Main dealers have competition from internet brokers. But they supply those brokers, so presumably reducing the number of high profit new sales they make. Allegedly there's no money in warranty work. They have high labour and overhead costs.
So where are main dealers making their money?
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Repairs out of warranty and to some extent used car sales. A nearly-new Audi is a poor bargain, and costs almost as much as a new one - but I'm sure the original owner took a hit.
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Parts I suspect, if anyone is daft enough to buy them.
I needed a new Lambda sensor on Saturday morning after breaking the old one when carelessly removing the exhaust downpipe on my zetec engined Ford. The local Ford dealership quoted me £122. I nearly died of shock. [I have long suspected the bloke at the parts counter doesn't like me ;-)] My local motor factor sorted me out for £35.
And I was under the impression that Ford parts were supposed to be cheap.
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>They have high labour and overhead costs.
The high overheads at most dealers seems to be sales staff drinking coffee and smoking (outside)! The labour rates chared for serving and repairs are staggering (locally £90 - £140 per hour). I suspect those needing work on their cars subsidise the sales side!
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Based on my last experience of buying a new car from a dealer and what else they try and sell you on top of the new car, I'd say they make their money from finance (no thanks...), GAP insurance (no thanks...), tyre insurance(?? no thanks...) and 'paint protection' (again, no thanks...)
Just my thoughts...
Peter
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Motor traders would have you believe there is no margin left in the industry and they?re now only providing a public service. But there?s no evidence of a stampede to get out of the business and the major franchises remain as much in demand as ever.
If they can?t make money at some of the exorbitant rates they charge for labour they don?t deserve to. A little black book published every month telling them all how much to pay for stock and what to sell it for and they can?t make a profit?
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My car went in on Friday to a Vx dealer in Bracknell to find out what a horrible noise was. The couresty car driver for the day happened to be the manager of the dealership! Their hourly rate is £72. For me, that's steep - but they do have premises, courtesy cars, receptionists etc etc and whole host of other business costs to maintain.
btw the horrible noise was the steering pump, which went completely on Friday night. The garage said it would, and told me to replace it would cost £871. As you might imagine, I am trying to source the part cheaper elsewhere...
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Manufacturer paid bonuses. They can run into millions and are based on volumes of vehicle and parts sales and are then restricted by mystery shop results.
Many dealers run at a loss in the hope of achieving them. When they dont they go bust.
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I did think bonuses had to be substantial. Does anyone know (or is prepared to say) how the structure works? Is it a myth that towards the end of a month or a quarter you may get a better deal because the dealer is trying to reach a figure of sales? Some years ago when I bought a new car, the manufacturer rang and seemed to be checking on the exact dates of the deal, registration, etc.
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The main dealer I used to work at worked to a margin on used cars of about 25%.
I remember back in the late 90's they sold an Audi A4 with 6 grand in it, getting every penny.
My van which I just traded in for £3300 is likely to go for sale at about £4495 or so there is a bit of money even in them, but it should turn around quickly.
My mums car was bought from what is apparently one of the top three Hyundai dealers for sales in the UK. Their business model is based entirely on the bonus system for new cars which means that even the cheap models are £1500 off list and £4-6000 on top models. But they sell huge volume and seem to do very well off it.
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I once set up a deal to buy a used car priced at £4,995 and, being cheeky, had offered £3,700 plus the fitting of a couple of new tyres and a full service.
The salesman basically agreed the deal, plus the PX, and said he would phone me later in the day to confirm it (I had an urgent appointment in my home town some 20 miles away).
The call was made, but I was told by the salesman that he had to reluctantly turn down my offer because the dealership would make little or no profit.
I was a bit miffed but, on the other hand, learned that my theory that dealerships make more money on secondhand sales than new was confirmed.
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We make money from all the sources previous mentioned in this thread .... just not a lot.
These following figures are the "average" nett profits versus turnover ....
A top dealer will make 4%-6% profit on turnover
A normal dealer will make 2.5% profit on turnover.
EG 1'000'000 (1 million) of turnover will generate £60000 for a top dealer (BMW / AUDI)
so an average dealer will have to turn over 1 million to clear £25000
Thats a lot of work for small returns in comparison the likes of Tesco's dont want to know unless they have a minimum or 15% or more ... apparently.
Our top earners in order of "profit" is as follows
Service
Bodyshop
Parts
Used Cars
New Cars
Fleet Cars.
and the reason we do it ??? personally cos I love it and for others possibly all they know oh and a fortune tied up in the business
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Also:
1. Financing - dealer commission on non-0% financing will be healthy.
2. Various insurance-backed guarantees. Money for old rope.
3. Car mats; "super duper £500 for a new car wax polish"; spoilers, big exhausts, tinted windscreens.
The cars are just a vehicle for selling the above.
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The money in selling cars is in buying a freehold site. I know two car dealers one non-franchise, the other ex-franchise, who have done very well out of selling their sites for residential development. I expect they made more money each year "sitting" on the plot than they did operating the business, but of course they couldn't take the profit out until the end, without racking up debt.
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