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Old 8th August 2005, 15:21   #1
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Default Profit on car sales

The salesman of dealership showroom say that they have only a margin of Rs.5000/- on sales of a hatchback car. This I had heard from different dealers dealing with different manufacturers like Hyundai/Maruti/Fiat etc.

Is this true?

I really wonder how come they survive with that big showroom on the main areas, if the profit level is so low
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Old 8th August 2005, 16:11   #2
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Quote:
Originally Posted by Surprise
The salesman of dealership showroom say that they have only a margin of Rs.5000/- on sales of a hatchback car. This I had heard from different dealers dealing with different manufacturers like Hyundai/Maruti/Fiat etc.

Is this true?

I really wonder how come they survive with that big showroom on the main areas, if the profit level is so low

add to that the dealer discounts....roughly 10 k for a normal hatch........and then even they are left with enough money to pay that brigade of salesmen and commerce people...

i think the amount should be of the tune od 20 k....though it may be lesser for M 800.....

but the firm is surely ripping money....a sudden 16 k price cut shpws that all this amount was in profit....and even after reducing prices and launching swift for so called " low" price... ( compare interirs with the price)...the profit jumped bt 33%.....correct me if i am wrong......
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Old 8th August 2005, 16:11   #3
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This is 100% true. They have about 2% profit margin for each car sold. (for 5L car they make a profit of 10K). As far as, how they survive, there are acces shops at almost each dealer location. That is the main profit centre for them.
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Old 8th August 2005, 16:13   #4
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Default Liar..Liar

Surprise,

Before I bought my Swift, I had made a small advance towards buying a 1.3 Flair Ikon (on the promise that I will confirm after the Swift is launched - got the deposit back, obviously ).
This Ford guy had been after me for a while and I also had some jaan-pehchaan at Ford plant in Chennai. So I was all out squeezing these geezers to cough-up more and more discounts (had managed 84,000 buck off the sticker prize including finance kick-back!).
It is then that I learnt that even after such discounts, the dealer was raking-in close to 10Gs - The dealership guy also pointed-out that max monies come-in at the time of ASS.

Dunno bout the hatchbacks but should be in-line.

Cheers
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Old 8th August 2005, 16:58   #5
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Quote:
Originally Posted by Xsailor
Surprise,

had managed 84,000 buck off the sticker prize including finance kick-back
Cheers


mannn...84 k is crazy for a 5 l car.....i think i should inform my friend about this....his dad' some big shot in the state govt. and knows jagdish khattar well.......m sure he can get Zxi for Lxi price after hearin this...n mayb i too and that too with no waiting period...
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Old 8th August 2005, 17:05   #6
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Default Re: Profit on car sales

Well... a Maruti dealership in Bangalore sells 10 cars per day (told by a dealer)... so even at Rs. 5K, it becomes Rs. 12,00,000... (24 days * 10 cars * 5K)

this is only from new car sales... excluding accessories that they would sell...

now take the costs : 10 staff < Rs. 2,00,000 per month.... showroom cost 2000 sft @ Rs. 100 per sft = Rs 2,00,000 ... add more costs , but you are not going to get close to Rs. 12L

service centers are profit centers in themselves...


so showroom gives you good enough profits for a standalone business...

Net result : Squeeze the last grand out of those dealers and do not be sympathetic
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Old 8th August 2005, 17:10   #7
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Quote:
Originally Posted by BuRnT RuBbEr

mannn...84 k is crazy for a 5 l car.....i think i should inform my friend about this....his dad' some big shot in the state govt. and knows jagdish khattar well.......m sure he can get Zxi for Lxi price after hearin this...n mayb i too and that too with no waiting period...
Sorry bout going a bit off-topic but..
@burntrubber
It is then, after the 84k discount, that I went for a test drive and found one too many build-related deficiencies in the interiors. I pointed this out to the showroom guy and guess what the reply was - "You get what you pay for".
Just that one statement pissed me off big time.
BTW, thus 84Gs include Loyalty and Corporate discounts.

Cheers
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Old 8th August 2005, 18:00   #8
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Quote:
Originally Posted by Xsailor
I went for a test drive and found one too many Build related deficiences in the interiors. I pointed this out to the showroom guy and guess what the reply was - "You get what you pay for".

were these deficiences in your car..i mean the one u were probably going to get... or was it a general test drive???....

flair build quality is low, no doubt....and it is the case with swift as well ( it' my personal opinion, u may or may not agree to this)...
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Old 8th August 2005, 18:22   #9
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Quote:
Originally Posted by Surprise
The salesman of dealership showroom say that they have only a margin of Rs.5000/- on sales of a hatchback car. This I had heard from different dealers dealing with different manufacturers like Hyundai/Maruti/Fiat etc.

