Car Buying. There has got to be a better way, I wouldn’t walk into a business meeting where a full 25% of my income for the next 72 months is going to be allocated without some type a mentor that has my best interest at heart. If I didn’t have a mentor at least I would educate myself, but every day across America that is exactly what people do they walk into a trap. The Dealership does not have your best interest at heart, they are there to make money whether that is negotiating a lopsided deal, selling you warranties you don’t need, or even after market items that will literally void your manufacturers warranty. Now I don’t think all dealerships are evil but they do have a job to do and that job is to extract as much of your hard earned money as they can so they can stay in business.
I recently (9 Sept 2020) walked into a dealership here in town. I had an appointment to look at a few used cars that this dealership had. As I stood in front of there multi-million dollar building standing among literally millions of dollars in inventory and listening to the Salesman talk about how the owner had flown the sales team on his private jet (Cessna Citation) to the coast for a ball game last year. I wondered how could they make so much money after all they repeatedly told me that on used cars they typically make only $2,000 and an even smaller mark up on new vehicles. So how can they lease a multi-million dollar building, pay for all there employees and even fly there team on a private jet. The answer is extracting as much money as they can through multiple avenues.
That dealership couldn’t afford the lease for one month on there building with the money they collect from FRONT END. The front end is the money they collect on the price of the car. It is fairly simple to know what the dealership is paying for the car. There is the invoice which most dealers will show you, plus they will get there hold back from the manufacturer. This averages about 3%. So on a very good car deal they may make $3,000. That won’t pay for the jetfuel to the coast. So what gives where is the big money? Just like any good business they have multiple streams of income. Selling cars, Selling accessories, Selling Warranties, Servicing Vehicles, Repairing Vehicles, and Financing Vehicles.
We will go over some finer points in my next blog for now be safe and educate yourself. If it makes you anxious even thinking about going to the Dealership we are always here to help.