Car Buying Articles

Where Does the Car Dealer Make Money?

Mostly From Service, Not From Car Sales


  • New Cars Aren't Tops for Profit Picture

    New Cars Aren't Tops for Profit Picture

    The new vehicle department of a car dealership accounts for about 30 percent of a dealership's gross profits. | November 26, 2013

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It goes without saying that car dealerships can't exist unless they are profitable. That's true for every business, from a neighborhood dry cleaner to a mega-retailer like Wal-Mart. At auto dealerships, the rows of shiny new cars might prompt shoppers to believe that they're where the business makes most of its money.

But that's not the case. According to the most recent data from the National Automobile Dealers Association (NADA), the new vehicle department of a car dealership accounts for about 30 percent of a dealership's gross profits. In addition to car sales, that figure also reflects profits from finance and insurance (F&I) products sold on new cars. That means such things as Gap insurance, alarm systems and, notably, extended warranties.

The used vehicle department represents nearly 26 percent of a dealership's gross profit, according to NADA. In addition to car sales, the figure also reflects profits from F&I products sold on used cars.

So where does the majority of a dealership's profit come from? It's not from car sales: at least not directly. It's from the service and parts department, which accounts for 44 percent of the dealership's gross profits, according to NADA.

Knowledge Is Powerful
What makes some shoppers wary as they enter car dealerships is the fact that they don't actually know what they're going to pay for the product. Shoppers don't expect to negotiate the cost of a quart of milk at the supermarket or the price to dry-clean a dress at the shop around the corner. We do expect to negotiate car prices, however.

An alternative to car price guesswork can be found via Edmunds Price Promise®, which gives shoppers an upfront, guaranteed price on a specific car. But until every dealership offers Price Promise, you can better navigate some of the more complex purchase negotiations by understanding some of the financial aspects of the car selling business. Here are some examples.

New Cars: Dealer Holdbacks and Dealer Cash
Car pricing is a complicated process. To simplify things, consumers learn to look at the invoice price of a car and assume that's what the dealer paid for it. They may then wonder how a dealer is making a profit if it's selling the car for the invoice price. This is where two other sources of manufacturer money come into play.

Dealer holdback: This is money the manufacturer pays to the dealer only after a car is sold. It's typically 2 or 3 percent of either the invoice or the sticker price of the car. On a $20,000 car, a holdback represents $400 to $600. The holdback allows dealers to sell a car at invoice price (or even below invoice) and still make money. Most manufacturers offer holdbacks to their brands' dealers, but not all. You can check the holdback percentage before going shopping but don't try to build it into your negotiations. Dealers consider this money off limits for the purposes of price negotiation.

Dealer cash: Dealer cash, on the other hand, is something you can make work for you. When a car isn't selling well, the manufacturer will sometimes offer an incentive — often as much as $2,000 — to move it off lots.

Dealer cash can also come into play at the end of a model year, when both the dealership and manufacturer want to clear out even popular cars to make way for the incoming new vehicles. Dealer cash is listed on our Incentives and Rebates page.

The Role of Commissions
Traditionally, a car salesperson works on commission, and maybe even "straight commission," without a base salary. The salesperson typically tries to hit sales goals in order to earn a more substantial paycheck. This can set up strains between the buyer, who wants a lower price on a car, and a salesperson, who may be paid better if the selling price is higher.

"Confessions of a Car Salesman" has an explanation of how this worked at a high-volume, high-pressure dealership in 2000. It boiled down to this: The higher the per-car profit for the dealership, the higher the commission a salesman would earn.

Today, dealerships vary in how they structure compensation for the sales staff. Some still hold to traditional commission-based plans. But in a growing number of dealerships, the push is to sell as many vehicles as possible, even if it means little or no profit per car. The bonuses are instead based on the number of cars sold, with higher percentages paid to salespeople for more cars sold above a certain goal. Bonuses based on sales volume, rather than more profit per car, have long been the model for dealership Internet departments. That's a good reason for car shoppers to work with them.

Used Cars: Trade-Ins and Purchases
Although used cars account for the smallest percent of a dealership's gross profits, the trade-ins themselves can be a "huge profit center for the dealer," says Oren Weintraub, a former general sales manager at a top Ford dealership and now president of the concierge car buying service Authority Auto in Los Angeles. And dealers really need those used cars. According to NADA, 61 percent of a dealer's used car inventory comes from trade-ins.

