What else do you want to know about the inner workings of a car dealership? Let me know and we'll be sure to cover it in the near future. Thanks for watching.
Can you explain the factoring loan process..the commercial finance side of business.. commissions.. vehicle transfers to different dealers..payback timings etc..
Youre right because i assumed i was getting my truck for 9,000 i paid 1500 down after taxes it was 8100 left i have made 5 payments well then i noticed my balance never moved. I called the fiance company.. Well he said my interest is 26%ARP. So im not paying 8100 im paying 14,000. I was wandering if there is another route i can go in that i want have to pay 14,000. For a vehicle i was told i would only owe 8,000 and they never said anything but that but what they do is put it in the contract. So they sell it to u for one price but the contract that you esign has something else. ThankYou so much and God bless you!❤🙌🙏
This explains a lot. I haven’t been in a dealership in 8 years. I had heard they make money off the loans but guess I just figured they had to chose the lowest rate as like some fair business practice. But today they only offered me a 8.99% which was double what I expected. Then told me I could not buy the car with my own bank loan. Had to be secured by them which seems a little unethical. Of course they changed their numbers as I was walking out but I just find it all so off putting now.
The real cost of car ownership is interest paid and the depreciating value of the asset, plus maintenance. Live below your means, save money every month, pay cash for a car.
@howzit3000 bring the lawyer to dealership, most russians come with lawyers, i guarantee you your visit will end up in the court, they not even allowed to ask you phone number
i know of a young finance manager that made so much money . he has a shelby gt lamborghini and acura nsx . he made milllions left the dealership now runs a coaching program plus his own financing etc
Guys, I am addicted to your channel. I started watching a few weeks ago and can not stop! Thanks for ALL the topics that you cover. It's the most interesting, no b.s., thing on RUclips. Wish me luck, as I'm going to my lease dealer tomorrow to purchase my 2017 F150. Residual is $27,200....11,200 miles. Positive equity this time around. Hope I don't screw it up when the hard-sell F&I guy has HIS turn!
This is really fascinating to learn. Also, you are great at explaining these concepts in a way that's easy to understand. Thank you for helping people learn more about how to approach the car buying or leasing process! It often feels like an intimidating process and your videos help a lot.
The service department makes the dealership a fortune. They use a labor book. I had to replace a side mirror assembly on my Honda Pilot. I called the dealer the assembly was $325.00 and the labor was $ 150.00 to put in. I went on Amazon and got same assembly for $55.00 and someone else I knew install it for $ 50.00. Stay away from the dealership if you can.
I used to work at a Toyota and a Chevy dealership. In the car dear industry, there’s a saying that the sales department sells the 1st car, and the service department sells the next vehicles.
Bought my first new car in '69, next in '72 then used till '77. None of the new cars needed service, except the '72. It was a Vega. Blew a head gasket (aluminum block and heads) at 14,000, Chevy replaced the engine for free with an improved aluminum block with steel sleeves in the cylinders, still aluminum heads. Blew another head gasket at 26,000. Same deal, Chevy replaced the entire engine again (free to me). Drove it til 76. At the end it was using half a quart of oil for every fill up. Traded it for a used '76 Civic which I later found out the Consumer Reports rated in their Top Ten Worst Used Cars (along with Chevy Vega) and boy were they right. Bottom line, I only use dealer service if the car is in warranty.
When I used to sell VW’s in 05 the dealer would receive a “bonus” from the manufacture based on if he sold X amount of cars for the month. He would make say $100 per car if he sold 10 cars that month and it would go up from there. Some months it would be as high as 300 a car so if we were 1 car shy of hitting our goal we would do anything to sell that final car even at a loss to not miss out on the bonus money. It’s a crazy job. To stressful. Glad I don’t do that anymore.
Interesting about the business office. Where we live (British Columbia , Canada) the business office isn’t allowed to sell insurance by law. They insurance is sold by an outside company that comes on site to sell car insurance and vehicle replacement. The dealer is only allowed to sell extended warranties for vehicles ( for any brand even if it they didn’t sell the car).
Very informative thx Ray. Service absorption- and that's why they send you msgs that it's time for servicing and give you breakdowns of how your car is looking to get you back in there spending more money on servicing.
Trying to learn more about car dealerships as me and my brother look to niche into the industry with our video business. This was super helpful! Thank you!
Thank God someone finally told the whole story, we really don't make much at all on the new car market. Thank you from myself and Sparks Nissan and Kia brother.
Regarding extended warranties and service contracts, the finance agent I worked with at AutoNation Chrysler in Phoenix worked me over for 20 or 30 minutes trying to get me to buy one. I was almost in tears saying no.
I have a 2017 Lexus GS 350. I got my car during covid 2020. Lexus certified 6yr unlimited mile warranty. With 12 schedule services so I'm at Lexus alot not paying. But I see how much I would have paid if I didn't have the warranty. But the car dealership is making the money 💰 🤑. There are hundreds of people in the service department all the time so I get your point on how there making money. Lexus is killing it...😂 love the video
PS I sure liked your letter to the Dealers inviting quotes on an Odyssey I think. That open manner and straightforward approach sure appeals to me and I'm sorry you discontinued the service. I'm terrible at negotiating and quite willing to pay for that service. Thanks for your previous prompt reply!
I grew up in Detroit in the '50's and '60's. NO one ever went to the dealer for service after the warranty ran out. Everyone knew that dealers WAY overcharged for service. I learned to do my own service, basic stuff ( plugs, points, wires, oil changes, carb rebuild, changed shocks etc). I have never gone to a dealer for service. Find a local mechanic (use the internet to find a reliable one) and read the reviews.
