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What's a fair and reasonable profit and commission?

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What's a fair and reasonable profit and commission?

 
Old 07-28-2017, 03:58 PM
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mpuzach
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Default What's a fair and reasonable profit and commission?

We often find discussion here about C7 pricing and discounts. It's no secret that it's gotten to the point that in many cases dealers have to sell these cars at a net loss if they're going to sell them at all; if one dealer isn't willing / able to take it in the shorts, another one will. In most cases, buyers couldn't care less; they'll pit dealers against each other to see how low they can get the price. My question is this: As Corvette buyers or future buyers, what do you think is a fair profit for the dealership and a fair commission for a salesperson on a new Corvette? By "profit" I'm referring to:

Dealer Invoice LESS holdback +/- $X

Most dealerships have very similar commission structures. The salesperson is paid a % (typically 20% - 30%) of the difference between M.S.R.P. and invoice. Hold back is a non-factor for most salespeople. In cases where it's a negative difference, there's a minimum commission of $100 - $300 depending on the dealership. At my store it's $150. If a salesperson spends, say, 5 hours with the buyer (not at all uncommon), what do you feel is a fair commission? For the purpose of this discussion, please assume that the salesperson is knowledgeable, helpful, and does a great job for you.

I look forward to your responses. Thx.
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Old 07-28-2017, 04:08 PM
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What they make its not my concern. As a customer I'm just looking for the best deal. As long as I got a good deal it doesn't matter if the salesman made $1 or $1000.
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Old 07-28-2017, 04:12 PM
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"Fair" to who?
& depends on what's "Fair" means...

My take:
Fair to Dealer: $1000 profit
Fair to Buyer: $200 - $500
Fair to SalesMen: $200 - $500
Fair to SalesWomen: 72% of Salesmen...
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Old 07-28-2017, 04:12 PM
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Are you sure the dealer is actually paying dealer invoice any more? That used to be a way to deal back in the 60s through the 70s but how much do they actually pay when dealer incentives are taken into account? Do you really think Kerbeck, McMulkin, Les Stanford, Matick or Criswell are losing money on every car they sell?

There used to be a dealer out of Florida that sold a lot of C5s nation wide at a really good price. Every one included free museum delivery. His actual dealership was a couple of small buildings and didn't have a lot of employees. He sold 5 or 6 Vettes per month and all he had to do was some paperwork and process the money. He could clear >$36K per year and never see any of the cars with himself and his wife doing all of the work.

Bill
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Old 07-28-2017, 04:13 PM
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I'd not want to be a car salesman in the age of the internet. Before going into medicine, I was sales manager for a big retail furniture company, with 22 stores in 4 states. Even back then (early 90's) the customers would try everything in the book to get you to drop the price. I can only imagine its a thousand times worse now with the internet. Everyone is looking for the best deal, and in most cases, rightfully so. I'll spend a little more to keep my money local when I can, but if a local dealer is significantly higher (> $1200 or so) than one of the 'mega-dealers' then I'll just make a road trip and spend that $1200 on that. As for a decent commission, I can only say that if a car salesman (or woman) is selling a decent amount of inventory, and they aren't getting decent pay, the market will correct that by the salespeople moving to another line, dealership or even category. (like leaving car sales and going into pharmaceuticals, as a friend of mine did) In your example, the salesperson made $30 per hour, which extrapolated out to 2080 hours in a year (40 hrs/week x 52 weeks) that should come out to over $60K a year, which isn't exactly shabby money, especially down here in NC, where average family income is in high 40's, if I remember correctly.
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Old 07-28-2017, 04:13 PM
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Unfortunately, many buyers feel the same way. They expect a great experience, a knowledgeable salesperson, and hours of their time but they expect that person to do it for free. Sad.
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Old 07-28-2017, 04:20 PM
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I think the dealer does still pay the invoice price, but he still gets the "hold back" which used to be about 3% of MSRP.

My dealer would sell most any car for $100 over invoice. Of course, 3% of a $75,000 Stingray ($1740), is a lot more than on our $27,000 Malibu ($810), and we still got $2500 cash back from GM and $1500 off list.

Also, with most dealers listing new cars on the internet, they have to give you very close to their bottom dollar price since the buyer can compare prices with any dealer in the country.
Not much room for old fashioned negotiations once you get to the showroom..like when you started out at MSRP.

For example, here is a 2017 listed for $11,815 off with no negotiation at all...



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Old 07-28-2017, 04:23 PM
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Originally Posted by mpuzach View Post
Unfortunately, many buyers feel the same way. They expect a great experience, a knowledgeable salesperson, and hours of their time but they expect that person to do it for free. Sad.


