lexus sc 430 : You have a good point. However, the service department and the partsdepartment are also major profit centers for a dealership.When my grandfather had a car dealership, the accepted wisdom was that theparts department was supposed to a goldmine. It was the one part of thedealership that was always supposed to make money.Certified Harley-Riding Yuppie Swine'01 FLSTC'00 Moto Guzzi JackalI don't claim to know the actual figures. However, a few years back, I read agreat book by a former salesman, and he described the way dealerships worked. In addition to disclosing the types of lies and tricks they use, he talkedabout the amount of money they needed to make per car in order to turn aprofit. He said a dealer should be able to sell for $500 over invoice and dofine. They get the $500, plus the hold-back, which at that time was severalhundred dollars. If you update that by a decade or so, it's reasonable toguess that a dealer should do fine if he gets $1000 over invoice.By the way, your math is completely wrong. I said the dealer should be able tosell for $54K, on a $53,117 invoice. You said that leaves a gross profit of$883. You completely neglect the hold-back, which used to be something like3%, if I recall correctly. In the case of a car costing over $50,000, that'sabout $1500. So you should be talking about $2383, not $883. A dealer selling175 cars per month at a gross profit of $2383 each makes ~ $475K, not $175K. You are off by a factor of almost three.
lexus sc 430 : I don't know where you got the crazy idea that invoice is what a dealeractually pays for a car. Car dealers say that all the time, but it's justanother one of their lies. Certified Harley-Riding Yuppie Swine'01 FLSTC'00 Moto Guzzi JackalI believe the holdback on Lexus is 2%."Yukon Cornelius" wrote in message...Sorry, prematurely hit the enter key on the last one. Damn small laptopkeyboards!I believe the holdback on Lexus is 2%. But if we start getting into actualprofit numbers, then we have to start talking about regional advertisingfees, special promotions, flooring costs, health benefit insurance, and thecost of electricity. And saying that a Ford dealership can make money at$500 over invoice means little to a Lexus dealership. Most Ford dealershipssell more F150s in month than a Lexus dealership sells cars in a year. Andthe level of customer service at a Lexus dealership is a whole differentgame. Bottom line: The car profit figure is slipperly. We don't knowwhat is costs.But morever it is irrelevent because supply/demand determines the price, notwhat you or I consider fair. The car selling business is extremelycompetitive in most markets and the margins on new car sales are slimcompared to most industries, especially considering the cut the salesmangets. Lexus dealers don't sell for MSRP because they are greedy or becausethey like taking people to the cleaners - they do it because customers willpay this in a competitive car maket. I'm not defending the businesspractices of dealers because they aren't very good. I generally dislikedealers and the old joke that you can tell when a car salesman is lying bywatching for their lips to move is sadly quite true.
lexus sc 430 : If you honestly feel you can make adequate profits selling Lexus cars at$900 over invoice, then I strongly suggest you raise the capital and open adealership. The world will beat a path to your door.As I said, I was relying on old figures in a book and multiplying them by whatI considered to be a reasonable factor to account for inflation. However,accepting your hold-back guess, it looks like a dealer who sells at invoiceplus a thousand is getting a gross profit of something like two thousand. Ibelieve that a high-volume dealer like the one I talked to can do very wellselling cars for that price. What if I'm wrong? Well, let's assume a dealer can't sell for $54K plus tagand title and so on. List is about $62K, which apparently includes about TENTHOUSAND in gross profit. There is no way in hell a dealer needs to chargethat much in order to be successful. Don't you think they could get by sellingfor closer to $54K than $62K? I do, especially when I consider the money theymake from parts and service and extended warranties.And given the current state of the economy, is it really reasonable for them topush for a big profit? The dealer I visited had MANY of these cars sittingaround gathering dust, and the 2003 model year is only a few months away. Ishould also add that I checked another local dealer and found that they had18--exact count--new SC 430's rotting on their lot, at a time when NO localdealer has more than three T-Birds. So there are at least forty of thesethings in my city alone, waiting to be sold to a public caught in a recession.
lexus sc 430 : I remember visiting a local Harley dealer before the economy got tight. Theynever had more than seven or eight bikes on the lot (desirable Harleys, notSportsters), and several of the bikes would always have "sold" tags on them. That's what a strong market looks like. If they had had 18 of a given modelsitting around rusting, they would have had a hard time pushing for highprices, and I don't think Lexus dealers should get away with it, either.I think your estimate is very high, and besides, we were talking about $1000over invoice for the Lexus. I realize that there are a lot of Fords sold, butLexus is not a minor player these days. And the dealer I went to also has ahuge Toyota business.Again, I don't think you or I have any idea about what it takes to run a cardealership. You keep saying things like "a dealer only needs to make X",but you really don't have absolutely no information to back this up.I'm now going to tell you as a lawyer that you make too much, that yourbusiness is infested with gouging scoundrels, that you can easily make ahandsome profit from your clients by charging then 50% of what your currentrates are and still be successful. What is your reaction to my telling youthat?
lexus sc 430 : You know better than that. I said earlier that I used figures from a bookwritten by a career car salesman, and that I updated them based on inflation. It's a very reasonable ballpark guess. And it is not necessary to do researchto conclude that a car dealer does not have to make ten thousand dollars ingross profit per car, unless he's selling ten cars per year. I don't know whatmy grocer pays for Rick Krispies, or what their overhead is, but if they startcharging ten dollars a box, I'll know something is wrong.I can buy an Infiniti Q45 for less money (over invoice) than an SC430. The Q45is unquestionably equal in quality, it requires more raw materials, it has abetter engine, and it obviously takes about the same amount of labor toassemble. If an Infiniti dealer can sell for less (and they sell fewer carsthan Lexus), why would you think a Lexus dealer needs ten grand in gross profitper car?"Infested" is an exaggeration, but there is no shortage. I have never met acar dealer who wasn't a criminal, whereas the majority of lawyers (maybe 85%)are honest.
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