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Why Dealership Used Cars Cost More
- pc86 11y agoThe important part here is that the dealership's profit is $700-1k on a good CPO, not the $7,000 in total markup, which itself is a questionable figure. I've never worked in car sales but a classmate from my undergrad sold at a new and used Lexus dealership for about a year and a half immediately after graduation. Even back in the 2007-2010 time period, there was so much information going around that the vast majority of his deals were "minis," or sales where he got the minimum commission of $150 (I've heard it as low as $75 depending on dealership and make). Car sales is sort of like a startup where if you grind for a while and build up a base you can make a pretty good upper-middle lifestyle. $150-200k a year is uncommon but not unattainable if you're naturally charismatic and can put a lot of volume through your pipeline, especially if you can move into the high-end aspirational market (e.g. Porsche, Aston-Martin, etc). It's also totally possible (likely even) to do $125k one year and $30k the next, and a lot of people can't handle that high level of volatility. I really enjoy cars from a design perspective and I really enjoy business, if I had any sales ability at all it'd probably be a good part-time job.
- totalrobe 11y agoGreater than $100k as a floor sales guy is extremely uncommon in a modern new car dealership, and really only possible in your major car meccas like houston/atlanta/LA. Most deals are "minis" (varies between $75 - 150). I worked in sales for a while and the average income is closer to 40k. It's also pretty much impossible 'part-time'. Most people don't buy during their first visit. We worked 80 hour weeks because if you missed your client when they came back to buy it was somebody else's deal (or a halfsie).
- pc86 11y agoAgreed on all counts (I figured it was an untenable PT gig but wasn't sure). I just meant that while the average is comparatively low to tech (if still slightly above the US average personal income), it's possible but uncommon to get into the range of upper-middle, with a considerable amount of skill/work/luck.
- totalrobe 11y agoSo at each dealership there is one sales guy that is going to be making good money. This is the guy that is given all deals that come through management in order to keep the rest of the floor guys drooling. I believe in the prostitution world this is the 'bottom bitch'. From what I understood from the older guys, it used to a be a solid middle class gig with a free car, good hours, benefits, other perks, etc..but most new car dealerships are now consolidated countrywide conglomerates and the sales jobs are typical shitty retail with no time off and constant turnover. Management and the finance guys still make good money but they work even more hours and you have to sit on a damn car lot 24/7. To tell the truth, I lost all interest in cars after working on a lot. I drove high end bmw's, a ferrari (older), hummers, etc and now I give 0 shits about what I drive as long as it gets me around.
- pc86 11y agoI come from a lower-middle/working class family and have always wanted a BMW. Everyone has said it's a waste of money, and intellectually I agree 100%. And I know with 90% certainty that when I eventually buy one at some point I'll think "Oh, that's it?" and get rid of it for another Toyota or VW. But until then I will probably continue building BMWs, Benzes and Porsches online every few months :)
- totalrobe 11y agoDon't get me wrong - driving a powerful car is a hell a lot of fun. But to me it was a novelty, and IMO you can get your fill and save a pile of cash by going to a track and renting a supercar for a day.
- crapolasplatter 11y agototally agree on renting the supercar and using the money saved to purchase nth home.
- ValG 11y agoIt may be a bit on the high end, but not by much. A quick way to sanity check is to use KBB. I just did this; kbb a 2013 Honda Accord EX with 40,000 miles. Dealership CPO suggested price: $20,388. Now do the opposite, trade in a 2013 Honda Accord Ex with 40,000 miles. KBB suggested Trade-In: 14,200. The spread? Over $6k. That doesn't mean that's what the dealership makes of course, but it is a heck of a mark-up.
- atwebb 11y agoThis seems like a "thin article"...of course a dealer is going to be more expensive, why do people hate some businesses for making money? Did you know Uber charges you more than it costs to drive? I've recently bought 2 cars (first time through dealers), in all my calculations, over the life of the car, new or CPO came out significantly cheaper not even factoring in the nicer experience than trying to buy a Craigslist car or going to gravel lot dealers. I can't believe I just defended car dealers either, but, man, this article came across as terrible.
- pc86 11y agoA lot of the dealership hate stems from the fact that negotiation is expected, so their first offer is always high, even above MSRP, and if you're meek and mild you're very likely to pay more than you need to. Even still, with the amount of information out there, margin are being squeezed and you're almost never going to find thousands in markup on any vehicle, especially brand new models, so a dealer offers MSRP (e.g. $30k), you counter with $25k, but since the dealer breaks even at $29,400 they stop answering your emails. Transparency has helped but not as much as it could.