Used cars are far more profitable for a dealer than are new cars. For example, there's a $4,000 difference between the trade-in value of a 2010 Toyota Camry XLE (what the dealer would pay you for it) and its dealer retail price (what the dealer would sell it for). That $4,000 is essentially the dealer's expected profit. Dealers will point out that they have to recondition used cars, and that costs money. But even so, the profit margin on a used car is typically more than what a new car sale can bring. NADA reports that at the average car dealership in 2012, net profit per new vehicle retailed was $111.

On the buying side, used cars can be tricky for shoppers because they can be a "blind negotiation," Weintraub says. The car shopper doesn't know what the dealer paid for the used car and might not know its current market value. An Edmunds' True Market Value (TMV®) appraisal of a used car can help. While TMV adjusts for regions, local markets can have quirks that are difficult for the car shopper to spot. Only by researching the current market and comparing prices can you know the right price for a used car.

Finance and Insurance: More Important Than Ever
F&I is an important source of dealership income. According to NADA, nearly 37 percent of a dealership's gross profit comes from the sale of F&I products and service contracts on new and used cars. And while the gross margin on the sale of new cars and trucks fell to 4.2 percent in 2012 from 4.6 percent in 2011, aftermarket income rose, "because of increasing F&I and service contract dollars," according to NADA.

The average profit on a new car from F&I products was $804 in 2011, according to a 2012 survey of 800 subscribers to F&I and Showroom magazine. With increased training for the F&I staff, that figure can go up to $1,200 per car, according to Zurich, a company that does F&I sales training. In short, F&I sales are critical for a dealership's success.

The dealership's F&I manager is primarily there to present the dealership's pitch for financing. It's worth listening: Sometimes the interest rates are lower. But you also should arrange independent financing first.Then you'll be able to know for sure how good the deal is.

In addition to offering dealer financing, the F&I manager typically offers extended warranties (also known as extended service contracts). The pitch for extended service contracts appears to be a winning one with car buyers. In 2012, customers bought extended service contracts on 42 percent of new vehicles. That's the highest rate in the past two decades, according to Automotive News, citing NADA data.

If you do want to buy a product such as an extended warranty, it's important to remember that the price is negotiable. To get some tips on arriving at a better deal, read "How To Get the Best Price on an Extended Car Warranty."

The Service Department
In economic hard times, service bays have kept many dealerships afloat. Dealers know that there's a good chance that a car buyer will bring the vehicle in for regular service, and even if the dealership only ekes out a thin margin on a new car sale, there's the possibility of continued cash flow from a service relationship.

Commissions play a part in the service operation as well. Service advisors typically receive a commission on all the parts and services they sell. Again, the amount of sales pressure you'll experience varies widely.

For some tips on how to handle scheduled maintenance visits and auto repairs, please read "Maintenance Basics" and "Stop Changing Your Oil."

Reputation, Reputation, Reputation
Now that you know more about where a dealership makes its money, you can move on to picking one that has a good track record in how it deals with customers, both as buyers and as clients of the service department. Visit Edmunds dealer ratings and reviews, where you can read about real consumer experiences.

Comments

  • azgm azgm Posts:

    There are too many blanket statements in this article. Everyone wants a good deal, but there's too much attention on where the dealer makes money. Dealers have huge overhead in their facilities and are not non profit orginazations. If you like the service and feel good about it then you should move forward... that sounds like a much less stressful experience that trying to figure out where the dealer makes money. It's laughable that the previous Ford GSM is making it sound like it's bad to work on commission. Maybe he worked for a dealer that liked to take advantage of people (takes one to know one kind of a thing) but my experience is that people still buy from people they like. I'm paid on commission too, and sometimes my store goes into the red for a month or two, but using the logic in this article I should raise my prices if this happens? Edmunds has make lots of money by spreading false propaganda about dealers and asking shoppers to find out how dealers make money? So stupipd!

