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How much do car dealers make when I buy a car?

Ask Scott LogoThere are countless websites claiming to know how to buy a new car at or below dealer cost.  There are others where, for a fee, you can buy a copy of the dealer wholesale invoice. We all know somebody who seems to be good at getting the best deal. Maybe you have an uncle or brother-in-law you love to bring along when you go car shopping.

Some people always feel like they got a great deal.

Some people always feel they paid too much.

How do you know if you got a good deal?

You Don’t.

Often, perception has little to do with reality. Allow me to explain;

As a Dodge dealer in Edmonton, I can tell you the overall margins in this city are often lower than many other markets in Canada, due to fierce competition. Several of the largest Dodge retailers in Canada can be found here. Sherwood Park Dodge is one of them. My peers carefully consider price points when planning their marketing, as do I. They know if they are too high, their customers will go elsewhere. If they are too low, they will have difficulty covering their expenses.

If there were only one dealer in the city, would prices be higher?

Yes. Competition keeps the prices down.

Car shoppers who do their homework and know what they want usually get a better deal simply because they know what they want.  They have visited websites, emailed for additional information, and narrowed down their list of potential vehicles. The most successful shoppers read reviews of both the products, and reviews of the dealership(s). All this information is available online. Many speak to others who are driving a similar vehicle and ask, “How do you like it?”  “Where did you buy it?” “What kind of a deal did you get?” These buyers know what they want and have a short list of dealers from which they intend to buy. This well informed group make decisions based on logic rather than emotion.

Why do people who make decisions based on logic get a better deal?

Have you ever heard of someone winning the 649 and stopping off at a dealership to buy a car on the way back from picking up their winnings? How much research did they do? Did they pay sticker? Did they get a good deal? Would this be an example of an emotional buy or a well thought out and carefully researched logical purchase?

If you want the best deal, follow these simple steps;

1. Know what your trade is worth before you go to the dealership.

2. Know what you what to buy before you go to the dealership.

3. Know what you owe on your trade, (if anything.)

4. Speak with someone who drives what you are intending to buy.

5. Speak with someone who has bought from the dealership(s) you are considering.

6. Search online for product reviews.

7. Search online for reviews of the dealership(s).

8. Know how much you want to spend and do not exceed your budget, under any circumstances, without sleeping on it first. Walk away. (You can always come back.)

9. If you have a dealer you are happy with, do your research and then carefully consider the value of your relationship with “your dealer” before making a final decision. (You know the service guy. The lady at the parts counter knows your name. The salesperson went the extra mile to help your daughter find the perfect used car last summer. You like doing business with them. Why switch?)

As you can see, there are many things to consider when buying a car other than just price. Having said that;

How much do I make on a new car sale at Sherwood Park Dodge?

3 % – 6 % Gross Profit, on average. This is before various expenses are covered like the sales persons pay, rent, training, insurance, etc. (This would be typical for any Dodge dealer in Edmonton. We are all very close in terms of profit margins.)

Do I ever lose money on a deal? VERY RARELY. I am not in business to lose money nor are my peers. As a matter of fact, due to the competitive nature of the Edmonton market, if a dealer is selling cars at a loss, he or she wont be around long.

If you are ever presented with an offer to buy a car and told “we are losing money on this deal,” ask yourself, “are they bad at what they do or are they not being completely honest with me?”

Either way, you may want to keep shopping. The best way to keep your cost down in the long run, and consistently get the best price, is to find a store where you enjoy doing business, where you trust the people you are dealing with,  and stick with them. Repeat customers are what makes a business like mine successful. It is my intention to hold onto all my customers. I work very hard everyday to ensure that happens.

Let me know how we are doing by responding to this post.

Scott Held

{ 7 comments… add one }
  • Scott September 15, 2010, 11:01 am

    HI Joseph,
    Thank you for your comments.
    We will contact you shortly and yes, we are happy to arrange delivery anywhere in Canada.

  • Joseph Fellner September 14, 2010, 9:27 am

    Hi There
    Interesting info on your blog here. Nice to see honesty. I see your comment that you deliver. I am about to head out with my dad and he wants to purchase a new Dodge Caravan. If we get some numbers – can I send them to you to see if you can either do better or at least let us know if the deal is a good one. He won’t have any trade in – so will be an all cash deal – no financing etc…
    Cheers,
    Joseph

  • Scott May 31, 2010, 1:25 pm

    Thank you Ken.

    We do a lot of business all over the west.

    Oh, by the way, we also deliver : )

  • Scott May 31, 2010, 1:22 pm

    Thank you for taking the time to write me Keith.

    Your concerns are shared by many people.

  • ken calder May 29, 2010, 10:28 am

    Hi Scott

    I’m from Abbotsford B.C. and just want to tell you your newsletter is very informative. Keep up the good work.I’m not ready to buy right now but will consider your dealership when the time is right.I have kids in Edmonton so am no stranger to the city

  • Keith May 28, 2010, 10:14 pm

    I respect the fact that anyone that is running a business has to show a profit. What concerns me about purchasing a car is not really knowing what that car actually costs – in other words what is the dealership paying for the vehicle, then if they need to make 3-6% on the vehicle I can figure out where my ability is to negotiate on the price. I am more than willing to work with a sales person to make it both a fair deal for me and for the dealership, what I don’t like to see in advertising is “We have slashed our prices by $10,000” How can that be and still make money or are the car dealers gouging the buyers in the first place. I am looking for a vehicle I have done my research but still feel when I purchase there are all these extra costs popping up – dealer preparation, car fax reports etc. When I look at me as a customer and I go to a dealership they should be all over me to get my business but I have walk out of quite a few dealerships without the sales person as much as asking me for my name or phone number so that he can do the research for me. I do like your new ads and how you are approaching the market place with your open concept perhaps I will check your inventory to see if you have the product I am looking for.

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