Cash is not king for the car dealer

Read an interesting article in Saturday August 30th Daily Mail by their Motoring Editor Ray Massey. In fact it was “interesting” for all the wrong reasons. Now I don’t know Ray Massey but I understand he is a respected journalist in motoring circles but I’m afraid he’s got this one wrong. here’s what he had to say;

“Car makers are bracing themselves for a tough new-car market as second hand resale values plummet. But it’s good for the buyer.
Monday sees the new September 1 registration plate hit the road and it’s the number “58”. The “8” signifies the year “2008” and “5” means we are halfway through 2008.
If you are in the market for a new car, this is an excellent time to haggle hard and nail dealers to the floor on price. Take no prisoners. They will bite your arm off – and their own – if they think there’s a chance of you driving out of their showroom in a new car.
As ever in a faltering economy, the cash buyer is king. The credit crunch means those seeking to borrow to buy may face more of a struggle”.

Well that’s nonsense, I’m afraid Ray, the cash buyer hasn’t been king in the motor trade for years. I wonder how much Mr. Massey actually knows about buying or selling cars? If cash were king and dealers made their money from just selling cars why are there now more extras offered than ever before.

Finance – now more competitive rates for the consumer but a great money spinner for the dealer especially when you consider that most dealer groups are on a fat volume bonus “kick back” from their proffered finance house.

GAP insurance – very cheap for the dealer to buy, easy to sell as it is actually a good product but the mark up can be extortionate.

PPP (payment protection) – again in these days of faltering confidence with job security payment protection is becoming easier to sell but again very expensive.

Paintwork protection – products marketed with glossy DVDs about that back to the showroom look a special rubberoid compound that protects your paintwork from the elements and road debris to keep that all year round sheen and help with better re-sale, again slick marketing not a bad product but a dealer can purchase and apply this system for around £60 but have been known to charge up to £600 to apply on certain models, the list goes on.

So think about it, all the dealers are in competition to sell more cars but they also need to make a profit, so if you go in and wave your cash about saying I want 10% off because I am paying cash how is the dealer going to make a profit from selling that car? The truth is he won’t.

However in some cases it’s true that you will still get a great deal because the sale of the car can be loss making if profit can be gained by selling add-ons.

This is the new world of motor traders; the money is in the add-ons and profit from workshops and after-sales, the actual metal (car) is literally only used as a vehicle (pardon the pun) to generate profit centre’s from elsewhere.

Ray Massey is right about one thing though, there has never been a better time to buy a car, there are some exciting new models on offer and some great manufacturer based initiatives, so go in, explore all the options get a deal agreed on the car, haggle like mad and let them think you want all the add-ons then by all means change your mind when the deal is done, once the price of the car is agreed they cannot force you to take out the other products.