Dealers only make a little on car sales, I'm not having it!
Discussion
Mastiff said:
Sytner are, in turn owned by Penske Automotive. Penske Automotive are a listed on NASDAQ. They are audited under the Sarbennes Oxley Act designed to protect shareholders and prevent accounting fraud. I don't think I'd be too quick to suggest that they are "hiding money under the mattress" online. Not that you were Silentbrown but others were heading that way!
FWIW, Sytner dealers are NOT targeted to make a trade profit as part of their profit/loss accounts. In fact under the "treating customers fairly" rules within Sytner - if a dealer starts to make too much profit from his trade-ins (retail aside), questions are asked.
No, no. FWIW, Sytner dealers are NOT targeted to make a trade profit as part of their profit/loss accounts. In fact under the "treating customers fairly" rules within Sytner - if a dealer starts to make too much profit from his trade-ins (retail aside), questions are asked.
You're wrong. My friends sisters cousins aunt used to work for sytner and every week they had a big barbeque out the back lit with a million in £20 notes just to get rid of some of the profit. They used £50 notes as toilet paper too.
OBVIOUSLY they're making a whole pile of money, because i say so.
Anyone wonder why cars depreciate so much when they roll off the forecourt?
Everything is generally over-valued. Premium products more so.
Popular premium products even more more so!
Who cares how much Mercedes make on a new car unless you're buying one, in which case vote with your feet if you don't like it.
Personally I'm quite happy with this arrangement, as used cars are cheaper, but you can enjoy the nice premises when you take your older used car there for work doing etc.
Dave
Everything is generally over-valued. Premium products more so.
Popular premium products even more more so!
Who cares how much Mercedes make on a new car unless you're buying one, in which case vote with your feet if you don't like it.
Personally I'm quite happy with this arrangement, as used cars are cheaper, but you can enjoy the nice premises when you take your older used car there for work doing etc.
Dave
ralphrj said:
Sheepshanks said:
They must make money, or the model as it is now would collapse.
Dealers do make money but the profit is less than a lot of people think. Particularly as a percentage of their turnover. The vast majority of a dealerships turnover comes from new car sales but little if any of the profit.Sheepshanks said:
It's just not obvious in any everyday business sense how it's done, but it's clear there's a got to be a lot more than a couple of hundred pounds in selling a new car. I don't have a problem with this, but dealers claiming they're basically a charity are lying.
They aren't charities but at the same time that does not mean there are huge profits in new car sales. How much they make per car depends on the point you choose to measure the profit.When I worked at MB the dealer margin was 8+2. The dealer bought the car at an 8% discount on list price. For example a £30k car list price is £25k + VAT. The dealer would pay £23k and at the end of the quarter they would receive a further £500 of 'holdback'. If you gave the customer a £2k discount (inc VAT) then the gross profit per unit on the sale would be £333. Including the 'holdback' this would rise to £833.
Sometimes manufacturers would offer additional margin in order to help sell models that are struggling. This could be a straightforward extra £1,000 per unit sold or it could be in the form of a discounted finance package. Often the discounted finance package is via the manufacturers finance arm but is only partially funded - the cost of providing the package is split between the finance arm and the dealer (out of their 8% margin). These kind of deals don't usually result in a bigger profit per unit for the dealer as the extra margin is given to the customer as discount.
Out of the gross profit per unit the dealer has to cover the cost of the salesmens salaries, sales adminstrators salaries, depreciation of the demo fleet, petrol for demonstrators, advertising, etc.
In general we were aiming for the sales department to breakeven after these costs.
Then there is a dealership bonus payable by the manufacturer if the dealer hits their registration target. This would typically be a further 1% if all new cars sold. Therefore if the dealership hits the target there is a good profit (small as a percentage but potentially a few £100k for a big dealer.
Aftersales is a much smaller element of the dealerships turnover but has much higher margins and it is where the dealer makes their money.
Typically we would aim to make enough profit on aftersales to cover the overhead costs of the dealership. Within the industry there was a common KPI called overheads absorption ratio and is aftersales profit divided by overheads. A 100% ratio meant that the cost of the building, Dealer Principal, Dealer Accountant etc were all paid for by the aftersales profit.