- atwebb 11y agoIt's the same with private sellers, everyone wants the best price for them. Private sellers/buyers are terrible most of the time and act just like the stereotypical dealer, misrepresenting, not being communicative or transparent, dodging questions, etc. The main reason (I think) private party sales are lower is because very few people are comfortable doing a >$15k transaction without some sort of licensing and business reputation so there has to be a really good incentive to get a car from a non-dealer/franchise.
- ghaff 11y agoAnd this is hardly unique to cars. Yes, I'm going to pay more buying a used camera lens from B&H photo rather than off ebay. It's essentially a risk premium. (With autos, a dealer also provides some services related to paperwork and, potentially, financing/trade-in.)
- totalrobe 11y agoI was in a tight spot after college (recession 2010-11) and hustled hondas and vw's for a year and while this guy makes some good points, the 'average' car salesman was not making 60k. The guys on the floor were busting their asses 10-16 hours a day, 6-7 days a week (Saturdays mandatory, no paid vacation) for 30 - 50k at most places. It wasn't uncommon to come in at 7 AM and close up at 11 PM after dealing with idiots that demanded to drive 5 cars and then get kicked out because they had 350 FICOs and wanted a new SUV with 0 down. The majority of people had no idea what kind of car they needed or what they could afford. The things this guy doesn't point out is that dealerships will work with banks to get deals financed that otherwise might not be, they provide loaner cars, make sure people have insurance, and they deal with title/registration paperwork that is a huge hassle. They'll also take just about any trade-in if it runs (and some that barely run) and dispose of them (something that could cost you). Vehicles are the highest value or 2nd highest value purchase for most people. You definitely need to know your stuff when purchasing a car, and I'm totally against predatory dealership tactics, but after working in the industry I don't have faith that the average american can navigate the myriad of vehicles, processes, paperwork, and other tasks that go into buying/selling cars directly. I also have a hard time trusting an individual seller after seeing the completely wasted cars we took in on trades.
- Retric 11y agoAverages are weighted by the top end. Some salesman making 100k bring up the average wage even if the median might be ~45k.
- totalrobe 11y agoI do understand statistics but 60k is way off. The lower end of the scale would be weighted more heavily due to turnover in the profession. http://www.payscale.com/research/US/Job=Sales_Consultant,_Automobile%2FCars/Salary http://www.payscale.com/research/US/Job=Sales_Consultant,_Au...
- Retric 11y agoThat brings up an interesting question if a dealership has 10 people working there on average, but 2 of those positions have really high turnover at the end of the year you might have 8 people that worked the full year, and another 8 that only did 3 months. The day to day average would then be a lot higher than the per person average.
- fluxquanta 11y agoI currently work in this industry and the only thing I see that's drastically out of line with the real world is this: >All the cars you see on the lot? They are owned by the dealership itself. This, at least for the dealerships I work with, is almost never the case. For independent dealerships the only cars on the lot that they actually own are previous trade-ins. The majority are bought at auctions on credit (called "floor planning" in the industry). These are short term lines of credit that usually mature in 90 or 180 days. If the lot is productive, the unit will be long sold by then and the line of credit paid off, only to be used again. Depending on the number of sales made in the past year, the credit line with the floor plan company fluctuates. Often, the same company (like Manheim in the US) owns the auction AND the floor plan financier. Cox Enterprises (Manheim's parent company) and KAR Auction Services in particular seem to be buying up smaller businesses in the industry left and right not unlike your big players in Silicon Valley. My company has fielded offers from both in the past, but our owner won't budge. But I digress...the only other thing in the article that seems off to me is the emphasis on Certified Pre-Owned vehicles. Almost every dealer I work with will budge on that price. Making the sale is more important than a few extra dollars, in most cases. Plus, independent dealerships have a harder time with even getting vehicles certified, as opposed to the franchise stores that already have certified mechanics on site.
- tacon 11y ago>For independent dealerships the only cars on the lot that they actually own are previous trade-ins. Unless you are saying the dealer can return cars they bought at auction, I don't see what difference the floor-planning makes to the ownership of the car. When purchased off the dealer's lot, I presume the dealer's name will appear on the title as the seller.
