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Curiosity of how much dealers pay for cars from audi

Discussion in 'A3/S3/Sportback (8P Chassis)' started by steve184, May 3, 2006.

  1. steve184
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    steve184 Active Member

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    [May 3, 2006]
    Just wondering - bit depressing but anyone ever wondered what a dealer actually buys the car for that you pay £20k for??? if you drop the VAT off i bet a £20k retail car is bought in for about £14k!!!!
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  3. h5djr
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    h5djr Well-Known Member VCDS Map User

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    [May 4, 2006]
    I don't know any figures but I bet it's a much smaller percentage than in many other industries and shops. At lot of shops make 50% on all items sold.
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  4. Eeef
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    Eeef Lord of War

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    [May 4, 2006]
    a friend of mine used to work in a well known furniture store which used to average 400% mark up....
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  5. imported_cd8
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    imported_cd8 Guest

    [May 4, 2006]
    When I was last in the dealers buying a car I got a look at the computer screen when we were discussing prices.

    A 20 grand car (A3 2.0 TDI sport) had a cost price of about14,500-15,000 if I remember right. So about a 25% mark up. The Audi guy said the biggest discount they do is 20% for VIPS or Audi employees.
    #4
  6. imported_cd8
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    imported_cd8 Guest

    [May 4, 2006]
    [ QUOTE ]
    When I was last in the dealers buying a car I got a look at the computer screen when we were discussing prices.

    A 20 grand car (A3 2.0 TDI sport) had a cost price of about14,500-15,000 if I remember right. So about a 25% mark up. The Audi guy said the biggest discount they do is 20% for VIPS or Audi employees.

    [/ QUOTE ]

    Sorry my maths is bad. It's a 33% ish hike.
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  7. mikep
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    mikep Member

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    [May 4, 2006]
    A 20 grand car includes VAT at 17.5% which makes it £17,000 so maybe a £2,000 profit if the in-cost is £15,000.
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  8. jdp1962
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    jdp1962 Grumpy Old Moderator Staff Member Moderator

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    [May 4, 2006]
    [ QUOTE ]
    A 20 grand car includes VAT at 17.5% which makes it £17,000 so maybe a £2,000 profit if the in-cost is £15,000.

    [/ QUOTE ]

    But even that £2,000 is not profit. You have to apportion a contribution to the dealer's fixed costs for each car. Even if you say that's £150 (a complete guess, by the way, merely for illustration purposes), the profit comes down to £1,850.

    Then the dealer has to pay its variable costs from there. These will vary depending on whether a car is supplied to a specific order from a customer, or bought for showroom stock. If the latter, the dealer pays for the car up front, and could be carrying it for some time before someone buys it. Let's say in our example the variable cost is another £150. That reduced the income to £1,700. That is then subject to Corporation Tax at 30%, which brings the actual net income down to £1,190.

    So, whilst I hold no particular brief for car dealers, please remember that what looks like a big rake-off is not quite all that it seems.

    I've just traded my old 2.8Q for £3,800. Two days later, it was on the forecourt at £6,500. Was I pi$$ed off? Not at all.

    Take off £230 for VAT, then another £500 for the cost of the used warranty (yes, that IS how much it costs, as it was listed separately on the invoice for the car I bought), and then you're down to £1,970. Then take out the cost of any preparation for sale work, and factor in a contribution to fixed costs, & the dealer's profit before Corporation Tax is likely to be about half the mark-up difference.

    So the dealer will sell my car for a profit but, hey, that's what it's there to do. It's a commercial business, after all.
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  9. Anito
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    Anito Member

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    [May 4, 2006]
    My understading was that dealers makes less than 10% on the sale of a car. That said they get lots of dosh, annualy from Audi for shifting volume and hitting targets, I think that's where they really make money.

    Of course I could be completely wrong
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  10. Amchlolor
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    Amchlolor Active Member

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    [May 4, 2006]
    [ QUOTE ]
    My understading was that dealers makes less than 10% on the sale of a car. That said they get lots of dosh, annualy from Audi for shifting volume and hitting targets, I think that's where they really make money.

