Buying a Vantage privately
Discussion
I completely understand why dealers versus private prices differ so much.
However, I am considering changing my 2006 Vantage and noticed a nice replacement at an AM dealers.
I filled out the part exchange form and they came back with a price £8-10k lower than what I would consider market value.
Now, based on the great information Simon provided, this ties in with the costs associated with taking in part ex.
However, this didn't stop me being completed offended by the offer and not even bothering pursuing a part ex with the dealers in question.
Therefore, my only option would be to sell private and then buy whatever I want (Still making my mind up on best way to go).
So, as much as the costs involved are understood, its still a bitter pill to swallow when you get offered a very low price on your pride and joy.
However, I am considering changing my 2006 Vantage and noticed a nice replacement at an AM dealers.
I filled out the part exchange form and they came back with a price £8-10k lower than what I would consider market value.
Now, based on the great information Simon provided, this ties in with the costs associated with taking in part ex.
However, this didn't stop me being completed offended by the offer and not even bothering pursuing a part ex with the dealers in question.
Therefore, my only option would be to sell private and then buy whatever I want (Still making my mind up on best way to go).
So, as much as the costs involved are understood, its still a bitter pill to swallow when you get offered a very low price on your pride and joy.
leerandle said:
I completely understand why dealers versus private prices differ so much.
However, I am considering changing my 2006 Vantage and noticed a nice replacement at an AM dealers.
I filled out the part exchange form and they came back with a price £8-10k lower than what I would consider market value.
Now, based on the great information Simon provided, this ties in with the costs associated with taking in part ex.
However, this didn't stop me being completed offended by the offer and not even bothering pursuing a part ex with the dealers in question.
Therefore, my only option would be to sell private and then buy whatever I want (Still making my mind up on best way to go).
So, as much as the costs involved are understood, its still a bitter pill to swallow when you get offered a very low price on your pride and joy.
I'd suggest lifting the phone to them and seeing if there might be some middle ground? I'd like to think they would be on the phone to you doing just that, but if its a car you want to buy, worth exploring. There is usually a happy medium if both parties are willing to compromise.However, I am considering changing my 2006 Vantage and noticed a nice replacement at an AM dealers.
I filled out the part exchange form and they came back with a price £8-10k lower than what I would consider market value.
Now, based on the great information Simon provided, this ties in with the costs associated with taking in part ex.
However, this didn't stop me being completed offended by the offer and not even bothering pursuing a part ex with the dealers in question.
Therefore, my only option would be to sell private and then buy whatever I want (Still making my mind up on best way to go).
So, as much as the costs involved are understood, its still a bitter pill to swallow when you get offered a very low price on your pride and joy.
Simon Lane said:
I'd suggest lifting the phone to them and seeing if there might be some middle ground? I'd like to think they would be on the phone to you doing just that, but if its a car you want to buy, worth exploring. There is usually a happy medium if both parties are willing to compromise.
Simon, you are probably right, but I'm happy sulking for a little while and will then consider giving them a call...................I don't want to give to much away, but the valuation gives 2 quotes, 1 'showroom' and then other 'average', so they are already kinda giving you their 'top' valuation. I personally don't think its a very good way to do business, but others might.
Combine that with the fact that AM very rarely reduce the sale price and it feels like your getting a raw deal at both ends (Although i know you can negotiate future services, parts, jobs etc)
The economics from Simon are very clear, and make a lot of sense. He (like all legitimate businesses) need to have a margin on any bought in goods (part-ex cars) when putting them to market.
From my limited experience, once a garage part-ex's a car they either push them out to auction (and hope to achieve broadly what they paid for them - i.e. CAP) or they put them on the forecourt with an undisclosed margin.
Interesting that Simon built up the economic picture by stating VAT as the first slice of the pie to justify a £10k delta from part'ex to forecourt. As the VAT is a 20% tax on the value add (hence the name), the build up would be:
As a thought experiment - Simon Lane Would you be interesting in a customer paying say £200 for a "pre-part'ex inspection" in the workshop? That would reduce the risk to you in the 'make good' element. If nothing comes up in the pre-part'ex inspection then as a dealer you'd have a reduced risk on buying the car, so can offer more for it for a given sticker price. Similarly if a major issue arises then everyone goes in with their eyes wide open.
When buying a car privately most of the PH'ers seem to suggest getting an independent inspection done, so whilst not independent the pre-part'ex inspection could be good for both parties.
Thoughts?
From my limited experience, once a garage part-ex's a car they either push them out to auction (and hope to achieve broadly what they paid for them - i.e. CAP) or they put them on the forecourt with an undisclosed margin.