This was so informative. And gives me confidence in buying a new car. I now understand where the dealers are targeting me. So if I get a extended warranty through the dealer they will want me to get serviced there thus making more money.
a good service department is worth its weight in gold, my local toyota dealer just lost me as a customer. over wet seats, went in for an oil change got into a car with wet seats from snow that was on the roof . i don't know how or why and got no answers.
Extended warranties provide HUGE commissions to the seller. I've seen stories where the seller gets 50% commission on extended warranties. That can't be a good value for the buyer. I always decline extended warranties. The factory warranty will cover just about anything that becomes a problem within the 1st three years. I take good care of my cars and I can fix most issues myself.
You mentioned that the Dealership makes a lot of money on warranty work. What you didn't tell the reader is that the Dealership Mechanic gets paid a reduced hourly rate and usually a shorter time period based on flat rate to repair the warranted item. So, there's another way the Dealer makes money. Your Sales Persons hawk all the Warranties but your Service Department gets screwed.
That explains why about a year ago I needed new brake pads after only 17,000 miles on my brand new Toyota after they started making a terrible noise. Took it to the dealer I bought the car from and was told the dealer's mechanic told me the brakes are fine nothing wrong with them and sometimes when brakes get wet they squeal and sent me on my way. It's a garage kept car and they squeal all the time even when it hasn't rained in days. I could see for myself through the wheel hub that the pads were shot, so I spent $15.00 and took the car to my local mechanic of whom I trust just to validate my claim that the pads were shot. Took the car back to the dealer and they were repaired promptly after I let them know that an independent mechanic verified my claims, not a problem since.
Interesting! One thing I’m puzzled about, why do we have to get in a battle with dealership for some warranty work when they in return bill back the car maker?
I live in the Philippines. Wish i could use a lot of your information here. I find it interesting and informative. Buying cars here is another whole story. Will be looking for a new Honda BR V later in 2023, so I'm starting my research now. Again, thanks for the information and insights.
this is 1000% actuate. the dealers don't make money in sales. they make it in the finance, & service departments. the labor rate is $110-250 a hour depending what part of country you're in. theres dealerships out by my dads farm, where the only reason they're still in business is because they've invested heavily in the service department, so the dealership can stay open.
I just came across your video and I love your personality and the content of all of your videos. I subscribed before you even ask us too. I really enjoyed listening to you plus I learn a lot from you. Please continue to make more videos and I'll keep watching them. Thanks!
When I bought my Range Rover, they tried to sell me these very nice wheels for $9,000 I told them I don’t want them, I went to eBay bought exactly the same wheels for $1,100 and brought back their wheels after driving the car for a week. Basically, they sold me a car without wheels
Did they credit you for the wheels you brought back? Why would you bring them back if they didnt give you money for them? You could have sold them on ebay
Fantastic information. Thank you for the video. Unfortunately I live in an area where most of the population is uneducated on the inner workings of new car dealers. All vehicles are sold well above MSRP. Customers are happy to finance for 6+ years. This makes it very difficult to get a good deal. Use course even at the end of the quarter, I've had car salesman. Tell me they don't care to make a deal. They'll just wait someone else to come in and pay what they want.
the problem with dealerships now days is that you have people that, fire the good people and keep young toxic start up tech who friend up and wanna bully other people car bussiness has dissapointed me too many techs that instead of helping they dig others just the other day i seen a state inspector and his helper get someone fired just because they wanted that extra car bay
If you were a buyer of a high end car, with access to quality car repair and willing to pay cash. My question is not paying cash off the lot (I know you can fill a book, however) but in the long run: certified vs non.
I have only bought one car from a broker here and that was in 1978. It was a Toyota Celica fastback. At that time some of the "rules" were you had to send a $500 non refundable deposit. You didn't get to see or drive the car until you arrived and paid the balance. There were no hidden extra fees. You just paid the taxes, license and insurance. Being a Toyota it turned out to be one of the best cars I bought. Times have changed as I think they may now take trades and allow you to see your purchase first. We have another service called Car Cost Canada where they do the shopping around for quotes for you for a reasonable fee. I keep my cars a long time as I'm driving a 1998 Accord EX V6 as I do a lot of my own maintenance. It's not worth anything on the market but when I'm ready for a new car I'll give it to a family member. I'm not very popular with Dealers though but can't stand the BS and games.
I've been searching for cars on the internet. I narrowed it down to a few in my price range. But also my credit isn't strong. So I'm already assuming they are going to ask for a bigger down payment, last time it was at 20% which is quite high. After you mentioning about how banks cut the dealer a lower percentage rate, I feel I can negotiate a lower percentage rate on my end. Any tips or advice on doing that?? By the way great video. Very informative... Subscribed. 👍
Guys I need your opinion and advice. What OUT THE DOOR amount to offer for a new 2021 (not 2022) Mazda 3 2.5 engine sedan ? (RSVP on website : $24,240) PLEASEEE HELP !!! With some help from a few people which I must pay back , I am trying to outright buy a car paid in full, no financing .
I get authorization letters from my bank & use only my mechanic, so i do not see dealership ever again after i leave dealers parking lot, am i doing right thing?
Order my 15 c7 i take it to my dealer that I trust but would not want them to go out of business they know the car and thank you for doing a good job of explaining
Thanks very much for the explanation -- too often business is presented like the movies, where nobody ever stops to pay for the cab, or pays a bill. And you wonder, "but how does this really work?"
They also make money on volume incentives from the manufacturer. It's typically monthly. Now with inventory super low in todays weird covid world it may not be as relevant but once things go back to normal it will be relevant again. Negotiate at the end of the month, not the beginning.
I like your new channel a lot even though we live in Canada. One question I have is why don't more people buy from a broker where everything is straightforward and up front? It bypasses all the BS and games that the Dealers play.
