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Dealer Economics (won't take trade-ins)

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  • 27-07-2008 9:47am
    #1
    jayok
    Registered Users Posts: 1,907 ✭✭✭


    Read the thread relating to a 05 Focus that main Ford dealers won't take as a trade in and a few previous ones. I don't really understand why. Yes, I am aware of the stock overflow but this is all about price. Say the dealer was to offer you €1,000 for a trade in for a 2005 Focus. While a low price if you were willing to trade at in at this price he could surely sell it for €2,000?

    What amazes me about this whole 2nd hand slow down is dealers don't seem to get that they make their money on the transaction, not the value of the car. Now I know that the bottom has fallen out of the 2nd hand prices, but surely a dealer just needs to adjust his / her trade-in value accordingly?

    For (an extreme) example take a Golf GTi fully loaded costing say €50,000. Say I bought one in 2006 and now want to trade for a new one. Why would a dealer say I've too much stock sorry? Shouldn't the dealer say to himself, "Right, I want the transaction here, so I'll offer €5,000 for the car". Now €5k is a crazy price, but if the transaction happens he should be able to sell a fully specced GTi for €5k. The point here is that the loss is being passed to the consumer not the trade. The only question here is that at such ridiculously low trade-values the consumer probably won't trade.

    I think though after years of good times, dealers, have simply become order takers and have forgotten how to deal.
    Tagged:


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    #2
    crosstownk
    Registered Users Posts: 12,863 ✭✭✭✭crosstownk


    You are right to a certain extent.

    Don't forget that with a lot of dealers, stock (both new and used) is purchased with the banks money. Some dealers may be too close their limit at the moment and need to shift second hand units in order to get some headroom on the bank balance.
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    #3
    Mr.Diagnostic
    Registered Users Posts: 937 ✭✭✭Mr.Diagnostic


    Dealers dont have bottomless bank accounts and overdrafts I suppose.


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    #4
    Mr.Diagnostic
    Registered Users Posts: 937 ✭✭✭Mr.Diagnostic


    crosstownk wrote: »
    You are right to a certain extent.

    Don't forget that with a lot of dealers, stock (both new and used) is purchased with the banks money. Some dealers may be too close their limit at the moment and need to shift second hand units in order to get some headroom on the bank balance.

    Great minds and all that.................


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    #5
    jayok
    Registered Users Posts: 1,907 ✭✭✭jayok


    crosstownk wrote: »
    Don't forget that with a lot of dealers, stock (both new and used) is purchased with the banks money. Some dealers may be too close their limit at the moment and need to shift second hand units in order to get some headroom on the bank balance.

    Ok, but it would be better to shift it with some margin rather than hold with none - the cars are continually depreciating. Again, if its a trade-in for a new car just drop the price out of the older car. For example for the previous posters Focus. New Focus €25,000 offer for old €1,000 - better than saying no.

    To both fund and clear the finance that dealers have on stock wouldn't be be better to get things moving rather that the wait and see approach? (this is of course an over-simplification of the market demand)


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    #6
    crosstownk
    Registered Users Posts: 12,863 ✭✭✭✭crosstownk


    I'm sure some dealers are offering low values on trade-ins - but in most cases the customer will not be happy with what's being offered so the deal never happens.
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    #7
    ImDave
    Registered Users Posts: 1,096 ✭✭✭ImDave


    Like the above said, it is probably a case where the dealer would rather just say I am not taking a trade in full stop, rather than get a bad rep for allowing crazy prices on trade ins.


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    #8
    peasant
    Registered Users Posts: 17,819 ✭✭✭✭peasant


    jayok wrote: »
    For example for the previous posters Focus. New Focus €25,000 offer for old €1,000 - better than saying no.

    Really?

    If I was offered €1000 for a three year old car, I'd have a few choice words for that dealer (and would have to be restrained so not to punch him in the face).
    "No" isn't what I'd like to hear either ...but at least it's honest and not insulting ...and there is a chance that I would go back to try again once the market has settled a bit.

    The dealer insulting me with an "offer" of €1000 would never,ever see me again ...not even for spares.


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    #9
    ShadowHearth
    Registered Users Posts: 22,929 ✭✭✭✭ShadowHearth


    peasant wrote: »
    Really?

    If I was offered €1000 for a three year old car, I'd have a few choice words for that dealer (and would have to be restrained so not to punch him in the face).
    "No" isn't what I'd like to hear either ...but at least it's honest and not insulting ...and there is a chance that I would go back to try again once the market has settled a bit.

    The dealer insulting me with an "offer" of €1000 would never,ever see me again ...not even for spares.

    well said m8, atleast he was honest. And if he say 1k eu, you defenetly not going to return to him. Becouse you will know, that he is cheap b*****.

    but thing is here in ireland dealers dont have any trade skills, remeber i tryed to buy a brand new car and take finance, they were not even looking seriuos at me. Thought it could be becouse i am foreigner aswell....

    back in mine country they would be licking mine tail, becouse everyone are fighting for each customer, there is not much of them there, believe me.


