Casual reports are emerging that a growing quantity of dealerships are starting to scale back their markups on replacement insurance and financing. The dealer finance markup, as well as dealer insurance markup, can be pretty high as often as not.
Finance and insurance markup going away
The sticky wicket about self-interest is that one must balance long-term with short term. For instance, bacon is delicious but too many outcomes in a heart attack. Likewise, car dealerships have to talk customers into paying more than invoice and getting add-ons but cannot be too greedy. Word gets around and they'll lose business or worse, attract the federals.
Hence why AutoBlog reports numerous dealerships told the Automotive News they were scaling back dealer finance markup and dealer insurance markup. Many already cap the markup, meaning they only charge so much, but the idea is reining it in will avoid attracting regulators and driving away customers.
Why a markup?
Theaters make pretty much no money from ticket sales and have to increase the cost of concessions to make up for all the costs. That is the same idea as at dealerships. They make most of their money off service repairs and markups. Dealerships do not actually make all that much money from selling the car, according to Forbes.
With finance markup, dealers make a lot of cash.
All relies on place you go
Dealers make a ton of cash with a finder's fee, according to BankRate. This fee is typically around a thousand dollars and is given to the dealership that helps set up the loan with the bank.
There is less interest with a bank loan before going to get a vehicle than through a third party at a car dealership, according to BB&T car loans. This is because dealerships get lower rates than direct loans from car dealers with 3rd parties. Usually, the loan is about 2.5 percent with an extra 2.5 APR for the dealership, according to Automotive News. Consumers end up paying more through the dealership when they get financing, according to the Federal Trade Commission.
Getting more
Aside from dealer finance markup, there are also dealer insurance products, such as extended warranties, LoJack and GAP coverage or guaranteed asset protection, which pays the main difference between the car's value and the loan balance in case an automobile is totaled or stolen.
These services equates to about $1,100 per vehicle sold, according to Forbes, though there is not a whole lot of data on it. According to Asbury Automotive, they came in as about 3 percent of total income but made up about 20 percent of all profits in 2011.
At Penske Automotive in 2011, 13 percent of revenue and 44 percent of profit was from the service station. About 57 percent of profit came from the parts and services department compared to 8 percent on car sales. Apparently service stations are a real moneymaker.
It is always possible to negotiate, but you have to ask. These things will all help the dealership keep its doors open.
Finance and insurance markup going away
The sticky wicket about self-interest is that one must balance long-term with short term. For instance, bacon is delicious but too many outcomes in a heart attack. Likewise, car dealerships have to talk customers into paying more than invoice and getting add-ons but cannot be too greedy. Word gets around and they'll lose business or worse, attract the federals.
Hence why AutoBlog reports numerous dealerships told the Automotive News they were scaling back dealer finance markup and dealer insurance markup. Many already cap the markup, meaning they only charge so much, but the idea is reining it in will avoid attracting regulators and driving away customers.
Why a markup?
Theaters make pretty much no money from ticket sales and have to increase the cost of concessions to make up for all the costs. That is the same idea as at dealerships. They make most of their money off service repairs and markups. Dealerships do not actually make all that much money from selling the car, according to Forbes.
With finance markup, dealers make a lot of cash.
All relies on place you go
Dealers make a ton of cash with a finder's fee, according to BankRate. This fee is typically around a thousand dollars and is given to the dealership that helps set up the loan with the bank.
There is less interest with a bank loan before going to get a vehicle than through a third party at a car dealership, according to BB&T car loans. This is because dealerships get lower rates than direct loans from car dealers with 3rd parties. Usually, the loan is about 2.5 percent with an extra 2.5 APR for the dealership, according to Automotive News. Consumers end up paying more through the dealership when they get financing, according to the Federal Trade Commission.
Getting more
Aside from dealer finance markup, there are also dealer insurance products, such as extended warranties, LoJack and GAP coverage or guaranteed asset protection, which pays the main difference between the car's value and the loan balance in case an automobile is totaled or stolen.
These services equates to about $1,100 per vehicle sold, according to Forbes, though there is not a whole lot of data on it. According to Asbury Automotive, they came in as about 3 percent of total income but made up about 20 percent of all profits in 2011.
At Penske Automotive in 2011, 13 percent of revenue and 44 percent of profit was from the service station. About 57 percent of profit came from the parts and services department compared to 8 percent on car sales. Apparently service stations are a real moneymaker.
It is always possible to negotiate, but you have to ask. These things will all help the dealership keep its doors open.
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