SW17LS

If you’re not saying a dealership can survive just on selling cars I’m not sure what you’re saying...

You’re confusing profitability for the manufacturer with profitability for the dealer. It doesn’t do anything for the dealer that it doesn’t cost $70k more to make an S63 than a E400, the wholesale cost vs what they can sell it for is what the dealers care about. Yes of course car manufacturers make a lot of money selling new cars. The question is how profitable is it for the DEALERSHIP?

And actually, the LS460 got more profitable as it aged for the manufacturer. All of those R&D and retooling costs they saved. That does nothing for the dealership though. As for the new one making more for the dealer, I doubt it. They will be 10k off in no time, everything in the segment is. And in any event if they sell 1000 a month which is the goal, there are over 250 Lexus dealers. How many LS500s will the dealer sell on a month? 4?

Toys4RJill

No confusion at all. The dealer cost for a $50K Tundra has at least 10K profit built into the MSRP. Both manufacturer and dealer benefit. Dealers make big money of selling new cars, but it is at the mid to high end. Not at the low end. Lexus is expecting 12000 per year for the LS. Let's say at $5000 profit, that is $212,000 per year, per dealer, assuming there are 275 dealers on the US.

SW17LS

And that Tundra sells at $8-9k off MSRP.

That profit expectation for the LS is way high, and doesn’t build in any salespersons commission, but even then it makes my point. $212,000 in profit is nothing, that doesn’t even pay the GM’s salary.

Toys4RJill

But as you add all the sales in a new car dealer. It makes them money. Used cars as well and the dominate source is from the service. NADA breaks it down year after year. I believe it's 35 percent from new cars, 25 from used and 40 perfect from service. Or something along those splits. But everyone seems to say that new cars are sold for no profit. That is BS.

bitkahuna

iTrader: (20)

mixing car maker profit with dealer profit makes little sense. the dealer pays a varying amount for the vehicle from the manufacturer, but once they have it they have it, the profit to the manufacturer is baked in, but the dealer gets extra benefits for selling it quickly because usually the 'inventory' is financed by the car maker (!) so the longer it sits on the lot the more the dealer ends up paying, and if things get particularly slow moving to the point a car maker thinks it's making them look bad or their dealers, the manufacturer may then offer additional customer and/or dealer incentives to move the vehicle off the lot.

but again, mixing car maker and dealer profits is too simplistic. a car maker might make $5k on a vehicle while a dealer makes $0 or even less than zero if it's been sitting on the lot a while and the customer who finally buys it drives a hard bargain and the dealer agrees just to get rid of it.

but we're off topic again!

if there's nothing left to say about the OP being upset over a $28 'fee' on his service work, then this will be closed. thanks.

SW17LS

It isn't BS lol. Your numbers are a little off, the NADA numbers are 30% new cars. That figure also includes finance, warranty, extra sales such as add ons, paint sealants, etc. 26% used cars. 44% service. So right there, a dealership makes nearly 50% more on service than they do from new car sales, finance, warranties, and add ons combined. Thats a very significant difference. Here's a question for you, what you're talking about is gross revenue, what % of gross revenue do you think overhead is for a car dealership? The figure is like 85% just FYI. When you factor in something like 75% of the space and resources of a car dealership are devoted to selling cars, displaying cars, and holding cars in inventory, then no...car dealers don't make money selling new cars, or even selling new and used cars. Net profit per car sale is maybe 1-2%. It takes upwards of 7-9 employees efforts to sell you a car, overhead is huge and profit is very small.

A car dealership COULD survive just doing service, because their space and payroll needs would be much, much smaller. However, there is no way a car dealership in our definition of what a "car dealership" is could survive without the service department. Yes revenue is made from selling cars, but hardly any "profit" is made.

oldcajun

I had a neighbor who had an early Acura dealership and they really struggled to make it. No older cars for service and few warranty calls on the new ones. Used cars kept them afloat for several years. Imagine how tough it will be for the first stand-alone Genesis dealers.
Steve

mmarshall

In my case, I had moved up to a new Lexis IS300 from previous Toyotas (and a Saturn SL-2)...the Service Manager of the Toyota dealership was very close to me (we had known each other for some time, and considered ourselves friends, as he sometimes came to me for advice on cars he didn't know anything about, and vice-versa). He was simply blown away when he saw the bright-yellow IS300 I had gotten...told me his shop could do oil changes, servicing, and minor repairs on it (for about 50-60% of what the Lexus shop wanted)..but that any official warranty work would require a Lexus shop. At the time, that Toyota shop didn't have some of the customer-perks you have at the Lexus shops, like washing all of the cars that go through service. I didn't care, though.......by my own choice, I usually wash my own car. I generally don't trust others to do it correctly, without getting scratches on it. Getting a little old for that, though, now, and my legs and back aren't as strong as they once were.