I had 3 dealers give me quotes on a new 2024 Honda Odyssey EXL. With a few dealer add-ons such as locking lug nuts and the rubber mats AND extended bumper to bumper warranty for 150k tax, tag, title, crap doc fee in WRITING $45,000 OTD and $46,000 OTD. MSRP was $42,700, rebate $750. Invoice was $39,900. I didn't think that was too bad. What do you think? Will there be pushes for wheel and tire protection, glass protection, paint and upholstery protection, gap insurance, a dealer lifetime warranty INSTEAD of the quoted warranty...which is usually tied to "lifetime" oil changes...at a long interval no doubt, credit life and disability insurance, and who knows what else? Or will they honor without offering that stuff?
Hard to find new videos. After hearing that new car dealers are not making any money on the sale I had to look for date of video.Yup...3 years old. Is there a way to get newer videos?
If parts and service are so crucial to success, I'm not seeing how selling a used car (which often isn't the same brand as the dealership) guarantees the car will be serviced at that dealer. There are many independent repair shops that can work on a car, and many people go there instead. As far as I know, cars are not tied to where the car is purchased.
One way they make money is when you take a vehicle in for recall work and "they find" a laundry list of other issues that "must be taken care of immediately" even though your car is regularly maintained by a reputable local shop. The only way I've found to get around this is to hire my local shop to take the car in for the recall and let the dealer know that if they think they find anything, the local shop will get the work. Since I've started that I've had ZERO claims of issues found by the dealer's shop while doing the recall work. Are there words I can speak to the service desk that will preclude them from "creating work for themselves" and still take my vehicle in for recall work only? Thank you for your time and answer...
Alvan, just turn down whatever work they say your car needs other than the recall. They can only charge you for work that you agree to prior to them doing it. So yes, they will find "issues" that need to be addressed "immediately" but let them know that you will be seeking a second opinion before you commit to another further repairs above and beyond the recall. Stay safe, Ray
I purchased a preowned Pathfinder from a dealership, the used car lot was adjacent to the new car lot. There were a few issues that were documented, had to return in 30 days for the work to be done for no charge. While waiting my turn in the new car service bay I walked over to the used car office to say hello. When they discovered my car was in the new car service dept, I thought they were going to have a stroke. I was instructed to immediately drive the car to a nearby service station that services their used cars. I paid a visit to the dealership manager for an explanation. He said their used car lot operates as an independent business and does not have the budget to cover the new car service dept. labor rate. Within a week the car was sold at a loss, no more Nissan. Is this a common practice in the car business?
Dealerships would not stay in business just selling cars unless they do a lot of fleet sales. Dealerships make money in three places if they have them Service Department, Parts Department and a Body Shop which many Dealerships no longer have. Many Dealerships have now added separate oil change outlets and drive through car washes those customers want to wait not leave their vehicles.
My wife went to a Toyota dealership attempting to trade in her car for a used 2019 .. After HOURS!! of sitting there , the manager says shes approved and can drive off today. But after they come from financing , their telling her she HAS to put down 1000$ even though shes trading in her car with a KBB price of 2000$ .. The manager claims he really tried. So we couldn't get car 😞 .. Any advice on any of this?
I think my wife and I should take you with us next time we go car shopping. We'll buy your lunch. LOL We don't want to get taken to the cleaners. On a side note, you are exactly right about the Mini Cooper dealerships that seemed to spring up over night. A third generation, very successful Cadillac dealership family where I live decided to buy an old GMC etc dealership on a very upscale side of town and refurbish it. They sold Minis. Very nice property. It lasted maybe 18 months, and then as quickly as it sprung up, it was gone. Scratching my head. You're right though. They didn't have any other income than the new minis. From what I understand they are pretty reliable cars.
How about selling your data? I noticed recently when I bought cars I always got calls for extended warranties from different company. This only happens after buying a car
I'm leasing a car and it has some front body damage to the plastic. orobaly around 200 to 300 worth of damages. wondering if its worth fixing before I go in to dealer to either lease anything one or trade it. havnt decided on that part yet but really wondering how much they would take off on the valve if the car. hope that makes sense lol.
Hi Can you plz ans i had plan to sell my car to one of our friend, i send my ownership amd my license to friend, our friend went to dealer is this possibilty dealer approve his loan without talking to me on my car
I never went to dealer with my car and i dnt want to sell my car but now friend is sucking my energy everday could you plz explain me whts going on. Is this possible someone pay my loan and my lender bank with not ask me before process this all😮
I know a lot of dealers are dishonest, I just wish you could agree on a price where they weren’t making their mortgage and boat payment when they sell me a car. I realize they need to make a profit, now just hate the negotiating.
Hi Ray, another informative straight forward video on something 95% of retail automobile buyer don't know but should; how a car dealership makes money. FYI. REITs (Real Estate Investment Trusts) can be privately held or publicly traded entities and are owned by the investors/shareholders of that particular REIT just as other businesses entities are.
Can i ask u. Dealers make money on extra points on the financing, but if i find a lower rate from a bank and refi within 30 days does the dealer still make money?
Extended warranties are *never* a good idea. Think about it -- by definition, if every customer made out on the deal, the warranty company would go out of business in no time!
Awesome info Is there a way to take the profit away from the loan and get a rate very close to their wholesale rate Assuming great credit Does the finance manager care Or does he get a piece of the action
i only work for dealerships who lets me make money for them and also aloe me to make money for me, i hate when they are so strict about you bringing friend or family member cars im glad not all dealers are like that but some shopforemans are straight haters
What is your take on tactics like pen striping (when they add those 2 decal pen stripe lines just under the windows to mark up the car a few hundred dollars) or products like Enviroguard? Is Enviro Guard legitimately beneficial or is it more or less a gimmick to add money to a sale.