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    #10
    DublinDilbert
    Registered Users Posts: 5,366 ✭✭✭DublinDilbert


    jayok wrote: »
    Say the dealer was to offer you €1,000 for a trade in for a 2005 Focus. While a low price if you were willing to trade at in at this price he could surely sell it for €2,000?

    So if he sell's it for 2K he immediately reduces the value of all the Focus's he has on the forecourt to 2K, or less.

    To be honest i can see a few dealerships going under in the current climate, when you look at the size of the show rooms they built during the good times, on the basis that the current sales levels would continue.


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    #11
    jayok
    Registered Users Posts: 1,907 ✭✭✭jayok


    peasant wrote: »
    Really?

    If I was offered €1000 for a three year old car, I'd have a few choice words for that dealer (and would have to be restrained so not to punch him in the face).
    "No" isn't what I'd like to hear either ...but at least it's honest and not insulting ...and there is a chance that I would go back to try again once the market has settled a bit.

    The dealer insulting me with an "offer" of €1000 would never,ever see me again ...not even for spares.

    My example of €1,000 was simply to demonstrate the point - not the actual offering.

    Your reaction is actually the case in point problem - most believe believe that their car is worth more than it actually is. Supply and demand - it's as simple as that. Take a look at carzone for a 2005 Ford Focus and they range from €18k to €9k. Mileage and condition aside that's some difference! Do you really think there's going to be a whole lot of movement on the €18k models?

    If the most anyone will pay for your car after three years is €1,000 then that is all it is worth. Cars are depreciating assets (excluding classics). If everyone was to offer €1,000 then that's its value - again this is just to demo the point.
    So if he sell's it for 2K he immediately reduces the value of all the Focus's he has on the forecourt to 2K, or less.

    If that's what he has to reduce to sell it, then that's all its worth. What's the point in holding onto a car you "think" is worth €10,000 when everyone else is selling them for €2K? I really don't get this. You won't sell them.


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    #12
    TheDriver
    Registered Users Posts: 12,404 ✭✭✭✭TheDriver


    Other view is that no one will trade in their cars if trade in is that crap, i want to trade in my focus but naturally will consider holding onto it if its economically too unviable to change. Or even purchasing something like a kia because residuals aren't being kept anyways and bebefit from the reliability.
    P.S. So want to get away from Ford, unreliable yokes


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    #13
    ninty9er
    Registered Users Posts: 9,366 ✭✭✭ninty9er


    Money isn't the only issue here. Space is naturally going to be a big problem if everyone wants new and nobody is buying s/hand. The aunt's husband is a Ford dealer and stopped taking trade ins in March. He has nowhere to put them!

    Yet the only 2 Kugas they could get for the moment (one of which he wanted) sold for cash within a week of being on the forecourt.


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    #14
    knifey_spoonie
    Registered Users Posts: 3,648 ✭✭✭knifey_spoonie


    They main reasons dealers are taken trade-ins, is the state of the market, it has got to the point where in some cases, when you give a customer a cost to change, you have to be a least out of swinging distance .

    Dealers are avoiding pricing cars, because all you will do is insult someone, and or tarnish the name of the dealership "i went to so and so and they only gave me 1000 for me car" then the person who heard that avoids that dealership for that reason

    Because of the current market it has become next to impossible to trade in profit all of the time, thats why no-one is pricing

    and if you have a renault save the petrol you would use going to the dealership, and use it to burn the car


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    #15
    JHMEG
    Closed Accounts Posts: 7,686 ✭✭✭JHMEG


    I can't help but think that with all the 2nd hand imports coming in from the UK (70,000 last year was it?) that the country will sink under the weight of all the cars. We need to start shipping them out again like we did with the Ladas and Yugos. Most of them seem to have ended up in Malta.


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    #16
    dunkindonuts
    Closed Accounts Posts: 233 ✭✭dunkindonuts


    peasant wrote: »
    Really?

    If I was offered €1000 for a three year old car, I'd have a few choice words for that dealer (and would have to be restrained so not to punch him in the face).
    "No" isn't what I'd like to hear either ...but at least it's honest and not insulting ...and there is a chance that I would go back to try again once the market has settled a bit.

    The dealer insulting me with an "offer" of €1000 would never,ever see me again ...not even for spares.


    Agree with you, Jayok doesnt know what he is talking about :)

    I have a golf gti and got offered 20k (07 model) whereas cheapest one on carzone is approx 29k. I told the dealer to f off in simple english.


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    #17
    jayok
    Registered Users Posts: 1,907 ✭✭✭jayok


    dunkindonuts wrote: »
    Agree with you, Jayok doesnt know what he is talking about :)

    I have a golf gti and got offered 20k (07 model) whereas cheapest one on carzone is approx 29k. I told the dealer to f off in simple english.

    Jeez, the €1000 is simply a magic figure to demonstrate the point.

    Re the offering of €20K from the dealer - do you think he was trying to pull a fast one or do you simply think he was being unrealistic? Problem with carzone is that it is generally overpriced.


