The Motor Trade

[byronkincaid]

I left the motor trade to look after my daughter and to hopefully win a bit of money playing poker just over 2 years ago. My peabrain is almost full up with reverse implied odds, when to fire a second barrel and what time I've got to pick her up from playgroup so before I forget all of this and to stop me from having to go out for a run or losing any more money this afternoon I thought I'd write this which may be of some help the next time some of you buy a car.

I used to work for a volume franchise, one of the manufacturers who needs to sell hundreds of thousands of cars a year to remain in business. If you're looking to buy a new car by far and away the best way to get a good discount is to shop around. We used to have insane competition with quite a few other dealers selling the same cars only a few miles away. If you played us off against each other then a lot of the time we would let a car go for cost price or not much more just to get the numbers we needed. Basically the dealerships have to sell X amount of cars per quarter to receive hefty bonuses from the manufacturers. If we were coming up to the end of a quarter and hadn't sold quite enough cars then some people would get cars sold at a loss to us but it meant we'd get the £100K or whatever kickback so it was well worth it. Obv some dealers will be more desperate than others so you really need to be on the phone to as many dealers as you can chipping away at their prices. Remember it's the price to change that's important so don't get all upset with the dealer who only offers you a grand for your Part Exchange. If he's doing you £3K off the new one it's obv a better deal than the dealer who offers you £3500 for it but no discount.

There are often bonuses for flogging particular models, the older they are the more we'd tend to get given to flog them. If a dealer is advertising that he's selling the car at cost you can be pretty sure that he's getting an extra bonus to sell it so you can still get a better deal if you ask. There isn't really any need to haggle to buy a mainstream volume produced car, just get prices off the internet, from car brokers and other dealers then go into your local dealer test drive it let him do the best he can and then pull out your bit of paper with the best price and tell him to beat it or you'll buy it somewhere else. When we bought my GF's car it had a list price of £13500 and we got it for just over £9K cos it had been sitting in a field for a while and the new model was changing in a very slight way that was of no importance to us whatsoever.

Most of the used  cars that we sold we put a margin of £1500 on top of the price we paid for it. It can be a lot more for cars that are harder to shift, coupes, executive cars etc can easily have a £3-£4K margin. This is not all profit obv. The sales dept has to pay the service dept (average of maybe £200) to get it up to scratch and talking of scratches there's normally a few of them that have to be polished out as well (maybe £30-£50). This is fine if you can sell the cars soon after you get them, you can knock off £250 chuck in a set of  carpet mats and everyone's happy. Dealers start getting more desperate if the car sits around for a while. Every month the price of used cars goes down in the guides so if you have a thousand cars sitting on your forecourt every month those cars are worth substantially less. The people who get great deals on used cars in my experience are people who buy cars that haven't been written down yet, ie the sales manager has not yet got off his fat arse to reduce the price of some of his used cars. If he gives you a monkey or whatever off then it saves him 30 seconds paperwork. You will obv get better deals on cars with bigger margins across them. If we got a slow selling luxobarge in with £4K across it and you came in that day and offered to buy it for £1K less then you'd probably get a deal. Some people seemed to expect £1000 off a £3K Ford Fiesta which ain't gonna happen unless it's way overpriced to start with. Again shopping around is the best way to get a deal but it's harder to do with used cars and the deals won't be so great.

Which comes to one of the biggest profit centres a dealership has, the F and I dept. As very rough figures our service dept with dozens of members of staff was making roughly £40K profit a month, the sales dept also with big numbers of staff were making £20Kish (before manufacturer bonuses) and one guy sitting in his office flogging finance and warranties was often making more than the whole sales department. I'm sure you can be an honest decent person and make a load of money as a Finance manager but I've never met one who made big money. The best finance guys we had were earning close to £100K a year but were the biggest bunch of bullshitting rip off merchants I've ever met. I was trained as a Business Manager and did it for a little while but i could never really do the job well in a way which I felt comfortable with. A good business manager has balls of steal and will sit there blatantly lying to their customer while coming across as someone who's some sort of financial adviser who's getting you a great deal.

