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Old 10th August 2004, 18:59   #1
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Default GM cars, price details, & How do dealers make money?

Recently our company employees had a offer made by a GM dealer in Hyderabad. As usual they attached a XL sheet showing the discounts etc. But they goofed up by forgetting to delete the sheet that showed their margins and price breakups.  
If this sheet is to be believed then how do these dealers make money from such low margins ??  
-Chaxy

Last edited by Rehaan : 3rd May 2006 at 08:36.
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Old 10th August 2004, 20:09   #2
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hmmmm..
hey chaxy gm dealer made an offer???
which company if you dont mind me asking
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Old 10th August 2004, 22:18   #3
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Aadix, Its the usual offer that all the dealers make. free insurance, accessories etc..
Company is GE-ibc (used to be satyam-ge) in begumpet on way to chiran fort..
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Old 10th August 2004, 23:14   #4
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Quote:
Originally Posted by [b
Quote[/b] (chaxy @ Aug. 10 2004,17:29)]the sheet that showed their margins and price breakups. *
If this sheet is to be believed then how do these dealers make money from such low margins ?? *
Hey Chaxy.
Your XL sheet is more or less correct.
I got a cash discount of 35000/- for my Optra 1.8 LT.
Now this is the area where they can really bargain with the customer. If you see the dealer's profit margin column, it's 39100/-. This may vary from place to place but the difference wont be much. Unless there is some offer from the dealers you know the total price of the car (in my case for example) 987644/-. You have to add insurance and road tax after that which would be your on road cost of the car.
Let's say there are no offers kinda situation. You go to the showroom, have a test drive, like the car and start talking about the cost. Salesman will tell you 987644/- is the ex- showroom price. you calculate road tax and insurance and add to that showroom price... and suddenly you realise that you're actually paying much more than the company quoted price. So the only area where you can negotiate is the ex-showroom cost. Because your road tax and insurance remain unchanged.
If the particular car has a great demand, then dealer wont offer you more than couple of thousand. For him it's making little less money than otherwise he would be. But his invesment amount is back with him and much faster than he had anticipated. In my case I had asked for a black which they had in stock. Now, black is not exactly a popular colour in this country. So when I asked them for discount.. very promptly they offerd me 12000/-. I told them that I'm not interested in that amount and not interested in buying that car also.
For them a slow moving black car sitting in their stock and not moving plus blocking their capital also. So they'd rather make less money and clear their stock. Exactly after a day they called me and offered me 22000/-. Now there is no logic to this offer. However much they can make from that 39100/- is welcome.
Since I knew this dealer margin game, I told them 35000/-. They got back to me within an hour and accepted the figure.
For them it was roughly 5500/- profit from a car which wasn't probably moving because of the colour.
Your XL sheet also has a freight and insurance cost of 5925/- for each car. They order cars in bulk and do get a hefty discount from insurance also. This could be a huge amount depending on the car's cost and number they're ordering. This is a substantial amount which they pocket.
In your case if they get a bulk booking, they're more than happy cause their stock is clearing that much faster.
Also don't forget one more area where they make money... known as authorised service centre.
Hope you got the picture.
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Old 10th August 2004, 23:22   #5
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Quote:
Originally Posted by [b
Quote[/b] (Rudra Sen @ Aug. 10 2004,21:44)]Also don't forget one more area where they make money... known as authorised service centre.
Hope you got the picture.
right abt this rudra
abt two days back, one of my galpals has a minor accident with her santro, ie a scooter bumped into her santro on a signal
coz the car came back from a major repair just a week back, she knew her parents wouldnt accept it wasnt her fault
both of us went to the hyundai service station

guess what they quoted for a minor dent removal and paint job: rs 8000!!!!!!! and said to leave the car for two days!

took the car to our guy who does for all our company vehicles
he did it in 7 hrs, far better job than the dealer, guess the cost rs:1800!!!!!!!
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Old 11th August 2004, 00:43   #6
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Hey Chaxy,

This bit of information is worth its weight in G-O-L-D! Thanks for sharing it with us.

Quote:
Originally Posted by [b
Quote[/b] ]If this sheet is to be believed then how do these dealers make money from such low margins ??
From your excel sheet, its about 4 to 5 % per car - A very very reasonable margin on a high-ticket/value item. Pretty much the norm within similar industries.

