Clawing back the profits

There is a strong theme regarding profit generation running through new and used car sales at present and sales personnel are increasingly targeted to introduce the notion of finance and insurance based products very early on in the sales proceedings. As we have been explaining recently the dynamics of car selling are rapidly changing and with the pressure put on selling used cars due to lack of supply and high demand and new cars not selling so well, profitability is being hit hard. The onus on the finance and insurance products is now so intense that compared with say 5 years ago, when the income they generated per car sold was maybe £100 they are now targeted to make nearer £500 per car. In addition, where previously this income was seen as handy extra profit, it is now seen as vital to the overall profitability of the business.

This could present different challenges to the customer; if a business manager in trying to sell you finance is under that much pressure to maximize every income stream, he could well cut corners and buyers may be encouraged to purchase products that they not only don’t need. We have seen recent examples of payment protection policies which have been mis-sold and many of these products are expensive and are sometimes craftily included in the purchase of the car by way of a “pack”. This will happen more and more especially as modern sales tactics encourage sales people to be laser focussed on the affordability of a monthly price and not the total price of the car and any add-on’s. This makes it a lot easier to “disguise” what may or may not be included in that monthly figure as long as it is affordable.

Customers when buying new or used cars should be aware that these tactics could well be used and ensure that any product offered to them is fully explained. This should include the total cost over their entire ownership of the vehicle and whether the products being pushed are even relevant for your own particular circumstances.

In our experience, if a particular facet of profit potential is being aggressively focused on in the big marketing departments then customers will find themselves getting the ‘hard sell’ in the coming months.
As we’ve said before profits in the “metal” are now so slim that it’s inevitable that dealers will look to claw back losses through the ‘back door’.