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There are countless new and used car dealerships set up all across the country to sell you your next new or used car.
Now that you have your showroom stocked with the latest literature, banners, and give-aways (all of which you have to pay for through the Brand, by the way) you have to have a staff. Hidden costs from the manufacturer include anywhere from $500 to $1,500 per month just to access their portal to order vehicles, parts, record warranty information, report a sale, or anything dealing with a car from this manufacturer.
Now here is the Question for Saturday: How much do you think the dealer should make on each new or used car? Question of the Weekend: Independence Day, So Which Independent Car Brand Do You Wish Survived? If the dealer gives me some or all of that, it's worth a bit more than buying from a private owner. I'm more bothered by the dealership experience as a whole than I am about the actual prices they charge. Saturn made a dent twenty years ago, not because the cars were any good, but because of the buying experience.
I went to the Honda dealer today to get some free stuff done to the car and they had TWO free classic arcade consoles there. Car dealerships are a ridiculously outdated sales concept, like electronics stores or traditional department stores where the money necessary to keep the concern going forces up the price of the commodity far higher than other possible sales models. I foresee a decoupling of sales from service, and probably the slow replacement of dealers with direct sales, mostly online with home delivery. I love the replacement parts pricing… a fan control module for a Mitsubishi has an MSRP of $94. Back around 1970, a magazine priced out a $2,000 Ford Maverick if it was assembled from replacement parts ordered from Ford dealers. Oh yeah, I don't doubt that the individual parts are going to be that much going by their list prices.
I don't mean to pick on dealers in general, because they are not all bad, but a few rotten apples spoil the whole bunch. So get customers into a position where you can show them, honestly, how little you're making off of them because you want to play fair (by comparison) and earn repeat business. One way to get a factory price is buying a Volvo in the US (maybe Canada too, I don't know) using their overseas delivery program. I mention Volvo here because I have personal experience with their program (resulting in a V70R). The jovial guy who passes you off to F&I while the GM rips up your trade does not work when information is available to make smart buying decisions. Having worked at dealerships for the last decade I can say that the margins are actually not all that great, especially compared to other retail buisnesses.
In the parts end where I work on most parts the markup is roughly 50% on most parts (less than standard retail markup of 67%).
The funny part to me is how much time dealers will spend with you negotiating on a car, even when they know what their final number is. It does seem the larger the purchase price the more likely you are going to haggle on the price.
Dealerships probably are a relic from a bygone age, but i'm not sure that other systems would work very well either. Or maybe i'm just currently biased since the last car i bought was used, from a dealership and it went really well.
By the end of my short stint at Toyota, I brought up the Costco plan before we even went on a test drive. Dealers have so many avenues to put cash in the pockets of management that they will get theirs right up until they go out of business.
The Erie Sales Club is an education and networking resource for serious sales reps and sales managers in Northwestern PA. I recently purchased a new vehicle, so I got to experience the sales process of several local dealerships. Dealers have reasons to question the current trend for automobile dealerships to maintain customer loyalty programs.
The customers of dealerships like customer loyalty programs and feel they are very important. 1 – Consumers think a good loyalty program is one of the traits of a progressive dealership. 4 – Instead of being burdensome, a modern loyalty program for car dealership promotion is easier than ever to start-up and run. Dealers can be confident that a loyalty program for car dealership customers is a valuable marketing tool. There are per month fees to maintain the dealerships computer network, to connect to the respective states Motor Vehicle Department, to collect sales tax information, to initiate financial contracts, as well as fees for the regional advertising account, dealer council fees, and on and on and on. There is a lot of overhead when running a dealership, and some of the new cars are sold for little to no markup, just to get to the bonus level.
This is the free market and there is no guarantee of profit to the seller or of a good deal to the buyer. It certainly makes the shopping experience easier, and you can see the $2000-3000 of air in other dealerships prices.
The rise of internet sales managers is a gesture in a new direction, but still reliant on the dealership model and so still carrying much of the same premium. Test drives will be done at citywide test centers run by the marketing departments of the car companies. In some cities, due to zoning laws, the showroom floor is in the center of town while the service center is outside in an industrial area. The final cost (parts alone, not including putting the thing together) was close to $10,000.


My beef was with the fact that I suspect the MSRP had 100% of profit baked into it from the wholesale level.
