Is this taking the michael?

[Sheepshanks]

Zwolf said:

That's the invoiced cost of the manufacturer delivering the car to the dealership that is passed on to the customer. PDI, plates and fuel are dealer overheads that come out of their margin.

Not true. See my previous post.

[Garvin]

Zwolf said:

Some figures to get your head around from the group I work for. Last year turnover was £105m. Net profit after taxes for all 22 businesses within it was £336k (0.32%) - admittedly that included recovering from a £700k loss the year before, so even saying we made a million pounds profit makes for a less than 1%. Which is considered acceptable/normal. 2% is the target fo rthis year and most of the big PLCs run at between 2-3% profit after taxes on turnovers of billions.

Gross profits are good - costs are huge.

Interesting. By recovering from a loss the previous year I assume this means reducing your tax burden last year - what else would affect the in year profits?

What do you mean by 'gross profits' and what are the 'huge costs'. If they include the capital expenditure on the 'glass palaces' then that is merely reinvesting profits back into the business which is to be commended unless, of course, that is just to try to ensure the tax man doesn't get his hands on it. If so then the underlying profitability is probably quite reasonable. If not, then it really is a st business.

[Zwolf]

Sheepshanks said:

Zwolf said:

That's the invoiced cost of the manufacturer delivering the car to the dealership that is passed on to the customer. PDI, plates and fuel are dealer overheads that come out of their margin.

Not true. See my previous post.

True. As per the consignment notes and invoices we get from new cars from the manufacturer and as per our invoices out to customers.

Oh dear. Guess we'll have to see things differently. How many new cars have you ever supplied and been privy to all sides of the process?

[Sheepshanks]

Zwolf said:

Sheepshanks said:

Zwolf said:

That's the invoiced cost of the manufacturer delivering the car to the dealership that is passed on to the customer. PDI, plates and fuel are dealer overheads that come out of their margin.

Not true. See my previous post.

True. As per the consignment notes and invoices we get from new cars from the manufacturer and as per our invoices out to customers.

Oh dear. Guess we'll have to see things differently. How many new cars have you ever supplied and been privy to all sides of the process?

Not true. I posted a cut & paste from Honda price list - what else do you want?

OK, I'm talking about a specific manufacturer, but you're asserting that it's never true, which is clearly incorrect.

[Zwolf]

Sheepshanks said:

Not true. I posted a cut & paste from Honda price list - what else do you want?

OK, I'm talking about a specific manufacturer, but you're asserting that it's never true, which is clearly incorrect.

Seen it now, missed it previously. Well done, you found an exception that agrees with you, as ever there are very few universal truths, certainly in the retail motor trade. But there are situations that are so sommon as to be the general rule.

In that particular case then, provided the delivery charge of £655 is itemised on the invoice, there should be no reason you wouldn't get a full tank on handover. If you didn't - fair enough to raise an issue with the dealer.

That's not at all the situation the OP is in, however. He was offered something at a price, declined it, then was surprised and dismayed when it didn't magically appear anyway. Which is a bit silly really.

[Sheepshanks]

Zwolf said:

Seen it now, missed it previously. Well done, you found an exception that agrees with you,

I didn't "find" it, I'm buying a Honda and knew that it, like the last Honda I bought, will come with a full tank.

[Sheepshanks]

Garvin said:

If not, then it really is a st business.

Through work, I have a pretty good idea of how much it costs to actually manufacture a car. OK, there are lots of other costs involved but somewhere along the line, someone is taking the piss and, while I think we're certainly not getting the truth from dealers, they're not getting a good deal from the importers either.

The sales manager of the Honda dealer I'm buying off insists they're making a loss on the car they're selling me, which is clearly a ridiculous statement and he panicked when I said I'd walk away as it's no good to me if the dealership goes bust.

I just got back from the US and you've only got to look at the same cars for sale there to see, even after adjusting for tax and exchange rates, that we (that's buyers AND dealers) are being screwed by manufacturers and importers in the UK.

