Are most dealers like this?
07-05-2007, 11:46 AM
#21
Instructor
I have found from experience that buying cars from a private party is a much smoother transaction. I am willing to spend the time and effort to save some $$$ rather than try to negotiate with dealerships. Dealerships, in my opinion, don't really care about anything, except you signing on the dotted line........my two cents........
07-05-2007, 11:53 AM
#22
Drifting
Mariamznm - good explanation for the less enlightened.
I work for CarMax and when people start to talk about high profits I explain to them that CarMax is publicly owned company with published financial statements. The financial statements can be accessed from the CarMax website and they contain the average gross profit for the vehicles sold by CarMax. Now before everyone gets excited and goes searching for the financial statements you should know what Gross Profit is. Gross profit is Sale Price minus Cost of Goods Sold; however, gross profit is stated before selling and adminstrative costs are deducted. This means the real profit is lower than gross profit. Some quick definintions for you, cost of goods sold is the amount it cost the dealer to put the car on the lot, includes the cost charged by the service department to be reconditioned. The selling and adminstrative cost are all cost the dealer has related to the sales of the car, commissions, other salaries and benefits, facility costs, etc. When you deduct the selling and adminstrative cost there is a profit but it's not astronomical like people want to believe. Additionally, the financial statements are audited by an independent accounting firm for reliability. In case you can't tell I am also an accountant, but not for CarMax or their auditors.
If you still think dealers make huge profits that CarMax offers a unique opportunity, you can buy CarMax stock and you to can be an part owner of a dealership and share in the profits.
I work for CarMax and when people start to talk about high profits I explain to them that CarMax is publicly owned company with published financial statements. The financial statements can be accessed from the CarMax website and they contain the average gross profit for the vehicles sold by CarMax. Now before everyone gets excited and goes searching for the financial statements you should know what Gross Profit is. Gross profit is Sale Price minus Cost of Goods Sold; however, gross profit is stated before selling and adminstrative costs are deducted. This means the real profit is lower than gross profit. Some quick definintions for you, cost of goods sold is the amount it cost the dealer to put the car on the lot, includes the cost charged by the service department to be reconditioned. The selling and adminstrative cost are all cost the dealer has related to the sales of the car, commissions, other salaries and benefits, facility costs, etc. When you deduct the selling and adminstrative cost there is a profit but it's not astronomical like people want to believe. Additionally, the financial statements are audited by an independent accounting firm for reliability. In case you can't tell I am also an accountant, but not for CarMax or their auditors.
If you still think dealers make huge profits that CarMax offers a unique opportunity, you can buy CarMax stock and you to can be an part owner of a dealership and share in the profits.
07-05-2007, 12:49 PM
#23
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To clear up a few issues on multiple posts. KBB is not a joke nor is it a bible. Carmax the straight up dealer uses it on their web site to show how much you save over KBB. The dealer uses the black book which I used to subscribe to. They always use the "rough" price when figuring trades not clean or excellent. Another claim Carmax makes is that they spend 12 hours on every vehicle. What do they do for 12 hours on a vehicle with less than 1000 miles?
Another item is "PAC". This is overhead or dealer facility cost on all vehicles. At my dealer it was $435 was taken off the top before commissions. The dealer gets varying amounts from the manufacturer which are not considered profit so no commissions are paid. An example is I sold a $40,000 car. When all was said and done, my commission was $50. The car was a demo driven by the owner and had the normal demo 5K miles on it. I got my $50, the dealer got his PAC of $435 and holdback of $1,800. And lastly, I paid $23,000 for the truck after a $2,500 rebate and a $1,000 discount. I expected $20,000 to trade.
Another item is "PAC". This is overhead or dealer facility cost on all vehicles. At my dealer it was $435 was taken off the top before commissions. The dealer gets varying amounts from the manufacturer which are not considered profit so no commissions are paid. An example is I sold a $40,000 car. When all was said and done, my commission was $50. The car was a demo driven by the owner and had the normal demo 5K miles on it. I got my $50, the dealer got his PAC of $435 and holdback of $1,800. And lastly, I paid $23,000 for the truck after a $2,500 rebate and a $1,000 discount. I expected $20,000 to trade.
I'm also further assured that you're an uneducated buyer because you not only obviously thought you were getting a good deal on a domestic(generally more markup than foreign), but because you wanted what YOU thought the truck was worth, not what the buyer is willing to pay for it. Trucks (not as much small trucks) also generally have more mark up than a similarly priced car. Based on what you've said so far, whereever you bought the Ranger from probably made 2500-4000, depending on Pac, Hold-back(similar to Pac, just goes to different people), how much you financed in relation to what you put down, and how much they held back on whatever you traded in(if anything).