Interesting that Simon built up the economic picture by stating VAT as the first slice of the pie to justify a £10k delta from part'ex to forecourt. As the VAT is a 20% tax on the value add (hence the name), the build up would be:
| Min | Average | Notes |
|---|---|---|
| £500 | £500 | Inspection |
| £0 | £2700 | Make good |
| £2000 | £2000 | Warranty |
| £2000 | £2000 | Margin - pays for forecourt, reception, coffee and something for the Sales team |
| £4500 | £7200 | Subtotal (ex VAT) |
| £900 | £1440 | +VAT @ 20% of subtotal |
| £5400 | £7800 | Delta between part-ex and forecourt |
As a thought experiment - Simon Lane Would you be interesting in a customer paying say £200 for a "pre-part'ex inspection" in the workshop? That would reduce the risk to you in the 'make good' element. If nothing comes up in the pre-part'ex inspection then as a dealer you'd have a reduced risk on buying the car, so can offer more for it for a given sticker price. Similarly if a major issue arises then everyone goes in with their eyes wide open.
When buying a car privately most of the PH'ers seem to suggest getting an independent inspection done, so whilst not independent the pre-part'ex inspection could be good for both parties.
Thoughts?
malcolmbinns said:
The economics from Simon are very clear, and make a lot of sense. He (like all legitimate businesses) need to have a margin on any bought in goods (part-ex cars) when putting them to market.
From my limited experience, once a garage part-ex's a car they either push them out to auction (and hope to achieve broadly what they paid for them - i.e. CAP) or they put them on the forecourt with an undisclosed margin.
Interesting that Simon built up the economic picture by stating VAT as the first slice of the pie to justify a £10k delta from part'ex to forecourt. As the VAT is a 20% tax on the value add (hence the name), the build up would be:
As a thought experiment - Simon Lane Would you be interesting in a customer paying say £200 for a "pre-part'ex inspection" in the workshop? That would reduce the risk to you in the 'make good' element. If nothing comes up in the pre-part'ex inspection then as a dealer you'd have a reduced risk on buying the car, so can offer more for it for a given sticker price. Similarly if a major issue arises then everyone goes in with their eyes wide open.
When buying a car privately most of the PH'ers seem to suggest getting an independent inspection done, so whilst not independent the pre-part'ex inspection could be good for both parties.
Thoughts?
Hi Malcolm,From my limited experience, once a garage part-ex's a car they either push them out to auction (and hope to achieve broadly what they paid for them - i.e. CAP) or they put them on the forecourt with an undisclosed margin.
Interesting that Simon built up the economic picture by stating VAT as the first slice of the pie to justify a £10k delta from part'ex to forecourt. As the VAT is a 20% tax on the value add (hence the name), the build up would be:
| Min | Average | Notes |
|---|---|---|
| £500 | £500 | Inspection |
| £0 | £2700 | Make good |
| £2000 | £2000 | Warranty |
| £2000 | £2000 | Margin - pays for forecourt, reception, coffee and something for the Sales team |
| £4500 | £7200 | Subtotal (ex VAT) |
| £900 | £1440 | +VAT @ 20% of subtotal |
| £5400 | £7800 | Delta between part-ex and forecourt |
As a thought experiment - Simon Lane Would you be interesting in a customer paying say £200 for a "pre-part'ex inspection" in the workshop? That would reduce the risk to you in the 'make good' element. If nothing comes up in the pre-part'ex inspection then as a dealer you'd have a reduced risk on buying the car, so can offer more for it for a given sticker price. Similarly if a major issue arises then everyone goes in with their eyes wide open.
When buying a car privately most of the PH'ers seem to suggest getting an independent inspection done, so whilst not independent the pre-part'ex inspection could be good for both parties.
Thoughts?
We pay VAT on the gross margin i.e. the difference between purchase and sale price, so it is the first cost we take into account.
Good suggestion on px checks. We already try wherever possible (and at no cost) to check part exchanges in our workshop to get an accurate forecast of refurb costs when pricing them. If it’s not possible to do this (eg. a distance sale) then we will obtain a detailed description from the owner along with images to value the car. The £2,700 I quoted was the average spend across every used Aston Martin we retailed in 2017. Some cars require £0 spend but these are usually low mileage ex demos. I have yet to see a 2+ year old car that did not need some form of expenditure in order to pass Timeless. As a general rule, the older/higher mileage the car is, the higher the preparation costs are. We have to take all this into account when pricing a part exchange. Each car is treated in its own right, the £10k I used was just an example, sometimes the margin is bigger, sometimes smaller depending on accurate prep costs. Ultimately we want to do deals and sell cars. If we can make a deal make financial sense, even if it feels a bit uncomfortable we will try and do it to keep our money moving and buy fresh stock.
