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Anyone notice the "universal branding" of car dealerships today? They all look alike, as in a BMW dealer in NY should be identical to one in Texas regardless of how profitable they are or how many cars they sell. This crushed the small town dealerships (even smaller Harley Davidson dealers) that were being forced to remodel to look like a "corporate store model!"
If the manufacturer wants the store to look a certain way, they will typically foot all of a large portion of the bill for the remodel.
They give $59,000. They spend $2500 on cleanup, inspections, and BMW certifications - it's a guess, but somewhere around there. That's $61,500. They list it at $69,995, and the buyer negotiates them down to $67,500. The salesman makes 12% on the profit of the sale, so the profit to the dealership is $5,280. That's an 8% profit margin. If most businesses ran on an 8% profit margin, they would be a colossal failure. Yet somehow, car dealerships are expected to run on that, or less.
They may also have to carry it for months before it sells. Most individuals cannot afford to do that. They also have the cost of money that they have to invest. You also need to factor in marketing, rent, utilities, insurance, receptionist, other administrative people, and all of the other costs of maintaining the place where the car will be sold. A portion of those costs must be absorbed by the sale before you get to look at profit.
Does the salesman really make 12% ($7800)? That is surprising. If they sell just two cars a month, they are making a very nice living. I would expect a salesman to make more than 2 sales per month. If they average just four cars a month they make almost $400,000?
Does the salesman really make 12% ($7800)? That is surprising. If they sell just two cars a month, they are making a very nice living. I would expect a salesman to make more than 2 sales per month. If they average just four cars a month they make almost $400,000?
12% on the profit on the sale - that's what it was when I worked at dealerships. Not on the overall purchase price, but on the profit to the dealership. So in my example it would be 12% of $6,000. $6,000 is a pretty lofty figure for profit on a car, incidentally.
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