    Of course I could be completely wrong

    [/ QUOTE ]

    That's what my Alfa salesman tells me as well.

    There's 'up front' profit margins,which vary hugely depending on make and model,and retrospective discounts given to them based on targets.

    So the salesman might only have 10%-20% to play with when you buy,but if he sells a dozen he knows he'll get another 20% back later.

    Some dealers appear to be willing to take the retrospective discounts into account at buying time (calculated risk),or have already had some back,so can sell you the same car cheaper than the next dealer.
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  11. Karcsi
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    Karcsi Member

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    [May 4, 2006]
    [ QUOTE ]

    Take off £230 for VAT,

    [/ QUOTE ]

    No VAT on secondhand cars. But you have right about all the other costs. The best place to look to see what they make on a car is in their annual accounts - net profit after tax.

    That's made up of a combination of higher and lower margins (depending on the customer). So if you want to know the range, then you'll need to befriend a salesman. I just find it annoying that usually it's the rich get away with the biggest discounts. Talk about the rich getting richer.
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  12. benw123
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    benw123 Moderator

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    [May 4, 2006]
    Dealer margins vary wildly but are nearly always based on turnover - the more cars you sell, the smaller the margin. I would guess Audi dealers do very well.

    Speaking for used cars, I used to work for a company that supplies IT systems to one of the UK's largest used car supermarkets. Their profit strategy was simple - from the wholesale price (i.e. auction purchase or fleet disposal), they would slap an average £1000 margin on and send it to the site. The sales manager at the site would add up to another £1000 on to create a retail price and anything they made in this was their own profit. The business as a whole takes the remaining £1000 wholesale margin, and the computer system wouldn't let them sell the car for any less.

    So for example, a family hatch they'd purchased for £6000 at auction would retail for around £8000 and even the hardest hagglers from the public would not be able to purchase the car for less than £7000 so that they always made something on the car. Obviously these figures would be less for smaller, cheaper cars, or those in high demand, such as diesel compact execs, which cost a lot more to buy in the first place.
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  13. foolish3uk
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    foolish3uk Member

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    [May 4, 2006]
    ok here is the truth, i work at an audi main dealer, every six months we have a big meeting and the figures are shown on car sales, showing how much money is made on car sales, servicing etc.... it appears that we only make approx £25.00 per car. obiously this is an average and not exact per car, you can always get a good deal by shopping around dealers but they are not making as much as you all seem to think, that is why selling finance is so important to them because they make moreout of that than they do on the car sale!

    hope this sheds some light!
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  14. Amchlolor
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    Amchlolor Active Member

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    [May 5, 2006]
    [ QUOTE ]
    that is why selling finance is so important to them because they make moreout of that than they do on the car sale!

    [/ QUOTE ]

    My cars have been company motors for the past 20 years,but I've still bought at least a dozen private cars for various wives and girlfriends.

    As far as I can remember,I haven't once been pushed to take their finance at all.

    In fact,I bought a new Clio last week and their finance deals weren't even mentioned by the salesman.

    Strange that such a big deal is made about it,yet in my experience they simply don't bother even trying to sell it.

    /ubbthreads/images/graemlins/noidea.gif
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  15. Dandle
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    [May 5, 2006]
    [ QUOTE ]
    Strange that such a big deal is made about it,yet in my experience they simply don't bother even trying to sell it.

    /ubbthreads/images/graemlins/noidea.gif

    [/ QUOTE ]

    They made a big think about how good Audi finance was when we purchased our car. Even though we told them we had the money they still mentioned it a few times.
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  16. cdb2
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    [May 5, 2006]
    Foolish3UK - are you able to shed any light on how dealers calculate servicing rates per hour and calculate how long they will take for each particular service since it varies so much from dealer to dealer?