[n_const]

Sheepshanks said:

Cut & pasted Ffrom Honda price list:
"On The Road price
The recommended On The Road (OTR) price includes:
Delivery, number plates and a full tank of fuel £655
Vehicle first registration fee £55
First Year Rates of VED (12 months) See table on the right"

We're getting a second Jazz on Tuesday. It's discounted (although nothing like enough in my view) and I knew the OTR included fuel, but the salesman mentioned it (almost in passing) anyway.

We'll I apologise I never knew that. We've been selling Hondas for 12 months and not once have we filled the tank unless negotiated in the deal !!

[daemon]

Sheepshanks said:

It is remarkable how glass palace dealerships costing £3-5M or more can (mainly) survive when they're almost giving away their products.

They're not "giving away" their products, but they're working on waifer thin margins.

These glass palace showrooms are forced upon the franchise by the manufacturer. Its a case of "build this, or lose the franchise".

I know of several main dealers locally to me who declined when asked by the manufacturer / importer to build a shiny new showroom and let the brand go because they couldnt see any way to recoup the outlay.

Lets be honest, BMW arent going to let you sell their cars out of some bombsite car lot are they?

Edited by daemon on Sunday 31st August 13:13

[daemon]

Sheepshanks said:

Through work, I have a pretty good idea of how much it costs to actually manufacture a car. OK, there are lots of other costs involved but somewhere along the line, someone is taking the piss and, while I think we're certainly not getting the truth from dealers, they're not getting a good deal from the importers either.

The sales manager of the Honda dealer I'm buying off insists they're making a loss on the car they're selling me, which is clearly a ridiculous statement and he panicked when I said I'd walk away as it's no good to me if the dealership goes bust.

I think you're quite naive in terms of the costs of overheads thats a dealer has, and how that looks on a per car basis.

The very small percentages that Zwolf is quoting is in line with my experiences too, having worked in or around the motor trade for a very long time (sometimes full time, sometimes part time)

Also, i'd say your Honda dealer was using a little bit of smoke and mirrors, but probably taking a slight paper loss on each car, aiming to get to a higher bonus rate by the end of the quarter and make his money that way.

[Sheepshanks]

n_const said:

We'll I apologise I never knew that. We've been selling Hondas for 12 months and not once have we filled the tank unless negotiated in the deal !!

I'm amazed you've got away with it - Honda mandated this some time ago (quite a few years) due to customer complaints.

Your company has been defrauding its customers - you need to urgently contact all the customers you've sold new cars too and refund them the cost of a tank of fuel.

[Sheepshanks]

daemon said:

I think you're quite naive in terms of the costs of overheads thats a dealer has, and how that looks on a per car basis.

Would those costs be substantially lower in the US?

daemon said:

Also, i'd say your Honda dealer was using a little bit of smoke and mirrors, but probably taking a slight paper loss on each car, aiming to get to a higher bonus rate by the end of the quarter and make his money that way.

Of course. I understand how it works. In the world I work in, our distributors sell most things on "ship & debit" - they debit us for a rebate when they sell to the customer, so on the face of it everything is sold at a massive loss. In reality they're typically making 15-25% gross margin, depending on how much work they've done to win the order.

[Zwolf]

Sheepshanks said:

The sales manager of the Honda dealer I'm buying off insists they're making a loss on the car they're selling me, which is clearly a ridiculous statement.

Why is that ridiculous? We often make losses on new and used sales on an individual basis. Others make small profits, some make a good profit. So long as overall we achieve both the volume of units, turnover and average profit per retail unit, it's quite acceptable and standard business practice in automotive retail as any other.

Sometimes when you're a few units short of a target of several hundred in a quarter and you've a volume bonus of several thousand pounds due to you for reaching your target, you will do some deals that individually assessed, lose money, often a lot of it. Sales managers work on the department profitability overall (that's what they are paid on, not indivudual deals, that's the salespeople's remit). Sometimes you get a call from your manufacturer area manager a few days before month/quarter end dangling a carrot of £XXXXX if you achieve X amount over your target, so you are forced to do some silly deals that lose £XXXX on the face of it.

