UKSaabs

THE site for UK Saab people!
It is currently Wed Oct 17, 2018 7:01 am

All times are UTC





Post new topic Reply to topic  [ 19 posts ] 
Author Message
 Post subject: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 12:53 pm 
Offline
UKS Addict
User avatar

Joined: Fri Feb 10, 2012 9:22 am
Posts: 7470
Location: West Sussex
Car Model: 9000 Aero......GM900i
Briefly thought about getting a newer Smart car.
Dealer had one up for £6275.
Thought I would hit him with £5000 plus my Smart as a px (zero MOT and due a major service :argh: )
Many words later and no compromise being reached he fessed up and showed me the price he paid at auction. £5600.
He would need to service and MOT it plus replace sat nav screen (£200).

Even at FAP he would struggle to make £250 profit.

Almost felt sorry for him :park:

_________________
96 9000 Aero
96 gm900 vert
Motorhome
05 Smart


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 1:03 pm 
Offline
UKS Addict
User avatar

Joined: Wed Jan 18, 2012 5:24 pm
Posts: 6362
Location: Wigan, Lancashire
Car Model: 9000 Anni, 9-5s by the score
I used to have a girlfriend who was the salesperson at the local Fiat dealership. She explained that some months they only made the money because of the Fiat incentives and bonus payments for hitting targets. It was worth more to the company to register a car to hit target and sell then sell it as used than not hit target for a month. It may have been per Quarter, yeah that's more likely.

_________________
Underskatt aldrig en gammal man med en gammal SAAB


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 1:07 pm 
Offline
Arkwright.
User avatar

Joined: Sat Jan 20, 2007 6:33 pm
Posts: 39960
Location: NETTLEHAM, LINCOLNSHIRE
Car Model: 99GL, Fiat 500 & Volvo V70
I know of quite a few dealers who work on the principle of ''small profit high turnover''.

Thats why they are unwilling to offer high/silly PX prices often expected by buyers.

Most work on the priciple if a px has no MOT or a short MOT, its only worth scrap value.

_________________
Think you know it all, it's a sure sign you don't.

Self righteousness is for the narrow-minded.


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 1:10 pm 
Offline
Arkwright.
User avatar

Joined: Sat Jan 20, 2007 6:33 pm
Posts: 39960
Location: NETTLEHAM, LINCOLNSHIRE
Car Model: 99GL, Fiat 500 & Volvo V70
DeeDub8 wrote:
I used to have a girlfriend who was the salesperson at the local Fiat dealership. She explained that some months they only made the money because of the Fiat incentives and bonus payments for hitting targets. It was worth more to the company to register a car to hit target and sell then sell it as used than not hit target for a month. It may have been per Quarter, yeah that's more likely.


Very common with franchised dealers.

Pre registered cars are on most if not all forecourts for this very reason.

_________________
Think you know it all, it's a sure sign you don't.

Self righteousness is for the narrow-minded.


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 2:17 pm 
Offline
UKS Addict
User avatar

Joined: Wed Jan 18, 2012 5:24 pm
Posts: 6362
Location: Wigan, Lancashire
Car Model: 9000 Anni, 9-5s by the score
Espin99 wrote:
DeeDub8 wrote:
I used to have a girlfriend who was the salesperson at the local Fiat dealership. She explained that some months they only made the money because of the Fiat incentives and bonus payments for hitting targets. It was worth more to the company to register a car to hit target and sell then sell it as used than not hit target for a month. It may have been per Quarter, yeah that's more likely.


Very common with franchised dealers.

Pre registered cars are on most if not all forecourts for this very reason.

I'll be honest, I wasn't taking much notice of what she was saying though I do remember she had cracking legs. :)

_________________
Underskatt aldrig en gammal man med en gammal SAAB


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 3:04 pm 
Offline
UKS Addict
User avatar

Joined: Fri Feb 10, 2012 9:22 am
Posts: 7470
Location: West Sussex
Car Model: 9000 Aero......GM900i
Think there is probably a cream for that.