  • pryorpat pryorpat Posts:

    The author talks about profit as if it is evil. If you own a business with millions of dollars in inventory and millions in payroll, you need to make a profit, and compare to many other businesses that require such large dollars, selling cars does not have a great rate of return all the time. If your financial adviser told you that you may make somewhere between $500 to $1500 on your $20,000 investment, and it may take a week or 10 months, and you would have to pay overhead the longer you have it, would you invest? No. The largest profit center for a dealership is the service dept. Service is where the long term relationship is built. You only buy the car 1 time and even if you only return for warranty repairs, it is still profitable. Salespersons commissions are not always based on a tier system by profit, or at all. Financing is offered to buys via the dealership and they have a buy rate which is lower than what you can get and they mark it up, just like the guy/gal at the bank, they get a piece of the action. There is much much more but Edmunds needs to keep that quiet to preserve their relationship with the manufacturers.

  • erzuahsiam erzuahsiam Posts:

    Even though you guys have some insight into the car business, the picture you have portrayed in this write-up is a gross representation of the car business. Anybody reading this post will automatically cultivate a carricatured image of these hard-working sales persons. Here are people toiling daily not only to feed their families but also helping the economy to move along being depicted as cut-throat vermins bent on wrecking the pocket books of Americans. To help beef up your outdated knowledge, I will like to point out to you that NOT EVERY CAR SALES PERSON IS ON COMMISSION. For example, sales persons working for the Sheehy Auto group are paid salaries, plus FLAT AMOUNTS on every car sold. The arrangment allowed the Sheehy company to usher in the concept of Sheehy Markdown where every single car is marked down below average market price. For your information, Sheehy arrives at markdown prices uses sources like Edmunds.com, Cars.com, KBB.com, etc. Thus, for Edmunds to turn around and castigate dealers (which, of course, include Sheehy Auto company) is tantamount to saying that car buyers should not trust Edmunds.com. Talk about shooting oneself on the foot! Also, what is so heinous about dealerships making profit ? Is Edmunds surviving on hand-outs and donations from philantropic organizations ? This drum-beat of car dealerships making profit is getting old, stale, annoying, and stupifying. Why won't Edmunds contributers write about Walmart making profit, or Exxon Mobil making profit ? PLease, if you have nothing to write about, start finding something else to do and stop painting this gargoyle-like picture of harworking and sincere sales people. Siam Erzuah Sheehy Honda Alexandria, Virginia

  • earlgrayhot earlgrayhot Posts:

    It's true dealers have overhead that they need to make, including paying the guys in service so they can stay open. But it's always a good idea to know as much as you can so the unscrupulous saleman can't dupe you into paying way more than you should. Me thinks someone is a car salesman or dealership owner to comment that buyers should buy according to how they "feel" about the deal. Forewarned and all that.

  • margarian margarian Posts:

    The number of fraudulent dealer practices is astonishing. Just look at http://www.DealerFraud.org - Franchise dealerships lie, small dealerships lie... So, yes do your homework and go prepared! Yes some are hones and care about the consumer. I have not met those yet! Also, I used LeaseSmart iPhone app and caught them cheating me on the lease money factor/interest!

  • jmer3810 jmer3810 Posts:

    Well said, azgm. Where in the world did the term "commisson" become so negative. Does a Lawyer work on a salary, do doctors make the same salary when they perform operations. Why don't we negotiate the price of these services. Commisson-based service provides a high level of attentiveness, and a commisson-based salesman provides great customer service. A commisson-based sales person has a vested interest in satisfying his/her customer, he/she is interested in repeat and referral business. If the salesman was simply collecting a salary, then he/she might not have the same level of vesting. Do other sales people work on commisson, you bet. Keep this in mind, no sale means zero commisson. Wake up.

  • pin_sekr pin_sekr Posts:

    The fact of the matter is that most new car departments lose money. The dealership today makes most of profit its from parts and service, along with manufacturer incentives for things like customer satisfaction and sales programs.

  • strafauto strafauto Posts:

    Anyone that buys their cars from dealerships are fools. not much more can be said about that, You get tajen,m and you deserve it.

