Over the years, car dealers have become synonymous with less than honest sales tactics. Consequently, the information that dealers provide during a sales deal is usually not taken at face value. With the seemingly sly nature that car dealers have been associated with, consumers think that the dealers profit much more than they actually do.
Recently, the National Automobile Dealer Association (NADA) conducted a survey examining the profits of car dealers around the country. The survey found that only one and a half percent of car sales yielded a profit, while more than 20% of dealers reportedly lost money. Another finding in the survey was that foreign auto dealers are faring somewhat better in the current market place than dealers of domestic cars.
Needless to say, car dealers have many new challenges. Consumers have more choices than ever, and the economy and price of fuel has contributed to an abrupt shift in buying habits and demands. For example, among dealers selling domestic makes such as Detroit Chevrolet Dealers, inventory of full-size trucks and SUVs like the F-150 and Expedition generally had no trouble selling in recent years, but in recent months have been increasingly difficult to move off the lot, even with attractive incentives. Instead of new car buyers gravitating towards large vehicles and sport utility vehicles, consumers are now looking to small, efficient cars and crossovers. Those dealers that sell brands with a full lineup of economical and even “green” offerings are therefore reaping more of the benefits.
But even dealers with plenty of hybrids or high MPG models are not on stable ground as nationwide car sales are down overall, with June marking the lowest point in auto sales in over a decade, and each subsequent month not being much better.
In such an adverse environment, car dealers such as our Saint Louis Mitsubishi are changing their ways in order to stay profitable. Dealers are reducing the amount of new hires, reducing customer perks and the availability of loaner cars, and streamlining operations to help save money.
In addition to generating less money than what’s perceived by consumers, much of the money auto dealers do make on a vehicle goes back into the dealership according to Los Angeles Toyota dealers. Like most businesses, income needs to be reinvesting back into the business to help it grow, whether it means new facilities, employee benefits, or increasing inventory. Revenue from an entire sale is not simply pocketed by the sales person involved.
The dramatic changes in the automotive industry have caused car dealers to have vastly different operating strategies. Rather than new cars being the main profit center, dealers are now promoting service centers more and more as they now provide a more steady flow of income. In addition, Texarkana Used Car dealers and other dealers are focusing on their used car inventory more so than their new vehicle inventory.
This is not intended to defend all dealerships and their practices. The important thing to remember is that consumers should do their homework and utilize resources such as Edmunds.com or Kelley Blue Book to understand what a vehicle really costs and try to get within reason of that price point. Make sure you focus on your deal and feel good about, and don’t worry what the dealer potentially is or isn’t getting on his end.
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Learn more about what’s happening in the car dealer business here.