Dealers only make a little on car sales, I'm not having it!
Discussion
Sheepshanks said:
On a new car we bought a few months ago there was an extra discount available but ONLY if we took the 0% APR PCP. Why on earth would any straightforward business do such a thing?
Simple - to incentivise the sale of the car without further discounting - which would hurt both resale values and values of used cars already in stock at dealers.These "finance contributions" usually come from the manufacturers finance company - as do 0% deals.
Its all just ways of having to avoid massive discounting
EDIT : You bought a new Honda Jazz, didnt you?
Both the extra £500 finance contribution and 0% finance come directly from Honda
http://www.honda.co.uk/cars/jazz/offers-and-financ...
Edited by daemon on Sunday 7th December 16:12
daemon said:
Sheepshanks said:
On a new car we bought a few months ago there was an extra discount available but ONLY if we took the 0% APR PCP. Why on earth would any straightforward business do such a thing?
Simple - to incentivise the sale of the car without further discounting - which would hurt both resale values and values of used cars already in stock at dealers.unrepentant said:
daemon said:
Sheepshanks said:
On a new car we bought a few months ago there was an extra discount available but ONLY if we took the 0% APR PCP. Why on earth would any straightforward business do such a thing?
Simple - to incentivise the sale of the car without further discounting - which would hurt both resale values and values of used cars already in stock at dealers.unrepentant said:
You drive an old beater though. You are obviously going to use a cheap back street garage to look after it. I wouldn't trust a new car to anyone other than a factory trained expert.
To be fair a new car needs far less expertise to look after than an old one (little should go wrong for a start). I'd only trust my old beater to Eric at my garage who did 20+ years at MB before leaving because he disliked the poor quality of modern Mercs!
My guys know far more about looking after a car and keeping it working than any main dealer. The difference is that the money I pay them goes into their pockets and not into a flash dealership - I have no problem at all with flash dealerships, they offer what their customers want.
daemon said:
Sheepshanks said:
On a new car we bought a few months ago there was an extra discount available but ONLY if we took the 0% APR PCP. Why on earth would any straightforward business do such a thing?
Simple - to incentivise the sale of the car without further discounting - which would hurt both resale values and values of used cars already in stock at dealers.These "finance contributions" usually come from the manufacturers finance company - as do 0% deals.
Its all just ways of having to avoid massive discounting
EDIT : You bought a new Honda Jazz, didnt you?
Both the extra £500 finance contribution and 0% finance come directly from Honda
http://www.honda.co.uk/cars/jazz/offers-and-financ...
I know these things come from the manufacturer - but the way incentives and rebates etc feed back into dealers it's disingenuous to suggest it doesn't benefit the dealer.
Sheepshanks said:
The car was already pretty heavily discounted, but another £500 was available with 0% PCP. The dealer suggested I took it and settled it straightaway, although they then backed off from that asked me to keep it in place for 3 months.
I know these things come from the manufacturer - but the way incentives and rebates etc feed back into dealers it's disingenuous to suggest it doesn't benefit the dealer.
I'm not suggesting it doesnt benefit the dealer. At very least the salesman would get a commission payment and probably the dealer will at least get something back. I know these things come from the manufacturer - but the way incentives and rebates etc feed back into dealers it's disingenuous to suggest it doesn't benefit the dealer.
BUT the purpose of the 0% offer and "finance incentives" are to put more cars on the road for the manufacturer.
AW111 said:
If the margins are so thin (I am not saying they aren't), is the blinging up of dealerships cost-justified?
Here in Aus VAG have been upgrading all the dealerships to glass and pretension, and incidentally driving away owners of older cars who used to get them dealer serviced.
My mum is a case in point : at 75, she has switched to an independant as the local dealership has been subsumed into a monster new temple of glass and faux marble, where she was "treated like a poor relation" when going in to get her car serviced.
She's not the only one in that area with a similar story.
As everyone says the money is in service rather than sales, why do this? You sell a car once, but services are repeat business.
Their profit is calculated after they've spent income on the things you mention above. As others have said the accountants will do what they can to minimize profit as tax is paid on that!Here in Aus VAG have been upgrading all the dealerships to glass and pretension, and incidentally driving away owners of older cars who used to get them dealer serviced.
My mum is a case in point : at 75, she has switched to an independant as the local dealership has been subsumed into a monster new temple of glass and faux marble, where she was "treated like a poor relation" when going in to get her car serviced.
She's not the only one in that area with a similar story.
As everyone says the money is in service rather than sales, why do this? You sell a car once, but services are repeat business.
TX.
daemon said:
BUT the purpose of the 0% offer and "finance incentives" are to put more cars on the road for the manufacturer.
b
ks - I was buy the car anyway. Why not give a cash paying customer the £500, instead of strong-arming them into finance?If anything it put me off as I was buying the car as a gift and having to put the recipient through the finance process was most unwelcome.
Sheepshanks said:
daemon said:
BUT the purpose of the 0% offer and "finance incentives" are to put more cars on the road for the manufacturer.
bks - I was buy the car anyway. Sheepshanks said:
Why not give a cash paying customer the £500, instead of strong-arming them into finance?
Did you not read my post? Because if they offered the £500 and the cost of the 0% just as discounts then it devalues the car and affects resale values.Sheepshanks said:
If anything it put me off as I was buying the car as a gift and having to put the recipient through the finance process was most unwelcome.