  • soonerdew soonerdew Posts:

    Its always amusing to see people rise in indignation over an article like this. No one said that working on commission was inherently wrong, nor was the notion that a dealership works for profit. The economic realities are that the amounts earned over fixed expenses are the region for bargaining between any customer and supplier. Given that dealerships work long and hard to conceal that information from the consumer and seek to extract maximum profit from him, it is perfectly reasonable that the consumer work to *his* own best interests as well - and that's to *minimize* the expense from his own pocketbook. That's the beauty of the free market - no one is compelled to purchase, no one is compelled to sell. Dealerships are at a nearly incalulable advantage over average consumers with regard to the "take price" for a given vehicle, and educating those consumers is their first, best defense against spending too much. Dealerships loathe educated consumers. Always have, always will. Up-front research will give you good information about what constitutes a good deal. I am delighted to have learned how this dance works many years ago, and have been very satisfied in having done my research up-front, and knowing I've been able to strike new vehicle deals under *my* control, not that of the dealer. The result is one wherein they pursue my business, rather than one wherein I beg them to sell me a car.

  • Profit must be a dirty word to you and your readers. Maybe you should write an article on how to negotiate the price of bacon and eggs at Bob Evans. There is no way that an order of 3 slices of bacon costs $3 to make, so that must be highway robbery. The above claim that "In my experience...$5,500 markup on a used car would be considered a nice profit.".....NO KIDDING. If I had profit like that on just a couple of the cars that I sell each month, I would be much farther on my way to retirement. Apparently you have not worked at a dealership lately. The dealership I work for makes money in volume. You fail to mention that a customer can find GREAT deals at places like mine....but instead, you write garbage like this....causing everyone to think that if they shop for a car, EVERYONE is looking to rip them off, and they need to negotiate THOUSANDS of dollars off used cars. Why not write an article about how people should expect to pay for great service. Why not write an article supporting the hard working salespeople at the dealership that are out to earn an honest living. We work 11-12 hours a day, 6 days a week. I guess you just feel that we should work for minimum wage. On a personal note....I have no problem selling a car for what the dealership has in it...but I don't work for free. I still deserve to get paid for the service I provide. Your article would have been relevant in the 1990's and before, but not in the internet age.

  • p0p02 p0p02 Posts:

    This article has to be written by a 3 year old. First off everything you buy has a profit in it. That does not make the product a bad choice. Secondly for a website that is geared towards cars and the "information" people seek. Your articles constantly bashing the car business is the reason why people are so guarded. When in fact if these "commissioned" sales people sold no cars you would have no job. I believe it is time for your company to write articles that dont paint a entire industry as scoundrels who are just looking to make a buck. But rather a place where services are offered to those who wish to use them and are accepting the terms of that service. All the things you mention above no one is pushing it on the consumer. If you dont want to pay a mark up in the service department. Solution: Fix your own car. Why should anyone show up for work and do it for free. How would the dealership afford to provide a service for free? The dreaded "Finance Office" Solution. Arrange your own financing, there are banks on every corner. But to ask someone to once again work for free makes no sense. I think you should work for free while typing this article since the quality of it is more like a copy paste from several articles written in past times. The salesman is entitled to get paid for assisting the customer find the right car that fits their customers needs. Any knowledgable customer appreciates this service. Which does not result in any commission getting paid until the customer agrees that the vehicle selected meets their needs. For a company that is about cars you guys always seem to have some "inside" information from crooks themselves. These guys dont represent the entire industry. But rather crooks who have probally done time for doing illegal activities and can not find any other work. Other than "protecting" consumers from individuals that think like they do. Ask any average consumer and you will find that their experience was good and they are pleased with their decision on which car they selected regardless of who got paid. Dont sell out the industry that pays your bills. We are not in the 70's the industry is regulated and there is protection from dealerships that look to take advantage of consumers. Find something else to discuss this is not journalism.

  • joepiccaso joepiccaso Posts:

    It is amazing that when anyone tries to explain something or inform people the trolls come out. Noe where was it said making a profit was bad or evil. No one said they lie to you, though most seem to, just from my experience, especially the Service Centers, which by the way is a HUGE profit center for these dealerships. It's just good practice to have as much information as you can get before going into the Lion's den. I've had some good experiences at dealerships, but I knew that because I was informed going in. How many people understand the Rule of 78's for a loan interest calculation. Do you know how the leasing operation works? Most don't and dealers are trained to take advantage of it. Everyone one has to make a profit or they don't survive, except the Government, and that's another problem. Do your homework, get approved for a loan at a credit union before you go in. Know what your trade in is worth. Then talk Cash with them. Then look at their Trade in deal, and credit deals separately. They maybe be fine, or they may be bad, but you won't know if you are not informed, because the dealer won't tell you. Last, but not least, be careful of Extended warranties. They are 80% profit/commission, and I'm being kind to that. Don't buy a 3rd party warranty, and do buy one if you are looking at Hybrids, turbo or supercharged motors and the like. Dealer service centers are the biggest cheats ever! I'm sure there are some that are good, but I can't afford to find them. The manufacturer won't even tell you the truth about their cars' problems, etc., what incentive does a dealer's service center have? If yo find a good one, stay with them. They are worth their weight in Gold! And, yes, always buy through the internet if you can. Avoid the "Rubber room" interrogation and dog & Pony act (aka "let me ask my man anger if I can do something that crazy") routine. Know what you can buy and for how much, before you talk to anyone at a dealer, or elsewhere for that matter. Just don't trust them and Know your stuff going in, and you'll be OK. And a little prayer that you find a good dealer won't hurt, either. Good Luck!