Is this true?

I really wonder how come they survive with that big showroom on the main areas, if the profit level is so low
Well, most of their income is from A/S/S, spares and accessories.. That is where the money comes from.. Also the manufacturer provides the dealers with bonus if the dealer achieves particular targets.. Also a bulk of money comes from the so called 0% APR car-loans that most people take from the dealer.. The banks also give some commission to the dealership if they sell the loans to the customer.. The insurance companies also share profits with the car dealers.. So while it is true that for selling a vehicle a dealer might earn only 2-5 %. The consumer ends up shelling out a lot more.. As if that alone were not enough, there is also the road-tax, toll-taxes, parking-fee, etc that you pay to the government..

Quote:
Originally Posted by Xsailor
I went for a test drive and found one too many build-related deficiencies in the interiors. I pointed this out to the showroom guy and guess what the reply was - "You get what you pay for".
A lot of people who bargain hard are cheated by being dumped the test-vehicles.. Make sure that doesn't happen to you..

Manish
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Old 8th August 2005, 21:12   #10
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@burntrubber
The car was a test drive car but the same issues existed on the showroom "show-off" car too.
Yep, I agree to an extent on the built quality of the Swift as well.
I'll stop hear as I have gone off-topic enough!!

Cheers
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Old 8th August 2005, 21:17   #11
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Quote:
Originally Posted by Xsailor
(had managed 84,000 buck off the sticker prize including finance kick-back!).
It is then that I learnt that even after such discounts, the dealer was raking-in close to 10Gs -
Are you saying that if some bholu had paid full sticker price for the Flair, the dealer would have made 94K profit on that transaction.
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Old 8th August 2005, 22:42   #12
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I have an aquaintence who owns a Maruti dealership ... he was giving me a total for 1.1 L discount on Baleno ( this is around 2 months back) ...this included Finance Discount , Coporate Discount etc. on maximum loan ...
I asked him the same question ....how much do you still make after giving me the Max. discount possible ... and he said 5 K . This 5 K according to him are the operational cost involved i.e salary , rent of the premises and also a small profit ....
According to him ... on an average, they usually make 10 - 15 K profit on every Baleno sold ...

The proft increases when a new model or a new version of an old car in launched ....
He did mention that Baleno was a relatively diffcult car to sell ...and that their profits on other models are generally higher ... not in terms of the amount of money they make but in trms of the profit as a percentage of the car price ...

also ... as has been said here .... he mentioned that A/S/S bring in reallly good money as well as the margins ...especially the Labour Charges ....

This was straight from the Horses mouth ....Hope it hepls all the get a decent idea of what goes on ...
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Old 8th August 2005, 23:10   #13
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Quote:
Originally Posted by metallica
I have an aquaintence who owns a Maruti dealership ...

ahaan....which one???.... maybe u can help me around with that longggg waiting list
pm me the name of the dealership if u please
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Old 8th August 2005, 23:16   #14
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Quote:
Originally Posted by man23ish
Well, most of their income is from A/S/S, spares and accessories.. That is where the money comes from.. Also the manufacturer provides the dealers with bonus if the dealer achieves particular targets.. Also a bulk of money comes from the so called 0% APR car-loans that most people take from the dealer.. The banks also give some commission to the dealership if they sell the loans to the customer.. The insurance companies also share profits with the car dealers.. So while it is true that for selling a vehicle a dealer might earn only 2-5 %. The consumer ends up shelling out a lot more.. As if that alone were not enough, there is also the road-tax, toll-taxes, parking-fee, etc that you pay to the government..
Along the same lines, now car makers have found another way of making money by opening true-value dealerships and giving exchange offer.. This is nothing but day-light robbery by auto-dealers.. Dude, i agree that the dealers don't get much by selling a brand new car.. Its the service and other things that you pay the premium for..
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Old 9th August 2005, 02:04   #15
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I think on some models..like newly launched ones..they make close to 10% however otherwise it should be more closer to 5%.


I don't think ..the work on less then 5% as a general rule though some case-by case exception would also exist based on market dynamics and company push.

Not to say support business gets bigger mullah
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