    It seems there is often disparity between dealers for time taken even for the the same service.

    Cheers.
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  17. Amchlolor
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    Amchlolor Active Member

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    [May 5, 2006]
    [ QUOTE ]
    [ QUOTE ]
    Strange that such a big deal is made about it,yet in my experience they simply don't bother even trying to sell it.

    /ubbthreads/images/graemlins/noidea.gif

    [/ QUOTE ]

    They made a big think about how good Audi finance was when we purchased our car. Even though we told them we had the money they still mentioned it a few times.

    [/ QUOTE ]

    That's the sort of thing I would expect,going by the general point of views aired,but I've never experienced it at all.

    I always tell them I'm financing it myself as soon as money is mentioned,so perhaps my demeanour tells them there;s no point in them even mentioning it again. /ubbthreads/images/graemlins/noidea.gif
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  18. Karcsi
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    [May 5, 2006]
    [ QUOTE ]
    ok here is the truth, i work at an audi main dealer, every six months we have a big meeting and the figures are shown on car sales, showing how much money is made on car sales, servicing etc.... it appears that we only make approx £25.00 per car. obiously this is an average and not exact per car, you can always get a good deal by shopping around dealers but they are not making as much as you all seem to think, that is why selling finance is so important to them because they make moreout of that than they do on the car sale!

    hope this sheds some light!

    [/ QUOTE ]

    I'm sorry, but that's rubbish. If so much hinged on the finance, then they'd be ramming it down our throats and the interest rate they offer would be far more competitive. Plus, discounts would not vary so much from dealer to dealer.

    You're suggesting that dealers would be better off chucking in the sales side of things and concentrate on servicing and finance.
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  19. powerplay
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    powerplay Grrrr

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    [May 5, 2006]
    [ QUOTE ]
    .... it appears that we only make approx £25.00 per car...

    [/ QUOTE ]

    sorry but that is nuts!

    When I was haggling to buy my Audi, the dealer even addmitted to me that they "only" made 750-1k on the sale, and couldn't possibly match the 2k I said I wanted in order to compete with online prices. Also that the "poor salesman's commission" came out of that margin also, and would I be so cruel as to force him to reduce his commission? (erm, no brainer obviously).

    So I said "ok, knock off 1k and you have a deal or its bye bye". They did, so either they let me have the car at cost or they made money on it. Probably at least another k I reccon, maybe even 2k.
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  20. nervus
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    nervus Well-Known Member

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    [May 5, 2006]
    I have seen at first hand the buy in price for an A3 3.2Q which had a few options like red leather, metallic, bose etc and the list price was approx £27,000. The bought in price on the screen was just over £20,000.

    Also I don't think the 5 pre-reg TT quattro sports my dealer has for sale with <20 miles showing are being sold for a loss @ the £22,995 they are asking. These cars origionally had a list price of nearly £30,000.

    I know there are upfront costs to add such as overheads for the showroom and salaries/ commision etc but they still have at least £5k in a £30k ish car.
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  21. Karcsi
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    [May 5, 2006]
    If overall the frachise group aims to make a after tax profit of 5-10% then they will have to make 20-30% gross on each car on average to cover admin etc costs. So, as nervus says, £5k on a £25k+VAT car is probably right.

    The TT quattro sports that were / are being so heavily discounted will have a smaller margin, but still a margin. Just because the dealer is selling them for peanuts does not mean no profit. Just that they got them for less than peanuts (nutshells?).
    #20
  22. god_thats_quick
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    god_thats_quick Numptie of the highest order

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    [May 5, 2006]
    You might also find that when the dealers are selling the TT quattro sport "at a loss" it would have been at a loss compared to the original purchase price from the distributer, however there can be either price protection or if it's a price change at the request of Audi (to get rid of the cars) then they may be supporting that price drop to make sure the dealer can still sell it on at a profit.
    #21
  23. OutLore
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    OutLore VOIP Dude

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    [May 5, 2006]
    When I worked at Nissan, new car sales all hinged on 2 things:

    1) Trade in. There's generally more profit in a 7K trade in than there is in a 25K new sale.

