When I worked at a large Oldsmobile and Honda dealer (97-2001), the order of the departments in terms of revenue/profit was
1. Service Department 2. Used cars 3. F&I 4. New cars 5. Body shop Donald H. Snook > On Jun 16, 2022, at 3:41 PM, Kaleb Striplin <ka...@striplin.net> wrote: > > Warranties are a 3rd party product that the dealer sells. It’s a huge profit > center for them. There are basically 2 sides of a dealership. The fixed ops > side which is parts and service, and the variable ops side which is sales. In > a car deal, it is a 3 legged stool basically the dealer makes money on. First > is the gross on the car. Next is what they will make on your trade. And > finally is F&I. This is when you are in the box after negotiating the price > and they sign the paperwork. This is really just another sales session where > they sell you aftermarket’s and warranties. This is also where they make most > of their money if they are not making all that much on the front end. Also, > they make money on the financing. Let’s say they hang your paper at a local > credit union, bank, or even a national lender. That lender comes back at 3% > on the deal and they allow a 2 point markup. Dealer can then sell it to you > at anywhere from 3-5%. So if dealers signs you at 5% they are making 2 on > your loan. Also depending on the situation if you are a prime customer > different lenders may also pay the dealer a fixed amount to send them the > deal which the F&I manager typically pockets. If you are subprime, the dealer > might actually have to pay the lender a fee to get the deal bought. That’s > why you might see cars listed for x amount but when somebody with low credit > wants to buy it, not only are they going to pay a higher interest rate they > also raise the price of the car in order to cover the fee. > > In other words, there is a lot involved in a car dealership and a lot of > crooked stuff happens. Even if the dealer is not crooked, they are making > money every step of the way. > > In normal time, a dealer would gross maybe $1500 on a used car. On new > sometimes they didn’t make anything except the hold back, which is a fixed > among the OEM pays the dealer per car sold. Sometimes they might make $400. > Now days the average gross is $5-6k in the front end, not including the back > end gross which could be another $2k or more. Some of these stores are doing > over a million a month in gross, not even counting fixed ops. > > Sent from my iPhone > >> On Jun 16, 2022, at 1:53 PM, Donald Snook via Mercedes >> <mercedes@okiebenz.com> wrote: >> >> I imagine most people on here wouldn’t buy an extended warranty. And I have >> never bought one before. But, back in September I decided I needed an SUV. >> We went on a family vacation and taking the dog, kids, stuff, etc we didn’t >> have much room in my car. >> >> I bought a 2014 Lexus GX 460. It’s not the biggest SUV, but it is still full >> size and three rows. I bought it with only 39,000 miles from the local BMW >> dealer. They offered to sell me an extended warranty and I immediately said >> no. Then, I wondered what crazy number they were going to quote me. They >> said $2000 for 4 years and 48,000 miles — on top of the miles it already >> had. I started thinking with an 8 year old vehicle things like an >> alternator or a starter or power window motors are going to fail. None of >> those are outrageous, but a few repairs here and there and it’s not hard to >> get to $2000. This is the zero deductible top of the line coverage. >> >> I got an oil change last week and they called me and said the timing cover >> is leaking oil and said $3000 to fix. BUT, I had the warranty. They >> covered it. I watched the video on how to do it. ALL the stuff in front has >> to come off. It’s a huge job. >> >> I picked up my car at lunch and it’s all done and it cost me nothing. I only >> mention this because it is so rare that a car extended warranty (other than >> CPO) actually works out. >> >> Donald H. Snook >> >> >> _______________________________________ >> http://www.okiebenz.com >> >> To search list archives http://www.okiebenz.com/archive/ >> >> To Unsubscribe or change delivery options go to: >> http://mail.okiebenz.com/mailman/listinfo/mercedes_okiebenz.com >> > > > _______________________________________ http://www.okiebenz.com To search list archives http://www.okiebenz.com/archive/ To Unsubscribe or change delivery options go to: http://mail.okiebenz.com/mailman/listinfo/mercedes_okiebenz.com