You're salesperson went home early that day.
07-05-2007, 02:02 PM
#24
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Mariamznm gave a accurate post on the dealings within a dealership, and yes KBB is a big joke!!! If you go by that you've already lost. P.P. is the way to go in most instances to save money.
07-05-2007, 03:37 PM
#25
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Your right, CarMax will not repair a vehicle if the repair is covered under the manufacture's warranty, why would they cover a repair that is already covered. Further, if the repair is performed by the manufacture it's done by the manufacture's trained techs with OEM parts and no deductible, that is what I would perfer. A sales consultant should explain when the extended warranty is presented, and again when the car is being delivered, that items still covered by a manufacture's warranty will be repaired by the manufacture. A consumer should read the all the paperwork associated with the warranty before purchasing i or within 90 days of purchasing it. CarMax gives you the contract when purchase the warranty and then gives you 90 days to return the warranty for a 100% refund. In addition, your family member can also return there warranty at any time with in the coverage period and receive a prorated refund for the unused portion.
07-05-2007, 03:51 PM
#26
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As for KBB and other book values they are all skewed. Trade in value an retail values are inflated. KBB surveys dealers and collects data on values. We all know a traditional dealer will inflate a trade in for various reasons, lower the amount of negative equity, make a buyer happly, etc. And then the buyer pays more for the car their buying so the dealer can keep make their target profit, thus retail prices get inflated. The book values should only be used in part of the buying process, a good buyer should do their research. As a sales consultant I truly enjoy an educated buyer, it makes the process so much easier.
I'll leave you with some quick tips:
Check websites for the true cost of ownership associated with a vehicle, no just price.
Never buy a new car model that rental companies and fleet companies use, you'll lose your *** if you don't keep it until it's paid for. This means stay away from domestic sedans!
For reference -the Honda Accord has the best resale value - with average milage its worth approx 50% of retail price after 3 years, depreciation is quicker now. The more expensive the car the more money you loss to depreciation.
I'll leave you with some quick tips:
Check websites for the true cost of ownership associated with a vehicle, no just price.
Never buy a new car model that rental companies and fleet companies use, you'll lose your *** if you don't keep it until it's paid for. This means stay away from domestic sedans!
For reference -the Honda Accord has the best resale value - with average milage its worth approx 50% of retail price after 3 years, depreciation is quicker now. The more expensive the car the more money you loss to depreciation.
07-05-2007, 11:14 PM
#27
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Your right, CarMax will not repair a vehicle if the repair is covered under the manufacture's warranty, why would they cover a repair that is already covered. Further, if the repair is performed by the manufacture it's done by the manufacture's trained techs with OEM parts and no deductible, that is what I would perfer. A sales consultant should explain when the extended warranty is presented, and again when the car is being delivered, that items still covered by a manufacture's warranty will be repaired by the manufacture. A consumer should read the all the paperwork associated with the warranty before purchasing i or within 90 days of purchasing it. CarMax gives you the contract when purchase the warranty and then gives you 90 days to return the warranty for a 100% refund. In addition, your family member can also return there warranty at any time with in the coverage period and receive a prorated refund for the unused portion.
07-06-2007, 01:54 AM
#28
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A note on KBB, NADA, etc...
There are TWO DIFFERENT VERSIONS of these books. One is a retail version that anyone has access to, and the other is a dealers only version.
There are TWO DIFFERENT VERSIONS of these books. One is a retail version that anyone has access to, and the other is a dealers only version.
07-06-2007, 07:49 AM
#29
Team Owner
07-06-2007, 11:25 AM
#30
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And let's not forget the guys who say they'll be right over and don't show up, the guys who want to drive it and then offer you half your asking price, the guys who call and ask stuff about the car that was clearly listed in your ad, and so on...
07-06-2007, 11:25 AM
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07-06-2007, 03:51 PM
#32
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Why is it Corvette dealers and dealerships want to give us the minimum dollar for our cars then turn around and ask top dollar for their cars? You challenge them on that business practice and they then try to make you feel stupid or bad! I looked at C5 verts at (Carmax, Driver's Way, Bill Heard, and Jim Reeds (Nashville). They asked up to $3000 more than KBB retail and tried to convince me that was a fair, low and no haggle price. I pulled my laptop out of the car, went to KBB, and found the private party and retail prices. Most said that was not a measure of the value of cars in the Nashville areas (BS) and said their no haggle price was fair, market driven and non-negotiable. What bull$**t! I'll stick to buying from private owners for my Vettes! I understand fair business and profit concepts but have come to despise most large dealerships. Naive and uneducated buyers beware!
