Forum menu
Hmmm, sorry but I believe there's a reasonable markup on new cars.
Dealers are prepared to drop their prices significantly all the time. You don't get large knock downs on low sale goods with tights margins.
Dealers make their money in three ways:
1. Margin on the car (normally 2% for a basic model)
2. kick backs from the manufacturer for hitting targets
3. Aftersales, service, parts, etc
The kick backs can be quite large, so if a dealer only needs to sell two models to benefit from a 5% bonus, he might well discount the next two cars and sell at a loss to hit the target and make the months / quarter's numbers.
Quite often the manufacturer will offer discounts to dealers to shift stock, so if you haggle and get 10% off, most likely there is a promotion on and the dealer is also getting 10% off the price pay for their model.
NB My wife manages franchised dealers for car manufacturers for a job. She says no one would chose being a dealer; you'd make a better return putting the money is a savings account. It's a very tough business now as over supply and competition have killed all the profit in the retail side.
[i]NB My wife manages franchised dealers for car manufacturers for a job. She says no one would chose being a dealer; you'd make a better return putting the money is a savings account. It's a very tough business now as over supply and competition have killed all the profit in the retail side. [/i]
But like most things, it depends on how (well) the manufacturer controls supply.
We've just bought a (nearly) new LR, we'd have bought a new one but the earliest we could get what my wife wanted (auto and black) was December so no real discounts on offer - but some incentives on new (£1000 for your deposit).
Fiat only make 1 car with a list price margin over 10%.
But in reality I suppose its where you hide the development costs. The RangeRover Sport is a massively over priced parts bin special where the development could be hidden but I am sure its nowhere near 300%.
Tbh, knowing how my costs have gone up I imagine most manufactures are finding their margins getting far smaller
[quoteNB My wife manages franchised dealers for car manufacturers for a job. She says no one would chose being a dealer; you'd make a better return putting the money is a savings account. It's a very tough business now as over supply and competition have killed all the profit in the retail side.
Depends on what you are selling and how well you do it, inchcape retails share price has tripled in the past 18 months. They are making money and lots of it, it would seem.
Re kickbacks. My lease car is 100a month/15k mileage a year. The dealer admitted they make £13 @ month but the car helped hit a target.
But like most things, it depends on how (well) the manufacturer controls supply.
They can only control the supply of their models, there have been a lot of new entrants into the UK market, which means the traditional bunch have lost market share eg Peugeot has gone from something like 10% of the UK car market to 5% over the last few years. On the flip side, the likes of Kia / Skoda etc have been gaining market share for several years.
If you see the price you could pay on drive the deal dot com, you have to wonder what incentive the maker is offering the dealer to shift a few more by the quarter's end or whenever. So presumably the dealer slips one or two out at cost.
I bought a new Polo at the end of March. I don't know about the margins etc, but there was absolutely no doubt that the dealer was only interested in hitting, monthly, quarterly, annual targets, and comission on finance, not profit on that individual sale.
I gave them a 10 month old Up! they gave me a new Polo and a cheque for £7k. I made a gentleman's agreement not to pay off the VW finance in the first 6 months, I can only assume so VW did not clawback the salesman's commission.