For example if you buy a used car it may be a good idea to buy an extended warranty. We used to sell a four year warranty for around £800, it used to cost us around £250, which you think might be enough profit for anyone but if you get a real financially illiterate customer you could bump that up to maybe £1200 and include it in his finance deal so that he'll never know how much he paid for it. Mr Clued up Geezer who's been down the bank to ask how much it is for a loan will find that the Business Manager can match or beat that deal, but Mr Never did like Maths at School will find himself paying some extortionate rate of interest. the more interest the BM can charge over base rate the more he gets paid. The salesman will also get a cut out of the BM's profit on his customers deal. Sometimes we would sell a car really cheap but only cos the BM had stacked it so he was pulling £3k out of the deal.

Payment Protection Insurance is another great source of profit. If you get sick, the sack or die the insurance company might pay some of you payments for you. Maybe. We used to get half of whatever was charged so if you're paying £40 a month for your insurance you can feel happy that your BM and salesman had a few beers out of that one. There's also that crap that they sell which is meant to protect the inside and outside of your car Diamondguard or something it is usually called. I've heard of people being charged up to £800 (usually £3-£400) for their car to be protected from their kids dropping an icecream on the seat. It used to cost us £80 from our parts dept (they prob got it for about £50) and we had to pay a cleaner £20 to apply it. A few years ago Scotchguard (sp?) was pulled off the market because they found it may have cancer causing chemicals in it. I'm sure that Diamondguard has got completely different chemicals in it that are perfectly safe for your toddler to sit on.

Basically anything a BM trys to sell you will have a huge profit margin across it and he will always have a special deal on just for today which means it's half price etc etc etc.

My first job in the motor trade was working on Service reception but I got pretty much burnt out from the constant grief that you get doing the job and went on to sales. You'll probably be paying something like £70/£80 an hour for a mechanic to look at you car. Mechanics (technitions) get bonuses which means that they like almost everyone else in the motor trade gets paid more money the more profit they make. In practise this means that most services are done in less that half the time you're charged for. This is not necessarily a bad thing. There are some excellent technitions who do a great job. There are some though who will add on little jobs that are labour intensive and you'll never know if they've been done of not, driveshaft oil seals were a good one. Another example is many mechanics will just get a large syringe to suck out most of your brake fluid and then top it up when it needs to be replaced, rather than doing it properly and spending time bleeding them through. Basically like a lawyer a technition will be looking to charge you as much time as possible. the one thing that I used to hate was Fuel Line Cleaner. We had to charge about £15 a service for fuel line cleaner that was very rarely put in and probably doesn't do anything even if it is put in. Pure profit for doing FA.

I'd better get out for my run now but if anyone has any questions about buying/selling/servicing cars please ask.

[Colchester Kev]

Great info, real eye opening stuff.... Top post !!

[ACE2M]

the world is one big ****ing scam.

nice post

[AndrewT]

A good business manager has balls of steal

This is a fantastic typo, if it is a typo.

[lazaroonie]

so Byron,

any advice on me buying my next "luxobarge" ? (just love that term).

currently a committed (should be) jaguar lover.

[byronkincaid]

lol Andrew yeah that was a typo.

Laz there used to be a (probably mythical motor trade legend) Jaguar BM who charged absolutely everyone 8% flat. You could be the financially clued up person in the world buying a £50K Jag and you could either take his rate or F off down the bank and get a loan. Made a fortune apparently.

I never sold prestige but I would bear in mind what sort of margins those guys put across their metal.

[Acidmouse]

I am currently looking to lease a care, whats our views on it?

[kinboshi]

I work for a website selling new, used and lease/contract hire cars.

Some of the savings that you can get on new cars are massive - especially compared to your local dealer.  It's often the case that you walk into a local dealer, and ask for a discount on a car - you won't get it.  Especially if you're paying cash and they aren't going to make anything from you on the finance side.

Anyway, someone from outside that dealer's region calls, and asks for a discount on the same car, they might well get it.  The dealer considers the local market as 'his' - and therefore he doesn't need to work hard and give out great discounts to keep this business.