_________________
96 9000 Aero
96 gm900 vert
Motorhome
05 Smart


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 3:35 pm 
Offline
Active user
User avatar

Joined: Mon Jul 30, 2018 10:18 pm
Posts: 92
Car Model: 9-3 OG 2.0t 2003
Which is why they are so anxious to sell you the EDP (Extra Dealer Profit) items - fancy sounding polish/coatings/fabric treatment, window security etching, GAP insurance (yes on a non HP/lease car as well!), extended warranty, delivery charge, preparation charge, credit card fee, etc etc..


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 4:39 pm 
Offline
Full Pressure Turbo

Joined: Thu Dec 01, 2011 12:32 pm
Posts: 865
Location: kent
Car Model: saab 9-5 aero
IslandSaab wrote:
Which is why they are so anxious to sell you the EDP (Extra Dealer Profit) items - fancy sounding polish/coatings/fabric treatment, window security etching, GAP insurance (yes on a non HP/lease car as well!), extended warranty, delivery charge, preparation charge, credit card fee, etc etc..


..administration charge. Thats one I love.
Have been seeing it a lot in adverts recently "please note all our cars are subject to an administration charge of £xxx" So I cant buy the car for the price you're advertising it at then? :wall:


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 4:48 pm 
Offline
UKS Addict

Joined: Sun Jan 26, 2014 9:41 am
Posts: 2607
Location: Royal Tunbridge Wells
Car Model: '03 9-5 2.3 Vector Auto Estate
Its the same with second hand cars. A few months ago my wife looked at a 3 year old silver Toyota Auris (why is a mystery as she wanted to look for a white SUV and only does 1000 mile a year, managed to talk her out of it in the end). By the time they had added for various paint treatments, scratch protection, wheel protection and loads of other bits the £11k front price had increased by £2000!

_________________
Alan

'03 Saab 9-5 Vector 2.3t Auto Noob Stg 1
'01 Saab 9-3 2.0t SE Convertible
'81 Triumph TR7 DHC


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 6:48 pm 
Offline
UKSaabs Trader
User avatar

Joined: Sun Mar 20, 2011 2:08 pm
Posts: 4211
Location: West Sussex
Car Model: 9-3 9000 Aero 96 V4 Yamaha FJR
PCP's etc have also had a negative effect on second hand prices...

_________________
http://ccautomotive.co.uk
rust correction/prevention


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Tue Aug 28, 2018 6:59 pm 
Offline
UKS Addict
User avatar

Joined: Sun Oct 15, 2006 7:02 pm
Posts: 7031
Location: Reading, Saabshire
Car Model: Merc A200d AMG 7sp DCT
DeeDub8 wrote:
I used to have a girlfriend who was the salesperson at the local Fiat dealership. She explained that some months they only made the money because of the Fiat incentives and bonus payments for hitting targets. It was worth more to the company to register a car to hit target and sell then sell it as used than not hit target for a month. It may have been per Quarter, yeah that's more likely.


My god-daughter works in Mercedes sales. She said typically they make around 4k on a new vehicle.
Thats assuming the customer does not haggle or try to bleed them dry.
Sometimes they loose big chunks of that on transportation. I.e the car with the spec you want is at a Bristol branch, and they need a transporter to take it to Oxford for example.

_________________
16 Merc A200d 2.2d DCT AMG, BRABUS D2
92 9000 CSE 2.0T TD04, Wasaabi II
08 Vauxhall Astra 1.8 Elite.


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Wed Aug 29, 2018 9:52 am 
Offline
Saab Nut
User avatar

Joined: Fri Oct 05, 2012 5:02 pm
Posts: 1494
Location: Aberdeen
Car Model: Leon cupra 1.8t - badger5'd
The money is in the finance side, they get a finders fee type deal for getting someone on finance or if they do their own the final payment/guaranteed future value is always really low, thats where their margin sits


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Wed Aug 29, 2018 2:56 pm 
Offline
UKS Addict