I certainly don't expect a salesperson to do it for free, I was in sales for many years, so I get what you're saying. But I do think that some dealerships just count on that one "impulse buyer" that will just buy a car without shopping around. Heck, there's a Suzuki motorcycle shop in my town that's been that way for years. They sell for retail period, and won't discount a bike that's been on their floor for 2 years. And eventually, some poor sod will walk in and not know any better, and he'll buy it. Now THAT is sad. I always said that customers are like sheep, you can shear them a million times, but you can only skin them once.
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Old 07-28-2017, 04:25 PM
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Originally Posted by TEXHAWK0 View Post
I think the dealer does still pay the invoice price, but he still gets the "hold back" which used to be about 3% of MSRP.

My dealer would sell most any car for $100 over invoice. Of course, 3% of a $75,000 Stingray ($1740), is a lot more than on our $27,000 Malibu ($810), and we still got $2500 cash back from GM and $1500 off list.

Also, with most dealers listing new cars on the internet, they have to give you very close to their bottom dollar price since the buyer can compare prices with any dealer in the country.
Not much room for old fashioned negotiations once you get to the showroom..like when you started out at MSRP.

Last time I checked, 3% of $75,000 was 2250. But then, I've never been good at this new-fangled mathermatiks.
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Old 07-28-2017, 04:31 PM
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If I have to spend 5 hours with a salesman to buy a damned car, I'm not going to be a happy customer.

The time wasted on some of these transactions is ridiculous.

Best car buying experiences I've had were 45 minutes to an hour and me getting what I consider a fair shake. Don't care how the dealer and salesman split their share.

But don't waste half of my damned day on the deal.
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Old 07-28-2017, 04:54 PM
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Originally Posted by OnPoint View Post
If I have to spend 5 hours with a salesman to buy a damned car, I'm not going to be a happy customer.

The time wasted on some of these transactions is ridiculous.

Best car buying experiences I've had were 45 minutes to an hour and me getting what I consider a fair shake. Don't care how the dealer and salesman split their share.

But don't waste half of my damned day on the deal.
I can assure you that the salesperson doesn't like it either. When it takes that long it's usually because the buyer is causing it to do so. Not every buyer is informed. I've had to spend an hour or longer just "showing" the car because the buyer has never seen a C7 before. Then once they get done trying to buy the car for $5,000 below invoice and they end up buying it for whatever the agreed upon price is, they often want a complete demonstration and explanation of every last button, switch, and icon on / in the car. When I have a customer who drops $70K on a car, I'm going to give them what they want.
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Old 07-28-2017, 05:33 PM
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Back in the day (I'm old) it was like pulling hens teeth when buying a car. It was a dreadful experience. Today anyone with a little common sense can find the invoice of the car they want, ask the dealer if they will sell the car at that price, pay the fee's, tax, tag, title, and be on their merry way. Unfortunately that uninformed car buyer for the most part makes it hard on themselves, and the salesperson by wanting the car at that special price they feel they deserve. I'm fairly sure I would get fired right after that person left if I was a salesperson at at car dealer.

The dealer (locally owned) I have been buying from for over 30 years is one of the easiest to make a deal with if you just understand they are in business to make a small profit, and make a serious offer. It works for me every time I'm in the market.

Unlike many others I try to understand that the salesperson has a family to feed, and I'm not going to embarrass them by making a stupid offer. To me a person that doesn't care if that person makes a profit is a sad sad individual. Everyone on this earth that works deserves to be paid for their labors. Just like the person that doesn't care if that worker makes a profit. IMHO

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Old 07-28-2017, 05:46 PM
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Originally Posted by Blue666's View Post
Last time I checked, 3% of $75,000 was 2250. But then, I've never been good at this new-fangled mathermatiks.
You are of course correct. I still had in mind 3% of my mere Stingray which only cost $58,000 way back in 2014.

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Old 07-28-2017, 06:06 PM
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It really depends on what you are doing to earn that commission. Compare a guy who ambles into a store knowing nothing about anything and you spend five hours with him explaining everything in detail. He's got a shitty old trade that he thinks is worth vastly more than it is. Then he vacillates back and forth and tries ineptly to "deal" with you in ways you've described in the past, and winds up wasting your time. That sucks, and you have my utmost sympathy. Now a second guy contacts you by email and knows everything there is to know about the car. He knows it better than you do. He doesn't want a test drive and has no trade. He's either looked at your inventory and picked out the very car he wants, or he has the RPO codes for his options and tells you to order the car, puts a few thousand down and tells you to call him when it gets in. You spend ten minutes total talking to him and the dealership secretary does all the paperwork.