On our site we allow dealers and brokers from all over the country enter their prices on the system, so for the same car we might have 5 different prices from 5 dealers.  This gives the customer the choice, and of course the prices tend to be the most competitive. 

At the moment we have an R-Class Mercedes for £36,588 which is a saving of £14,947 from the list price of £51,535!  I'll be very surprised if you can get anything near that if you walk into your local Mercedes dealer.  Yet the car is exactly the same - it's new, UK supplied, with all the same warranties, etc., you get from a dealer - because it comes from a dealer!  The same dealer that won't offer you anywhere near that discount if you walked in to his showroom...

There are also lots of offers on lease/contract hire, which makes a lot of sense for many people - as you get a brand new car, but don't have to fork out for the full cost of the car (and lose the VAT and depreciation from the new cost).  Of course you don't get anything back at the end of the contract (usually 2 or 3 years), but neither do you have to sell the car and fight to get what you think it's worth with a private sale, or get far less than what it's worth from a dealer.

At the end of the day, once you've selected the new car that you want, it's essentially a commodity.  All you should be interested in then is getting it at the lowest cost to you over the lifetime of you owning the car.



PS.  Great post Byron!!

[SuffolkPunch]

I left the motor trade to look after my daughter and to hopefully win a bit of money playing poker just over 2 years ago. My peabrain is almost full up with reverse implied odds, when to fire a second barrel and what time I've got to pick her up from playgroup so before I forget all of this and to stop me from having to go out for a run or losing any more money this afternoon I thought I'd write this which may be of some help the next time some of you buy a car.

I used to work for a volume franchise, one of the manufacturers who needs to sell hundreds of thousands of cars a year to remain in business. If you're looking to buy a new car by far and away the best way to get a good discount is to shop around. We used to have insane competition with quite a few other dealers selling the same cars only a few miles away. If you played us off against each other then a lot of the time we would let a car go for cost price or not much more just to get the numbers we needed. Basically the dealerships have to sell X amount of cars per quarter to receive hefty bonuses from the manufacturers. If we were coming up to the end of a quarter and hadn't sold quite enough cars then some people would get cars sold at a loss to us but it meant we'd get the £100K or whatever kickback so it was well worth it. Obv some dealers will be more desperate than others so you really need to be on the phone to as many dealers as you can chipping away at their prices. Remember it's the price to change that's important so don't get all upset with the dealer who only offers you a grand for your Part Exchange. If he's doing you £3K off the new one it's obv a better deal than the dealer who offers you £3500 for it but no discount.

There are often bonuses for flogging particular models, the older they are the more we'd tend to get given to flog them. If a dealer is advertising that he's selling the car at cost you can be pretty sure that he's getting an extra bonus to sell it so you can still get a better deal if you ask. There isn't really any need to haggle to buy a mainstream volume produced car, just get prices off the internet, from car brokers and other dealers then go into your local dealer test drive it let him do the best he can and then pull out your bit of paper with the best price and tell him to beat it or you'll buy it somewhere else. When we bought my GF's car it had a list price of £13500 and we got it for just over £9K cos it had been sitting in a field for a while and the new model was changing in a very slight way that was of no importance to us whatsoever.

Most of the used  cars that we sold we put a margin of £1500 on top of the price we paid for it. It can be a lot more for cars that are harder to shift, coupes, executive cars etc can easily have a £3-£4K margin. This is not all profit obv. The sales dept has to pay the service dept (average of maybe £200) to get it up to scratch and talking of scratches there's normally a few of them that have to be polished out as well (maybe £30-£50). This is fine if you can sell the cars soon after you get them, you can knock off £250 chuck in a set of  carpet mats and everyone's happy. Dealers start getting more desperate if the car sits around for a while. Every month the price of used cars goes down in the guides so if you have a thousand cars sitting on your forecourt every month those cars are worth substantially less. The people who get great deals on used cars in my experience are people who buy cars that haven't been written down yet, ie the sales manager has not yet got off his fat arse to reduce the price of some of his used cars. If he gives you a monkey or whatever off then it saves him 30 seconds paperwork. You will obv get better deals on cars with bigger margins across them. If we got a slow selling luxobarge in with £4K across it and you came in that day and offered to buy it for £1K less then you'd probably get a deal. Some people seemed to expect £1000 off a £3K Ford Fiesta which ain't gonna happen unless it's way overpriced to start with. Again shopping around is the best way to get a deal but it's harder to do with used cars and the deals won't be so great.