Joined: Thu Mar 31, 2011 11:46 am
Posts: 4328
Location: suffolk
Car Model: 1993 9000 2.0 cse
me and a few mates nearly started a car sales place here as its so close to where i live but never happened them not me
https://www.google.co.uk/maps/@52.03937 ... 312!8i6656

it never happened and its now not got many cars there for sale
he was always good fair price treated you ok
he just said there so many cars now that arent broken but still need fixing money spending on etc
margins being so tight you have to as said in polish out next next and he would rather not do it than do it badly

_________________
never underestimate the predictability of stupidity


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Sat Sep 15, 2018 9:02 pm 
Offline
SAAB Sport & Rally Guy
User avatar

Joined: Sat Apr 23, 2005 6:13 pm
Posts: 26371
Location: Whitley Bay
Car Model: 96, C900, 9k, 9-3 & 9-5
jopo001 wrote:
The money is in the finance side, they get a finders fee type deal for getting someone on finance or if they do their own the final payment/guaranteed future value is always really low, thats where their margin sits


As with many things, they sell finance. Cars are just a means of facilitating this.


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Sat Sep 15, 2018 10:33 pm 
Offline
Light Pressure Turbo

Joined: Thu Sep 05, 2013 7:39 pm
Posts: 373
Location: Slough, Berks
Car Model: 2000 93 Aero (far from stock)
I have been reading some of these comments with a great deal of interest. I was in the motor trade for best part of 20 years, started in sales and had many different roles at many different franchises. It's interesting to see how things are perceived by 'outsiders' - zero offence meant to anyone by that comment!

This is what I can tell you:

New cars make almost nothing for a franchised new car dealership. The dealer makes money from new cars by using the sale of a new car as a vehicle (no pun intended) for selling add-ons. If a dealer hits their manufacturer set target of new car registrations, they get a retrospective bonus of some sort which varies between manufacturers and usually changes each quarter to allow for different times of the year. Sales staff generally earn under £50 a car for new car sales but can massively increase that with sales of things like paint protection (Diamondbrite, Supagard etc etc) and GAP insurance as mentioned by others previously. Also worth noting that, in my opinion, none of the paint protection kits sold are worth what they're charged at. Example, Supagard was sold, at one place I worked, for £350 inc VAT but only costs the dealer £20 +VAT...… In all the years I've been at dealerships, I've never seen anyone make a claim on the protection part of the kit. Washing your car regularly will do the same job as buying one of the kits and having the dealer apply it to your car. Essentially it's just an extra layer of wax, don't bother buying it!

Finance is indeed where a lot of money is earned by dealerships. Generally, a PCP does not usually earn the dealer THAT much money until the dealer hits their target and gets a bonus. Worth noting that sales staff can also earn some nice prizes along the way too, which incentivises them to sell as much as possible on finance. Standard finance deals (eg 4 year term, deposit plus monthly payment and you own the car at the end of the agreement) can earn a lot more money for the dealer and most customers don't even think it's possible to haggle on these kind of deals. Top tip, if you get to see the screen when the dealer is working out your payments on any kind of car finance, have a look for a long number at the bottom of the screen. The last 4 digits of that number are often the amount of commission the dealer gets from the finance company... In my experience, a lot of people haggle on the price of the car but not the cost of the finance.

Used cars generally earn the dealer a LOT more money for just the sale of the vehicle. I know for a fact that most used Range Rovers under a year old will have at least £5,000 profit across them, sometimes a lot more. This helps the dealer give a lot more than trade value for a part exchange for instance. The margin in any used car will massively depend on where the dealer sourced the car. How long the car has been in stock also comes into play as the dealer writes down the value of every used car in stock every month. Most dealers I worked at had a 90 day stocking policy, so the dealer needs to shift the car within 90 days. Some bargains can be had if you find an 'overage' car on a forecourt as the dealer will almost give it away just to get it off their profit and loss statement. (This is how phrases like '90 day white' came about as white cars used to just sit and sit - now it seems like every 3rd car I see is white!)