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    #18
    -Chris-
    Closed Accounts Posts: 12,035 ✭✭✭✭-Chris-


    Very few dealers trying to pull a fast one in the current climate, you take all the deals you can get. Not worth scaring the customer away for the chance of making an extra few quid (not that you'd do that anyway, it's unscrupulous).

    More likely that's what the dealer thinks the car is worth - or that's less than the dealer thinks the car's worth, but they already have a few in stock and so that's all it's worth to them at the moment.


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    #19
    Ferris
    Registered Users Posts: 2,280 ✭✭✭Ferris


    dunkindonuts wrote: »
    Agree with you, Jayok doesnt know what he is talking about :)

    I have a golf gti and got offered 20k (07 model) whereas cheapest one on carzone is approx 29k. I told the dealer to f off in simple english.

    20k drop in a year, ouch!

    BUT I looked at an '07 GTi in a dealers for 29k a couple of weeks back and its still there despite the fact that its the cheapest '07 GTi on carzone with a decent spec.

    Cars are just not shifting, I feel sorry for people who need to trade/sell at the mo but thats just the way it is.


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    #20
    Bluehair
    Registered Users Posts: 1,336 ✭✭✭Bluehair


    There are some astonishing bargains to be had out there at the moment, especially in anything with a big petrol engine. I remember when I bought my bmw 323i from a chap who'd bought a new 5-series from Joe Duffy. They way he put it was "they wouldn't even make me an offer on the trade-in, not even a derisory one". Most private sellers hugely overestimate the value of their cars so it seems the dealers would rather not make an offer than insult them and drive the new sale away.... nothing like having your private sale advertised for months with no offers to bring you back to earth though....


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    #21
    bazz26
    Registered Users Posts: 51,141 ✭✭✭✭bazz26


    AudiChris wrote: »
    Very few dealers trying to pull a fast one in the current climate, you take all the deals you can get. Not worth scaring the customer away for the chance of making an extra few quid (not that you'd do that anyway, it's unscrupulous).

    More likely that's what the dealer thinks the car is worth - or that's less than the dealer thinks the car's worth, but they already have a few in stock and so that's all it's worth to them at the moment.

    I don't know about that, I pass a dealer on my way to work every morning, I noticed he had a new shape 05 Passat 2.0 TDi on sale for €19,800 for a good number of weeks. Passed the same car last week and had to check my eyes as the new sticker price is now €22,900 :eek:

    The laughable thing is that even if he did originally undervalue it (hard to believe anyway) he could not sell it at €19,800 so he is dreaming in thinking he will get anywhere near €22,900 for it now.


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    #22
    -Chris-
    Closed Accounts Posts: 12,035 ✭✭✭✭-Chris-


    Well, based on that info, I wouldn't expect that car to sell...

    Doesn't mean he's pulling a fast one, just re-valuing (and probably overvaluing) his stock.


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    #23
    Del2005
    Registered Users Posts: 18,890 ✭✭✭✭Del2005


    DublinDilbert wrote: »
    So if he sell's it for 2K he immediately reduces the value of all the Focus's he has on the forecourt to 2K, or less.

    To be honest i can see a few dealerships going under in the current climate, when you look at the size of the show rooms they built during the good times, on the basis that the current sales levels would continue.

    The dealers didn't build their huge glass showrooms for the good times, they where forced to do it under EU law for car dealers. You can't be a franchised garage without meeting these criteria.


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    #24
    ninty9er
    Registered Users Posts: 9,366 ✭✭✭ninty9er


    AudiChris wrote: »
    Well, based on that info, I wouldn't expect that car to sell...

    Doesn't mean he's pulling a fast one, just re-valuing (and probably overvaluing) his stock.

    Or perhaps it's closer to what he gave for it and has an auditor coming who'll be checking the list and cost price of everything on the forecourt.


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    #25
    yknaa
    Registered Users Posts: 830 ✭✭✭yknaa


    This doesn't sounds good. I was hoping to upgrade to a 08 Focus from
    my 1.4lx 2005 model.
    Is it unlikely that there will many fleet cars for sale with the new post-July taxes? I wouldn't mind nabbing the 1.8d focus with the low tax band. I'd imagine most of these fleet cars would be however registered long before July.


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    #26
    -Chris-
    Closed Accounts Posts: 12,035 ✭✭✭✭-Chris-


    Any car reg'd in 2008 is eligible for the new Road Tax bands, and odds are their current sale price will have been reduced to allow for the fact that they're now cheaper new.

    You're getting most of the benefit of both worlds with an '08 ex-fleet/demo car.


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    #27
    Kwesty
    Closed Accounts Posts: 8 ✭Kwesty


    I was hoping to downgrade my car (no other way to come up with some cash :()

    My car is worth (having looked at similars) anywhere from €5-9K, are dealers fond of selling 2nd hand+cash for my car?

    I have been looking at cars in and around the €4K mark, now I dont know much about cars :o and have seen some bmw's I like the look of - is €4K for a 3 series 1996 2.5 with 92,000miles a good deal:confused: Is their much trouble with older BMWs?

    Thanks


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