The other factor that affects our decision on margin is the working capital invested. In our case, as with most large dealer groups, we have to work within a strict working capital allowance. There is not a bottomless pit of money. The return on investment on a £200k car needs to be more than a £50k car. The financial risk on high value cars is also greater if the market goes backwards and it’s easy to get it wrong & take a big pill (GT8 anyone?!).
Apologies if this all seems a bit cold & hard but we are all in business to make money. I love the AM brand, the cars, people and social scene. But ultimately my existence as DP depends on my ability to turn a profit. A good performing franchised car dealership will make around 2% Return on Sales. The best return I have ever seen (a well known German sports car franchise) has achieved 4%. I’d wager most folks on here work in businesses with much higher returns than that. It really is knifedge stuff, easy to get wrong and lose a lot money. For this reason most small owner/driver businesses have disappeared and been bought by the large dealer groups with the economy of scale to make them work. Hope this sheds some light on the black art of motor retail. I’m firmly of the opinion that a transparent approach is the way to go in business. S
Thanks Simon.
I struggle to find it in my soul to feel pity for a motor dealer
, but a 2% RoS is tight for any business. Take care!
Agree on the transparency - better to deal with the whole economics of buying a car in a clear language so both parties can make considered decisions. I'm sure for most on here an AM is the second biggest purchases they make, so it needs to be without feeling any "buyers remorse".
Surprised that you'd do a distance part-ex without significant risk premium (i.e. heavily discounted purchase), given the variability in quality of part'ex vehicles, but as you say you "want to do deals and sell cars".
I struggle to find it in my soul to feel pity for a motor dealer
, but a 2% RoS is tight for any business. Take care!Agree on the transparency - better to deal with the whole economics of buying a car in a clear language so both parties can make considered decisions. I'm sure for most on here an AM is the second biggest purchases they make, so it needs to be without feeling any "buyers remorse".
Surprised that you'd do a distance part-ex without significant risk premium (i.e. heavily discounted purchase), given the variability in quality of part'ex vehicles, but as you say you "want to do deals and sell cars".
Not sure if someone has asked this but.....
Does the dealer not claim the VAT back on any costs?
Also, I think I'm right saying that they will pay the VAT on the profit made so if you sell a car with a margin of (made up for simple calcs) £120 the dealer in fact only makes £100?
I may have missed this in the explainations in this thread?
Does the dealer not claim the VAT back on any costs?
Also, I think I'm right saying that they will pay the VAT on the profit made so if you sell a car with a margin of (made up for simple calcs) £120 the dealer in fact only makes £100?
I may have missed this in the explainations in this thread?
shortlad said:
Not sure if someone has asked this but.....
Does the dealer not claim the VAT back on any costs?
Also, I think I'm right saying that they will pay the VAT on the profit made so if you sell a car with a margin of (made up for simple calcs) £120 the dealer in fact only makes £100?
I may have missed this in the explainations in this thread?
We pay VAT on the gross margin i.e. difference between purchase and sale price. All other costs are ex VAT. Warranty cost has no VAT as its an insurance product so it has Insurance Premium Tax which we can't claim back. All other example costs I quoted above were ex VAT. Hope that helps, doing my best to avoid industry jargon!Does the dealer not claim the VAT back on any costs?
Also, I think I'm right saying that they will pay the VAT on the profit made so if you sell a car with a margin of (made up for simple calcs) £120 the dealer in fact only makes £100?
I may have missed this in the explainations in this thread?
malcolmbinns said:
Thanks Simon.
I'm sure for most on here an AM is the second biggest purchases they make, so it needs to be without feeling any "buyers remorse".
We are acutely aware of this and do all we can to make the experience special. No one gets it right every time, but our customer satisfaction survey stats are pretty good. We finished 2017 as global No. 1 for customer service in aftersales. Hoping we can get our sales department into a similar position this year.
Surprised that you'd do a distance part-ex without significant risk premium (i.e. heavily discounted purchase), given the variability in quality of part'ex vehicles, but as you say you "want to do deals and sell cars".