A 3 year PCP deal often means the dealer will be able to get cars back at a good price from their customers when they trade in or give the car back at the end of the PCP. PCPs are all backed by the relevant manufacturer and they all have their own name for their own PCP. Peugeot have Passport, VW have Solutions etc etc. The fact that 'the final payment/GFV is really low' protects both the dealer and the customer. The GFV is set based on the mileage the car will do over the term of the agreement. The main objective for the manufacturer is to entice you to change your car for a new one every 2 or 3 years, ensuring repeat business for them.

At the end of a PCP, you have 3 options.
1. Hand the car back and it's guaranteed to settle it's own finance as the GFV is the same as the settlement figure as long as you've not exceeded the agreed mileage.
2. Pay the GFV and keep the car. If the GFV is low, this means you can buy your car for a lot less than the value of an equivalent model sitting on the forecourt.
3. Trade in your car for a new one. This is where having a low GFV helps the dealer as they are often able to give you more for your car than the GFV, which then means you have a deposit to put towards your next new car. The low GFV also acts as a safety net for dealer and customer. Consider this, if electric cars suddenly became ubiquitous and internal combustion engines became obsolete, the GFV still allows you to hand your car back and settle its own finance. If you had 'normal' finance, you'd end up out of pocket, as your car would be worthless and you'd still owe money on it. (Generally, a PCP gives you a lower monthly payment by effectively off-setting part of the value of the vehicle till the end of the agreement to get to a similar monthly payment, you'd need to take 'normal' finance over 4 or 5 years)

Just realised I have 'gone off on one' a bit now....apologies for that . It seems like I had a bit to get off my chest :-)


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Sat Sep 15, 2018 11:01 pm 
Offline
UKS Addict
User avatar

Joined: Wed Jan 18, 2012 5:24 pm
Posts: 6362
Location: Wigan, Lancashire
Car Model: 9000 Anni, 9-5s by the score
It was an interesting read though.

I bought a bike and financed it. On the Saturday I saw the bike and put the deposit down the place offered finance at x%. I left it that I'd be calling the bank on Monday (it was a *long* time ago) and they'd process the application with their finance house.

Later in the week the bank has said yes at a better rate. Then the bike shop rang to say unfortunately x% had been turned down but y% had been approved. I smelt a rat but my bank had been better so I said so and asked how much would the banker's draft* need to be to pick the bike up at the weekend.

A twist was after I picked the banker's draft up Friday and checked the sale agreement it was a couple of hundred quid short. About the value of the helmet and jacket I'd included in the deal. No hassles I'll take my cheque book and pay the balance.

Salesman was either busy with customers or not in shop so the manager did the business. "No finance I see and you have a cheque for...". I handed him the bank cheque. "Excellent, let's get the keys...". He scanned the paperwork presumably totting up the figures. I detected that he'd also spotted what I'd spotted but carried on and wished me well on my trip home after checking my insurance. I'd like to have been a fly on the wall when that conversation started.


*Ask yer Nan.

_________________
Underskatt aldrig en gammal man med en gammal SAAB


Last edited by DeeDub8 on Sat Sep 15, 2018 11:57 pm, edited 1 time in total.

Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Sat Sep 15, 2018 11:12 pm 
Offline
UKS Addict
User avatar

Joined: Wed Apr 16, 2014 12:26 pm
Posts: 3466
Location: South Oxfordshire
Car Model: 9-3ss Aero 2.0T; OG9-3 vert
Tasrar wrote:
I have been reading some of these comments with a great deal of interest. I was in the motor trade for best part of 20 years, started in sales and had many different roles at many different franchises. It's interesting to see how things are perceived by 'outsiders' - zero offence meant to anyone by that comment!