@@labornurse Neither had I but our CRV had it not sure if we were charged for it could not see it anywhere on the contract but not sure how it would be listed there.
I just discovered your show and subscribe as well, can you please let me know how much percentage should i ask off on the brand new vehicle price. Thank you in advance
Rustproofing is pretty much a waste since all cars today carry a corrosion warranty of some kind. It is hard to comment on a bunch of other stuff without knowing what the bunch consists of. Stay safe, Ray
Apart from an early first car all my cars have been cash. Finance, just say no. I signed up once but never again. Find yourself a good solid independent mechanic and no need for a warranty. He gets my service business too as many dealerships are overpriced.
Still like the old classic/vintage trucks Ray why? No rocket science computer crap therefore easier and fun to do the maintenance remember the hydramatic automatic no computer modular in the transmission Chevrolet made the hydramatic automatic transmission so that in case in an emergency you could push start the automatic transmission by having another vehicle giving you a bumper to bumper push now that's cool.
No, in most cases the gap insurance is a direct correlation to the amount of customer cash or trade equity down and has nothing to do with paying too much for the car. Little or no cash or trade equity down means that you would be in a negative equity position if the vehicle was declared a total loss and is not necessarily reflective of selling price. Ray
@@CarEdge I stand by my statement. If you negotiate a good deal you dont need gap insurance. I have bought 4 brand new cars in 20 years and have never paid more than 85% of MSRP out the door. I have never needed gap insurance.
No they can’t lose on the vehicle and the financing. It has to be a deal beneficial to both parties. Problem is customers want it for dirt cheap not understanding the salesman needs to make a living
Well. If all of this is true, then for sure we are in the last few years of the dealership model. Great info! Thank you "Your Auto Advocate" Tesla's model is the future.
Markup on the loan or lease is negotiated by Sales not the Business Manager. The reason why Finance is more important these days is because the margin of profit on a new car sale is very very small compared to anything else we buy as consumers. That’s correct you Can No Longer mark up the rate more than 2 and half percent and if the dealer is getting a better rate than you can get anywhere else than it doesn’t matter because your getting a great rate. The dealer is in fact giving the banks an incredible amount of business which the banks make way way way more money than the dealer who is originating that loan. The truth is exactly what your saying. There needs to be multiple avenues of profit or else dealerships would not exist. I’m a Sales Manager and what you are saying is completely true but I disagree. It’s true today finance and insurance is the department that gets the most attention and service and parts next. Here is the real deal. The Finance department doesn’t a chance to do anything without a Sales Team selling and saying hey here is your deal on a silver plater. It’s all negotiated and agreed upon. You just have to print it up and send the credit app over to the banks that we filled out. Sales creates all the revenue for all departments. I think 20 groups are forgetting. Sales……. 90 percent keeps the dealership alive and well. The BDC in my opinion is now the MOST IMPORTANT PART OF ANY DEALERSHIP. Focus on your BDCs because without them we are nothing.
Yes, he's 100% Correct. The Dealer makes a Profit on Finance, Leases, Warranty, Wheel and Tire, etc. So What? What is Profit a Dirty Word?? A Car Salesman, Finance Manager, Sales Manager have to make a living. And, The Owner of the Dealer where you purchase your Shiny New Car, has a Nut to Crack every Month which can be Upwards of $250K just to keep the Lights On. These Burned Out Old Car Salesmen don't want to bore you with those details, do they?
What else do you want to know about the inner workings of a car dealership? Let me know and we'll be sure to cover it in the near future. Thanks for watching.
How can they afford to have so many cars on the lot for such long periods? I see cars there for months.
I'd like to know about the parts and service departments too. Thanks
Can you explain the factoring loan process..the commercial finance side of business.. commissions.. vehicle transfers to different dealers..payback timings etc..
Youre right because i assumed i was getting my truck for 9,000 i paid 1500 down after taxes it was 8100 left i have made 5 payments well then i noticed my balance never moved. I called the fiance company.. Well he said my interest is 26%ARP. So im not paying 8100 im paying 14,000. I was wandering if there is another route i can go in that i want have to pay 14,000. For a vehicle i was told i would only owe 8,000 and they never said anything but that but what they do is put it in the contract. So they sell it to u for one price but the contract that you esign has something else. ThankYou so much and God bless you!❤🙌🙏
How can I know how many days a car has been in the dealership?
Spot On Sir! I spent over 50 years in sales, the greater majority in the Automotive and Truck business and you telling it like it is.
How do dealerships afford to purchase used cars from local buyers. Do they purchase the cars with their own money or borrowed money.
Keep making videos, the general public needs to know the real deal.
I agree, knowledge is power
Wow, this is the most comprehensive explanation I’ve ever heard. You are a great educator Ray! Thank you 🙏
This explains a lot. I haven’t been in a dealership in 8 years. I had heard they make money off the loans but guess I just figured they had to chose the lowest rate as like some fair business practice. But today they only offered me a 8.99% which was double what I expected. Then told me I could not buy the car with my own bank loan. Had to be secured by them which seems a little unethical. Of course they changed their numbers as I was walking out but I just find it all so off putting now.
The real cost of car ownership is interest paid and the depreciating value of the asset, plus maintenance. Live below your means, save money every month, pay cash for a car.