If I want a car from a company that does not do business here (like a Tata Nano or Maruti 800), I should be free to import it and drive it. The website CarCostCanada up here says that a fair markup over invoice pricing and basic costs is 6%. The local Ford dealer in the town I used to live in was a good example of a crooked outfit. They're the very same, they just offload all the dirtbaggery onto the dealership so they can appear squeaky clean.
With the basic program, you go to your local dealer, ask to talk to the overseas delivery specialist (if they look at you like you're from another planet, move on to the next dealership). It really shouldn't take that long, and instead of hours in their tiny sales box, they could be out there snagging another customer. Sure, you could order from the manufacturer (you're paying for delivery to the dealership anyhow), but where would you test drive? The kind of salesman that most of our mothers would want to deal with usually doesn't make enough money to justify the odd hours and frustrations of the sales game.
We would get our commissions docked on used cars if it came back for something that was broken, even though there was money built into the deal to cover exactly that circumstance.
The biggest impression I was left with was the importance of professional presentation, not just by the individual salesperson, but by the company. I like your post and everything you share with us is current and very informative, I want to bookmark the page so I can return here from you that you have done a fantastic job .. They point to problems in the past with the operation of such programs, including complaints by customers.
In fact, they rate the presence of such programs in the top ten services they want their dealership to provide. A failure to have a proper program could result in the loss of a dealership’s most loyal customers. Modern loyalty programs do not use loyalty cards, which was one of the main complaints from dealers and customers in the past.
In fact, a good loyalty program is something the consumer with a smart-phone sees every day. Considering the ease with which these programs can start a progressive dealership should be eager to start.
There is a minimum level of Stocking you will have to undertake to keep said franchise, from the number of cars you keep on hand, to the number of parts you have to stock.
If you are not very bright and lack the ability to negotiate or are too lazy to do research when you go to buy a car then you deserve to get ripped off. We, as a society have, in this segment, gone to such great lengths to protect businesses from themselves that it's a positively anti-capitalist system. Sure, for now they've only sold 1600 cars worldwide, so only time will tell if this model works once (finger crossed) they start mass producing the upcoming model S.
So I took the free market into my own hands and contacted a dealership in Dallas who was willing to deliver it to my hands in two days for $85, including UPS ground shipping and sales tax.
The local dealers didn't feel that that was enough so they went and figured 200% over wholesale was fair enough.
Instead, I am stuck with whatever the government deems worthy for me to buy in our pseudo free market economy.
If Joe Businessman wants to open up a franchise business of ANY type, they have to abide by the regulations of the parent company. On new cars the margins are shockingly small from an average of about $100 dollars on a Versa up to a couple thousand on a loaded Denali.
As to the discrepancy on parts prices noted above very large dealers are able to purchase parts on truckload programs for cheaper prices than ordinary dealers who do not have the capital or space for such purchases. No guarantee that it's the lowest price you could get, but it was transparent and no-hassle.
Knock the dealers for every penny you can, but if you get a helpful salesman, by all means, tip him some of your savings.
The biggest contrast was between Bianchi Honda on Upper Peach Street and a dealership in Erie County that I'll call ABC to protect their identification.
The dealers also question if customer loyalty can actually be maintained with the use of such programs, or are they just a lot of work with few definite benefits. Here are the top five reasons why every car dealership needs a program to reward customer loyalty.
This constant exposure increases the probability of early return for service from a higher percentage of customers. In service, you are required to have a set number of service writers, the right quantity of mechanics, and they all have to be trained on the latest electronics. There are still ways of making money on new vehicles for the dealer, including Hold Backs, and Performance Bonus Plans, but you have to make your quota to realize any of this extra money.
After all, the dealer does not hold all the cards because you, the consumer still hold the ability to walk away.
If one car company starts to expand direct sales, it will immediately be able to undercut its competitors' prices by a significant percentage.
They did that me with the touch up paint pen too, MSRP $12 turned into $25 at the parts counter. In a perfect world, there would be a direct breakdown of build cost, and profit percentages, to put it into black and white in order to help sell cars. Of course these cars have to be floor plan financed by the dealer but there are financial incentives from the manufactuer for meeting sales targets. Service is one area where profit can be made, our labor rate which is on the low end for the area, is $99 an hour of which only about $30-35 goes to the tech.