This is what I can tell you:

New cars make almost nothing for a franchised new car dealership. The dealer makes money from new cars by using the sale of a new car as a vehicle (no pun intended) for selling add-ons. If a dealer hits their manufacturer set target of new car registrations, they get a retrospective bonus of some sort which varies between manufacturers and usually changes each quarter to allow for different times of the year. Sales staff generally earn under £50 a car for new car sales but can massively increase that with sales of things like paint protection (Diamondbrite, Supagard etc etc) and GAP insurance as mentioned by others previously. Also worth noting that, in my opinion, none of the paint protection kits sold are worth what they're charged at. Example, Supagard was sold, at one place I worked, for £350 inc VAT but only costs the dealer £20 +VAT...… In all the years I've been at dealerships, I've never seen anyone make a claim on the protection part of the kit. Washing your car regularly will do the same job as buying one of the kits and having the dealer apply it to your car. Essentially it's just an extra layer of wax, don't bother buying it!

Finance is indeed where a lot of money is earned by dealerships. Generally, a PCP does not usually earn the dealer THAT much money until the dealer hits their target and gets a bonus. Worth noting that sales staff can also earn some nice prizes along the way too, which incentivises them to sell as much as possible on finance. Standard finance deals (eg 4 year term, deposit plus monthly payment and you own the car at the end of the agreement) can earn a lot more money for the dealer and most customers don't even think it's possible to haggle on these kind of deals. Top tip, if you get to see the screen when the dealer is working out your payments on any kind of car finance, have a look for a long number at the bottom of the screen. The last 4 digits of that number are often the amount of commission the dealer gets from the finance company... In my experience, a lot of people haggle on the price of the car but not the cost of the finance.

Used cars generally earn the dealer a LOT more money for just the sale of the vehicle. I know for a fact that most used Range Rovers under a year old will have at least £5,000 profit across them, sometimes a lot more. This helps the dealer give a lot more than trade value for a part exchange for instance. The margin in any used car will massively depend on where the dealer sourced the car. How long the car has been in stock also comes into play as the dealer writes down the value of every used car in stock every month. Most dealers I worked at had a 90 day stocking policy, so the dealer needs to shift the car within 90 days. Some bargains can be had if you find an 'overage' car on a forecourt as the dealer will almost give it away just to get it off their profit and loss statement. (This is how phrases like '90 day white' came about as white cars used to just sit and sit - now it seems like every 3rd car I see is white!)

A 3 year PCP deal often means the dealer will be able to get cars back at a good price from their customers when they trade in or give the car back at the end of the PCP. PCPs are all backed by the relevant manufacturer and they all have their own name for their own PCP. Peugeot have Passport, VW have Solutions etc etc. The fact that 'the final payment/GFV is really low' protects both the dealer and the customer. The GFV is set based on the mileage the car will do over the term of the agreement. The main objective for the manufacturer is to entice you to change your car for a new one every 2 or 3 years, ensuring repeat business for them.

At the end of a PCP, you have 3 options.
1. Hand the car back and it's guaranteed to settle it's own finance as the GFV is the same as the settlement figure as long as you've not exceeded the agreed mileage.
2. Pay the GFV and keep the car. If the GFV is low, this means you can buy your car for a lot less than the value of an equivalent model sitting on the forecourt.
3. Trade in your car for a new one. This is where having a low GFV helps the dealer as they are often able to give you more for your car than the GFV, which then means you have a deposit to put towards your next new car. The low GFV also acts as a safety net for dealer and customer. Consider this, if electric cars suddenly became ubiquitous and internal combustion engines became obsolete, the GFV still allows you to hand your car back and settle its own finance. If you had 'normal' finance, you'd end up out of pocket, as your car would be worthless and you'd still owe money on it. (Generally, a PCP gives you a lower monthly payment by effectively off-setting part of the value of the vehicle till the end of the agreement to get to a similar monthly payment, you'd need to take 'normal' finance over 4 or 5 years)

Just realised I have 'gone off on one' a bit now....apologies for that . It seems like I had a bit to get off my chest :-)
I appreciated it! I've never had car finance so your explanation helps a bit. I understood it but your explanation of why the guaranteed final value is low is useful.