Finally there was a dealer standards bonus. This was payable based on lots of different criteria including providing financial performance information to the manufacturer (called composites), having a dealership building that met the current corporate image requirements of the manufacturer, customer satisfaction survey results, mystery shopper results, using an approved accounting package, achieving the manufacturers requirements for sending staff on training etc. This could be 1 to 1.5% of new car sales turnover.
So, a well run dealership may have results that look like:
Vehicle sales: £20m turnover. £0 profit before target bonus, £200k profit after target bonus.
Aftersales: £5m turnover. £1m profit.
Overheads: £1m cost
Profit before dealer standards bonus: £200k
Dealer standards bonus: £300k
Profit: £500k
Return on sales (profit as percentage of turnover): 2.0%
However, return on sales is perhaps not the most meaningful measure of a dealership performance. If you were the owner of a dealership you would be more interested in how much money you were making on your investment.
If the example dealership above cost £5m to set up then the return on investment (profit over investment) is 10.0%.
Presumably all the nay sayers will give it a rest now?
daemon said:
TA14 said:
The other really big flaw with the figures that deamon quotes each month is what one usually calls profit. If you or I bought a car for £10K, spent £1K on it and sold it for £15K we'd call it £4K profit but in those big groups you knock off the salesman's wages and bonus and all of a sudden that £15K sale only made £200.
Uh huh.And the really big flaw in what you have just said is that you havent included all the indirect costs that need to be included like rent, rates, electric, wages, advertising, VAT, etc.
If you or I bought a car for £10K, spent £500 on it and all of the indirect costs that need to be included like rent, rates, electric, wages, advertising, VAT, etc. were £500, then sold it for £15K we'd call it £4K profit but in those big groups you knock off the salesman's wages and bonus and all of a sudden that £15K sale only made £200.
Mr Whippy said:
Anyone wonder why cars depreciate so much when they roll off the forecourt?
Because the customer perceives a new car is worth more?Because a dealer restocking a used car still has to make a margin on it and price it to interest above said customer?
Because noone is going to pay the price of a new one for a second hand one?
Because theres better incentives to buy a new car?
V8RX7 said:
unrepentant said:
I wouldn't trust a new car to anyone other than a factory trained expert.
You clearly haven't met the monkeys working in a Dealership.
You'll be lucky to have one mechanic who knows what he's doing - the rest haven't got a clue
As said most people in dealers don't have a clue just plug a computer in and lack any common sense at all. You would be far better off at a decent independent garage to be honest unless it was less than 3 years old and want to keep a warranty.
Dealers make money otherwise they wouldn't remain in business in the long-run. In the short-run with sunk costs they could make losses.
As has been said, the key figure here is how much return the 'owner/investor' makes on their investment. If somebody can control a car dealership for relatively little money then they don't need huge absolute returns to make a decent return on their investment.
greggy50 said:
V8RX7 said:
unrepentant said:
I wouldn't trust a new car to anyone other than a factory trained expert.
You clearly haven't met the monkeys working in a Dealership.
You'll be lucky to have one mechanic who knows what he's doing - the rest haven't got a clue
As said most people in dealers don't have a clue just plug a computer in and lack any common sense at all. You would be far better off at a decent independent garage to be honest unless it was less than 3 years old and want to keep a warranty.
king up in complex ways (and it will when it's a few years old of course and the thin veneer of JLR quality wears away) you really will be high and dry.TA14 said:
Let me make it easier for you then:
If you or I bought a car for £10K, spent £500 on it and all of the indirect costs that need to be included like rent, rates, electric, wages, advertising, VAT, etc. were £500, then sold it for £15K we'd call it £4K profit but in those big groups you knock off the salesman's wages and bonus and all of a sudden that £15K sale only made £200.
Gee, would that be because the indirect costs amount to more than £500????If you or I bought a car for £10K, spent £500 on it and all of the indirect costs that need to be included like rent, rates, electric, wages, advertising, VAT, etc. were £500, then sold it for £15K we'd call it £4K profit but in those big groups you knock off the salesman's wages and bonus and all of a sudden that £15K sale only made £200.
For kick off the VAT would be payable on the margin, so theres £833 down the pan and thats before you take into account the massive running costs of those "glass palaces" we're talking about, so your £500 figure is wayyyyy out.
Heres a closer to life worked example BTW -
£15K used car on a forecourt, the dealer has probably bought it for £12,000.
The customer will be expecting 10% discount, so theres £750 gone.
The VAT man will take the guts of £400.
