Why do dealers keep cars for so long without cutting price?
Discussion
gamefreaks said:
This doesn’t make any sense to me either.
If I was a dealer, I’d want to be churning through stock.
If you can make on average 10% on each deal and on average a car takes 1 month to sell then you can turn your £30k into £90k over 1 year.
So, if you make a mistake and overpay for a car, it's better to move it on quick, even for a loss than sit on it until prices rise or a bigger idiot turns up...
This but I'm not in the trade so I suspect it's more complex than that. I take the view that a car sold will allow you to sell another. One sat on your forecourt is costing money unless it is a appreciating car.If I was a dealer, I’d want to be churning through stock.
If you can make on average 10% on each deal and on average a car takes 1 month to sell then you can turn your £30k into £90k over 1 year.
So, if you make a mistake and overpay for a car, it's better to move it on quick, even for a loss than sit on it until prices rise or a bigger idiot turns up...
What some dealers don't realise is the customer is king as they have what you need, payment for the car they're trying to sell.
gamefreaks said:
This doesn’t make any sense to me either.
If I was a dealer, I’d want to be churning through stock.
If you can make on average 10% on each deal and on average a car takes 1 month to sell then you can turn your £30k into £90k over 1 year.
So, if you make a mistake and overpay for a car, it's better to move it on quick, even for a loss than sit on it until prices rise or a bigger idiot turns up...
average 10%?? You clearly have never worked in the industry.If I was a dealer, I’d want to be churning through stock.
If you can make on average 10% on each deal and on average a car takes 1 month to sell then you can turn your £30k into £90k over 1 year.
So, if you make a mistake and overpay for a car, it's better to move it on quick, even for a loss than sit on it until prices rise or a bigger idiot turns up...
F20CN16 said:
The blue one?
No, it was red. It's odd, some sites have it listed still, but some don't. Hasn't been taxed since August last year either. Edit to add: It looks like it's just been sold, I looked for it the other day and it wasn't taxed, but it's now taxed and not listed on any of the sites. It was with them for 10 months.
Edited by ThisInJapanese on Wednesday 22 June 10:01
Blown2CV said:
dealers do not have very much margin to play with. It isn't anything like what many people (even on here) for some reason seem to believe it is, on new cars at RRP, that do not have an type of additional manufacturer support applied. The car is on credit to the manufacturer, and this is usually 6 months or so, and then the vehicle needs to be paid for in full, at cost price. Cars have very minor updates every 6 months or so, so dealers want to avoid keeping unregistered but paid-for cars for longer than they need to. Sometimes another dealer in the country will have that car sold, and will get in touch do transfer it. This gets more complex if the car is paid for. Often instead the car is registered in the dealers name, AKA 'pre-reg', where it then goes onto the used car book and is the used car sales manager's problem. However there is no point in registering a car that cannot be made cheap somehow, through manufacturer support or suchlike. Sometimes the manufacturer will apply extra support to a vehicle+Model year in order to get rid of them out of the network. However, if they don't do that, then the dealer is somewhat stuck with a car they cannot shift and cannot make cheap unless they want to make a loss on it, which is very bad juju. One loss-making chassis in this sort of instance can wipe out the profit of several other new car deals.
Why would one new car not sell? I understand there are second hand cars that hang aroung but surely a new car is more or less the same as the next one?There was a garage locally that sold classic cars and was around for some years, 5 maybe more. The stock remaind more or less the same through out the time it was in business.
The cars had no prices on display and so went in one day to enquire about a car (I forget what it was) and the woman on reception snapped at me if you need to ask you can't afford it. The cars value was around £20,000 as I did the research before I went in.
Edit: I passed it one day it was open, I passed it the following day and all the cars had gone!
The cars had no prices on display and so went in one day to enquire about a car (I forget what it was) and the woman on reception snapped at me if you need to ask you can't afford it. The cars value was around £20,000 as I did the research before I went in.
Edit: I passed it one day it was open, I passed it the following day and all the cars had gone!
Edited by I Know Nothing on Wednesday 22 June 12:27
Blown2CV said:
average 10%?? You clearly have never worked in the industry.
Nope. I haven't.The numbers were purely as an example but plug any numbers you like in there (assuming there are cars to buy and you don't have infinate bank) then the best move is usually going to be recouping as much as you can and moving on if you have overpaid.
What would a typical margin look like?
I figured buy at £25k, spend £2k prepping and sell for £30k sounded about right.
I Know Nothing said:
Blown2CV said:
dealers do not have very much margin to play with. It isn't anything like what many people (even on here) for some reason seem to believe it is, on new cars at RRP, that do not have an type of additional manufacturer support applied. The car is on credit to the manufacturer, and this is usually 6 months or so, and then the vehicle needs to be paid for in full, at cost price. Cars have very minor updates every 6 months or so, so dealers want to avoid keeping unregistered but paid-for cars for longer than they need to. Sometimes another dealer in the country will have that car sold, and will get in touch do transfer it. This gets more complex if the car is paid for. Often instead the car is registered in the dealers name, AKA 'pre-reg', where it then goes onto the used car book and is the used car sales manager's problem. However there is no point in registering a car that cannot be made cheap somehow, through manufacturer support or suchlike. Sometimes the manufacturer will apply extra support to a vehicle+Model year in order to get rid of them out of the network. However, if they don't do that, then the dealer is somewhat stuck with a car they cannot shift and cannot make cheap unless they want to make a loss on it, which is very bad juju. One loss-making chassis in this sort of instance can wipe out the profit of several other new car deals.
Why would one new car not sell? I understand there are second hand cars that hang aroung but surely a new car is more or less the same as the next one?gamefreaks said:
Blown2CV said:
average 10%?? You clearly have never worked in the industry.
Nope. I haven't.The numbers were purely as an example but plug any numbers you like in there (assuming there are cars to buy and you don't have infinate bank) then the best move is usually going to be recouping as much as you can and moving on if you have overpaid.
What would a typical margin look like?
I figured buy at £25k, spend £2k prepping and sell for £30k sounded about right.
Blown2CV said:
on new cars it is far less than that. More like 2%. The money is made in achieving targets for various things, and of course overall scale.
Suspect the business model for a dealership is very different to a trader selling 3-10 year old cars that are low on warranty and high on depreciation.In this case, the profit margins would need to be higher because you are on the hook for the intermittent airbag light the seller 'forgot' to mention.
Having overpriced cars sitting there (assuming you can source new stock) is madness to me.
The only thing I can think of (apart from SOR or half-hearted private sellers) is that the stock has been borrowed against and reducing the price would cause a problem there.
A few things to consider.
Lack of stock means churning at a low price leaves the dealer unable to replace.
Lack of stock also means less traded volume therefore higher individual margins sought.
Dealers don't need to sell the car and can sit on it until a bite (may need to wait until the market moves to a position they will sell at).
Or, they could be up the creek and are hoping for the best.
Suspect mainly the first three with a few in the latter category.
Lack of stock means churning at a low price leaves the dealer unable to replace.
Lack of stock also means less traded volume therefore higher individual margins sought.
Dealers don't need to sell the car and can sit on it until a bite (may need to wait until the market moves to a position they will sell at).
Or, they could be up the creek and are hoping for the best.
Suspect mainly the first three with a few in the latter category.
Gassing Station | Car Buying | Top of Page | What's New | My Stuff