    2) Bonus for volume shifting. This is one of the reasons why certain dealers give bigger discounts than others - and it depends on when you ask them. If they are just a few cars short of moving up a band on volume sales, then they will sell the car to you with just enough profit to cover their costs (which, I hasten to add are pretty high) so they don't have to pre-register cars as demos.

    You have to bear in mind - car dealerships do not make astronomical amounts of money. They do make a good profit if run correctly, and all the departments help each other (which is rare).
    #22
  24. Amchlolor
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    Amchlolor Active Member

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    [May 5, 2006]
    [ QUOTE ]

    You have to bear in mind - car dealerships do not make astronomical amounts of money.

    [/ QUOTE ]

    You've obviously not heard of Arnold Clark or John Clark (no relation).
    #23
  25. neil.c
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    neil.c Senior

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    [May 7, 2006]
    The service department supports the sales department, but you knew that anyway the prices they are charging./ubbthreads/images/graemlins/grin.gif They should give the cars away really and then tie you into a service contract to claw some cash back
    #24
  26. imported_RedSportback
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    imported_RedSportback Guest

    [May 7, 2006]
    My salesman maintained that they made 5% on each sale and that was that.

    That they make there money on the trade in and aftersales service.


    Hence I negotiated the 5% discount.

    Might be true might not ... but at then end of the day I was happy with the deal I negotiated
    #25
  27. Dandle
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    [May 7, 2006]
    [ QUOTE ]
    My salesman maintained that they made 5% on each sale and that was that.

    That they make there money on the trade in and aftersales service.


    Hence I negotiated the 5% discount.

    Might be true might not ... but at then end of the day I was happy with the deal I negotiated

    [/ QUOTE ]

    I think he wasnt telling you the truth. We got 8% plus another £400 off the list price of our car and we didnt part ex or take finance.
    #26
  28. Nelson_R32
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    [May 7, 2006]
    [ QUOTE ]
    [ QUOTE ]
    that is why selling finance is so important to them because they make moreout of that than they do on the car sale!

    [/ QUOTE ]

    My cars have been company motors for the past 20 years,but I've still bought at least a dozen private cars for various wives and girlfriends.

    As far as I can remember,I haven't once been pushed to take their finance at all.


    [/ QUOTE ]

    Thats because 20 years ago the rules were different.

    Ever since people discovered Imports were cheaper the UK Car market (especially C & D segment) has never fully recovered. Once the prices were realigned and in order to keep image high Audi took away nearly all the Dealers margin and decided to pay more on a bonus structure. Renault's basic policy is pile em high, sell em cheap, different companies do different things, different ways.

    Typically there is 5-8% margin in an A3 or A4, rising to 10-12% in an A6 or A8. The only reason a Dealer usually gives more is because they are either trying to hit Target or get bonus from Audi UK.

    If you ever had the chance to look at Dealer figures they would certainly interest you. Sales departments make on average a loss of between £100-300k a year, Service and Part's Departments make all that money back throughout the year. This is why GAP finance, Accessories and Aftersales are being pushed more than ever because the Dealers are making a loss on most cars they sell.
    #27
  29. Karcsi
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    [May 7, 2006]
    Bowfer said over 20 years or purchasing cars, not 20 years ago.

    I very much doubt that Audi dealers make a loss on new car sales. If they are making a loss, then what sort of loss are the Renault dealers making?!

    What is their desperation to sell a new car that makes it sensible to make a loss? They don't make all that much on servicing - £100-200 profit per customer every 18 months. Some pitence from warranty work? And then once your car nears 2-3 years old, their desperate to sell you another new one. Is it all just to get hold of your part exchange car? But then surely they'd be pushing more for you to trade up to a more expensive secondhand car rather than a new one?