Around 50% of our used car stock is sold outside our local area. Buyers will travel a long way to buy the right car, with the right spec at the right price. I'm sure this is the same for most other dealers. We have to be fair with part exchange values, acknowledging that in most cases, neither party has physically seen the car they are buying. If a px arrives and is not as it was described, then we would need to revalue it. I can't remember this ever happening in the 4 years I've been here, but I think thats because Aston Martin attracts nice people. In a previous life with Porsche, I had everything from a demo car lent out on 24 hour test drive being used as a getaway vehicle in a ram raid, to a p/x we had previously appraised undamaged parked up tight against a wall on handover day in an effort to conceal the remodeled passenger side that now required a new door. Obvs there are some nice Porsche customers too I'm sure for most on here an AM is the second biggest purchases they make, so it needs to be without feeling any "buyers remorse".
We are acutely aware of this and do all we can to make the experience special. No one gets it right every time, but our customer satisfaction survey stats are pretty good. We finished 2017 as global No. 1 for customer service in aftersales. Hoping we can get our sales department into a similar position this year.
Surprised that you'd do a distance part-ex without significant risk premium (i.e. heavily discounted purchase), given the variability in quality of part'ex vehicles, but as you say you "want to do deals and sell cars".
It's interesting to hear the on going costs associated with running a dealership but...
Of the costs you link with facturing in re-sale of the trade in car VAT works both ways and you surely save VAT in other areas?
Similarly the warranty aspect isn't actually a cost (barring the cost of the paper it's written on) until someone claims on that warranty.
Of the costs you link with facturing in re-sale of the trade in car VAT works both ways and you surely save VAT in other areas?
Similarly the warranty aspect isn't actually a cost (barring the cost of the paper it's written on) until someone claims on that warranty.
Mansfield said:
It's interesting to hear the on going costs associated with running a dealership but...
Of the costs you link with facturing in re-sale of the trade in car VAT works both ways and you surely save VAT in other areas?
Similarly the warranty aspect isn't actually a cost (barring the cost of the paper it's written on) until someone claims on that warranty.
I expect the warranty is an insurance policy (hence Simon's reference to Insurance Premium Tax above), and will not be underwritten by Jardines (or any other motor dealer).Of the costs you link with facturing in re-sale of the trade in car VAT works both ways and you surely save VAT in other areas?
Similarly the warranty aspect isn't actually a cost (barring the cost of the paper it's written on) until someone claims on that warranty.
malcolmbinns said:
I expect the warranty is an insurance policy (hence Simon's reference to Insurance Premium Tax above), and will not be underwritten by Jardines (or any other motor dealer).
Correct on the warranty, the AM extended warranty is an insurance backed warranty, as most warranties are. We purchase the warranty and include it in the sale price.With regards to VAT I see where you are coming from, yes we can claim VAT back on items we purchase as a business. Equally we have to pay VAT on items we sell. We can’t invoice a paying customer for a new car which includes VAT and then decide not to hand it over to the Inland Revenue. Similarly, although you won’t see VAT on the invoice,l for a used car (unless it is VAT qualifying eg. an ex-demo that has only been used for businesses purposes) there is VAT payable to the Inland Revenue on our gross margin. We have to hand over that 20% chunk, we can’t subsequently claim it back. Hopefully that makes sense. Not easy explaining all this on an iPhone keyboard!
ds666 said:
Isn't there a margin on the warranty too ?
I'm sure there is some profit to be made in the selling of the insurance product (i.e. a commission), and the insurer will want to make a profit across the portfolio of all warranties sold. Everyone has to make a living!I know that the warranty company on my current car (2 year policy) paid out more in year one than I purchased the policy for, but I'm sure that overall they've done well.
M
It's interesting to see your comments/insight Simon. Whilst I usually (but not always) end up buying privately, I have no issue with dealers charging more - they're offering a service and peace of mind. There still seem to be a few posts trying to scrutinise/challenge the model to a level that I suspect most people wouldn't enjoy if the shoe were on the other foot; businesses are there to make money!
Hi Simon
I am a Porsche driver , bought the Panamera turbo from the “shop” next to you .
After many issues , I wish I had gone for the rapide from you !!
I know I would have had a few issues with a rapide , but I know your guys would have dealt with the issues efficiently ( as you have with my Aston’s )
It’s amazing how the customer service is like chalk and cheese between the two brands.
Pity you didn’t have that GT 8 when I got the Porsche :-)
I am a Porsche driver , bought the Panamera turbo from the “shop” next to you .
After many issues , I wish I had gone for the rapide from you !!
I know I would have had a few issues with a rapide , but I know your guys would have dealt with the issues efficiently ( as you have with my Aston’s )
It’s amazing how the customer service is like chalk and cheese between the two brands.
Pity you didn’t have that GT 8 when I got the Porsche :-)
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