5 ms·

not really, car dealers make most of their money on their service department. That new Civic might net the dealer a $500 profit....but if that car comes in for

by vaksel 15y ago

not really, car dealers make most of their money on their service department. That new Civic might net the dealer a $500 profit....but if that car comes in for a single service, they'll net more than that from the repair. And yes you aren't paying any cash for warranty work...but the dealer gets paid by the manufacturer, so they don't care.

evilduck 15y ago
That's for dealerships. There's tons of small used car dealers that operate on empty lots or out of their garage. Their profit is derived solely from car sales.
- slouch 15y ago
  ..and it's easier for them to make more than 500$ a car. Also, don't forget used car warranties.
gregpilling 15y ago
I agree partially. I have been in the auto business for 20 years and have talked at length with dealer principles. My brother ran a dealership for a number of years. The money a dealer makes at the time of sale is in Finance and Insurance (F&I), as well as preloading with accessories before purchase (disclaimer, I sell truck accessories to dealers). It is common to add points to the deal on the financing. I purchased a Jeep last year and the dollar amount was right (went through the internet guy) but they attempted to stick it to me on the finance - 8.99%! So I walked out and told them to call me when it was 4%. A few hours later they called and said we had a deal at 4%, so I had them deliver the Jeep to my work. When I used to sell automotive equipment to dealers ('90-'01), MY finance companies always gave me the option to pad the deal. I could add up to 2% to the interest rate and the finance company would give me about half of the extra interest charge. While I thought this was a sleazy practice and never did it myself, on many of my deals the interest money would have far exceeded the income on the equipment. Besides the service that you mentioned (warranty work and customer pay), there is also a lot of money in parts, especially collision parts. I had the pleasure of spending a plane ride with a dealer principal of 12 dealers, and she said the overwhelming majority of their company profits were on crash parts - especially their domestic brands. She also said accessories for Minis were very strong for the bottom line. Her other significant comment was that they never make any real money from new car sales and they were a pain. She has a lot of headaches with the manufacturers demanding facility upgrades every couple of years (at the dealer expense), and moving cars that the manufacturers occasionally compel the dealers to take (these are the undesirable cars that get sold below cost, a unintended consequence of CAFE regulations). Another less talked about area for dealer profits are used cars. As the old dealer saying goes "All new cars are the same; every used car is unique", and there can be more profit in a used car than the same model new. Many trade-ins at dealers go to auctions like Manheim where they are sold fast and furious in as-is condition for the most part. Used car departments purchase these cars and then sell them on their lots. A friend of mine just purchased a Honda Element that was missing back seats and some windshield trim for $2000 below KBB trade-in. Ebay and the dealer supplied the needed parts for under $200. If you are looking for a deal on a used car, try and find a friend with a dealer license.

by vaksel 15y ago

evilduck 15y ago

That's for dealerships. There's tons of small used car dealers that operate on empty lots or out of their garage. Their profit is derived solely from car sales.

slouch 15y ago
..and it's easier for them to make more than 500$ a car. Also, don't forget used car warranties.

gregpilling 15y ago

I agree partially. I have been in the auto business for 20 years and have talked at length with dealer principles. My brother ran a dealership for a number of years. The money a dealer makes at the time of sale is in Finance and Insurance (F&I), as well as preloading with accessories before purchase (disclaimer, I sell truck accessories to dealers). It is common to add points to the deal on the financing. I purchased a Jeep last year and the dollar amount was right (went through the internet guy) but they attempted to stick it to me on the finance - 8.99%! So I walked out and told them to call me when it was 4%. A few hours later they called and said we had a deal at 4%, so I had them deliver the Jeep to my work. When I used to sell automotive equipment to dealers ('90-'01), MY finance companies always gave me the option to pad the deal. I could add up to 2% to the interest rate and the finance company would give me about half of the extra interest charge. While I thought this was a sleazy practice and never did it myself, on many of my deals the interest money would have far exceeded the income on the equipment. Besides the service that you mentioned (warranty work and customer pay), there is also a lot of money in parts, especially collision parts. I had the pleasure of spending a plane ride with a dealer principal of 12 dealers, and she said the overwhelming majority of their company profits were on crash parts - especially their domestic brands. She also said accessories for Minis were very strong for the bottom line. Her other significant comment was that they never make any real money from new car sales and they were a pain. She has a lot of headaches with the manufacturers demanding facility upgrades every couple of years (at the dealer expense), and moving cars that the manufacturers occasionally compel the dealers to take (these are the undesirable cars that get sold below cost, a unintended consequence of CAFE regulations). Another less talked about area for dealer profits are used cars. As the old dealer saying goes "All new cars are the same; every used car is unique", and there can be more profit in a used car than the same model new. Many trade-ins at dealers go to auctions like Manheim where they are sold fast and furious in as-is condition for the most part. Used car departments purchase these cars and then sell them on their lots. A friend of mine just purchased a Honda Element that was missing back seats and some windshield trim for $2000 below KBB trade-in. Ebay and the dealer supplied the needed parts for under $200. If you are looking for a deal on a used car, try and find a friend with a dealer license.