I understand what your saying, BUT why don't you call up MR. KELLY BLUE BOOK and ask him to find you that same car for the same money. If private parties have the car you want cheaper why don't you buy it and leave the dealerships alone?
The last time I checked we are in America and there is a cost to doing business. Your book values are nothing more than a guide not the bible. Further more one of two private party sales don't make the market. I'm sure the cars private paryt can't be the exact same as the ones your looking at the dealership (miles, condition, options, etc.) Does your company work for little to no profit?
Its no surprise dealerships make a living don't this. Something tells me that if 4 to 6 dealerships all have the same prices or practice they might know what their doing vs a few private party sales. I do have news for you the wholesale market is very strong right now so that might be what your Nashville dealers are referring to when they tell you their market is strong.
Good luck with your private party sales.
07-06-2007, 06:00 PM
#33
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Sooo, you'll sell the warranty, and you wont cover it if it overlaps the OE warranty, but you ask "why would we stand behind the product we sell?". It may also be possible that for some consumers a Carmax is located 10 minutes away, whereas the local manufacturer dealership is an hour away. If you've got a warranty at both, why not save some time? Whether or not the consumer reads all the paperwork line by line(yeah right, how many of your customers have done that), the salesperson neglects to mention the stipulations of the warranty.
07-06-2007, 06:18 PM
#34
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Broncobeno I understand you can buy warranties online. But the point is not alot of us have a few thousand laying around to buy a warranty. Its more affordable for us to pay an extra 30 dollars a month instead of dishing out 1500 or so out of pocket. And as far Sheldon I think Carmax is one of the best dealerships to buy a car at because they thoroghly (doubt I spelled it right) inspect the vehicle. My buddy is a car salesman and I feel sorry for alot of car salesman. People have this idea when they step in the dealership that if they buy a car then the dealership made 5000 on you. Then you have the unloyal ones that spend 2hrs of your time then sell you out for a free oil change or floor mats at the dealership down the street. Then after they buy the car they never want to speak to you again because their friend would tell them they got ripped off so now you look like a jerk and a liar everytime you see them. I am not speaking for all customers but from what he tells me a good majority. He tells me stories thats crazy. Fact of the matter is the avg profit on a used car is about 500 - 800 dollars. And new cars forget about it its sold at a 0 dollar net. Everyone has invoices nowadays.
I looked at an 04 Coupe at a dealership today with 30,000 miles on it and they're asking 37,900 for it. Wanna take a stab at what the markup is on that car? I'm guessing its somewhere close to TEN GRAND. And I can pretty much guarantee it's at least 8,000.
Car salesmen (like apparently your buddy) that bitch about customers wasting their time kill me. Its your JOB to wait on customers you dummy. You think every customer that walks through the door and you spend a little time with is obligated to buy from you? Get real. It's like getting a job as a janitor and then complaining that your boss is making you clean things.
Plus I've never met a car salesman that didn't spend at least 25% of his time standing around BSing or smoking cigarettes, and for a lot of them its more like 75%. It's impossible to waste their time, if they weren't talking to customers they'd just be wasting it doing something completely unproductive. And if your buddy is only making 500 a car then hes not much of a salesman, or he works at a janky dealership in an ultracompetetive market, because I assure you that isn't the average profit. When I sold cars I personally averaged about 500 a car, which means the dealership was averaging about 2000 per used car.
07-06-2007, 09:06 PM
#35
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playing the game
recently a friend of mine informed me of a '02 Z06 located south of boston, that i should make a concentrated effort to see this car. 02 electron blue, black and red interior with a few bolt on goodies(air intake. corsa exhaust, chrome rims)with just over 12,000 miles on the odometer. previous owner traded in this car for an 07 convertible. asking price was $38,000, at which i laughed and proceeded to walk out of the showroom thanking him for his time. within 5 minutes my salesman had introduced me to everyone in the dealership(except for the landscape crew). and within those 5 minutes i had introduced my one and only offer $29,000. which he accepted once he saw my credit rating( which is near perfect)my advice is to walk in disinterested, only after you have done research and know how much you are willing to spend. drop the lowest possible number, and sign nothing until you thought about it for 24 hours. as soon as a salesman introduces the no haggle element, i walk away thanking him and within minutes the price is negotiable and he will not let me leave.