Do you think those two sales are equivalent? Do you think they deserve the same commission? Corvette buyers tend to know what they want. They're not out shopping for "some sort of SUV." When I placed my order I sent a single email: "What's yer discount for a factory ordered car?" He wrote back: "XX%." I sent the RPO Codes and $2K down. An assistant (not the salesperson) did all the paperwork. I made a single mistake on the RPO codes which she corrected. I actually talked to a salesperson from the firm twice. The first call was not necessary. He as just being friendly. The second was because of a minor problem with the temp license. The dealership never saw me. They never saw the car because it went to the NCM. The dealership did not "sell" me the car. They simply submitted the order with my specifications and they collected the money. Even the paperwork was not done by the salesperson, but by an assistant (very likely an hourly employee.)

Now, let us examine what happens to a person like me who buys a car from a dealer, pre-selected by me, money down before I even walked into the dealership for the first time. Pretty quickly I got handed off to the "paperwork lady." First she tried to sell me an extended warranty "because you never know about those advanced electronics." I tried to explain to her how electronics fail. She wasn't at all interested. Then she tried to sell me a "special coating" for the paint. I have no idea what this was. I did not know about ceramic coatings at the time, but my impression was that it was not one of those. I declined. Then she wanted to sell me an undercoating. I declined. Then she wanted to sell me a "Scotch guard" seat protection. I declined. "Doing the paperwork" was more like a gauntlet to run through where the dealership attempted to sell me various "dealer packs" we all know I did not need. And this was an easy sale. I picked the exact car out before I went there.

This is the kind of thing consumers must go through with local dealers, even if you manage to get with a salesperson who is not overly pushy and the sales manager stays out of the way. You still "run the gauntlet" and you still have no idea how much the dealership actually paid for the car. If I don't believe the MSRP price why should I believe the "invoice" price? There are so many deals, hold backs, bonuses, and end-of-month/year goals that there is no way the average person really knows what the wholesale price of the car is. And I'm convinced the front-line sales person doesn't really know either.
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Old 07-28-2017, 06:25 PM
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It is also very hard to negotiate a price between local dealers when the local dealers all belong to the same auto sales group (Autonation, Group 1, etc.) and charge the same price.
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Old 07-28-2017, 06:37 PM
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july has been an excellent month to show the puppet meister and his works. the puppermeister declared "no soup for you!" in July (no rebates/incentives/bonus tags/loyalty bucks) and the dealer inventory C7 forum has been as quiet as a tomb this month. Same old "bump" of the major players presence listings to the front; but no new daily deals the way it was from Nov to April of 2016/2017.

The puppetmeister knows the whole of the USA buys vettes in the summer. and they rake in the profits accordingly. Their puppets, the dealers, do as much as they can with the small spread they are allotted, and i appreciate their efforts, but the real sizzle with the steak comes from the puppetmeister when they do the big cash-off deals. But the puppetmeister has bigger fish to fry than vettes. This week Wall street reported GM may cut up to six car lines and retool/close factories to focus on SUV's and trucks production, America's real love affairs.

it is my understanding that the dealership makes their dough-ray-mi from the used car lot, the financing of same (and new financing too), service contracts/warranty contracts, the service department and the parts department. However, dealers aren't going to take a loss on their new car sales; witness the 415 NEW 2016 Corvettes for sale on cars.com on July 28, 2017; 2 models years old and still wallflowers. And the extremely quiet july Dealership inventory forum right here on 2017/2018 deals, eg none.

So, to my way of thinking, a fair profit for the dealer is when GM offers all the following combined on a corvette: the Bonus tag event, the corvette loyalty owner $2k savings, the Farm Bureau member $500 savings, the j57 $5k savings, etc etc. The savings are to be enjoyed by the buyer; but not at the expense of the dealers sliver of pie. if the dealer wants to throw a little more of his crumbs in to sweeten the pot, more power to him.

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Old 07-28-2017, 06:40 PM
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Originally Posted by mschuyler View Post
It really depends on what you are doing to earn that commission. Compare a guy who ambles into a store knowing nothing about anything and you spend five hours with him explaining everything in detail. He's got a shitty old trade that he thinks is worth vastly more than it is. Then he vacillates back and forth and tries ineptly to "deal" with you in ways you've described in the past, and winds up wasting your time. That sucks, and you have my utmost sympathy. Now a second guy contacts you by email and knows everything there is to know about the car. He knows it better than you do. He doesn't want a test drive and has no trade. He's either looked at your inventory and picked out the very car he wants, or he has the RPO codes for his options and tells you to order the car, puts a few thousand down and tells you to call him when it gets in. You spend ten minutes total talking to him and the dealership secretary does all the paperwork.