    Everyone ask their dealer, do they make a profit on car sales and what sort of percentage do they aim for. Let's see what range of answers we get.
    #28
  30. IanMcA3
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    [May 7, 2006]
    I work in a company specialising in finacial services for the motor trade, it is true, that the margin on new vehicles (for Audi or other marques) can be as low as a few hundred.

    The dealers rely on the upsell for finance & insurance profuct & DFA etc.

    The bonuses they get from the manufacturer vary car to car & are usually a % of list, however there will be additional support on a run out model or "special editions".

    Ex-demo cars often make so much sense because the dealer get specific "demo discount" on such vehicles.

    Overall though I know that its a lot of hassle for v little profit on the new sales in most cases. Thats why they F&(k us on servicing, parts and warranty!! /ubbthreads/images/graemlins/smile.gif
    #29
  31. Nelson_R32
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    [May 7, 2006]
    [ QUOTE ]
    Bowfer said over 20 years or purchasing cars, not 20 years ago.

    I very much doubt that Audi dealers make a loss on new car sales. If they are making a loss, then what sort of loss are the Renault dealers making?!

    What is their desperation to sell a new car that makes it sensible to make a loss? They don't make all that much on servicing - £100-200 profit per customer every 18 months. Some pitence from warranty work? And then once your car nears 2-3 years old, their desperate to sell you another new one. Is it all just to get hold of your part exchange car? But then surely they'd be pushing more for you to trade up to a more expensive secondhand car rather than a new one?

    Everyone ask their dealer, do they make a profit on car sales and what sort of percentage do they aim for. Let's see what range of answers we get.

    [/ QUOTE ]

    I didn't say they were making a loss on the cars they sold, I said there SALES departments as a whole were. Once you've added fuel costs, depreciation on Demonstrators, tax, fuel for demonstrators and freebies for customers they end up with a big hole in there pocket after a year and we're not talking a few thousand either.

    As I said. Different Manufacturers have different ways of doing things. The 'mainstream' (Ford, Renault, Vauxhall) have much bigger margins on there vehicles and because dealers have the choice to (and do) give rediculous discounts this affects there resale value,

    The reason some dealers are willing to make a loss on vehicles is because they make the money back on Aftersales (Servicing, warranty repairs) The group I work for (which has 3 Audi Centres and 4 VW Centres made a £950,000 profit combined on warranty sales alone last year. You say Dealers don't make much money from the Aftersales of a car? Yet what about maintenance, Warranty Repairs, Retrofit Accessories? All these things add up.

    I've work for an Audi Centre for over four years now and its the way they nearly all run.
    #30
  32. Karcsi
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    [May 7, 2006]
    Yes, making a loss on each car - after all costs of sale are factored in, and not simply the difference between purchase and sales prices. I can't believe that for a second.

    Maintenance is the few £100 pounds profit per car that I mention. Warranty work, as far as I know, is charged at a much lower labour rate than to you or me. So that's no where near as lucrative as it sounds. Retrofit accessories? Do dealers really sell that much?

    Yes, it all adds up - and in no way do I suggest dealerships are run at a loss. But making no or very little money on car sales? That sounds like a very strange way of doing things.
    #31
  33. marriedblonde
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    marriedblonde Moderator

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    [May 7, 2006]

    Not only do the mainstream aanufactures have bigger margains (no doubt helped by the rental compaies bussiness!) also don't forget a mainstream dealer's setup and running costs are also considerabley lower than the premium brands.

    Look at the difference in premises of say a renault, vauxhall and Audi for example. Also the stock that they have sitting around be it new or used is also considerably different.

    J.
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  34. Amchlolor
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    Amchlolor Active Member

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    [May 8, 2006]
    [ QUOTE ]

    Not only do the mainstream aanufactures have bigger margains (no doubt helped by the rental compaies bussiness!) also don't forget a mainstream dealer's setup and running costs are also considerabley lower than the premium brands.

    Look at the difference in premises of say a renault, vauxhall and Audi for example. Also the stock that they have sitting around be it new or used is also considerably different.