  • jcinwi jcinwi Posts:

    Warning to car buyers, this is a crooked manuever many dealers now use that makes them a bundle of money! You negotiate a price but if you arrange financing at the dealer, they write the loan for more than you agreed to, then start by drawing your attention to the monthly payments so that you do NOT notice that the total loan amount is wrong! They have tried to pull that on me and my daughter and I know many people that did NOT catch it and were burned with a bug loan! You see, once you sign the loan, you have agreed to pay the amount ON the loan and it does not matter what was said before! It is a legal document and you signed it! It used to be only real shady dealers would try this, but I have seen it almost everywhere now! Remember, check the total loan amount and make sure it is right!

  • carguy166 carguy166 Posts:

    here is the question , why in the world would someone invest millions of dollars in a car dealership(they are ver expensive to operate) and not try to make money. you guys ad edmonds are ridiculous, you open a business and i mean any business to make as much profit as possible. and why do you make it appear that its some kind of sin to make money. i dont see any exposes on mcdonalds or coca cola , i wonder what it really cost to make a big mac and how dare they sell it for one penny over their cost.

  • wmjarski wmjarski Posts:

    I have a friend who was a car salesman who told me that dealers make a lot of money stealing rebates. The dealers simply do not inform customers of rebates, and on the back of the contract there would be a statement that "dealer retains all rebates and factory incentives". And then there's the infamous "dealer fees" preprinted on the contract, added after the deal was agreed to.

  • shawnfoster shawnfoster Posts:

    I find it very ironic that Edmonds, the very company that survives by dealers selling cars would print this article. Even more ironic is a former car salesman spilling his beans on the subject. I wonder how he would have reacted to this article had he still been in the business. That old saying holds true, "those that can, do. those that can't teach." Far more customers lie to dealers than the other way around. Ever tell a salesman what the least amount for your trade in was acceptable? If you are like all other customers, you started $3000 above that number. Was that lying?

  • The post by AZGM clearly comes from an auto dealer. No one is saying that the car dealership shouldn't make money, what folks are saying though is that the practices employed at many car dealerships are plain out immoral and predatory. I recommend never going to the dealership without knowing that you have financing already secured through your own financial institution, or even better have cash to spend. Also, don't let them know anything more than they need to know at any point. Planning to trade in your car, great, don't tell them this until after you've agreed on the sales price of the new vehicle and have a signed agreement on the price. Planning to pay in cash, good plan as well, don't tell them until you have signed agreement on the sales price. I did this to a dealership in Houston, TX a few years ago, walked in, negotiated a price for a truck (got it for over $8,000 less than sticker, and at a price i felt was definitely fair), got in the F&I room, pulled out my checkbook stroked them a check for amount and asked for my keys and title. Needless to say they haven't really reached out to me since then. You're never going to stop them from making a profit (and you shouldn't try to, its part of the economic circle), but keeping as much of your money in your pocket isn't a crime. Smart, prepared buyers will be able to do this.

  • jzal35 jzal35 Posts:

    While you have some valid points I stongly disagree with most of your blanket statements in this article. I work as a Used Car Manager at a multiline New and Used Car Dealership in Gardner Ma. I would consider the profits you suggest to be obscene and take issue that we run a dishonest business. I would be very happy to extend an offer to you to come to our Dealership, train to be a Salesperson and then work here for a month and see how you feel about our business at that point.. Come and live only on the normal pay structure for that time and then write an article about your true to life exeriences. Speak from personal knowledge of the business and not what some disgruntled ex employee has related to you. Do all this and I will consider your article at that time to be valid.