- fluxquanta 11y agoThe article seemed to imply that the dealer owns the inventory, where as I was just saying that the lines aren't always so cut and dried. It's not uncommon for a dealer to buy a vehicle at auction without getting the title at the time of the auction purchase, floor it, then sell it with outside financing before the title is even in hand. So the title essentially jumps from the auction seller to the outside finance company of the end buyer at some point after the time of the sale. The dealer never actually spends any money out of pocket for the vehicle, since it was floor planned. Having a car last on your lot longer than the floor plan term usually means that it was a bad fit for your customer base (like stocking luxury cars in farm country) or you don't have good salesmen. Almost all sales are finalized before the floor plan term is up, so there is no out of pocket cost to the dealer up front. Dealers can return vehicles to the auction in some cases (for a fee), but usually that's only in the case of the auction itself being misleading (not disclosing prior major repair, salvage title status, or things like that).
- rplst8 11y agoCar salesmen don't make great livings, and their income is very volatile. However, dealership owners always have the largest house in town. They also like to take advantage of unsuspecting customers. I have no sympathy for car dealers.
- deleted 11y ago[deleted]
- crapolasplatter 11y agoHere is my recipe for purchasing cars. At first I really tried to purchase a car through car-max because I hated the negotiating process with the normal dealers. What I discovered was that car max typically priced their cars 2-3K above what I could negotiate with another dealer. I also discovered if you want a used honda don't go to a honda dealer all the time, try going to a porche dealer or other high end dealers that don't want those hondas in their inventory at the end of the month. Also be willing to walk away Summary: 1. Goto car-max to get the max price of the vehicle and deduct 2-3k from it and try to find another dealer that will negotiate that price. 2. Goto to high end dealers for non high end cars. 3. Try to go towards the end of the month so I have been told by people in the business but I'm not sure on this. 4. Most importantly don't be afraid to walk away . Last car I purchased I walked away then the dealer called me back a couple of weeks later and I got them for what I wanted to pay. This really shouldn't be an issue as most cars are not one of a kind and can be found at anytime for purchase. 5. If the car is a hot model than all the above will likely be negated and they will be willing to not put to much time into selling you the car (negotiate) 6. Buy at the end of the year nov-dec timeframe. This is because once January hits the car will be officially a year older. Hence the dealer will work harder to sell you that 2014 or 2015 model before it becomes 2016 and it gets tainted officially as last years or 2 years ago model. 7. Try to go by yourself and not with with your spouse or significant other , so you are the final word.
- amalag 11y agoNice tips, I will try to use these. End of the month is when they are trying to fill their quotas. You can similarly get decent deals on new cars when the model year is finishing and the new model year is coming into stock so they want to get rid of their old stock.
- crapolasplatter 11y agoYou are absolutely right about the model year coming to an end. I typically also buy 1 or 2 year old low mileage models at the end of the year around nov-dec timeframe. This is because once January hits the car will be officially a year older. Hence the dealer will work harder to sell you that 2014 or 2015 model before it becomes 2016 and it gets tainted officially as last years or 2 years ago model.
- VLM 11y agoThe article and comments (so far) miss the second dealer purchase negotiation phase. So you got a car for MSRP, or whatever, that's very nice. Well for $5/month over the lifetime of the loan we can throw in dealer provided product like this custom set of floor mats, they're really nice floor mats and you want a clean car and they're only going to cost you $5/month, right? (note that's $200 for those floor mats...). Or how about rust protection underbody spray, our dealership sells that for only 100% markup over just hiring a local to do it. Or how bout that service plan, we can roll your manufacturer scheduled $80 oil changes right into your loan, why, during your loan you wouldn't have to pay for anything but the loan and gas (and insurance, and garage, and parking permits, and that $80 oil change costs $40 anywhere else or $20 if you do it at home). You just spent $25K, how bout getting years of extra worry free driving with out extended warranty program, years of worry free driving for just another $3K?
- mizchief2 11y agoMiddlemen
- guruz 11y agoAlso: E.g. In Germany, dealerships have to provide 1 year of warranty for the car. In some cases they also need to add 19% VAT (if it is a commercial re-sale?)
- oxguy3 11y agoSorry, won't be reading this article or any other on your site until you disable smooth scrolling (or at least move the smooth scrolling logic into a separate smooth-scroll.js file so uBlock catches it and disables it).