@howzit3000 Just don't tell them You are paying cash until you sign the paperwork
If you listen to president putin, his advise is to get out of any loan, since there will be soon no middle class, only taxes on top of taxes
@howzit3000 bring the lawyer to dealership, most russians come with lawyers, i guarantee you your visit will end up in the court, they not even allowed to ask you phone number
If you keep paying cash for everything then when IRS knocks on you door Lol
Chill lol someone gotta be responsible for the economy
i know of a young finance manager that made so much money . he has a shelby gt lamborghini and acura nsx . he made milllions left the dealership now runs a coaching program plus his own financing etc
Guys, I am addicted to your channel. I started watching a few weeks ago and can not stop! Thanks for ALL the topics that you cover. It's the most interesting, no b.s., thing on RUclips. Wish me luck, as I'm going to my lease dealer tomorrow to purchase my 2017 F150. Residual is $27,200....11,200 miles. Positive equity this time around. Hope I don't screw it up when the hard-sell F&I guy has HIS turn!
Charlie thanks for the kind words and good luck tomorrow, but if you've been watching our videos you'll do fine. Stay safe, Ray
This is really fascinating to learn. Also, you are great at explaining these concepts in a way that's easy to understand. Thank you for helping people learn more about how to approach the car buying or leasing process! It often feels like an intimidating process and your videos help a lot.
The service department makes the dealership a fortune. They use a labor book. I had to replace a side mirror assembly on my Honda Pilot. I called the dealer the assembly was $325.00 and the labor was $ 150.00 to put in. I went on Amazon and got same assembly for $55.00 and someone else I knew install it for $ 50.00. Stay away from the dealership if you can.
I used to work at a Toyota and a Chevy dealership. In the car dear industry, there’s a saying that the sales department sells the 1st car, and the service department sells the next vehicles.
Bought my first new car in '69, next in '72 then used till '77. None of the new cars needed service, except the '72. It was a Vega. Blew a head gasket (aluminum block and heads) at 14,000, Chevy replaced the engine for free with an improved aluminum block with steel sleeves in the cylinders, still aluminum heads. Blew another head gasket at 26,000. Same deal, Chevy replaced the entire engine again (free to me). Drove it til 76. At the end it was using half a quart of oil for every fill up. Traded it for a used '76 Civic which I later found out the Consumer Reports rated in their Top Ten Worst Used Cars (along with Chevy Vega) and boy were they right. Bottom line, I only use dealer service if the car is in warranty.
When I used to sell VW’s in 05 the dealer would receive a “bonus” from the manufacture based on if he sold X amount of cars for the month. He would make say $100 per car if he sold 10 cars that month and it would go up from there. Some months it would be as high as 300 a car so if we were 1 car shy of hitting our goal we would do anything to sell that final car even at a loss to not miss out on the bonus money.
It’s a crazy job. To stressful. Glad I don’t do that anymore.
Interesting about the business office. Where we live (British Columbia , Canada) the business office isn’t allowed to sell insurance by law. They insurance is sold by an outside company that comes on site to sell car insurance and vehicle replacement. The dealer is only allowed to sell extended warranties for vehicles ( for any brand even if it they didn’t sell the car).
Good info, that's why it takes so long to get appointments for servicing my Ram!
Thanks for watching!
Very informative thx Ray. Service absorption- and that's why they send you msgs that it's time for servicing and give you breakdowns of how your car is looking to get you back in there spending more money on servicing.
And why they have sometimes ridiculous quotes on the repairs they do
Trying to learn more about car dealerships as me and my brother look to niche into the industry with our video business. This was super helpful! Thank you!
Thank God someone finally told the whole story, we really don't make much at all on the new car market. Thank you from myself and Sparks Nissan and Kia brother.
This is FANTASTIC information. Love the content and the presentation. Keep up the great retirement work 😂. Subscribed!
Appreciate the support, Alan. Retirement on RUclips is fun!
@@CarEdge 🙈😆I love all of your videos and your content. Keep up the good work!
@@CarEdge Glad to hear that you are enjoying your retirement
Regarding extended warranties and service contracts, the finance agent I worked with at AutoNation Chrysler in Phoenix worked me over for 20 or 30 minutes trying to get me to buy one. I was almost in tears saying no.
I have a 2017 Lexus GS 350. I got my car during covid 2020. Lexus certified 6yr unlimited mile warranty. With 12 schedule services so I'm at Lexus alot not paying. But I see how much I would have paid if I didn't have the warranty. But the car dealership is making the money 💰 🤑. There are hundreds of people in the service department all the time so I get your point on how there making money. Lexus is killing it...😂 love the video
PS I sure liked your letter to the Dealers inviting quotes on an Odyssey I think. That open manner and straightforward approach sure appeals to me and I'm sorry you discontinued the service. I'm terrible at negotiating and quite willing to pay for that service. Thanks for your previous prompt reply!
I grew up in Detroit in the '50's and '60's. NO one ever went to the dealer for service after the warranty ran out. Everyone knew that dealers WAY overcharged for service. I learned to do my own service, basic stuff ( plugs, points, wires, oil changes, carb rebuild, changed shocks etc). I have never gone to a dealer for service. Find a local mechanic (use the internet to find a reliable one) and read the reviews.
This was so informative. And gives me confidence in buying a new car. I now understand where the dealers are targeting me. So if I get a extended warranty through the dealer they will want me to get serviced there thus making more money.
a good service department is worth its weight in gold, my local toyota dealer just lost me as a customer. over wet seats, went in for an oil change got into a car with wet seats from snow that was on the roof . i don't know how or why and got no answers.
Extended warranties provide HUGE commissions to the seller. I've seen stories where the seller gets 50% commission on extended warranties. That can't be a good value for the buyer. I always decline extended warranties. The factory warranty will cover just about anything that becomes a problem within the 1st three years. I take good care of my cars and I can fix most issues myself.
what about when the warranty is up?? and there is t a factory warranty for example on a used car
You mentioned that the Dealership makes a lot of money on warranty work. What you didn't tell the reader is that the Dealership Mechanic gets paid a reduced hourly rate and usually a shorter time period based on flat rate to repair the warranted item. So, there's another way the Dealer makes money. Your Sales Persons hawk all the Warranties but your Service Department gets screwed.
