3 ms·

I don't see any massive discounts happening. If someone started offering some serious deals on cars, let's say 25% off the ordinary price and no bullshit like

I don't see any massive discounts happening. If someone started offering some serious deals on cars, let's say 25% off the ordinary price and no bullshit like the other guy ran into, I'm sure they could sell some serious volume. Instead it's just the dumb sit and wait like it has been in past recessions.

8f2ab37a-ed6c 6y ago
Exactly. I don't feel bad about them not being able to move inventory during this time if they're unwilling to alter pricing. Dealers are effectively rent-seeking, and nobody but those profiting from it will mind them disappearing overnight. It won't happen, but one can dream.
ineedasername 6y ago
25% is generally more than both the dealership & manufacturer's gross profit put together, so 25% would be a loss. Dealerships themselves generally markup 2-5%.
- bittercynic 6y ago
  It might be a smaller loss than they'd take by waiting for things to deteriorate further. I interpret their 'wait and see' strategy as optimism that things will be better soon.
  - ineedasername 6y ago
    True. If they're stuck servicing loans or paying storage fees (especially those associated with having them on a ship for an extra week) at some point it makes sense to sell at a loss rather than incur more fees and uncertainty.
- GordonS 6y ago
  > Dealerships themselves generally markup 2-5% Sounds very different from the UK if true. Here in the UK, I've got 8-12% off every new car I've ever bought, by haggling hard.
  - ineedasername 6y ago
    It depends on options & features (1), at least in the U.S., along with things like whether or not you're trading in another car (2), and your financing options (3), and manufacturer incentives (4) 1) The car as delivered from the factory has a 2% to 5% markup from the dealer. The factory usually sells it at about a 15% gross profit. But some features added on are often done by the dealership and have a larger mark up, meaning it gives the dealership more room to negotiate. 2) If you're trading in a car, the dealership will often present things as a package. It is very difficult to get them to first negotiate a car trade value, and only then move on to selecting a car, negotiating a price, etc. Because of this, they can give the appearance of cutting the price of the car when in reality they just gave you a much lower price for the trade in than they know they can sell it for. 3) Dealerships make a significant amount of their money from financing: if you have a loan for 6%, chances are the dealership, through volume with the bank, are "buying" that money at 3% and pocketing the difference. This means they have further wiggle room on price without sacrificing profit. 4) There are frequently manufacturer incentives, especially toward the end of the model year when new models are set to come out soon. It's not uncommon for manufacturers to want to clear out dealer inventory to make room, and frequently they'll give around $1k to $3k in rebates. Dealerships don't necessarily present this in a straightforward way, and will sell the customer on the idea that they're getting a discount on the car price from the dealer. If you don't happen to know about the rebate and don't negotiate well enough, you might not get the rebate at all. All of the above mean that dealerships frequently have options to negotiate the appearance of a much better deal than you're actually getting. They're not actually cutting the car price, they're tweaking all of the other parameters that determine their revenue stream. If you go into a dealership and want no upgrades, have no trade in vehicle, are able to pay for the car without financing from the dealer, and there aren't any other rebates, you won't get much off the sticker price. In fact the sales folks will often treat you like they're doing you a favor just being willing to sell you the car at the sticker price.

8f2ab37a-ed6c 6y ago

Exactly. I don't feel bad about them not being able to move inventory during this time if they're unwilling to alter pricing. Dealers are effectively rent-seeking, and nobody but those profiting from it will mind them disappearing overnight. It won't happen, but one can dream.

ineedasername 6y ago

25% is generally more than both the dealership & manufacturer's gross profit put together, so 25% would be a loss. Dealerships themselves generally markup 2-5%.

bittercynic 6y ago
It might be a smaller loss than they'd take by waiting for things to deteriorate further. I interpret their 'wait and see' strategy as optimism that things will be better soon.
- ineedasername 6y ago
  True. If they're stuck servicing loans or paying storage fees (especially those associated with having them on a ship for an extra week) at some point it makes sense to sell at a loss rather than incur more fees and uncertainty.
GordonS 6y ago
> Dealerships themselves generally markup 2-5% Sounds very different from the UK if true. Here in the UK, I've got 8-12% off every new car I've ever bought, by haggling hard.
- ineedasername 6y ago
  It depends on options & features (1), at least in the U.S., along with things like whether or not you're trading in another car (2), and your financing options (3), and manufacturer incentives (4) 1) The car as delivered from the factory has a 2% to 5% markup from the dealer. The factory usually sells it at about a 15% gross profit. But some features added on are often done by the dealership and have a larger mark up, meaning it gives the dealership more room to negotiate. 2) If you're trading in a car, the dealership will often present things as a package. It is very difficult to get them to first negotiate a car trade value, and only then move on to selecting a car, negotiating a price, etc. Because of this, they can give the appearance of cutting the price of the car when in reality they just gave you a much lower price for the trade in than they know they can sell it for. 3) Dealerships make a significant amount of their money from financing: if you have a loan for 6%, chances are the dealership, through volume with the bank, are "buying" that money at 3% and pocketing the difference. This means they have further wiggle room on price without sacrificing profit. 4) There are frequently manufacturer incentives, especially toward the end of the model year when new models are set to come out soon. It's not uncommon for manufacturers to want to clear out dealer inventory to make room, and frequently they'll give around $1k to $3k in rebates. Dealerships don't necessarily present this in a straightforward way, and will sell the customer on the idea that they're getting a discount on the car price from the dealer. If you don't happen to know about the rebate and don't negotiate well enough, you might not get the rebate at all. All of the above mean that dealerships frequently have options to negotiate the appearance of a much better deal than you're actually getting. They're not actually cutting the car price, they're tweaking all of the other parameters that determine their revenue stream. If you go into a dealership and want no upgrades, have no trade in vehicle, are able to pay for the car without financing from the dealer, and there aren't any other rebates, you won't get much off the sticker price. In fact the sales folks will often treat you like they're doing you a favor just being willing to sell you the car at the sticker price.