Ask a car salesman anything...anything at all (Vol. 2).

Ask a car salesman anything...anything at all (Vol. 2).

Author
Discussion

robsco

7,111 posts

141 months

Tuesday 23rd March
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911pleb said:
I guess this is a margin and haggling question.

There was I car I rather liked for sale privately on AT. For reasons that are unimportant, the car sold before I was in a position to buy it.

Thing is, its now popped up at a dealership (main brand, not indy) with an huge markup on it.

I hear dealers all over the place, including this thread saying that the margins are super tight and they barely have £300 to play with, yet this car was up for 27.5k and the dealer is now advertising it at 35k.

I assume the dealer probably paid less than 27.5k for it, so the margin is likely around 9-10k.

Thats just plain cheeky imo. 1500-2000 maybe I could stomach, but 10k!?

Knowing these figures, im obviously reluctant to pay 35k for it. How should I approach the dealer in this case? Of course I have more 'protection' than I would a private sale, but 10k worth? No way.

Its also the most expensive car on AT at the moment too, so its overpriced imo regardless.

I guess they can always wait for someone who didn't see the original advert to come along and tell me to do one, but I really want it.

Thoughts?
What’s the car?

You pay 20% VAT on the gross margin (before costs not after). Then you pay to prepare the car by way of service, MOT, cosmetics, tyres. Then you pay a warranty company to cover it. You may discount the car a little. Then you pay a salesman a commission. Then you have to pay everybody’s wages and pay for the big building you’re operating from. And all just in time to pay tax on the profits!

911pleb

305 posts

26 months

Tuesday 23rd March
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Its a boxster.

I guess I'm just bitter that I missed it.

Fast Bug

9,319 posts

126 months

Tuesday 23rd March
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A big chunk of that margin can very quickly get eaten up preparing a Boxster for sale

robsco

7,111 posts

141 months

Tuesday 23rd March
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Definitely, a service can easily run into £6-700, plus a couple of tyres and some small cosmetic works, you’re already into £1000. A lot of dealers trawl private sales to buy cars for stock these days. You don’t pay an auction house extortionate fees, and if the car isn’t right on arrival, you just turn back and get the train back home.

papa3

1,241 posts

152 months

Tuesday 23rd March
quotequote all
911pleb said:
I guess this is a margin and haggling question.

There was I car I rather liked for sale privately on AT. For reasons that are unimportant, the car sold before I was in a position to buy it.

Thing is, its now popped up at a dealership (main brand, not indy) with an huge markup on it.

I hear dealers all over the place, including this thread saying that the margins are super tight and they barely have £300 to play with, yet this car was up for 27.5k and the dealer is now advertising it at 35k.

I assume the dealer probably paid less than 27.5k for it, so the margin is likely around 9-10k.

Thats just plain cheeky imo. 1500-2000 maybe I could stomach, but 10k!?

Knowing these figures, im obviously reluctant to pay 35k for it. How should I approach the dealer in this case? Of course I have more 'protection' than I would a private sale, but 10k worth? No way.

Its also the most expensive car on AT at the moment too, so its overpriced imo regardless.

I guess they can always wait for someone who didn't see the original advert to come along and tell me to do one, but I really want it.

Thoughts?
The likelihood is the dealer paid close to asking, knowing what price the car could realise. Lets call it £27,000. Asking price £35,000 gives a gross margin of. £8,000

The VAT man likes his cut and operates a margin scheme for car dealers. Margin now £6,666.

Main dealer will have a warranty to supply. On something from Porsche this will cost £700-1000. For the sake of lazy maths margin left £6,000.

Workshop prep. Even the cleanest car in a main dealer workshop will cost £300-500 for pre sales. Add in a service and 2 tyres on a Porsche, that becomes £1000. Margin left £5,000. Hope it doesn't need discs and pads.

Discount/over allowance. Even when playing hard nosed, most deals will end up with a discount or gesture to close a deal. Margin remaining £4,500.