Prep costs - servicing, valet, minor repairs - £300
Advertising - £100
"House" charge per car to cover rent, rates, electric, etc - £300
Warranty - £300
Salesmans commission - £100
TAX allowance - £200
So thats leaving him with a heady £550 NET profit, which is on a used car which is where the REAL profit is.
dme123 said:
greggy50 said:
V8RX7 said:
unrepentant said:
I wouldn't trust a new car to anyone other than a factory trained expert.
You clearly haven't met the monkeys working in a Dealership.
You'll be lucky to have one mechanic who knows what he's doing - the rest haven't got a clue
As said most people in dealers don't have a clue just plug a computer in and lack any common sense at all. You would be far better off at a decent independent garage to be honest unless it was less than 3 years old and want to keep a warranty.
king up in complex ways (and it will when it's a few years old of course and the thin veneer of JLR quality wears away) you really will be high and dry.ksNot sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
I'm
And they don't retail Porsches ? He was asked the question and said that he sold them on at profit for the company lol
Of course everyone believed him
I was always led to believe the workshop always props up the sales department even though the sales guys were payed more for doing less
Ozzie Osmond said:
Seriously, you need to explain that.
What makes you think a "£100k company car" has no costs attached to it? It's more than 10 years since HMRC made flashy company cars a thing of the past - except for people making their money elsewhere.
Explain how the martins group ceo drives around in a new porsche 911 company car replaced every 6 months What makes you think a "£100k company car" has no costs attached to it? It's more than 10 years since HMRC made flashy company cars a thing of the past - except for people making their money elsewhere.
And they don't retail Porsches ? He was asked the question and said that he sold them on at profit for the company lol
Of course everyone believed him
I was always led to believe the workshop always props up the sales department even though the sales guys were payed more for doing less
loose cannon said:
I was always led to believe the workshop always props up the sales department even though the sales guys were payed more for doing less
The new car sales injects new cars into the local area for the service department to subsequently work on.A typical new car salesman in an "average" dealership selling fords or vauxhalls might earn £25,000 to £30,000 a year including commission.
For that he'll be expected to do 09:00 to 18:00, with at least two late nights and probably a saturday or sunday and he'll be expected to sell several million pounds worth of new cars each year.
Granted they might scratch their plums for part of any given day, but its hardly film star wages
greggy50 said:
Dealer equipment must be a load of bks
Not sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
Before I left mercedes in 2006 you already had to print off the service sheet by plugging in the car which then told you what service was required there was no other way of knowing the schedule unless you made it up of course ksNot sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
Grandfondo said:
greggy50 said:
Dealer equipment must be a load of bks
Not sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
Maybe to turn off the service due light? ksNot sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
loose cannon said:
greggy50 said:
Dealer equipment must be a load of bks
Not sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
Before I left mercedes in 2006 you already had to print off the service sheet by plugging in the car which then told you what service was required there was no other way of knowing the schedule unless you made it up of course ksNot sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
greggy50 said:
Dealer equipment must be a load of bks
Not sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
Some modern cars don't have sump nuts.ksNot sure how you need special equipment to remove a sump nut, change a filter and then fill a car back up with oil...
Nor dipsticks.
And unless you tell the ECU, at best you'll have an annoying "SERVICE" dash message but I think some now restrict performance if the ECU isn't told that it's been serviced.
daemon said:
The new car sales injects new cars into the local area for the service department to subsequently work on.
A typical new car salesman in an "average" dealership selling fords or vauxhalls might earn £25,000 to £30,000 a year including commission.
For that he'll be expected to do 09:00 to 18:00, with at least two late nights and probably a saturday or sunday and he'll be expected to sell several million pounds worth of new cars each year.
Granted they might scratch their plums for part of any given day, but its hardly film star wages
Did they have to go to college for 5 years to learn mechanics and electrical diagnosis and risk killing people if they don't do the job correct ! Err no they didn't therefore the mechanic/ technician should be paid more than somebody that talks car features and discusses pricing which is generally fixed to a pre sales plan decided by the sales manager ? A typical new car salesman in an "average" dealership selling fords or vauxhalls might earn £25,000 to £30,000 a year including commission.
For that he'll be expected to do 09:00 to 18:00, with at least two late nights and probably a saturday or sunday and he'll be expected to sell several million pounds worth of new cars each year.
Granted they might scratch their plums for part of any given day, but its hardly film star wages
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