You'll have negotiated a deal that for whatever business reason is still viable for them to still accept into the bucket along with every other that month/quarter/year, nominal loss taken into account. Some other customers will have paid list price or closer to it. Or, they stand to make it back because in the deal you've given them a retailable first tier used car that will make a profit that justifies the loss on paper at day of handover.

So in practice, it's not a ridiculous claim and often very true. But put back into theoverall context of how a sales department runs, can make total sense. In a simlar way, supermarkets sell particular products at a loss - because of the overall effect that is later realised and/or prevents a customer buying from the competition at that point in time. Manufacturers don't particularly care if their franchisees make or lose money per deal (the franchise holder does that), but they care very much indeed about market share and target unit registrations and pay (or don't) volume bonuses accordingly for achieving them.

Missing your registration and/or market share objective could cost your business tens or even hundreds of thousands of pounds, so losing a few hundred on some of those deals isn't an issue if it gets you there. New car retained dealer margin for a volume franchise tends to run around 1-2%. Added to by F&I and paint protection etc, but "chassis profit" on new in most cases is basically non-existent, but a game that has to be played with the manufacturer. So long as just enough is made to keep opening the doors and churning out units, the manufacturer is happy. They make the same money on a new car sale whether we sell at car at MRRP, for a loss or anywhere in-between...

Sheepshanks said:

You need to urgently contact all the customers you've sold new cars too and refund them the cost of a tank of fuel.

Yes. This will definitely happen.

Sheepshanks said:

Of course. I understand how it works. In the world I work in, our distributors sell most things on "ship & debit" - they debit us for a rebate when they sell to the customer, so on the face of it everything is sold at a massive loss. In reality they're typically making 15-25% gross margin, depending on how much work they've done to win the order.

Ah, good. You do understand why it's not ridiculous to say they're making a loss on your deal then. They may still be, even with the related bonuses taken into account.

Although put a decimal point in the 15-25% bit for us, sadly. If we made ~20% per new car, I'd be earning somewhere in the £500k+ pa bracket. Which would be nice. Then I'd gladly accept that we're all robbing bar stewards.

Edited by Zwolf on Sunday 31st August 13:41

[Sheepshanks]

Zwolf said:

Why is that ridiculous?

Because, as you explained so eloquently, far from losing money, the car actually makes the dealer a lot (possibly a fairly enormous) amount of money.

Zwolf said:

Sheepshanks said:

You need to urgently contact all the customers you've sold new cars too and refund them the cost of a tank of fuel.

Yes. This will definitely happen.

Are you questioning the integrity of a car salesman? How very dare you!

TBH, I'm pretty amazed that no-one has noticed and kicked off about it, especially your typical new Honda buyer.

Edited by Sheepshanks on Sunday 31st August 13:55

[Sheepshanks]

Zwolf said:

Although put a decimal point in the 15-25% bit for us, sadly. If we made ~20% per new car, I'd be earning somewhere in the £500k+ pa bracket. Which would be nice. Then I'd gladly accept that we're all robbing bar stewards.

You need to have a word with Unrepentant.

We're all (dealers and customers) being raped in the UK.

[Zwolf]

Sheepshanks said:

Zwolf said:

Why is that ridiculous?

Because, as you explained so eloquently, far from losing money, the car actually makes the dealer a lot (possibly a fairly enormous) amount of money.

Individually, it didn't. But taken as part of the whole, it'll have played its role. As well as the ones that do make a profit at the point of sale.

Of course one doesn't tend to mention to those customers how much we're making on their deal, so the statement only arises with the harder/better negotiators.

Sheepshanks said:

Are you questioning the integrity of a car salesman? How very dare you!

Not of an individual, no. Of the industry in general, from experience - absolutely. A salesperson with integrity may well start filling up their new car customers' cars by way of recompense. Until it gets accounted for/picked up by management and they get the sack for unauthorised fuel expenditure.

Sheepshanks said:

TBH, I'm pretty amazed that no-one has noticed and kicked off about it, especially your typical new Honda buyer.

