Dealers only make a little on car sales, I'm not having it!
Discussion
I went into Mercedes Northampton yesterday.
A really impressive building, clean as a hospital and fitted out like a four star hotel. All new stock in the showroom, about 20 cars, were the same snow white colour wrapped in a Christmas bow.
A sales meeting had finished and at least 10 people in suits came down the stainless steel and glass stairs.
There were three on reception, a guy from service helped me, I had a hot chocolate served by someone and tucked in to a pastry.
Many claim main dealers make only a couple of hundred from a new car sale and servicing is only around £250 a year. If anything goes wrong the warranty covers it and there was no oil in sight.
How can they afford to run an operation like this whilst those who work there claim margins are so low?
A really impressive building, clean as a hospital and fitted out like a four star hotel. All new stock in the showroom, about 20 cars, were the same snow white colour wrapped in a Christmas bow.
A sales meeting had finished and at least 10 people in suits came down the stainless steel and glass stairs.
There were three on reception, a guy from service helped me, I had a hot chocolate served by someone and tucked in to a pastry.
Many claim main dealers make only a couple of hundred from a new car sale and servicing is only around £250 a year. If anything goes wrong the warranty covers it and there was no oil in sight.
How can they afford to run an operation like this whilst those who work there claim margins are so low?
VorsprungDirk said:
You really cant see any further than the end of your nose can you, I work at Audi, also in Northampton and we make 0.7% profit against turnover this year, if I was investing in a business it wouldnt be a car dealership.
Thanks for the self analysis, much appreciated.Now, I don't know your role at Audi Northampton but if you made 0.7% profit V turnover, quite clearly that is poor. Well below industry norm.
Haven't seen your accounts, post them up and i'll make some comments and recommendations, I won't even charge for the advice mate.
oldnbold said:
Thankyou4calling why don't you post up what your position in the motor trade is that gives you such a clear and factual insight into the profitability of the motor trade.
You seem to know far more than any of us that work or have worked in the trade, including a chap who had daily visability of the P&L accounts for a large dealer group.
So please share the source of your knowledge with us all.
I don't work in the motor trade. My last post referred to accounts, these are just numbers, I don't see that it matters as to what they relate to.You seem to know far more than any of us that work or have worked in the trade, including a chap who had daily visability of the P&L accounts for a large dealer group.
So please share the source of your knowledge with us all.
I'm not trying to be clever at all but the guy who says he works at Audi northampton was stating some figures so I'd like to see them.
Ozzie Osmond said:
Like many things in business it depends what you choose to believe about human nature. For instance, do Red Bull's increased drinks sales justify their investment in F1? Does Torro Rosso add any additional value beyond the Red bull team or is it just wasted money?
Cars sell to consumers. Consumers of new cars are looking for various things, including "image". The Bentley customer spending £250k doesn't expect to have to deal with Arthur Daley under the railway arches. A new £15k car is expensive for most customers and they want to feel valued when spending so much money.
Then there's the costs involved. Vehicle stock, parts stock and workshop equipment are all expensive irrespective of what building the dealer occupies.
So when you fit the whole picture together "chrome and glass" probably makes sense. The motor trade is highly competitive. If shifting cars from backstreet premises was the best way forward somebody would be doing it and making a huge success of it.
I know Tesco entered the new car sales market with a different business model a few years back and failed pretty miserably.Cars sell to consumers. Consumers of new cars are looking for various things, including "image". The Bentley customer spending £250k doesn't expect to have to deal with Arthur Daley under the railway arches. A new £15k car is expensive for most customers and they want to feel valued when spending so much money.
Then there's the costs involved. Vehicle stock, parts stock and workshop equipment are all expensive irrespective of what building the dealer occupies.
So when you fit the whole picture together "chrome and glass" probably makes sense. The motor trade is highly competitive. If shifting cars from backstreet premises was the best way forward somebody would be doing it and making a huge success of it.
From this thread I've come to the conclusion that if you just sold mainstream cars from the type of premises i visited in Northampton you'd be out of business pretty quickly, but the building is a hub if you like for all the other things that go on, used car sales, servicing, parts, merchandise etc and once someone has bought a car the dealer then has the opportunity to use that sale for more business.
I spoke to a guy yesterday who was drioving a white Jag XF, he said every 18 months the dealer called him and offered him a deal to change to a new car whilst his monthly payment did'nt move much. it was his third new car in 5 years and he raved as to how hard the dealer worked to sweeten the deal for him.
One new car sale isn't going to cut the mustard but repeat business, servicing, taking that car back in and selling it as approved used is a good business.
Finally, for those who say that dealer groups who make 5% v turnover show it's not a good business, look at any retailer, Tesco, Dixons PLC even an oil giant like Shell. 5% isn't that bad at all.
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