New car margin - main dealers

Casati

Do main dealers typically make the same margin on new cars as they do on used cars? Ie would they see 20/30% markup which seems typical on used cars that main dealers retail?

Atlantic Dawn

It's much smaller, around 5%.

Casati

How do they manage with such a small margin, yet need such a massive margin on used cars?

mickdw

Last I saw the breakdown, their margin is tight on new but they get massive bonus for meeting sales targets and even saw that there was percentage bonus added based on quality reviews and other measures too.

mk7r

https://www.boards.ie/discussion/comment/121449217#Comment_121449217

The need the used car margin to make their money, they also make money on extras, parts and servicing.

Cushtie

It's mostly back end bonus, ie for hitting registration targets, finance targets, other manufacturers KPI's that the money is made in the new Dept. Some times margin on the metal can be as low as 1500.

Good money being made on used sales the last couple of years.

As someone said above, parts and service are big contributors also. Ideally the absorption rate, ie the rate that aftersales depts contributes to overall dealership overhead is 90 to 100%

Casati

https://www.boards.ie/discussion/comment/121449242#Comment_121449242

Would meeting all of those targets see the margin get near the used car margin I wonder- it’s a long walk from 5% to massive used car markups of maybe 30% that are norm now?

Surprising to think the it’s the used lot outside the big glass box that brings in the most profit

Cushtie

The markups on used are not as big as they first appear. So for example you trade in your car to the garage for 20k and you see it advertised online for 25k. And it sells for 25k

Of that 5k the dealership needs to pay Vat @ 23% on the 5k Margin.

After that there are Mech Prep costs. Say 500 to 1000 depending on what needs doing. Valeting costs 100 and a provision for warranty if its out of manufacturer's of maybe 500.

AndrewJRenko

Is selling the finance for the car a big part of the revenue for them? Or will you get a better price if you've arranged your own finance privately?

mk7r

https://www.boards.ie/discussion/comment/121449774#Comment_121449774

The get commission on the finance so its more favourable if you are not a cash buyer/have you own finance

Casati

https://www.boards.ie/discussion/comment/121449586#Comment_121449586

Still though in that example it could be 3k profit on a 20k car - which sounds like more than for a new car?

You see loads of examples especially on newish trades where dealers are looking for a 10k markup. I recently was trading a two year old VW - so still in warranty for another year and literally needing no more than a valet to make ready for sale - yet some dealers were offering 8k less than other dealers or over 10k less than they had a similar model priced at on their forecourt. Big money there!

I dont think they have as much risk with a new car either, as in, from what I remember from a cousin who worked in a sales place, the news cars are more liquid assest, where as they need to pay for and buy the 2nd hand ones, so more risk of them sitting around.