I'm still pretty unlikely to get car finance or lease a car though! Unless the Aero died tomorrow, then I may consider some form of finance on an NG9-5 or a 9-3 Turbo X / Carlsson. Not likely at all though.

_________________
9-3ss SOC Registrar @BHOSaab

2003(53) 9-3 Aero 2.0T
2002(51) 9-3 Vert auto 2.3 Stg5
2013(63) VW T5


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Fri Sep 21, 2018 4:18 pm 
Offline
Full Pressure Turbo
User avatar

Joined: Fri Mar 09, 2018 9:53 am
Posts: 855
Location: North Cambridgeshire
Car Model: 9-5 p/white 9-5 s/grey
TwyRob wrote:
Tasrar wrote:
I have been reading some of these comments with a great deal of interest. I was in the motor trade for best part of 20 years, started in sales and had many different roles at many different franchises. It's interesting to see how things are perceived by 'outsiders' - zero offence meant to anyone by that comment!

This is what I can tell you:

New cars make almost nothing for a franchised new car dealership. The dealer makes money from new cars by using the sale of a new car as a vehicle (no pun intended) for selling add-ons. If a dealer hits their manufacturer set target of new car registrations, they get a retrospective bonus of some sort which varies between manufacturers and usually changes each quarter to allow for different times of the year. Sales staff generally earn under £50 a car for new car sales but can massively increase that with sales of things like paint protection (Diamondbrite, Supagard etc etc) and GAP insurance as mentioned by others previously. Also worth noting that, in my opinion, none of the paint protection kits sold are worth what they're charged at. Example, Supagard was sold, at one place I worked, for £350 inc VAT but only costs the dealer £20 +VAT...… In all the years I've been at dealerships, I've never seen anyone make a claim on the protection part of the kit. Washing your car regularly will do the same job as buying one of the kits and having the dealer apply it to your car. Essentially it's just an extra layer of wax, don't bother buying it!

Finance is indeed where a lot of money is earned by dealerships. Generally, a PCP does not usually earn the dealer THAT much money until the dealer hits their target and gets a bonus. Worth noting that sales staff can also earn some nice prizes along the way too, which incentivises them to sell as much as possible on finance. Standard finance deals (eg 4 year term, deposit plus monthly payment and you own the car at the end of the agreement) can earn a lot more money for the dealer and most customers don't even think it's possible to haggle on these kind of deals. Top tip, if you get to see the screen when the dealer is working out your payments on any kind of car finance, have a look for a long number at the bottom of the screen. The last 4 digits of that number are often the amount of commission the dealer gets from the finance company... In my experience, a lot of people haggle on the price of the car but not the cost of the finance.

Used cars generally earn the dealer a LOT more money for just the sale of the vehicle. I know for a fact that most used Range Rovers under a year old will have at least £5,000 profit across them, sometimes a lot more. This helps the dealer give a lot more than trade value for a part exchange for instance. The margin in any used car will massively depend on where the dealer sourced the car. How long the car has been in stock also comes into play as the dealer writes down the value of every used car in stock every month. Most dealers I worked at had a 90 day stocking policy, so the dealer needs to shift the car within 90 days. Some bargains can be had if you find an 'overage' car on a forecourt as the dealer will almost give it away just to get it off their profit and loss statement. (This is how phrases like '90 day white' came about as white cars used to just sit and sit - now it seems like every 3rd car I see is white!)

A 3 year PCP deal often means the dealer will be able to get cars back at a good price from their customers when they trade in or give the car back at the end of the PCP. PCPs are all backed by the relevant manufacturer and they all have their own name for their own PCP. Peugeot have Passport, VW have Solutions etc etc. The fact that 'the final payment/GFV is really low' protects both the dealer and the customer. The GFV is set based on the mileage the car will do over the term of the agreement. The main objective for the manufacturer is to entice you to change your car for a new one every 2 or 3 years, ensuring repeat business for them.