Which comes to one of the biggest profit centres a dealership has, the F and I dept. As very rough figures our service dept with dozens of members of staff was making roughly £40K profit a month, the sales dept also with big numbers of staff were making £20Kish (before manufacturer bonuses) and one guy sitting in his office flogging finance and warranties was often making more than the whole sales department. I'm sure you can be an honest decent person and make a load of money as a Finance manager but I've never met one who made big money. The best finance guys we had were earning close to £100K a year but were the biggest bunch of bullshitting rip off merchants I've ever met. I was trained as a Business Manager and did it for a little while but i could never really do the job well in a way which I felt comfortable with. A good business manager has balls of steal and will sit there blatantly lying to their customer while coming across as someone who's some sort of financial adviser who's getting you a great deal.

For example if you buy a used car it may be a good idea to buy an extended warranty. We used to sell a four year warranty for around £800, it used to cost us around £250, which you think might be enough profit for anyone but if you get a real financially illiterate customer you could bump that up to maybe £1200 and include it in his finance deal so that he'll never know how much he paid for it. Mr Clued up Geezer who's been down the bank to ask how much it is for a loan will find that the Business Manager can match or beat that deal, but Mr Never did like Maths at School will find himself paying some extortionate rate of interest. the more interest the BM can charge over base rate the more he gets paid. The salesman will also get a cut out of the BM's profit on his customers deal. Sometimes we would sell a car really cheap but only cos the BM had stacked it so he was pulling £3k out of the deal.

Payment Protection Insurance is another great source of profit. If you get sick, the sack or die the insurance company might pay some of you payments for you. Maybe. We used to get half of whatever was charged so if you're paying £40 a month for your insurance you can feel happy that your BM and salesman had a few beers out of that one. There's also that crap that they sell which is meant to protect the inside and outside of your car Diamondguard or something it is usually called. I've heard of people being charged up to £800 (usually £3-£400) for their car to be protected from their kids dropping an icecream on the seat. It used to cost us £80 from our parts dept (they prob got it for about £50) and we had to pay a cleaner £20 to apply it. A few years ago Scotchguard (sp?) was pulled off the market because they found it may have cancer causing chemicals in it. I'm sure that Diamondguard has got completely different chemicals in it that are perfectly safe for your toddler to sit on.

Basically anything a BM trys to sell you will have a huge profit margin across it and he will always have a special deal on just for today which means it's half price etc etc etc.

My first job in the motor trade was working on Service reception but I got pretty much burnt out from the constant grief that you get doing the job and went on to sales. You'll probably be paying something like £70/£80 an hour for a mechanic to look at you car. Mechanics (technitions) get bonuses which means that they like almost everyone else in the motor trade gets paid more money the more profit they make. In practise this means that most services are done in less that half the time you're charged for. This is not necessarily a bad thing. There are some excellent technitions who do a great job. There are some though who will add on little jobs that are labour intensive and you'll never know if they've been done of not, driveshaft oil seals were a good one. Another example is many mechanics will just get a large syringe to suck out most of your brake fluid and then top it up when it needs to be replaced, rather than doing it properly and spending time bleeding them through. Basically like a lawyer a technition will be looking to charge you as much time as possible. the one thing that I used to hate was Fuel Line Cleaner. We had to charge about £15 a service for fuel line cleaner that was very rarely put in and probably doesn't do anything even if it is put in. Pure profit for doing FA.

I'd better get out for my run now but if anyone has any questions about buying/selling/servicing cars please ask.

What is a driveshaft oil seal??

Seriously, very good post.

[MPOWER]

I left the motor trade to look after my daughter and to hopefully win a bit of money playing poker just over 2 years ago. My peabrain is almost full up with reverse implied odds, when to fire a second barrel and what time I've got to pick her up from playgroup so before I forget all of this and to stop me from having to go out for a run or losing any more money this afternoon I thought I'd write this which may be of some help the next time some of you buy a car.

