New(ish) Car Prices

scandarahar

I've recently been trying to get a deal on a car - any I've looked at are a couple of months old and ex-demo models. I'm a cash buyer and the cars are in the £21-22k bracket. Most will not budge on the price even though I can pay cash and the most discount I've been offered is £500. Even trying to get mats and flaps thrown in isn't working. A couple of years ago I got £2.5k off a £20k car for paying cash...no haggling at all.

Is there a hardening of attitude towards cash discount in the motoring trade?
Has anyone else any similar 'buying' experience recently?

I thought that with the reports of a slow-down in the car market, they would be keen to get a sale...

Hintza

They make more on the finance, so start talking as if you are gioing to finance the deal....;) and then when you have got them down just say you'll pay by cash.

I have found you need to phone around dealers further afield the ones round us never offer great deals.

in51der

In today’s challenging market more pressure than ever is being put on the profit margins from selling new and used cars. Whereas maybe 5 years ago the profit that would come from the ‘metal’ would probably make upwards of 85-90% of the deal, we now live in a completely different world.
There are a number of reasons for this, primarily better competition; there really isn’t a terrible car on the road anymore. Remember Lada and Skoda before they became VW? So the market is full of great deals, new models with the latest technology and the modern car dealer has had to get smart. With chassis profit margins being eroded modern car dealers still need to achieve the bottom line, so to rise to this challenge a few things have happened:
A) Business Managers have a far more prominent role to play in the business and indeed are now paid and measured on the extra income they create.
Sales staff are also specifically incentivized to introduce prospective customers to the business manger in order to try and “up sell” them into other products.
C) Hourly rates and prices have increased in the workshops so that profits may be achieved through the service and parts departments.
In the early to mid 90s (and maybe before) the average profit (net of expenses and vat) that could be achieved on purely selling a car would be approx £1500 - £2000 per car, today that figure is probably nearer £700 and in some cases even less To try and combat this in a market where expenses are rising, a few things have happened. The trade has just had to get more creative and what you will now see everywhere is what is referred to as ‘add ons’.
Traditionally you may expect to take out a finance deal, i.e. HP or PCP, and maybe a warranty upgrade that would create a profit opportunity for the dealer, however today there are a range of F&I (finance and insurance) based products) which will achieve the overall profit required.
You may now be introduced to payment protection, (sickness, unemployment cover etc.) GAP insurance, where you can insure the invoice price of your car against theft and write-off and paintwork protection products which will protect your car from the elements. They even have tyre and MOT cover to offer you. These are often sold in packs (i.e. bronze silver or gold) and each are priced so that you have a choice of the level of cover you need. The package price will increase depending on the price of the vehicle being purchased.
Now remember these products are all useful to varying degrees depending on your situation and you may indeed choose one or all of them, however the mark up on these packages can be astronomic and the dealer will use this to compensate for the profit lost in selling the car. For example a standard package including GAP insurance (AKA Retail Price Protection), paintwork protection and tyre cover might retail at around £800 but cost the dealer only £150 - £200.
The advice is to negotiate the price of the car and then get info about any add-ons and decide what (if any) extras you need before you collect your car. You will often be told by some salesmen or business mangers that you must sign up for one of these products on the day of purchase to qualify for any deal they may offer you. This is absolute rubbish, you can go away and think about it and indeed cancel during a cooling off period if you wish. You can also shop around for the same or similar products if they appeal and get them a lot cheaper. Remember they are pushing you on an "add on" as its very profitable for them, so be in control.
I will leave you with a true story that happened to an old colleague.
He once met a rather difficult customer who spent hours trying to knock him down on the price of a car, in trying to be clever he allowed the man to have his way with the final price but “up sold” him on lots of accessories which would have bought in an extra £1500 profit (there was a pitiful profit in the car alone).
On signing the deal the customer said he would buy the car but asked whether him buying the extras depended on him getting this deal? "Absolutely not" he was confidently told and so he signed.
The salesman, on the departure of his customer swaggered around boasting about how he had got one over on a difficult customer (not the real words used, obviously!) until, that is, when 2 days later his customer telephoned to say that he still wanted the car but had managed to get the accessories cheaper elsewhere and would no longer need the extras he’d been offered. Needless to say the salesman was absolutely gutted, the customer was very happy and the salesman’s colleagues quite smug as we watched him having to explain to our Sales manager how he had just blown a big profit by trying to be clever.
The moral of the story, "add ons" are great if you want them but cannot be used to close a deal on a car, so let them think you want a gold package right up until you have agreed a price on the car then make up your own mind!

jammin_2

in51der wrote: »

In today’s challenging market more pressure than ever is being put on the profit margins from selling new and used cars...

anewman

in51der wrote: »

Remember Lada and Skoda before they became VW?

Lada never had anything to do with VW and Skoda were never as bad as those jokes people liked to make made out.

in51der

My apologies if you thought my post was spam. At first I was a little perplexed but after I had a think about it I can see why. I have been reading the posts in these forums for a while now but felt compelled to "get involved" when I read this particular question. To save time I just lifted a post from our own site which I thought was relevant but I suppose this coupled with the "newbie" status and the direct link in the signature all adds up to a justifiable accusation of self promotion. I would be lying if I said I didn't want to achieve some interest in our own site but that was not the primary motive. On reflection I may even have boobed by posting duplicate content as Google et al may penalize our site in the serp's, what with the MoneySavingExpert.com site being a close personal friend of the googlebot (i.e. it's a regular visitor and indexes the pages here almost every day it appears). Anyway that said I'll be happy to remove the post (if it isn't done so by a moderator at some point - assuming an abuse notification was sent) but would like to point out that at least one person found it interesting and passed on thanks.

In response to the original question (this is fresh - promise!)...

There is a definite hardening towards cash buyers due to those add ons, with chassis profits coming under more pressure than ever, prices are becoming more internet driven therefore profits are being sort through add on products. Also a good source of haggling used to be with a demo model, something 3-8 months old for instance, however with manufacturer driven incentives and big discounts available on many new cars in the quest for maintaining market share, dealers are more than ever pricing demos 'to go' with little or no room for maneuver and the fact that a lot of manufacturer driven demo plans mean that any up-front bonus money is taken to profit immediately rather than (as used to happen) being put against the car in order to realise a profit on the demo when sold.

BTW of course Lada never had anything to do with VW and many thanks for pointing out my punctuation error

in51der

[FONT=&quot]So going into a showroom and saying 'how much for cash' is a phrase that holds little weight when negotiating in the modern showroom.
[/FONT]

AdrianHi

in51der wrote: »

[FONT=&quot]So going into a showroom and saying 'how much for cash' is a phrase that holds little weight when negotiating in the modern showroom.
[/FONT]

Absolutely, the "add-ons" and meeting other sales targets are where the money is made. The car by car margin is pretty slim.
Until recently, in a mortgage market where interest rates are low and margins for selling those mortgages are low, mortgage brokers and financial advisors made most of their money selling insurances like home insurance, life insurance but most of all payment protection insurance to people. The only people who have to buy the payment protection insurance to get a loan at all are those who are bad credit risks. No surprise that these guys went out to sell the biggest mortgage possible to people in this position. All different now though...

BillScarab

in51der wrote: »

the direct link in the signature all adds up to a justifiable accusation of self promotion.

BTW links in sigs aren't allowed unless specifically authorised by MSE.