to be available from stock.
I know there?s a lot of panic about falling SUV sales as the manufacturers were making a lot of money out of those ? at the height of the demand it was said that Ford was making $10,000 on every Explorer sold. Of course it doesn?t actually cost much more to make an SUV than it does to make a saloon car ? the process is the same, just needs a little bit more steel etc.
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