At the end of a PCP, you have 3 options.
1. Hand the car back and it's guaranteed to settle it's own finance as the GFV is the same as the settlement figure as long as you've not exceeded the agreed mileage.
2. Pay the GFV and keep the car. If the GFV is low, this means you can buy your car for a lot less than the value of an equivalent model sitting on the forecourt.
3. Trade in your car for a new one. This is where having a low GFV helps the dealer as they are often able to give you more for your car than the GFV, which then means you have a deposit to put towards your next new car. The low GFV also acts as a safety net for dealer and customer. Consider this, if electric cars suddenly became ubiquitous and internal combustion engines became obsolete, the GFV still allows you to hand your car back and settle its own finance. If you had 'normal' finance, you'd end up out of pocket, as your car would be worthless and you'd still owe money on it. (Generally, a PCP gives you a lower monthly payment by effectively off-setting part of the value of the vehicle till the end of the agreement to get to a similar monthly payment, you'd need to take 'normal' finance over 4 or 5 years)

Just realised I have 'gone off on one' a bit now....apologies for that . It seems like I had a bit to get off my chest :-)
I appreciated it! I've never had car finance so your explanation helps a bit. I understood it but your explanation of why the guaranteed final value is low is useful.

I'm still pretty unlikely to get car finance or lease a car though! Unless the Aero died tomorrow, then I may consider some form of finance on an NG9-5 or a 9-3 Turbo X / Carlsson. Not likely at all though.


if the Aero dies tomorrow then we will get you another one.... or rebuild the old one

_________________
SAAB


Top
 Profile  
 
 Post subject: Re: Car Dealers Margins
PostPosted: Sun Sep 23, 2018 9:40 am 
Offline
UKS Addict
User avatar

Joined: Sun Oct 15, 2006 7:02 pm
Posts: 7031
Location: Reading, Saabshire
Car Model: Merc A200d AMG 7sp DCT
calam1ty wrote:
TwyRob wrote:
Tasrar wrote:
I have been reading some of these comments with a great deal of interest. I was in the motor trade for best part of 20 years, started in sales and had many different roles at many different franchises. It's interesting to see how things are perceived by 'outsiders' - zero offence meant to anyone by that comment!

This is what I can tell you:

New cars make almost nothing for a franchised new car dealership. The dealer makes money from new cars by using the sale of a new car as a vehicle (no pun intended) for selling add-ons. If a dealer hits their manufacturer set target of new car registrations, they get a retrospective bonus of some sort which varies between manufacturers and usually changes each quarter to allow for different times of the year. Sales staff generally earn under £50 a car for new car sales but can massively increase that with sales of things like paint protection (Diamondbrite, Supagard etc etc) and GAP insurance as mentioned by others previously. Also worth noting that, in my opinion, none of the paint protection kits sold are worth what they're charged at. Example, Supagard was sold, at one place I worked, for £350 inc VAT but only costs the dealer £20 +VAT...… In all the years I've been at dealerships, I've never seen anyone make a claim on the protection part of the kit. Washing your car regularly will do the same job as buying one of the kits and having the dealer apply it to your car. Essentially it's just an extra layer of wax, don't bother buying it!

Finance is indeed where a lot of money is earned by dealerships. Generally, a PCP does not usually earn the dealer THAT much money until the dealer hits their target and gets a bonus. Worth noting that sales staff can also earn some nice prizes along the way too, which incentivises them to sell as much as possible on finance. Standard finance deals (eg 4 year term, deposit plus monthly payment and you own the car at the end of the agreement) can earn a lot more money for the dealer and most customers don't even think it's possible to haggle on these kind of deals. Top tip, if you get to see the screen when the dealer is working out your payments on any kind of car finance, have a look for a long number at the bottom of the screen. The last 4 digits of that number are often the amount of commission the dealer gets from the finance company... In my experience, a lot of people haggle on the price of the car but not the cost of the finance.