Sales Exec commission. I'm not familiar with Porsche but call it £250, this is a bit of a guess. Margin left £4,250

Valet cost. Again, not based on Porsche experience. £150 to allow for a valet plus re clean. Margin left £4,100.

Stocking charges. Many dealers use stocking lines (like a big overdraft) to fund the stock and improve cashflow. Assuming a fast turn £250 list and remove with a bit if interest. £3,850 Margin left.

Advertising cost. Generally budgeted at £100-150 per car (volume site, not Porsche) £3,700 left.

Those are the broad stroke direct costs. Then there is the overhead.

Sales exec, Sales Admin, Reception, Sales Manager, Dealer Principal and Accountant all need paid.

Rent/Mortgage, rates, heat and light, systems, subscriptions, training, insurance, fuel, good will, legal fees.

What about liability? You say you don't see £10k of value in the protection of buying from a dealer? What if it's a dud? In a Private sale you are fked. Literally zero protection. From a dealer you have the deck stacked in your favour. 12 months warranty is largely standard for approved used car schemes and that's before you consider the statutory rights granted by CCA, CCR et al. That protection could be worth your entire spend.

You also have a building full of highly (expensively) trained techs, on demand parts supply and all the tools and diagnostic equipment needed to maintain your chosen vehicle.

That building by the way cost A LOT to build and the guy who paid for it would like a few £££ back.

And finally, the vast majority of cars sold DO NOT have an £8,000 mark up.

Ultimately what the dealer paid doesn't come into the equation. He paid for an asset and you get to decide if it warrants, to you, the price he is asking.

For a comparison a franchised dealer at the top of his game will make 2% net. Most make 1% and plenty don't even do that. Have a think about the margin Tesco lift from you on a loaf of bread, then complain about the dealer.





911pleb

305 posts

26 months

Wednesday 24th March
quotequote all
Thank you for that very thorough run down.

I get it, but I still can't bring myself to accept having to pay 25% more than I could have done for the same car 3 days ago.

Maybe I'm cutting off my nose to spite my face. But if I bought
it now, Id just feel like I'd overpaid massively the whole time I'd own it which would ruin it for me.

Also, as I said, its already 2.5k more than the next most expensive one so regardless of knowing what I know now, they're still asking too much imo.

Super_G

848 posts

63 months

Wednesday 24th March
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1. Why are used car prices still high?
2. What is more reliable: CAP or BCA?
3. When are used car prices likely to come down?

cuprabob

9,847 posts

179 months

Wednesday 24th March
quotequote all
Super_G said:
1. Why are used car prices still high?
2. What is more reliable: CAP or BCA?
3. When are used car prices likely to come down?
3. Just after you buy one smile

Eyersey1234

2,237 posts

44 months

Saturday 3rd April
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A question for anyone that was selling new cars in the late 1980s. I found a Ford training video on YouTube dating from the late 80s and in it they said their target was to sell 30 Sierras. Did any of the manufacturers specifically say your target is to sell 30 of this model, 20 of that model etc or did they just say your target is to sell 100 cars this month?

The Rotrex Kid

24,020 posts

125 months

Saturday 3rd April
quotequote all
Eyersey1234 said:
A question for anyone that was selling new cars in the late 1980s. I found a Ford training video on YouTube dating from the late 80s and in it they said their target was to sell 30 Sierras. Did any of the manufacturers specifically say your target is to sell 30 of this model, 20 of that model etc or did they just say your target is to sell 100 cars this month?
We have a mix target sometimes, so we’re expected to sell X% of Y models but mostly it’s a number to hit.

Fast Bug

9,319 posts

126 months

Saturday 3rd April
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I have a model mix target, if I hit it I earn an additional bonus

resolve10

266 posts

10 months

Saturday 3rd April
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Currently going through the application process with a main dealer group (German manufacturer). I was surprised to learn that a unit sold is a unit sold, no incentive based on value or 'clearing the decks' of a certain model.