  • jeffrey23 jeffrey23 Posts:

    The author of this article paints the dealer, the sales person and the very concept of making a profit in a bad light. Furthermore, he insinuates the dealer makes and excessive or even an unfair profit on pre-owned vehicles and products which are sold in the finance office. While he does mention the high expense of operating a dealership, in order to make an assessment of exactly what is a fair profit one must first consider how much does it cost to operate a car dealership? Most customers want to have an enjoyable shopping and buying experience in a nice facility, this means the dealer has to invest in realestate and erect a premium structure. If he is selling new vehicles the franchise (ie Ford, Toyota, Honda) will have stringent, specific guidelines for how this facility must look. Often times the franchise agreemnent requires the dealer to purchase even the fixtures (desks, kiosk displays, picture frames and the enclosed pictures) from the manufacturer. all together this requires an investment in most cases well over a million dollars many times into the tens of millions! not to mention the franchise itself which costs millions. Next, car shoppers usually want a variety of options to choose from, in other words the new car dealer has to inventory not only several of each model offered by the manufacturer but several of each model in variuous colors with various trim levels this means he must inventory humdreds of vehicles to give his customers a variety of choices. With the average cost of a new vehicle over $20,000 inventory expense is in the tens of millions and that is not including used cars. Also most people don't want to wait for a sales person so you need to have staff, in most states there are laws which govern paperwork and procedures someone needs to handle that, more staff! the manufacturer saus you have to have a certain ammount of parts on hand for customers and the service deparetment this equalls in most cases another million dollars in inventory expense. Now lets look at the service department, millions of dollars are spent on tools and equipment to set that up plus it is another staff intensive department! All together this equalls, in most metropollitan markets severla hundred thousand dollard per month fixed and variable expenses! So I ask again, how much is a fair profit margin on a vehicle? Studies have shown people are far less likely to shop in a run down facility where the dealer offers few choises, in a bad part of town where real estate values are low. Studies have shown people do not want to wait three hours for their car to be worked on in the service department because the dealer cannot afford to have a full staff of technicians or support personel, or several days because the dealer needed to order parts! Think about it

  • I'm sorry to all those dealers and salesmen commenting on here but I look at it this way. Your predecessors have set the bar low on dealer expectations. I hear a lot of dealers now advertising clear, transparent, no haggling sales. They are trying to change that. But like with any sales oriented industry, there are too many bad eggs out there to sway people's opinion or expectations of your industry. Kudos to those of you who are honest. Please pressure your managers to instill honesty, integrity, and professionalism into your culture. And this goes for all sales industries. I buy only private sales for cars because of the "dealership culture" that besets you.

  • rdoner rdoner Posts:

    looks like there are only two comments - both from dealers/salespeople (go figure!). Their 'pay no attention to the man behind the curtain' comments with regard to profit vs. service are ridiculous. Of course you should know where they're making money. They want to know exactly where you make your money don't they? ...How much can you afford?, how much do you make? Maybe I should ignore the fact that fabric/paint 'guarantees' are bogus money makers (for them)? Shouldn't those things be warranted NOT to stain/chip? What about exorbitant 'extended' warranties (beyond 3yr/36K)? Do you guarantee the car or not!? The manufacturer will offer you an extension later on if you're really interested (actually, they won't leave you alone as you approach 36K or 3yrs) The most egregious practice is making you sit with the 'finance' guy who is the gatekeeper of your financing approval...all the while he's trying to upsell you! These guys should be ashamed of themselves! They don't get away with it with me; don't let them do it to you.

  • eric142 eric142 Posts:

    @ azgm well put. I work for a car lot and people like you guys floor me. I mean would you work up and ad for me on edmunds and then sell it to me at triple net?

  • Bottom line if you let the deal service anything they are screwing you! Find a trusted quality mechanic with a nice shop for a 1/3rd of the price! These dealer guys commenting on here are pissed because customers are becoming smarter. Years of playing games by oil slicked salesman has caught up! It's a new age and the computer and internet are helping a lot!