Well, there you go. No pleasing some people.daemon said:
Ah but the world doesnt revolve around you. The purpose of the offer is for the manufacturer to get more cars on the road.
I don't believe that in this case. It makes no normal business sense to give a discount on something which is free.It does however make perfect sense in terms of moving sales and profit into different profit centres within the global Honda empire.
daemon said:
Did you not read my post? Because if they offered the £500 and the cost of the 0% just as discounts then it devalues the car and affects resale values.
That's bks too. It was given as extra discount.ETA - The glass palace comments from the OP seem very relevant at this Honda dealership too - sales manager told me the snazzy building had cost multiple £Ms. I've never seen it anything other than deserted - we bought during a special event and it was close to embarrassing. I run a business and I can't imagine a straightforward way that the place even breaks even.
Edited by Sheepshanks on Sunday 7th December 17:36
0a said:
unrepentant said:
You drive an old beater though. You are obviously going to use a cheap back street garage to look after it. I wouldn't trust a new car to anyone other than a factory trained expert.
To be fair a new car needs far less expertise to look after than an old one (little should go wrong for a start). I'd only trust my old beater to Eric at my garage who did 20+ years at MB before leaving because he disliked the poor quality of modern Mercs!
My guys know far more about looking after a car and keeping it working than any main dealer. The difference is that the money I pay them goes into their pockets and not into a flash dealership - I have no problem at all with flash dealerships, they offer what their customers want.
unrepentant said:
Show my Jag to Eric and he wouldn't know where to start because he doesn't have the diagnostic equipment to deal with the complex electronics. He couldn't even change the oil.
I don't have a jag 
What do you need doing to your complex electronics anyway? If you need diagnostic software to change your oil there's something very wrong.
I was walked around an E60 M5 by my guys earlier this month - they look after a few, even doing the legendary clutch replacements without issue. They are just cars - no car actually needs a flashy garage to get serviced in.
I'm sure other modern cars contain some form of magic that needs main deal diagnostic equipment however
Edited by 0a on Sunday 7th December 18:02
Sheepshanks said:
It makes no normal business sense to give a discount on something which is free.
I dont get what you mean? Sheepshanks said:
It does however make perfect sense in terms of moving sales and profit into different profit centres within the global Honda empire.
As opposed to it being a tool to sell new cars?Honda - like BMW, Merc, etc - will have their own finance company. Its purpose is to support the parent company in selling cars.
Sheepshanks said:
That's bks too. It was given as extra discount.
I bet you're a pleasure to deal with. As i've said already, chances are the salesman is getting a commission for selling the Honda finance OR he has a certain amount of cars to sell on Honda finance to meet his target, so it was in his interest that he offered you the extra incentive. Wasnt in Hondas interest though.ks too. It was given as extra discount.Sheepshanks said:
ETA - The glass palace comments from the OP seem very relevant at this Honda dealership too - sales manager told me the snazzy building had cost multiple £Ms. I've never seen it anything other than deserted - we bought during a special event and it was close to embarrassing. I run a business and I can't imagine a straightforward way that the place even breaks even.
Because, as has already been said, the manufacturers force the local dealer network to either upgrade their showrooms to their specific requirements OR they'll lose the franchise. I know of a local dealer close to me that was told to either build a new "glass palace" as you call it for FIAT / Alfa Romeo OR they would revoke they franchise. They chose not to because the profits didnt justify the outlay for them so another group who were prepared to spend the money got it instead AND they built a new showroom as was requested.Local Audi dealer too - showroom wasnt flash enough, so they had to build a brand new showroom / supersite to keep the franchise.
You contradict yourself BTW, because you say they must be making a fortune selling new cars, then you're just after saying you cant imagine how the showroom makes money.
As you've already been told - IT DOESNT - or at best makes very little. Its all the ancilliary processes that make the money.
And if you want a comparable business model, look no further than games consoles - sold at a loss by Microsoft and SONY, and at a feeble profit for the retailer, but the real money is in everything else - the games (supplied by microsoft and sony), the controllers, etc, etc.
I heard it described on a motor trade forum that the only reason a car dealership sells new cars is to generate business in their local area for service, warranty claims, maintenance, parts, etc.
Terminator X said:
AW111 said:
If the margins are so thin (I am not saying they aren't), is the blinging up of dealerships cost-justified?
Here in Aus VAG have been upgrading all the dealerships to glass and pretension, and incidentally driving away owners of older cars who used to get them dealer serviced.
My mum is a case in point : at 75, she has switched to an independant as the local dealership has been subsumed into a monster new temple of glass and faux marble, where she was "treated like a poor relation" when going in to get her car serviced.
She's not the only one in that area with a similar story.
As everyone says the money is in service rather than sales, why do this? You sell a car once, but services are repeat business.
Their profit is calculated after they've spent income on the things you mention above. As others have said the accountants will do what they can to minimize profit as tax is paid on that!Here in Aus VAG have been upgrading all the dealerships to glass and pretension, and incidentally driving away owners of older cars who used to get them dealer serviced.
My mum is a case in point : at 75, she has switched to an independant as the local dealership has been subsumed into a monster new temple of glass and faux marble, where she was "treated like a poor relation" when going in to get her car serviced.
She's not the only one in that area with a similar story.
As everyone says the money is in service rather than sales, why do this? You sell a car once, but services are repeat business.
TX.
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