Buttttttttttttttttt the sale is only half the story. The real money comes in from:

1. Rs. 22,000 net from the Opel Corsa 1.4 GL. Did you know more cars sell without discounts bcoz of buyer ignorance?

2. Rs. 750 upwards - Commissions from the insurance company. You generally get insurance from the same dealer who sold you your car.

3. 1.5 % of financed amount - Commission from the finance company. Most people also get finance from the dealership itself. Thus if you avail of Rs. 400,000 financing for the Corsa, the dealer nets Rs. 6000 straight away.

4. Rs. 3000 upwards - Income from Thana registrations (In bombay dealerships). Note that this is taken in cash and thus tax-free.

5. $$$$ from over-priced accessories. Bombay dealerships charge about 2 - 3 grand for regular sunfilm, 15 grand for cd changers, 3 grand for wheel caps, 30 - 40 grand for leather seats etc. etc. HUGE source of profits.

6. Profits from sale of extended warranties.

7. Profits from the service centers. In a majority of the cases, service centers contribute more to the bank account than the dealerships. This case has strengthened with extended warranties, where you have to service your car at the authorised service center for extended coverage.

An ideal customer would contribute almost 50,000 to the dealerships kitty...and this is before he starts visiting the service station. Not bad for a 4.5 lac car, eh?

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Old 11th August 2004, 03:24   #7
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hey GTO
i know what u mean .....
i had a price list from maruti for their alto lx .......
man the prices were like so damn expensive .......
a car perume like poppy cost around 1100 and so did the beads on the seat .....
man damn .......
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Old 11th August 2004, 12:04   #8
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given in today's deccan chronicle
gm india has launched a limited edition called "design edition" of 150 cars for the optra in two colours of:"shimmering black and meadow gold" ex showroom delhi price is :rs10,49,566
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Old 11th August 2004, 13:49   #9
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Excellent information & discussion !

Thanks Chaxy, GTO.

Tarun
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Old 11th August 2004, 15:10   #10
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Thanks everyone!! That was really educating for me and others who plan to buy a car.
Moreover, The service center of the dealers are like money minting machines. Firstly the company sells spares with a good margin and the dealer adds exotic costs like labor, consumables etc etc..
Also the free service that these companies promise are not so free after all...
-Chaxy
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Old 2nd May 2006, 06:55   #11
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Exclamation How Car Dealers make money ?

If cars are zooming out of showrooms, are car dealers getting richer? No, say most dealers.

According to dealers, car dealer margins in other markets are in the range of 7 or 8 per cent. But in India it is just 2 per cent. This means that for every car that sells for Rs 5 lakh, the dealer makes just Rs 10,000.

Factor in costs like storage, showroom maintenance, salaries and other overheads and you wonder whether the dealers earn enough to make a living. So where does the money come from?

But read the fine print on any car ad. "Accessories shown are not part of the standard equipment" it proclaims sternly.

But most of us never ever buy the accessories from the showrooms, Right ? We simply prefer other accessory shops.

So how are they really making money ?

Seems to be like from the spares & services...
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Old 2nd May 2006, 07:56   #12
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Its more true in the US where in a big city like Chicago, you have 20 Honda dealers to choose from if you want to buy a Civic. Massive competetion means they are literally giving away cars.

They make all their money in service and parts.
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Old 2nd May 2006, 10:42   #13
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Dealerships around the world make most of their $$$ in after-sales service, loan and insurance commissions, accessories and used cars.

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Old 3rd May 2006, 08:38   #14
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Old 3rd May 2006, 11:45   #15
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One word, spare parts.
A part which the company gives to the dealer for rs 20000, is sold to customer for 48000.
Case in point. Original Bosch alternator(Skoda) is available in open market for 18000rs. Now if you go for the dealer price, they would have got it for 15000rs. The cost passed on the user is 48000rs.
Also look at labour charges. They make a lot of money there.
Consumables : They buy oil in bulk. So it costs them around 60% of what the user pays

Every time a car is sold, its more than just the margin, its the whole contract. Why do companies void warranty if service is not done from Authorized dealers? The reason is that the dealers will revolt if such a thing is ever done.

Now come to think of it what is a service. Change the oil, attach the computer to see any oroblems(99% no problems), and clean air filter if required and then wash the car. Bill 700rs for just the labour. Heck they even make money on free services due to consumables.

Spare part pricing is profitable even in economy cars. A tata indica glow plug, which is actually a glorified heater costs close to 300rs. check in open market, glow plugs of similar quality cost 120rs or so. The dealers get them for around 70-80rs/plug.
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