Precious metal – the car itself is just a vehicle for profit

As we have mentioned before the business manager is now arguably the most important member of the car dealership personnel, certainly when it comes to profit generation. If you have set foot in any car showrooms recently then you will, no doubt, be familiar with the extensive range of “add-on’s” available to the car buyer.

There are payment protection products (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, alloy wheel and MOT cover to offer you and these products 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 want but the package price will also increase depending on the price of the vehicle being purchased. When you add all these products to the profitable finance packages and the money to be made in the service department you can see a picture start to emerge of how the car itself can act as a mere doorway to the sale of very profitable add-on products for the modern car dealer.

It does pay to go into the showroom with your eyes open because, there is no doubt about it, the mark-up on these products can be quite steep and the true cost will be hidden in the monthly payment if you are negotiating on a finance package as well.

Whilst, of course, dealers need to make a profit, the marking up of paint work protection kits by as much as £800 on the more prestige cars smacks of blatant profiteering. Don’t get me wrong paintwork protection is a very good product but when you realise that it actually costs a dealer less than £100 including its application, it might suddenly seem not quite so necessary to have it included in any package.

It is certainly worthwhile establishing what products are relevant to you as a buyer and represent the best for your future motoring needs. Add them to the cost of the car and any finance deal and keep them in mind when you negotiate, aiming to get the entire package down to an acceptable and affordable price, rather than negotiating each thing separately.

Although many dealers will use this ploy to their advantage (it’s much easier to work with the smallest amount of money, the monthly payment, as it can seem affordable but mask the true cost of the add-on’s over the life of the deal) if a buyer knows the breakdown of each product then it won’t necessarily just be haggling over the monthly payment.

Because dealers will always try to establish what the optimum monthly payment is, it doesn’t mean that if they achieve it that the customer shouldn’t ask for a better deal. If a dealer says “no the deal can’t be done” it is then the time to consider whether the deal is right and that the savings that have been made suit the customers’ needs.

Subscribe to Motor Trade Insider by Email