Used cars generally earn the dealer a LOT more money for just the sale of the vehicle. I know for a fact that most used Range Rovers under a year old will have at least £5,000 profit across them, sometimes a lot more. This helps the dealer give a lot more than trade value for a part exchange for instance. The margin in any used car will massively depend on where the dealer sourced the car. How long the car has been in stock also comes into play as the dealer writes down the value of every used car in stock every month. Most dealers I worked at had a 90 day stocking policy, so the dealer needs to shift the car within 90 days. Some bargains can be had if you find an 'overage' car on a forecourt as the dealer will almost give it away just to get it off their profit and loss statement. (This is how phrases like '90 day white' came about as white cars used to just sit and sit - now it seems like every 3rd car I see is white!)

A 3 year PCP deal often means the dealer will be able to get cars back at a good price from their customers when they trade in or give the car back at the end of the PCP. PCPs are all backed by the relevant manufacturer and they all have their own name for their own PCP. Peugeot have Passport, VW have Solutions etc etc. The fact that 'the final payment/GFV is really low' protects both the dealer and the customer. The GFV is set based on the mileage the car will do over the term of the agreement. The main objective for the manufacturer is to entice you to change your car for a new one every 2 or 3 years, ensuring repeat business for them.

At the end of a PCP, you have 3 options.
1. Hand the car back and it's guaranteed to settle it's own finance as the GFV is the same as the settlement figure as long as you've not exceeded the agreed mileage.
2. Pay the GFV and keep the car. If the GFV is low, this means you can buy your car for a lot less than the value of an equivalent model sitting on the forecourt.
3. Trade in your car for a new one. This is where having a low GFV helps the dealer as they are often able to give you more for your car than the GFV, which then means you have a deposit to put towards your next new car. The low GFV also acts as a safety net for dealer and customer. Consider this, if electric cars suddenly became ubiquitous and internal combustion engines became obsolete, the GFV still allows you to hand your car back and settle its own finance. If you had 'normal' finance, you'd end up out of pocket, as your car would be worthless and you'd still owe money on it. (Generally, a PCP gives you a lower monthly payment by effectively off-setting part of the value of the vehicle till the end of the agreement to get to a similar monthly payment, you'd need to take 'normal' finance over 4 or 5 years)

Just realised I have 'gone off on one' a bit now....apologies for that . It seems like I had a bit to get off my chest :-)
I appreciated it! I've never had car finance so your explanation helps a bit. I understood it but your explanation of why the guaranteed final value is low is useful.

I'm still pretty unlikely to get car finance or lease a car though! Unless the Aero died tomorrow, then I may consider some form of finance on an NG9-5 or a 9-3 Turbo X / Carlsson. Not likely at all though.


if the Aero dies tomorrow then we will get you another one.... or rebuild the old one


Can you transplant a B2x4 series into a B207 ?. You know it makes sense.... :mrgreen:

_________________
16 Merc A200d 2.2d DCT AMG, BRABUS D2
92 9000 CSE 2.0T TD04, Wasaabi II
08 Vauxhall Astra 1.8 Elite.


Top
 Profile  
 
Display posts from previous:  Sort by  
Post new topic Reply to topic  [ 19 posts ] 

All times are UTC


Who is online

Users browsing this forum: Ahrefs [Bot], Buzz and 8 guests


You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot post attachments in this forum

Search for:
Jump to:  
Powered by phpBB® Forum Software © phpBB Group

follow UKSaabs on Twitter



UKSaabs silhouette logo images by Mark Green www.greenphotos.com
"subsilver2" slightly bodged by UKSaabs for our own use.

:: Disclaimer ::
Comments posted here are the views of their individual authors and are not necessarily shared by the owners of this Web site.
Authors assume all responsibility for comments posted here.

UKSaabs The biggest and best privately owned UK based independent Saab forum for all SAAB enthusiasts.
Whilst we encourage our users to support our advertisers the site wishes to remain independent and therefore does not endorse any particular advertiser(s)
UKSaabs is not affiliated with Saab Cars UK or Saab Automobile AB