That explains why about a year ago I needed new brake pads after only 17,000 miles on my brand new Toyota after they started making a terrible noise. Took it to the dealer I bought the car from and was told the dealer's mechanic told me the brakes are fine nothing wrong with them and sometimes when brakes get wet they squeal and sent me on my way. It's a garage kept car and they squeal all the time even when it hasn't rained in days. I could see for myself through the wheel hub that the pads were shot, so I spent $15.00 and took the car to my local mechanic of whom I trust just to validate my claim that the pads were shot. Took the car back to the dealer and they were repaired promptly after I let them know that an independent mechanic verified my claims, not a problem since.
Interesting! One thing I’m puzzled about, why do we have to get in a battle with dealership for some warranty work when they in return bill back the car maker?
I live in the Philippines. Wish i could use a lot of your information here. I find it interesting and informative. Buying cars here is another whole story. Will be looking for a new Honda BR V later in 2023, so I'm starting my research now. Again, thanks for the information and insights.
this is 1000% actuate. the dealers don't make money in sales. they make it in the finance, & service departments. the labor rate is $110-250 a hour depending what part of country you're in. theres dealerships out by my dads farm, where the only reason they're still in business is because they've invested heavily in the service department, so the dealership can stay open.
I just came across your video and I love your personality and the content of all of your videos. I subscribed before you even ask us too. I really enjoyed listening to you plus I learn a lot from you. Please continue to make more videos and I'll keep watching them. Thanks!
When I bought my Range Rover, they tried to sell me these very nice wheels for $9,000 I told them I don’t want them, I went to eBay bought exactly the same wheels for $1,100 and brought back their wheels after driving the car for a week. Basically, they sold me a car without wheels
Did they credit you for the wheels you brought back? Why would you bring them back if they didnt give you money for them? You could have sold them on ebay
Congratulations. You're going to need that money for maintenance and repairs on that money pit.
Fantastic information. Thank you for the video. Unfortunately I live in an area where most of the population is uneducated on the inner workings of new car dealers. All vehicles are sold well above MSRP. Customers are happy to finance for 6+ years. This makes it very difficult to get a good deal. Use course even at the end of the quarter, I've had car salesman. Tell me they don't care to make a deal. They'll just wait someone else to come in and pay what they want.
the problem with dealerships now days is that you have people that, fire the good people and keep young toxic start up tech who friend up and wanna bully other people car bussiness has dissapointed me too many techs that instead of helping they dig others just the other day i seen a state inspector and his helper get someone fired just because they wanted that extra car bay
If you were a buyer of a high end car, with access to quality car repair and willing to pay cash. My question is not paying cash off the lot (I know you can fill a book, however) but in the long run: certified vs non.
I have only bought one car from a broker here and that was in 1978. It was a Toyota Celica fastback. At that time some of the "rules" were you had to send a $500 non refundable deposit. You didn't get to see or drive the car until you arrived and paid the balance. There were no hidden extra fees. You just paid the taxes, license and insurance. Being a Toyota it turned out to be one of the best cars I bought. Times have changed as I think they may now take trades and allow you to see your purchase first. We have another service called Car Cost Canada where they do the shopping around for quotes for you for a reasonable fee. I keep my cars a long time as I'm driving a 1998 Accord EX V6 as I do a lot of my own maintenance. It's not worth anything on the market but when I'm ready for a new car I'll give it to a family member. I'm not very popular with Dealers though but can't stand the BS and games.
Very informative videos I definitely enjoy watching !
I've been searching for cars on the internet. I narrowed it down to a few in my price range. But also my credit isn't strong. So I'm already assuming they are going to ask for a bigger down payment, last time it was at 20% which is quite high. After you mentioning about how banks cut the dealer a lower percentage rate, I feel I can negotiate a lower percentage rate on my end. Any tips or advice on doing that?? By the way great video. Very informative... Subscribed. 👍
Guys I need your opinion and advice. What OUT THE DOOR amount to offer for a new 2021 (not 2022) Mazda 3 2.5 engine sedan ? (RSVP on website : $24,240) PLEASEEE HELP !!!
With some help from a few people which I must pay back , I am trying to outright buy a car paid in full, no financing .
I get authorization letters from my bank & use only my mechanic, so i do not see dealership ever again after i leave dealers parking lot, am i doing right thing?
Yes. Minimal exposure to the game. Dealer for warranty only.
Order my 15 c7 i take it to my dealer that I trust but would not want them to go out of business they know the car and thank you for doing a good job of explaining
Thanks very much for the explanation -- too often business is presented like the movies, where nobody ever stops to pay for the cab, or pays a bill. And you wonder, "but how does this really work?"
They also make money on volume incentives from the manufacturer. It's typically monthly. Now with inventory super low in todays weird covid world it may not be as relevant but once things go back to normal it will be relevant again. Negotiate at the end of the month, not the beginning.
You can always register at an auto auction or pay a dealer and buy a good car for a reduced cost.
I like your new channel a lot even though we live in Canada. One question I have is why don't more people buy from a broker where everything is straightforward and up front? It bypasses all the BS and games that the Dealers play.
Richard, I believe it is because most people are unfamiliar with brokers. Stay safe, Ray
In this day and age I don't understand why people buy new cars, buy any car at a dealership, or get their cars serviced at a stealership.
Because buying a used car, out of warranty, is a huge gamble that a lot of established adults don't want to deal with.
What is the DIC(not DOC)Fee on the itemize car sale worksheet?
With how much electric bicycles cost I wondered if their was any profit in car sales given the're so much more complex and heavier. Good insights.