    J.

    [/ QUOTE ]

    Yeah,but what finances the 'big flash' Audi building MB ?

    It's a chicken and egg situation.

    Does the Audi dealer need the big flash premises as part of the brand,or do they know they can afford the big flash premises because of the large profits they will be make.

    I would suggest the latter.

    If big flash premises were crucial to car sales,then online car sales wouldn't be the success they are.

    Of course,there are those who buy into the whole 'premium brand' thing,and feel superior or 'good' about going into a flash premises and being treated by a "ooh suit you sir" type,but I don't buy it.

    I'm lucky that I don't have to pay for my car or servicing.If I did.as I have said before,there's no way I'd buy into the Audi 'thing' as,frankly,I think it's a bit of con all round really.
    #33
  35. Amchlolor
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    Amchlolor Active Member

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    [May 8, 2006]
    Double post,sorry.
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  36. marriedblonde
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    marriedblonde Moderator

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    [May 8, 2006]

    But most people who buy on-line visit the a dealer first for a test drive and the smooze.

    When spending £20k plus on a car do you not expect a nice plush sales room and a pompous saleman (bit unfair as the guy I bought mine from was very down to earth - obviously was new to Audi /ubbthreads/images/graemlins/laugh.gif )?

    But yes chicken and egg

    J.
    #35
  37. Amchlolor
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    Amchlolor Active Member

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    [May 8, 2006]
    [ QUOTE ]

    When spending £20k plus on a car do you not expect a nice plush sales room and a pompous saleman
    J.

    [/ QUOTE ]

    Many will,of course,but it's a bit 'old-school',as witnessed by the fact online buying is becoming more and more popular.

    Your point that many people visit the dealer to have a swatch at a car before buying online is probably true though.

    I'm not saying dealers will cease to exist but,at the same time,I do feel the 'flash premises' thing is a bit distasteful and can have a detrimental effect on your clients.

    I know we're careful about our company cars for the same reasons.One of the managers here wanted a Merc,which was actually cheaper than my Audi,but he was declined as we felt it would be perceived negatively by the clients,so it's a fine line between keeping them happy and showing off.

    With regard to the mechanics,is there any proof we are getting superior mechanics to,say,the local Renault dealer ?
    #36
  38. god_thats_quick
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    god_thats_quick Numptie of the highest order

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    [May 8, 2006]
    You will also find for the dealers to keep their franchise with Audi they will have to have a certain quality of showroom etc. I know one lexus dealer that has just had to build a new showroom at a cost of around £5m because lexus told them too (although this is probably an extreme example).

    I personally couldn't care less what the showroom is like as long as their is somewhere to wait whilst getting a service etc and the people arn't /ubbthreads/images/graemlins/swear.gif!
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  39. Karcsi
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    [May 8, 2006]
    That proves Bowfer's point: there must be a pot of gold at the end of the rainbow for a franchise to spend £5 million to get there.

    I have always thought - premium brand, premium price, lower volumes but premium margins.

    The high volume manufacturers and retailers do not make a larger margin on their cars. Their margin is lower, but they sell many more cars. Because their focus is on selling as many cars as possible, and not to provide the customer with a "lifestyle experience", there is no flashy dealership - although, the run of the mill dealerships don't look too shabby to me.

    And I thought having to service the rental / lease companies would actually make it worse in terms of margins per car - the 30+% discounts we've heard about in the past. So I'd think the margins would be tighter, but again selling in high volumes.
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  40. god_thats_quick
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    [May 8, 2006]
    I think the key thing here is how much more does it cost to produce an A3 than say a clio, I wouldn't have thought it costs twice the price to make (I may be wrong) but they can sell a bog standard clio for under £8k and I just don't belive they can set out to make no money on the sale of the car. The costs of the dealers etc you would hope to be more at Audi but again, how much more can staff that are essentially doing the same job be paid maybe double but again I doubt it.
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