07-06-2007, 10:11 PM
#36
Drifting
really interesting opinions
IMHO.
1. Sell vehicles rather than trade. You will never get a decent value out of a car when you trade it. If you set a reasonable price, you can get it sold.
2. Buying new, use Edmunds and determine how much is fair profit, then go find a dealer that will take what you will pay.
3. Buying used, use Edmunds and other resources to set a range and then shop around some before making an offer. Set what you think is a fair price and go try to buy a car. If you can't get it done, maybe you are too low, or maybe you just need to wait another month.
If buying from a dealer, they are in business to make a profit. That is OK so long as it is a reasonable amount to you the buyer. Otherwise, you can walk. Don't get mad, just go find another car.
Prices that are way low are often an indication of a problem - or a car that nobody else wants. If you think you are stealing a car, make sure the fellow on the other side of the table is as dumb as you think he is.
Yes, I probably paid too much for mine. But I am driving the car I wanted.
1. Sell vehicles rather than trade. You will never get a decent value out of a car when you trade it. If you set a reasonable price, you can get it sold.
2. Buying new, use Edmunds and determine how much is fair profit, then go find a dealer that will take what you will pay.
3. Buying used, use Edmunds and other resources to set a range and then shop around some before making an offer. Set what you think is a fair price and go try to buy a car. If you can't get it done, maybe you are too low, or maybe you just need to wait another month.
If buying from a dealer, they are in business to make a profit. That is OK so long as it is a reasonable amount to you the buyer. Otherwise, you can walk. Don't get mad, just go find another car.
Prices that are way low are often an indication of a problem - or a car that nobody else wants. If you think you are stealing a car, make sure the fellow on the other side of the table is as dumb as you think he is.
Yes, I probably paid too much for mine. But I am driving the car I wanted.
07-07-2007, 12:55 AM
#37
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And I think anyone who practices good business would stand behind something they're very willing and happy to sell.
07-07-2007, 08:57 AM
#38
Team Owner
For everyone who says "sell outright" for more money, it depends on the situation. My wifes BMW x5, 4.4..a 2004 with 50 K on it would be a tough sell on CARS, or Autotrader. Most people are lazy and its easier to go to a dealer and get the plates , financing, etc in one stop, and maybe pay more. So selling a high end unit outright can be difficult.
99 out of a hundred 06, x5's I saw advertised, were by dealer. Same rule applies.
On Ebay, they were bringing right at 27 K, and at Manheim they were doing 29. I told the dealer I wanted 29, and he agreed. Now @ tax @ 8.75%, I saved another 2500 bucks on tax in NY, as you only pay tax on the difference between your trade and the newer car. So in reality, I got 31, 500 for my trade which is a much better and easier deal for me.
BTW, the dealer has it advertised at 35, 900 and you know what? I hope he gets it. He had to prep it, he has to warranty it, and he has to make a profit on it.
99 out of a hundred 06, x5's I saw advertised, were by dealer. Same rule applies.
On Ebay, they were bringing right at 27 K, and at Manheim they were doing 29. I told the dealer I wanted 29, and he agreed. Now @ tax @ 8.75%, I saved another 2500 bucks on tax in NY, as you only pay tax on the difference between your trade and the newer car. So in reality, I got 31, 500 for my trade which is a much better and easier deal for me.
BTW, the dealer has it advertised at 35, 900 and you know what? I hope he gets it. He had to prep it, he has to warranty it, and he has to make a profit on it.
07-07-2007, 09:28 AM
#39
Drifting
Not every state has the same tax laws. If I sell a car and keep the correct records of the sale, the state of Missouri lets me treat the sale price as trade in value if I buy the replacement within a time limit.
07-07-2007, 11:06 AM
#40
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For everyone who says "sell outright" for more money, it depends on the situation. My wifes BMW x5, 4.4..a 2004 with 50 K on it would be a tough sell on CARS, or Autotrader. Most people are lazy and its easier to go to a dealer and get the plates , financing, etc in one stop, and maybe pay more. So selling a high end unit outright can be difficult.
A few years back I was trying to sell my BMW motorcycle. One guy who looked at it said that he could get a new one for $5k more, so to him it was a no-brainer. I thought, "Yeah, save the $5k and buy mine." But his reasoning was that the $5k would only amount to a few dollars a month more on his loan payment, so he might as well get the new one.
People don't generally think in terms of "I'll save this much buying a used one" but rather "My monthly payments would only be $x more buying a new one."
I buy my vehicles outright, so saving $5k is a big deal to me.