The Rotrex Kid

24,020 posts

125 months

Saturday 3rd April
quotequote all
resolve10 said:
Currently going through the application process with a main dealer group (German manufacturer). I was surprised to learn that a unit sold is a unit sold, no incentive based on value or 'clearing the decks' of a certain model.
Good luck!

It’s normally the way, hence why some dealers don’t get hyped up or bothered about selling Halo models which can attract, er, interesting folk!


Eyersey1234

2,237 posts

44 months

Saturday 3rd April
quotequote all
The Rotrex Kid said:
We have a mix target sometimes, so we’re expected to sell X% of Y models but mostly it’s a number to hit.
Thanks, I just wondered how accurate the video was, I know some of it will have been played up for effect.

gl20

897 posts

114 months

Sunday 4th April
quotequote all
911pleb said:
Thank you for that very thorough run down.

I get it, but I still can't bring myself to accept having to pay 25% more than I could have done for the same car 3 days ago.

Maybe I'm cutting off my nose to spite my face. But if I bought
it now, Id just feel like I'd overpaid massively the whole time I'd own it which would ruin it for me.

Also, as I said, its already 2.5k more than the next most expensive one so regardless of knowing what I know now, they're still asking too much imo.
I’ve probably missed the boat on this particular question but have bought and sold two Boxsters to an OPC so thought I’d comment. Firstly, the margin you describe isn’t unusual for Porsche. I was a little shocked the first time I sold a Boxster back to the OPC for £22k to see it for sale for £28k but that’s how it is with them. So £6k not £8k, but it was on a lower value car than what you’re looking at.

Papa3 provides a lot of good detail but one bit to add/refine is on prep. The level of prep follows strict guidelines at Porsche and depends on age, but they are really thorough. To give you a couple of examples:
- first boxster - only just in when I went to look at it. Dealer pointed out they’d be replacing dashboard panels due to one tiny scratch I’d not noticed.
- second boxster - we thought there was a bit of swirling on the front lid. Without asking the dealer did a front end respray to rectify.

Of course you may feel this is OTT and therefore frustrated that this sort of prep jacks up the cost unnecessarily from your perspective. But that’s how they roll. On the last one I bought for an advertised £48k we got about £2-3k discount. Not on the price (they hate doing that) but in An overinflated PEx - £24k for my BMW that was then advertised by a franchised dealer for £25.5k.

Drawweight

1,555 posts

81 months

Sunday 4th April
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This has probably been asked a lot before but it’s about commission.

I’ve just bought a Fiesta from Arnold Clark for £15k

We were looked after by a very nice lady and my wife and I were idly wondering how much she would have made on that car?

Difficult to judge different companies of course but can you make an informed guess?

Is the commission usually per unit sold, a percentage of the sale price or a percentage of the sale/less trade in ie profit to the company?

Anonymous-poster

12,068 posts

171 months

Sunday 4th April
quotequote all
Drawweight said:
This has probably been asked a lot before but it’s about commission.

I’ve just bought a Fiesta from Arnold Clark for £15k

We were looked after by a very nice lady and my wife and I were idly wondering how much she would have made on that car?

Difficult to judge different companies of course but can you make an informed guess?

Is the commission usually per unit sold, a percentage of the sale price or a percentage of the sale/less trade in ie profit to the company?
It would depend on various things especially did you take finance, GAP, paint protection etc.

The Rotrex Kid

24,020 posts

125 months

Sunday 4th April
quotequote all
It varies massively from company to company. Some places get a fixed fee, others a % of profit, some both!

Anywhere from £20-£200 probably depending on their scheme/how they’re performing etc.

AC are supposedly one of the worst payers on commission so not a huge amount of money likely

nickfrog

14,118 posts

182 months

Sunday 4th April
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robsco said:
Then you pay a warranty company to cover it.
That's normally only £12.56 though wink

Toyoda

1,345 posts

65 months

Friday 16th April
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How's this week been then?!