Coming from an extensive automotive background, I thought it was high time I wrote this to help those who felt they were cheated or those whom are considering a purchase soon.
I have done it all from washing that elusive new/used car for delivery, selling a car, installing accessories as well as being an operations manager. Let me tear this down for you and in the end ultimately you are the one to make the decision, all I can tell you is that this is fact not fiction and that I no longer sell vehicles.
Everyone thinks that when they purchase a car today that the dealer has thousands of dollars profit margin and can give them any amount of accessories without blinking an eye if they truly wanted to. This statement couldn’t be further from the truth, and as I was getting closer to the point of being relieved from the business was becoming even farther. Vehicles were costing more to make and the markets were becoming and eventually became more competitive. Let’s look at an example, we all know that a salesperson gets paid for selling a vehicle, and usually with that they get a small base salary which you might as well know wouldn’t even pay your groceries for a month. On average vehicles today have a profit margin between 0 – 3500 dollars and about 80% being closer to the 1500 mark. This being said, the first thing out of a client’s mouth after the correct car has been chosen by them is, “What is your best price?” It is the universal question meaning I want the car for nothing and I’m going to make you jump though burning rings of fire until I’m satisfied. Now as a salesperson, your job is to not only keep as much profit in it for the dealership, but knowing your only getting between 10-20 percent at best of the profit, you also need to make sure you are able to feed you and your family. In turn this is where the unfortunate game begins of back and forth with offers that usually start with pricing below cost until we either have met a reasonable deal. Every dealer does things a little differently and numbers are up or down from what I’ve mentioned by a very small degree but I can attest to this being fact from what I did as well as friends from other dealers.
My advice to purchasers out there is to stay within a set budget for yourself after you have visited a few lots after hours to see what the pricing looks like. Every $1000 off of the price of the vehicle, whether it be money you have placed down or were somehow able to obtain a factory discount due to a clearance sale will reduce the payments approximately $20/mth. Buying out of your hometown may seem good, however, realize that in order for you to get anything done to that vehicle that may entail needing a favor here and there means having to get it serviced at that out of town dealer as your local dealer isn’t apt to go out of their way for you. You may have just read that and thought to yourself well they have to provide customer service right? Actually, they only have to provide the necessity of providing you with an appointment that suits them. They will book clients, provide shuttle service and perform favors to those customers whom have been loyal to them before anything else. Buy local, unless your sales person has done something to make you distrust him, trust what he is telling you is true and that he’s not out to get you as he isn’t.
If you have gone to the dealership knowing what the payment is and it is within your budget, what is it that can change the fact that you are about to get exactly what you wanted? If you want accessories added to the vehicle, again you can obtain any knowledge you need before visiting and add again approximately $20/month for every $1000 in accessories added this way there are no surprises.
When a salesperson tells you that the price on the window or the asking price of the car, unfortunately, is the best price he most likely is telling you the truth.Today’s car prices are much better than when I started in the car industry as the competition has gotten fierce, inform yourself as much as possible which is the norm nowadays and buy within your means.
I wrote this basing it on the average car buying and not in niche markets with cars above the $60,000 dollar mark, keeping in mind what the everyday family is spending on a new or used car. A salesperson in the industry can make a decent living, however, they are few and far between.
Thamks fornclarifying, I always wondered how much car dealerships profit
No problem, it’s been something I’ve wanted to write for a long time and put it off. It’s truly not a lot. Many cars have to be sold to run a dealership and I’ve seen many documentaries portraying the dealer or salesperson as a crook. That is not the case the better part of the time and more the fact that the customers expectations of a discount was astronomical.
Great post Matt! My wife and I were just talking about the costs of leasing today. Now we have some insight 🙂
Thanks, Anytime you want to hit me up with your details I could let you know what would be best for you lease/purchase without getting into personal finances. Always happy to help!!
I hate it when it is car shopping time… I leave it all to my husband. He will call more than 5+ dealers, research online etc.. .. yes, we will go out of town.. whoever has the best rate… It’s tough on both ends because YES the dealer may not make a huge profit in the end but sometimes the asking cost does not make sense.. We don’t haggle but we do ask for what is fair.
My best advice for those whom are set on price, which is o.k. I am as well. Do all of your price shopping elsewhere, then go to your closest to home dealer. This way you are at least giving them a chance to match the deal if nothing further can be done and you will be treated much better. It’s also easier to go in with a piece of paper and say here you go, this is what they are willing to do but I’d prefer to buy here and be done with it. You had mentioned you don’t haggle but you ask for what is fair, and I’m in complete agreement of that but fair to the salesperson on a car that has a profit margin of $1000 which is sincerely not far fetched would mean that he can’t take anything of the car in order to make a living. Some people come back with the fact that, “well he can’t but the dealership can”. Truth is, if this was the case they wouldn’t be in business long enough to sell you the next vehicle. Here is something else that people do not know, so it’s not taken into consideration. Dealerships have business bank accounts which when vehicles are dropped off from the particular manufacturer’s facility to the lot they pay usually a nominal fee for each vehicle. 30 days later they have to pay the tax on every vehicle they received and then they start paying interest on the cars. It’s a pretty detailed and confusing thing unless you have worked within it. I’m always available for car questions on what you may like to ask without any judgement what so ever and I’m very happy to do so.