Do you think those two sales are equivalent? Do you think they deserve the same commission? Corvette buyers tend to know what they want. They're not out shopping for "some sort of SUV." When I placed my order I sent a single email: "What's yer discount for a factory ordered car?" He wrote back: "XX%." I sent the RPO Codes and $2K down. An assistant (not the salesperson) did all the paperwork. I made a single mistake on the RPO codes which she corrected. I actually talked to a salesperson from the firm twice. The first call was not necessary. He as just being friendly. The second was because of a minor problem with the temp license. The dealership never saw me. They never saw the car because it went to the NCM. The dealership did not "sell" me the car. They simply submitted the order with my specifications and they collected the money. Even the paperwork was not done by the salesperson, but by an assistant (very likely an hourly employee.)

Now, let us examine what happens to a person like me who buys a car from a dealer, pre-selected by me, money down before I even walked into the dealership for the first time. Pretty quickly I got handed off to the "paperwork lady." First she tried to sell me an extended warranty "because you never know about those advanced electronics." I tried to explain to her how electronics fail. She wasn't at all interested. Then she tried to sell me a "special coating" for the paint. I have no idea what this was. I did not know about ceramic coatings at the time, but my impression was that it was not one of those. I declined. Then she wanted to sell me an undercoating. I declined. Then she wanted to sell me a "Scotch guard" seat protection. I declined. "Doing the paperwork" was more like a gauntlet to run through where the dealership attempted to sell me various "dealer packs" we all know I did not need. And this was an easy sale. I picked the exact car out before I went there.

This is the kind of thing consumers must go through with local dealers, even if you manage to get with a salesperson who is not overly pushy and the sales manager stays out of the way. You still "run the gauntlet" and you still have no idea how much the dealership actually paid for the car. If I don't believe the MSRP price why should I believe the "invoice" price? There are so many deals, hold backs, bonuses, and end-of-month/year goals that there is no way the average person really knows what the wholesale price of the car is. And I'm convinced the front-line sales person doesn't really know either.
Again, what are your thoughts on what makes for reasonable numbers...
  • ...assuming no trade
  • ...for your first scenario (lots of quality time with the customer before the sale, constant updates regarding status or factory order (if applicable), and thorough delivery process)
  • ...for your second scenario (minimal time before the sale, either NCM delivery or in-dealership delivery with, say, an hour of instruction of the car's features)
For the purpose of this discussion, let's not take into account optional products offered by the finance person. I fully get how annoying that can be but those things can be declined and they have no impact + or - on the salesperson's commission.

As for invoice, holdback, other bonuses from GM, just how much of that do you think the buyer is entitled to?
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Old 07-28-2017, 07:30 PM
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I'm a capitalist. I want the manufacturer, the dealer, and the salesman to make money. I don't know what is fair because I don't know the underlying economics of the dealership and people costs vary a lot from area to area.

In my view GM contributed greatly to this problem by offering widely varying dealer incentives. When I went shopping for my 2017 I was expecting the same kind of pricing as others for a couple months prior. It was only after I did my best attempt at negotiating with different dealers that I was convinced that the margin want there any more.

On top of that the dealership and the salesman get bonuses based on volume and other criteria. Then there's the litany of add ons in the finance office from kick backs on loans to the extra warranty coverage.
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Old 07-28-2017, 07:34 PM
  #19  
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Originally Posted by mpuzach View Post
I can assure you that the salesperson doesn't like it either. When it takes that long it's usually because the buyer is causing it to do so. Not every buyer is informed. I've had to spend an hour or longer just "showing" the car because the buyer has never seen a C7 before. Then once they get done trying to buy the car for $5,000 below invoice and they end up buying it for whatever the agreed upon price is, they often want a complete demonstration and explanation of every last button, switch, and icon on / in the car. When I have a customer who drops $70K on a car, I'm going to give them what they want.
I have no doubt that's true in some cases. That said, I've had large swaths of my time wasted at dealerships. I finally got to the point of just walking out if I'm there for more than an hour. I've told them to give me a call when they have act/papers together.

Blessedly, I've also had great experience on the other end of the spectrum. In fact the easiest, quickest and most painless car purchases I've made have been buying Corvettes from forum dealers.

I've never been concerned though how the dealership and salesman split their piece.
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Old 07-28-2017, 07:45 PM
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I've often wondered how car dealers make money when you see the multi-million dollar facilities they have. The millions in inventory on the lot etc. and their constant claims "I'm losing money on this deal". I assumed they make a killing off of leasing since that is the vast majority of what people do. Every time I buy a car the salesman is shocked when I tell him I am buying not leasing. One guy told me that less than 1 in 10 people buy.

I don't know what kind of education it takes to become a car salesman, I assume not much (that's not intended to be insulting). It's not manual labor or really even skilled labor so I would say $25 an hour on average.
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