  • zjones zjones Posts:

    I work in wholesale distribution, have for 33 years...I find it hilarious when we have our annual EBITA reports meetings and how our poor lil ole $6B dollar company only made 1.2% profit last year. Year before was worse so YOY we actually did better. BULL!...You can put your money in the bank and make more with little risk compared to running a business with 2200 employees and 70 warehouses World Wide.... There is more than one set of books that track profit folks...I would say Edmond's story has truth in it but there are other complex truth's that show if a company is making money or not....Hint: If they have been in business 3 yrs or more, they are doing something right...I bought 3 pickups in a row from the same dealer and same Sales Rep. I made good deals on the new truck and they made their profit on the trade. It's when they get greedy or are not sincere that I get bowed up. 3B

  • janetmd105 janetmd105 Posts:

    Geez, you guys are defensive. I did not detect the "tone" in the article that you did. The author is stating the facts (as he knows them). Information is power, and anyone purchasing a car should be as informed as they can be. I do not begrudge salespeople for trying to make a living, but at the same time I am going to try to get the best deal possible when I go to buy my next car. I am living in the same situation the salespeople are -- I buy food, gas and pay taxes, too. I did not realize that the service manager worked on commission. That is VERY helpful information to me and explains why the service manager recommended both front and rear brakes be replaced, while a week or two later the express service guy said my brakes were fine. How's that for integrity? For women especially, find out all you can before you buy a car. Thanks, Edmunds, for the information.

  • Does anyone really think that the dealer makes any profit on a $29.00 or even $39.00 oil change and filter? labor rates average more than $100 per hour in my region, and a dealer's 'cost" per hour after including wages, benefits, and overhead often exceed $50 per hour. Take $39.00, subtract the price of the filter, oil, and hazardous waste, and the dealer collects a mere $12 to $18 in labor per oil change. Yet the dealerships operating costs for that oil change easily exceed $25 to $30.00. BY the way, when did being a for profit business become so hideously unacceptable? The same customer's that demand a free loaner car, or a free shuttle ride down to the mall have no problem whatsoever spending $180 on some designer jeans that were sewn by children in some 3rd world country for a tremendous profit, but all in the name of fashion, so I guess it's more socially acceptable...?

  • rsmithfn rsmithfn Posts:

    These guys are obiviously car sales people trying to protect their turf. I have no problem with dealers making profit. Just tell me the truth and give up all of the information up front. Just purchased a new vehicle with several dealer and manufacturer incentives. After arriving at price I started to write the check and was told. Oh! You have to finance to get the discounts, and you have to make at least 4 payments, you have to finance at least $10,000. This is dishonesty. SHould have been disclosed when price was quoted. Then the finance starts the sales pitch about how you really need that extended warranty and he can only give you this price that day before you leave the dealership. What Bull! First of all I bought the particular car based on the reliability of the brand and previous experience with this particular manufacturer. I would hope the quality would negate the need for extended warranties. As far as hard working sales people go? I have known alot of car sales people in my life. Would not describe any of them as hard working. As far as the sallaried person that gets a flat rate for every car sold. Guess what. That is called a comission!

  • babba61 babba61 Posts:

    Years ago, I had great success buying a used car. I went on a Friday evening in late summer with a stack of $100 bills in my purse. I found a car I liked, then the salesman and I went for a drive. Of course I played dumb, letting him think that I didn't know what I was doing. But, I had owned a similar car before. When we went into his office, I offered him a third less than the dealers price. We played the game of his going to his manager with my offers several times. After nearly two hours, I hadn't budged an inch, and he had only come down a little. It was nearly 9pm and we all wanted to go home. So I reached in my purse and laid out only enough $100 bills to cover my offer. Then I said, "I'm tired and hungry and want to go home. Take it or leave it." He asked, "Does that have to include taxes?" I went home with my car and lots of money left over.

  • xanderv_ xanderv_ Posts:

    So much venom from the dealership employees in this topic. Tells me they do not really have a professional culture but only some sort of brotherhood code.

  • jrockford jrockford Posts:

    Nice to see a bunch of CAR SALESMAN chiming in here. You guys add NOTHING to the value of new or used cars anymore because few of you know anything more than a "typical" car buyer who has done a little internet research. The last 3 cars I bought none of the salesman could answer very basic questions about the vehicle without looking at the manual or on-line. Back in the 70s and 80s ALL salesman were required to "know their products" before ever hitting the sales floor, now most dealers hire anybody they can get, ESPECIALLY so-called "Internet Managers" those people are a JOKE.

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