I used to work for a volume franchise, one of the manufacturers who needs to sell hundreds of thousands of cars a year to remain in business. If you're looking to buy a new car by far and away the best way to get a good discount is to shop around. We used to have insane competition with quite a few other dealers selling the same cars only a few miles away. If you played us off against each other then a lot of the time we would let a car go for cost price or not much more just to get the numbers we needed. Basically the dealerships have to sell X amount of cars per quarter to receive hefty bonuses from the manufacturers. If we were coming up to the end of a quarter and hadn't sold quite enough cars then some people would get cars sold at a loss to us but it meant we'd get the £100K or whatever kickback so it was well worth it. Obv some dealers will be more desperate than others so you really need to be on the phone to as many dealers as you can chipping away at their prices. Remember it's the price to change that's important so don't get all upset with the dealer who only offers you a grand for your Part Exchange. If he's doing you £3K off the new one it's obv a better deal than the dealer who offers you £3500 for it but no discount.

There are often bonuses for flogging particular models, the older they are the more we'd tend to get given to flog them. If a dealer is advertising that he's selling the car at cost you can be pretty sure that he's getting an extra bonus to sell it so you can still get a better deal if you ask. There isn't really any need to haggle to buy a mainstream volume produced car, just get prices off the internet, from car brokers and other dealers then go into your local dealer test drive it let him do the best he can and then pull out your bit of paper with the best price and tell him to beat it or you'll buy it somewhere else. When we bought my GF's car it had a list price of £13500 and we got it for just over £9K cos it had been sitting in a field for a while and the new model was changing in a very slight way that was of no importance to us whatsoever.

Most of the used  cars that we sold we put a margin of £1500 on top of the price we paid for it. It can be a lot more for cars that are harder to shift, coupes, executive cars etc can easily have a £3-£4K margin. This is not all profit obv. The sales dept has to pay the service dept (average of maybe £200) to get it up to scratch and talking of scratches there's normally a few of them that have to be polished out as well (maybe £30-£50). This is fine if you can sell the cars soon after you get them, you can knock off £250 chuck in a set of  carpet mats and everyone's happy. Dealers start getting more desperate if the car sits around for a while. Every month the price of used cars goes down in the guides so if you have a thousand cars sitting on your forecourt every month those cars are worth substantially less. The people who get great deals on used cars in my experience are people who buy cars that haven't been written down yet, ie the sales manager has not yet got off his fat arse to reduce the price of some of his used cars. If he gives you a monkey or whatever off then it saves him 30 seconds paperwork. You will obv get better deals on cars with bigger margins across them. If we got a slow selling luxobarge in with £4K across it and you came in that day and offered to buy it for £1K less then you'd probably get a deal. Some people seemed to expect £1000 off a £3K Ford Fiesta which ain't gonna happen unless it's way overpriced to start with. Again shopping around is the best way to get a deal but it's harder to do with used cars and the deals won't be so great.

Which comes to one of the biggest profit centres a dealership has, the F and I dept. As very rough figures our service dept with dozens of members of staff was making roughly £40K profit a month, the sales dept also with big numbers of staff were making £20Kish (before manufacturer bonuses) and one guy sitting in his office flogging finance and warranties was often making more than the whole sales department. I'm sure you can be an honest decent person and make a load of money as a Finance manager but I've never met one who made big money. The best finance guys we had were earning close to £100K a year but were the biggest bunch of bullshitting rip off merchants I've ever met. I was trained as a Business Manager and did it for a little while but i could never really do the job well in a way which I felt comfortable with. A good business manager has balls of steal and will sit there blatantly lying to their customer while coming across as someone who's some sort of financial adviser who's getting you a great deal.

