Statistics will make your hair hurt, but dealerships make big $$ on service

Automotive dealerships 2007–19: profit-margin compression and product innovation : Monthly Labor Review: U.S. Bureau of Labor Statistics (bls.gov)

Basically, the stats show that dealerships make about 3x the money from their service departments vs sales. Stealership anyone?

 

Amazon's entire business model is to sell goods at a huge loss and then make up the profit with advertising revenue because their low prices drive so much traffic to their website.

Nobody seems to care how and where they get their profit from

 

business as usual

https://en.wikipedia.org/wiki/Loss_leader

 

Service and Parts Departments make the money to pay all the bills,salarys etc....then they are free and clear on the New/used car sales

 

In other news, the commonality that gas stations and movie theaters share is that the rent is paid from the candy and soda sales, and not from the thing that they're named after.

 

You should see the profit stats on dealers from 2019 to now. Profits quadrupled on flat revenue.

 

I could careless about "Profit Margins".
I care more about "Affordability".

If I can afford to buy it, then I don't care what profit you make.
If I can't afford to buy it, then profit margins are useless.

 

"We always sell at a loss, but make up for it with volume..."

 

LOL

I understand the advertising/traffic to site thing with Amazon, but that statement alone...and I've heard it before..but it always makes me laugh.

In and of itself, it just means "we sell things at a loss....so we sell more...so we just lose money faster than our competitors".

But of course real business is more complicated than that...and I get that. The "make it up in volume" argument, in and of itself, just makes me laugh.

 

I know, me too! It almost sounds like something that could have started on The Office tv show...

 

I thought Dealers making the majority of their profits off the parts and service department has been the norm for like…… ever?

My understanding was dealers could only charge x% over msrp which was not a huge margin. Essentially dealers were not making much profit off sales vs what they paid from the manufacturer to purchase and ship the vehicle in the first place. Of course covid wrecked everything because everyone does whatever tf they want now and give zero fucks.

Service departments are a gold mine. Book says 8 hour job. Takes me 2. That means I could do 24 hours worth of billable labor in a 8 hour shift. Then consider you have a dozen or two dozen other techs doing the same thing. $$$$

 

Let's see you go pull that off

 

Old news, I've known that for 50 years. That is why I only take my vehicles back to the dealer if it is a warranty repair, they are paying for. Even then they always push unnecessary and expensive repairs on you.

 

sold cars in the early 2000's 2004-2007 was damn good at it too. new cars were trash made my money on the accessories really. used cars were where the money was, buy a car cheap, resell high make money.
worked as a tech use to love working with the lube techs, taught many of them how to turn a "20 min oil change into an hour of work" 2/10 of an hr for the oil change get a tire rotation that was an additional 2/10ths that was 4/10 of an hour of work that could be done in 15min. get an air filter and a cabin air filter on that is another 2/10ths each, according to the book time, so and oil change a tire rotation and a cabin and engine airlifter were 8/10th of an hour. that can be done in less then 20min. heck i use to train the lube techs to turn most oil changes with all that in 15min or less with a 2man team. yeah they worked their pay. also me showing them how to do that and work their pay plan means when they see a leak or something that a tech should see and assess id often get a hey come see this. then that car would end up in my bay for other things.

think book time on a subaru for 1 front CV axle is 2 hours i can do them in 20min a side.. yeah im going to get paid for that skill and total time... pretty common to have the shop make the money.

 

I work for Toyota forklifts and it's the same thing.

 

Just wait 'til you see how much these new manufacturer labor contracts impact pricing...

 

"You will not be passing those increased prices on to me, you greedy money-hogging CEO!>!!>!>!>>! You'll take a pay cut !!!"

 

Happens all the time buddy. (Redacted)

 

I understand now why my dealer keeps calling me to service my truck

 

or option #2 you come in with your car its in for service, or you're close to the end of like a lease. hey have you seen the new Tacoma/ tundra/ 4r? come see what's better then yours. I use to love hanging outside the shop when I sold back in the day, your car needs 3k in repairs... nah come check this ill sell you a new one.