E43 AMG Estate Ride & Comfort

[ALFAitalia]

As it said I was just using the 4k repair as an example of how unfair the VAT system is to car dealers.....that you are taxed on the full margin between costs and retail no matter how much actual profit you make. Most dealers these days will need to start with 4k margin minimum if they want to keep the doors open. Merc dealers and other prestige brands with expensive showrooms and demo fleets to run will need more. That Lotus dealer either wont be there long.....or he gets his stock cheap somewhere......no one does this job for the fun of it. He still needs a good top line margin to make a living at the bottom line.

 

[Steve84N]

He's been running since 2015. Doesn't negotiate on prices hardly ever/at all because they are advertised at competitive prices. There's a lot of industries with too much BS, car sales isn't the only one but it's definitely one of them. It's nice to find a gem where there is some actual prep and keen pricing, a rare combo that earns lots of repeat business.

 

[ALFAitalia]

So how much margin do you think he has in his cars.....and what would you think is an acceptable margin for a used car dealer to run at in general?....I mean a proper dealer with staff and a showroom....not some bombsite wideboy trader.

 

[Steve84N]

I don't know, but in the £20-30k bracket I'd be surprised if it was more than £3k and probably more like £2k. He's not a wide boy trader, completely the opposite in fact. There's too much fat in most car dealerships that adds no meaningful value. Sales people who know nothing about what they're selling and expect handsome commissions for sitting on test drives and form filling. There are exceptions but not many.

 

[rockits]

I think many dealers will work on a £3k-£5k margin at this level. Some they will need little to no prep on but some will need a lot more. Many dealers do no prep at all now and negotiate this at the time of a deal/sale. Makes sense but they still expect a high margin even when they do little to no prep or spend on the car.

I suspect over time many will start to struggle as the car market changes and their ability to squeeze healthy margins out of cars will reduce. There are some good dealers out there and some shockers but I guess there will always be this disparity in this and most industries. Generally the healthiest and fittest will survive with the less so struggling over time.

I suppose it is down to how much time and money you spend as to what is a fair margin. If you flip a car with little time or spend and make £5k at this level that is a really healthy possibly inflated profit. People don't work for free though so need a fair profit to survive.

I don't think mine needs much prep or doing as it was only recently bought and sold by a dealer. So am guessing would have had some prep done for sale. I had a parking sensor replaced and replaced the rear tyres with nearly new and the front tyres with brand new. The brakes will likely need replacing next year or depending on mileage but don't need doing now. I think if the trade offered say £22k for mine they would be listing retail for £26995 level at a guess which is what it was listed for originally. Doesn't need a service as that was done fairly recently and the MOT was fresh when I bought it.

 

[ALFAitalia]

A feather dune

I don't know, but in the £20-30k bracket I'd be surprised if it was more than £3k and probably more like £2k. He's not a wide boy trader, completely the opposite in fact. There's too much fat in most car dealerships that adds no meaningful value. Sales people who know nothing about what they're selling and expect handsome commissions for sitting on test drives and form filling. There are exceptions but not many.

We had two or three grand in used cars in the 90s....can't see a dealer surviving on that now.

Ok let's say you buy a car for 20k and put it up for 22k (can't see it happening in 2023 but let's play along). For a start that's only 10 percent....not a lot of margin.....when I was selling jewelry we had between 100 and 200 percent markup...even supermarkets work typically at 75 to 100 percent margin). From your £2000 "profit" you lose 20% vat content of the profit...so that's £333.33. Then theres warranty...typically £200....then servicing and recon, probably an average of £300 for service/repairs. So that leaves about £1166 profit....for turning over £22,000!......But there is more to come out....each deal has to contribute to wages and or commission, heating and lighting, property maintenance. Any proper dealer wanting to stay in business and make a decent profit will need a lot more than £2k per unit these days.

 

[rockits]

I don't think anyone is saying a dealer is only allowed £2k profit in a car.

I don't think you can work on the same percentage of profit for a product that costs £2k to one that costs £20k but it depends on the sector, product and amount you can turnover I guess.

I could resell a £2k laptop and make £50 profit. So I'd suggest that a car dealer is doing pretty good at £2k nett profit and more. I could sell 10 x laptops at £2k each for £20k total and make £500 nett profit in comparison. As a business we cannot survive on that level of profit from hardware or even software. We have to offer and do so much more. Somehow people expect us to stay in business with some margins of 1-20% on often lower prices items. So I'm not going to shed any tears for car dealers.

 

[Steve84N]

@ALFAitalia my issue is how much margin most dealers seem to want to make for very little added value. They get stuck needing high percentage profit on each car because they're not getting the turnover to support a lower margin.

I reckon Jon Seal is selling around 1.5 cars a week, do that for 40 weeks of the year with a £1,500 profit and you're at £90,000 to cover wages and overheads, which aren't too high if you're a sole trader. Doesn't seem ridiculous to me.

Edit: £70k in dividends and two employees including the Mrs.

https://find-and-update.company-information.service.gov.uk/company/09489464/filing-history/MzM2MzQwNjAxOGFkaXF6a2N4/document?format=pdf&download=0

 

[rockits]

@ALFAitalia my issue is how much margin most dealers seem to want to make for very little added value. They get stuck needing high percentage profit on each car because they're not getting the turnover to support a lower margin.

I reckon Jon Seal is selling around 1.5 cars a week, do that for 40 weeks of the year with a £1,500 profit and you're at £90,000 to cover wages and overheads, which aren't too high if you're a sole trader. Doesn't seem ridiculous to me.

Edit: £70k in dividends and two employees including the Mrs.

https://find-and-update.company-information.service.gov.uk/company/09489464/filing-history/MzM2MzQwNjAxOGFkaXF6a2N4/document?format=pdf&download=0

I do agree with this and many in life get away with doing not a lot for quite a lot. Much of the time the free market should deal with this as it sees fit but not always. I guess if they can source the cars for a low price and sell then at a high price with the market supporting that then it will continue to happen regardless of whether it really makes sense or not. Some people are lazy or some want and easier risk free process and seem to be prepared to pay a healthy premium for that. My pockets aren't deep enough to justify or allow this so I have to work hard wherever I can to stretch our many as far as possible.

Also post Covid people might want to do less work and work less hours. I can get that but I suspect the tighter it all gets out there the harder it might get for some to survive. Generally it is survila of the fittest mainly.

 

[johntech]

Very interesting! I have run Citroens of one kind or another for the past 30 years of my motoring life but I have always wanted a Mercedes Benz! Last October I finally treated myself to a E-Class estate car. It is a beautiful machine and as a retred engineer I can appreciate the way it is put together. Unfortunately it is not designed for this country1 It is designed for high speed cruising approaching 150mph ! not pottering round english country lanes and driving at an absolute maximum of 70mph rarely getting into top gear! I find the ride is totally unacceptable for the average British B or A road only coming into its own on a motorway and then feels restrained of it's capabilities. I'm not sure what the answer is very regrettably I might have to revert to a "Lemon" car!
John