For example if you buy a used car it may be a good idea to buy an extended warranty. We used to sell a four year warranty for around £800, it used to cost us around £250, which you think might be enough profit for anyone but if you get a real financially illiterate customer you could bump that up to maybe £1200 and include it in his finance deal so that he'll never know how much he paid for it. Mr Clued up Geezer who's been down the bank to ask how much it is for a loan will find that the Business Manager can match or beat that deal, but Mr Never did like Maths at School will find himself paying some extortionate rate of interest. the more interest the BM can charge over base rate the more he gets paid. The salesman will also get a cut out of the BM's profit on his customers deal. Sometimes we would sell a car really cheap but only cos the BM had stacked it so he was pulling £3k out of the deal.

Payment Protection Insurance is another great source of profit. If you get sick, the sack or die the insurance company might pay some of you payments for you. Maybe. We used to get half of whatever was charged so if you're paying £40 a month for your insurance you can feel happy that your BM and salesman had a few beers out of that one. There's also that crap that they sell which is meant to protect the inside and outside of your car Diamondguard or something it is usually called. I've heard of people being charged up to £800 (usually £3-£400) for their car to be protected from their kids dropping an icecream on the seat. It used to cost us £80 from our parts dept (they prob got it for about £50) and we had to pay a cleaner £20 to apply it. A few years ago Scotchguard (sp?) was pulled off the market because they found it may have cancer causing chemicals in it. I'm sure that Diamondguard has got completely different chemicals in it that are perfectly safe for your toddler to sit on.

Basically anything a BM trys to sell you will have a huge profit margin across it and he will always have a special deal on just for today which means it's half price etc etc etc.

My first job in the motor trade was working on Service reception but I got pretty much burnt out from the constant grief that you get doing the job and went on to sales. You'll probably be paying something like £70/£80 an hour for a mechanic to look at you car. Mechanics (technitions) get bonuses which means that they like almost everyone else in the motor trade gets paid more money the more profit they make. In practise this means that most services are done in less that half the time you're charged for. This is not necessarily a bad thing. There are some excellent technitions who do a great job. There are some though who will add on little jobs that are labour intensive and you'll never know if they've been done of not, driveshaft oil seals were a good one. Another example is many mechanics will just get a large syringe to suck out most of your brake fluid and then top it up when it needs to be replaced, rather than doing it properly and spending time bleeding them through. Basically like a lawyer a technition will be looking to charge you as much time as possible. the one thing that I used to hate was Fuel Line Cleaner. We had to charge about £15 a service for fuel line cleaner that was very rarely put in and probably doesn't do anything even if it is put in. Pure profit for doing FA.

I'd better get out for my run now but if anyone has any questions about buying/selling/servicing cars please ask.

 

Regards

M

[thetank]

 

Cracking stuff.

[byronkincaid]

Acid

I don't know much about the company car sales. they just used to be an annoyance to us wanting test drives and stuff when we weren't allowed to sell them a car but had to deal with them! At best our company car guy got a deal but usually they just wanted to test drive a few so they could tell their company which car they wanted. i think Personal contract Plans (PCPs) which we were greatly incentivised to sell are a far better deal for the car manufacturers than the customers. They are designed to get as many people as possible into a 3 year buying cycle. There are different ways of leasing cars for companies, perhaps someone else can advise you better.

kinboshi

When you are talking about local markets and not giving discounts you must be talking more about the prestige stuff. The only cars we never discounted where some highly desirable convertables with a 10 month waiting list but only for like 2 or 3 months when they first came out, after that it was just the same as anything else.

SuffolkPunch

I would imagine that a driveshaft oil seal sits between the driveshaft and the gearbox. In our place it started when someone worked out a way to fit them in less than a quarter of the book time, for a while they were fitting them under warranty when perhaps they didn't need changing but after a while I think it got to the stage where they weren't even bothering to fit a new one just charging the time for it. It would be almost impossible for someone to check if the work had been done or not.

[booder]

oi acid...........does that fat kid get tired?  i have been watching for 20 minutes and he is still going   

[lazaroonie]

I work for a website selling new, used and lease/contract hire cars.

Ok then, whats your best price on a new RangeRover Sport Diesel. HSE Spec preferable. Oh, and more importantly, whats the availability ?


cheers

[MPOWER]

Great info, real eye opening stuff.... Top post !!

Kev the moon is made of cheese


Regards

M