INVESTIGATION
REVEALED: THE REAL PROFIT DEALERS MAKE ON CAR SALES A Car Dealer and What Car? survey shows a huge disparity between how much buyers think dealers make and the reality. James Baggott reports.
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he majority of car buyers in a survey said they thought dealers made between 10 and 20 per cent profit on every new car they sell. In an exclusive poll for Car Dealer, What Car? found that 28.2 per cent of 5,000 car buyers who were quizzed reckoned dealers made 10-20 per cent on every new car – the highest proportion of respondents among the percentage profit ranges. When it came to used cars, again most of the buyers in the survey thought dealers made 10-20 per cent profit, but this time 35.8 per cent were in agreement. Some 5.8 per cent of buyers quizzed thought car dealers made more than 50 per cent profit on new cars. When it came to who car buyers thought made the most cash out of selling a new car, 56.7 per cent said they thought it was the manufacturer, with 43.3 per cent thinking it was the dealer. Jim Holder, editorial director for What Car?, said: ‘While everyone knows car dealerships are there to make money, the public’s perception of how easy it is for them to rack up profits provides a fascinating insight into the challenges during a negotiation. ‘While I’m sure it’s possible, the suggestion from the significant proportion of respondents that dealers and car makers make more than 20 per cent margin on every new or used car deal is surely fanciful. ‘But there’s no question that the belief the dealer is racking up big earnings would compel buyers to haggle harder.’ When it came to new cars, 30.8 per cent of respondents believed that car dealers made more than 20 per cent profit. Shockingly, 2.6 per cent even thought car dealers made more than 75 per cent profit on every new car they sell. At the other end of the scale, 15.2 per cent thought dealers made five per cent or less. Holder added: ‘In recent years we’ve seen car factories close and low-margin cars being axed from vehicle line-ups because of a lack of profitability, highlighting the reality of some of the wafer-thin margins that they operate to. ‘But at the same time we’ve witnessed massive investment – some of it forced by manufacturers on to retailers – into modern, often swanky “gin palace” dealerships and corporate identities, all of which I suspect is giving this impression that selling cars is a route to printing money. ‘To me, this data highlights the fine line that needs to be tackled by dealers and OEMs – it is not hard to understand why a customer’s expectations may be out of kilter if they 12 | CarDealerMag.co.uk
Many people think dealers make large sums because the showrooms are that nice and expensive, they must be making that much. Industry analyst Mike Jones