They should try to get as much as they can for the car (and probably not operate at a loss), and I'm going to try to get it for as little as I can. These points can be redeemed in various ways, according to the plan agreed by dealership management. According to phone company statistics, nearly 50% of all adults use a smart-phone every day. Other costs include all those pretty brochures (they are no longer free from the manufacturer), posters, banners, and such for sales. You really don’t know what they paid for a used car, and they can sell it at or over Kelly Blue Book (as an example).
In the end then, it is a battle of wits and the best deal goes to the one who negotiates the best. Other things like design and brand status being equal, the competitive advantage will force other companies to follow suit or die off.
I don't feel a bit sorry for dealers and their business woes, because we all know someone that has been screwed over by a car dealer.
Used cars are much more lucrative as dealers are able to get these cars through special auctions for low prices. For service, all those repair manuals (even though they are on CD or DVD now), special tooling, training manuals, handbooks, and service literature also add up as far as costs. If the dealer fails to make a profit off my sale well then that's his problem-not mine. How cool would it be to be able to drive a car built with no regulations that costs less than $5,000? I think they should be bound by a certain profit margin, and the pricing should be cut and dry with none of the b.s. Computers, which big-box retailers say you can't actually make any money on, and have to rely on the up-sell of cables, paper, printers, software, is usually marked up between 5 and 10%.
Made no money, but got them in and out quickly, and they were pleased as punch with the process. I couldn't find any indoor shots online -- this was the best I could do -- but the showroom was spacious, bright, and clean. Mobile apps for customer management of various loyalty programs are one of the fastest growing areas of smart-phone app software production. When we told them we had priced them where we couldn't discount the cars anymore, they left.
When my wife and I met with veteran sales rep Bill Donor (pictured above) at his desk, we all sat in comfortable chairs and had room to move around if necessary. They were perfectly fine with paying more at another dealership, because they had priced them up a few thousand dollars, and then discounted it a few hundred, just because they FELT like they had received a better deal because they had haggled for it. Once your car is built, Volvo flies you and one other person, for free, to Sweden to pick up and drive your car. Oh, I didn't mention the best part of the buying process: the lounge in Bianchi's service department offers FREE Oreo cookies! You can drive it as little as you want (first night of hotel is free) or as much as six months across Europe. They didn't just have a couple sitting on a styrofoam plate; there's a plastic case on the counter filled with what had to be 100-150 Oreos. The downside is that you don't get the instant gratification of the single day buying experience. You couldn't help but feel confidence in their organization after spending half an hour there.The ABC dealership was a complete contrast. The showroom, which looked like it hadn't been updated since Reagan was President, was stuffed with vehicles -- so many that you felt cramped just being inside the building. A couple unused cubicles had collected assorted junk -- promotional signs, manuals, dirty car parts, etc.
On a bookshelf in one cubicle was a CD that someone had labeled "The Best of Christmas and Crazy Sh*t." When we met with the sales rep, his cubicle measured maybe 6 feet wide by 6 feet long.
And instead of sitting at a professional desk, he was crammed behind a secretary's desk like this one. His wall was decorated with several "Salesperson of the Month" award plaques, but none of them were recent.
While my wife and I were hanging out waiting for someone to look at my truck I was planning to trade in, I asked our rep and another about the award plaques. Now we just get our paychecks and they want us to be happy with just that."Back to Bianchi. I purchased my car in March and had some extras added to the vehicle the first week of April.
While waiting at the service area (and stuffing Oreos into my mouth), I noticed a memo from Bianchi owner Lou Porreco on a staff member's desk. Porreco was congratulating his team on setting an all-time sales record for March and announcing that every Bianchi employee would be treated to a on-site catered lunch.
If a friend asks me about my car-buying experience, I'll be sure to mention Bianchi's professional presentation and how they worked to make everyone who stepped onto their property feel like a valued customer. And I'll let my friend know that even if they're not interested in a Honda, they should at least stop by for the cookies!-- Jim Roddy, President, Jameson PublishingThe Erie Sales Club is a joint effort of three leading local businesses: Jameson Publishing, Marsha Marsh Real Estate Services, and VertMarkets.



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