I had 3 dealers give me quotes on a new 2024 Honda Odyssey EXL. With a few dealer add-ons such as locking lug nuts and the rubber mats AND extended bumper to bumper warranty for 150k tax, tag, title, crap doc fee in WRITING $45,000 OTD and $46,000 OTD. MSRP was $42,700, rebate $750. Invoice was $39,900. I didn't think that was too bad. What do you think? Will there be pushes for wheel and tire protection, glass protection, paint and upholstery protection, gap insurance, a dealer lifetime warranty INSTEAD of the quoted warranty...which is usually tied to "lifetime" oil changes...at a long interval no doubt, credit life and disability insurance, and who knows what else? Or will they honor without offering that stuff?
Hard to find new videos. After hearing that new car dealers are not making any money on the sale I had to look for date of video.Yup...3 years old. Is there a way to get newer videos?
Here you go, just check out our RUclips, CarEdge homepage. www.youtube.com/@caredge. All the best, Ray
Sooo not true anymore that profits are divided 1/3 parts & Service 1/3 used cars and 1/3 new cars?
Never EVER buy any backend...Always negotiate you rate down at least 1%, because your dealer is most likely quoting you 2% higher than they can close.
Warranty work is used as a Christmas tree effect to add on more customer out of pocket services
Found this very valuable!! Thank you!
If parts and service are so crucial to success, I'm not seeing how selling a used car (which often isn't the same brand as the dealership) guarantees the car will be serviced at that dealer. There are many independent repair shops that can work on a car, and many people go there instead. As far as I know, cars are not tied to where the car is purchased.
I have a question on credit scores Do you have videos on how high your score needs to be? Covid19 did make marks on my scores
One way they make money is when you take a vehicle in for recall work and "they find" a laundry list of other issues that "must be taken care of immediately" even though your car is regularly maintained by a reputable local shop. The only way I've found to get around this is to hire my local shop to take the car in for the recall and let the dealer know that if they think they find anything, the local shop will get the work. Since I've started that I've had ZERO claims of issues found by the dealer's shop while doing the recall work. Are there words I can speak to the service desk that will preclude them from "creating work for themselves" and still take my vehicle in for recall work only? Thank you for your time and answer...
Alvan, just turn down whatever work they say your car needs other than the recall. They can only charge you for work that you agree to prior to them doing it. So yes, they will find "issues" that need to be addressed "immediately" but let them know that you will be seeking a second opinion before you commit to another further repairs above and beyond the recall. Stay safe, Ray
I purchased a preowned Pathfinder from a dealership, the used car lot was adjacent to the new car lot. There were a few issues that were documented, had to return in 30 days for the work to be done for no charge. While waiting my turn in the new car service bay I walked over to the used car office to say hello. When they discovered my car was in the new car service dept, I thought they were going to have a stroke. I was instructed to immediately drive the car to a nearby service station that services their used cars. I paid a visit to the dealership manager for an explanation. He said their used car lot operates as an independent business and does not have the budget to cover the new car service dept. labor rate. Within a week the car was sold at a loss, no more Nissan. Is this a common practice in the car business?
No! If it’s below prime that rate is bought down. That cost in the long run is passed on to the consumer.
the way he asked you to subscribe though. you can tell this guy was in sales!
Great video, content and format
Dealerships would not stay in business just selling cars unless they do a lot of fleet sales. Dealerships make money in three places if they have them Service Department, Parts Department and a Body Shop which many Dealerships no longer have. Many Dealerships have now added separate oil change outlets and drive through car washes those customers want to wait not leave their vehicles.
My wife went to a Toyota dealership attempting to trade in her car for a used 2019 .. After HOURS!! of sitting there , the manager says shes approved and can drive off today. But after they come from financing , their telling her she HAS to put down 1000$ even though shes trading in her car with a KBB price of 2000$ .. The manager claims he really tried. So we couldn't get car 😞 .. Any advice on any of this?
I think my wife and I should take you with us next time we go car shopping. We'll buy your lunch. LOL We don't want to get taken to the cleaners. On a side note, you are exactly right about the Mini Cooper dealerships that seemed to spring up over night. A third generation, very successful Cadillac dealership family where I live decided to buy an old GMC etc dealership on a very upscale side of town and refurbish it. They sold Minis. Very nice property. It lasted maybe 18 months, and then as quickly as it sprung up, it was gone. Scratching my head. You're right though. They didn't have any other income than the new minis. From what I understand they are pretty reliable cars.
How about selling your data? I noticed recently when I bought cars I always got calls for extended warranties from different company. This only happens after buying a car
I'm leasing a car and it has some front body damage to the plastic. orobaly around 200 to 300 worth of damages. wondering if its worth fixing before I go in to dealer to either lease anything one or trade it. havnt decided on that part yet but really wondering how much they would take off on the valve if the car. hope that makes sense lol.
That's a nice watch, what is it ?
I appreciate the info thumbs up and subscribed
Hi Can you plz ans i had plan to sell my car to one of our friend, i send my ownership amd my license to friend, our friend went to dealer is this possibilty dealer approve his loan without talking to me on my car
I never went to dealer with my car and i dnt want to sell my car but now friend is sucking my energy everday could you plz explain me whts going on. Is this possible someone pay my loan and my lender bank with not ask me before process this all😮
The profit structure is similar to Chinese car dealers. Except for last year, which is under chip lacking situation.
I know a lot of dealers are dishonest, I just wish you could agree on a price where they weren’t making their mortgage and boat payment when they sell me a car. I realize they need to make a profit, now just hate the negotiating.
How do dealerships afford to purchase used cars from local buyers. Do they purchase the cars with their own money or borrowed money.