So am I actually. Goes to show how few people ever read the small print in brochures. That said, most of them fail to read the large print or get far beyond the pretty pictures, based on the questions they ask of salespeople after studying them "in depth".

Sheepshanks said:

You need to have a word with Unrepentant. We're all (dealers and customers) being raped in the UK.

Of that I'm well aware, having spent reasonable chunks of time across the water and looking into work and so on.

Edited by Zwolf on Sunday 31st August 14:01

[Buff Mchugelarge]

IanCress said:

Full tank £50, set of half decent mats £30. I'd say you were right to decline their offer. Just head to the nearest petrol station as soon as you're done.

It would be nice for them to stick £10 in, but it's money down the drain to them if they do.

Where I work we syhpon the fuel out of traded in cars and cars we've purchased and we always have enough fuel for the courtesy cars and we always make sure sold cars leave with at least 60 miles of fuel in them. It cost the fir,m nothing.

[unrepentant]

Sheepshanks said:

Zwolf said:

Although put a decimal point in the 15-25% bit for us, sadly. If we made ~20% per new car, I'd be earning somewhere in the £500k+ pa bracket. Which would be nice. Then I'd gladly accept that we're all robbing bar stewards.

You need to have a word with Unrepentant.

We're all (dealers and customers) being raped in the UK.

The margin calculations are different in the UK from here. Our front end gross is lower as a % than the UK so customers expectations for discounts are lower. You can go online and look up invoice but you can't see the full extent of "holdback" etc or whatever special rebates the manufacturers have. At the volume end of the business there is so much competition within each brand (we have 8 or so Ford and Chevy dealerships in the city) that they all end up selling close to or at "invoice" and make their margin on rebates and holdback.

I'm fortunate to be at the luxury end with products that are in high demand. I can therefore hold my gross much more easily (I haven't discounted a Land Rover for a very long time...) which is good for everyone. Sales people here get paid on gross and it's a straight calculation - the more you have to discount the less you make. It's also good for the customers if the cars are not being universally discounted - their residuals hold up much better and that also makes leases more competitive.

Remember - we have no VAT but sales tax (typically 7-8%) gets added to the sticker price of the car as well as "doc fees".

[daemon]

Sheepshanks said:

Zwolf said:

Although put a decimal point in the 15-25% bit for us, sadly. If we made ~20% per new car, I'd be earning somewhere in the £500k+ pa bracket. Which would be nice. Then I'd gladly accept that we're all robbing bar stewards.

You need to have a word with Unrepentant.

We're all (dealers and customers) being raped in the UK.

I think you're struggling with the concept of gross and net margin.

Net profit is extremely low on new cars.

[daemon]

unrepentant said:

The margin calculations are different in the UK from here. Our front end gross is lower as a % than the UK so customers expectations for discounts are lower. You can go online and look up invoice but you can't see the full extent of "holdback" etc or whatever special rebates the manufacturers have. At the volume end of the business there is so much competition within each brand (we have 8 or so Ford and Chevy dealerships in the city) that they all end up selling close to or at "invoice" and make their margin on rebates and holdback.

I'm fortunate to be at the luxury end with products that are in high demand. I can therefore hold my gross much more easily (I haven't discounted a Land Rover for a very long time...) which is good for everyone. Sales people here get paid on gross and it's a straight calculation - the more you have to discount the less you make. It's also good for the customers if the cars are not being universally discounted - their residuals hold up much better and that also makes leases more competitive.

Remember - we have no VAT but sales tax (typically 7-8%) gets added to the sticker price of the car as well as "doc fees".

So say on a 320i BMW with a list price of $32,750 (approx £19,500 in pounds sterling) and here with a list price of £26,565 here, by the time you take into account the higher discounts available here AND the 8% sales tax to be added AND the fact we pay 20% VAT in our prices, theres probably not a big hill of beans difference in the raw price?

£26,565 - 10% discount = approx £24,000.

£19,500 + 8% sales tax = approx £21,500.

The difference looks an awful lot like the 12% extra we are paying in VAT...

Edited by daemon on Sunday 31st August 15:34