Hi Ray, another informative straight forward video on something 95% of retail automobile buyer don't know but should; how a car dealership makes money.
FYI. REITs (Real Estate Investment Trusts) can be privately held or publicly traded entities and are owned by the investors/shareholders of that particular REIT just as other businesses entities are.
Good stuff to know for my next car!
I like this more direct format of video rather than the tag team you've been doing lately, trying to do the comedy act.
Can i ask u. Dealers make money on extra points on the financing, but if i find a lower rate from a bank and refi within 30 days does the dealer still make money?
Extended warranties are *never* a good idea. Think about it -- by definition, if every customer made out on the deal, the warranty company would go out of business in no time!
Awesome info
Is there a way to take the profit away from the loan and get a rate very close to their wholesale rate
Assuming great credit
Does the finance manager care
Or does he get a piece of the action
i only work for dealerships who lets me make money for them and also aloe me to make money for me, i hate when they are so strict about you bringing friend or family member cars im glad not all dealers are like that but some shopforemans are straight haters
This was excellent.
If you don't have a net worth of $1,000,000. You are a fool for buying a brand new car. You will be broke forever.
What used car price range produce the most profit margins ?
What is your take on tactics like pen striping (when they add those 2 decal pen stripe lines just under the windows to mark up the car a few hundred dollars) or products like Enviroguard? Is Enviro Guard legitimately beneficial or is it more or less a gimmick to add money to a sale.
Wow I haven't seen pin striping on a new car in ages!
@@labornurse Neither had I but our CRV had it not sure if we were charged for it could not see it anywhere on the contract but not sure how it would be listed there.
Can you identify the watch please? Very nice!
It is a LIV Rebel. LIV is a niche watch company. Stay safe, Ray
I just discovered your show and subscribe as well, can you please let me know how much percentage should i ask off on the brand new vehicle price. Thank you in advance
very interesting! about the new car market not being profitable.
My friend bought a 2019 corvette and they sold her on rustproofing and a bunch of other stuff. Do you think they are legit or worth it?
Rustproofing is pretty much a waste since all cars today carry a corrosion warranty of some kind. It is hard to comment on a bunch of other stuff without knowing what the bunch consists of. Stay safe, Ray
Think about being a visiting professor who lectures to new prospective franchise owners. Charge $200 an hour plus expenses with a 4 hour minimum.
Apart from an early first car all my cars have been cash. Finance, just say no. I signed up once but never again. Find yourself a good solid independent mechanic and no need for a warranty. He gets my service business too as many dealerships are overpriced.
Great content, thanks
Gr8 information sir...
So many other ways to get profit ...
I like this guy.
Still like the old classic/vintage trucks Ray why? No rocket science computer crap therefore easier and fun to do the maintenance remember the hydramatic automatic no computer modular in the transmission Chevrolet made the hydramatic automatic transmission so that in case in an emergency you could push start the automatic transmission by having another vehicle giving you a bumper to bumper push now that's cool.
Never, ever buy gap insurance. If you need gap insurance then you are paying too much for the car
No, in most cases the gap insurance is a direct correlation to the amount of customer cash or trade equity down and has nothing to do with paying too much for the car. Little or no cash or trade equity down means that you would be in a negative equity position if the vehicle was declared a total loss and is not necessarily reflective of selling price. Ray
@@CarEdge I stand by my statement. If you negotiate a good deal you dont need gap insurance. I have bought 4 brand new cars in 20 years and have never paid more than 85% of MSRP out the door. I have never needed gap insurance.
And that is without any money down
Is there any incentive for the dealer to give you a lower price on a car if you decide not to finance through the dealer?
No they can’t lose on the vehicle and the financing. It has to be a deal beneficial to both parties. Problem is customers want it for dirt cheap not understanding the salesman needs to make a living
This happened to me. I went to my bank was given a rate but dealer got a lower rate with the same bank. I really hate BOA. They are crooks.
So how do we beat the dealership
Well. If all of this is true, then for sure we are in the last few years of the dealership model. Great info! Thank you "Your Auto Advocate"
Tesla's model is the future.
Very helpful thanks sir!!!!
Markup on the loan or lease is negotiated by Sales not the Business Manager. The reason why Finance is more important these days is because the margin of profit on a new car sale is very very small compared to anything else we buy as consumers. That’s correct you Can No Longer mark up the rate more than 2 and half percent and if the dealer is getting a better rate than you can get anywhere else than it doesn’t matter because your getting a great rate. The dealer is in fact giving the banks an incredible amount of business which the banks make way way way more money than the dealer who is originating that loan. The truth is exactly what your saying. There needs to be multiple avenues of profit or else dealerships would not exist. I’m a Sales Manager and what you are saying is completely true but I disagree. It’s true today finance and insurance is the department that gets the most attention and service and parts next. Here is the real deal. The Finance department doesn’t a chance to do anything without a Sales Team selling and saying hey here is your deal on a silver plater. It’s all negotiated and agreed upon. You just have to print it up and send the credit app over to the banks that we filled out. Sales creates all the revenue for all departments. I think 20 groups are forgetting. Sales……. 90 percent keeps the dealership alive and well. The BDC in my opinion is now the MOST IMPORTANT PART OF ANY DEALERSHIP. Focus on your BDCs because without them we are nothing.
Yes, he's 100% Correct. The Dealer makes a Profit on Finance, Leases, Warranty, Wheel and Tire, etc. So What? What is Profit a Dirty Word?? A Car Salesman, Finance Manager, Sales Manager have to make a living. And, The Owner of the Dealer where you purchase your Shiny New Car, has a Nut to Crack every Month which can be Upwards of $250K just to keep the Lights On. These Burned Out Old Car Salesmen don't want to bore you with those details, do they?
Good video