Large scale dealers and margins on used cars

[Audi_TTS]

Take the finance and pay it off the next month.

do a lot of these agreements not have early payment penalties to stop that now?

 

[Coog]

do a lot of these agreements not have early payment penalties to stop that now?

Some have an admin fee but its not usually a large amount. Didn't realise they could claw back the commission though.

 

[Jason]

Im pretty sure you do not charge VAT on used cars as they are taxed VAT when new and you cant pay VAT on the same item twice. there's ovvo tax on profits but when your making profits after all costs then that's grand.

The dealer pays VAT on the profit margin on the sale. EG What they bought the vehicle for minus what it sold for, take that figure and divide by 6.

 

[svensktoppen]

Take the finance and pay it off the next month.

Have you tried that? Not sure that always works. A lot of loans I have come across have penalties where you effectively end up paying most or all of the interest that would have been payable without the early payment.

It is the first thing I would ask if taking any finance - what happens if I pay early. For all sorts of reasons when you might want to end the finance before the full term.

 

[RickyB]

Im pretty sure you do not charge VAT on used cars as they are taxed VAT when new and you cant pay VAT on the same item twice. there's ovvo tax on profits but when your making profits after all costs then that's grand.

Thats why I said you pay VAT on the margin. VAT is due on the difference between what you paid for the car and what you sold it for no matter how much you spent on it.

 

[mk2driver]

Have you tried that? Not sure that always works. A lot of loans I have come across have penalties where you effectively end up paying most or all of the interest that would have been payable without the early payment.

It is the first thing I would ask if taking any finance - what happens if I pay early. For all sorts of reasons when you might want to end the finance before the full term.

You can withdraw from any finance agreement within 14 days of taking it. Withdrawing is different from settling early and cannot have any penalties attached. You may lose some dealer finance contribution but that depends on the terms and conditions. To withdraw you must pay the entire balance similar to settling

 

[Coog]

Have you tried that? Not sure that always works. A lot of loans I have come across have penalties where you effectively end up paying most or all of the interest that would have been payable without the early payment.

It is the first thing I would ask if taking any finance - what happens if I pay early. For all sorts of reasons when you might want to end the finance before the full term.

Yes we did it on a nearly new B-Class last year. The settlement figure after a month excluded interest but had an admin fee IIRC. Even with that fee it saved my parents some money compared to what they would accept as a cash price.

I also did it a few years earlier with a 207 but waited 3 months until clearing it. They wouldn't even hear about knocking anything off until I mentioned the finance. Then it got a FOC smart repair and a few hundred knocked off the price.

I rarely let an agreement run its full course.

 

[Audi_TTS]

The dealer pays VAT on the profit margin on the sale.

ok get ya - So no VAT on the car but vat on profits if you're earning over the threshold - small dealer then would an advantage making 82k a tear with no VAT and a dealer making £85k a year would have a decent VAT bill? - though thinking about it I imaging the standard VAT thresholds dont apply and its from £0 up?

 

[Jason]

ok get ya - So no VAT on the car but vat on profits if you're earning over the threshold - small dealer then would an advantage making 82k a tear with no VAT and a dealer making £85k a year would have a decent VAT bill? - though thinking about it I imaging the standard VAT thresholds dont apply and its from £0 up?

No a small dealer making 82k a year would be WELL over the vat threshold it based on turnover not profit.

 

[Sharkey]

2 years ago I was buying a MK5 Golf R32.

Found a nice 2008 manual locally w/ 40k. Asking £10,500. (A very decent price 2 years ago for a 2008) I made him an offer, and then I sat on it for a day.

Called him a day later to accept his counter offer to which he replied that he sold it to Hollybrooks for £10k.

I called them up to see what they wanted for it as the ad said POA. £14,500!!! after repainting the wings and removing a few small dents.

Not a bad profit, if they got anything near that. I should have been quicker.

 

[RoniN]

You seem quite the expert Cheers! lol

See it daily !! lol

Cheers

 

[BobSpounge]

A few years ago when I was looking for a VXR astra I spotted one on Hurst used direct website priced at £7.5 k, phoned them and arranged to see it the next day. When I got there the price had went up by £750. I asked why and was given no explanation. I wouldn't have gave them £750 for it never mind £7.5k. Twas a complete turd.

 

[Peadar]

As @RickyB says, VAT on used cars is a complete nightmare, it's based on the margin between buying price and selling price; not on your profit margin.

You're not much of a car dealer if you're not VAT reg'd as if you sell 8 cars with a selling price of £10k each in a 12 month period that's you over the threshold.

In my main business we charge VAT on our invoices & pay it to the VAT man. No real skin off our nose as we make the profit on the invoice and then just + VAT, which is the way most VAT reg'd businesses work. Car dealers get tanked with VAT.

 

[da.murf]

Bavarian Mini aim to make 500-1k on their used car trade ins that they can put back out as Approved used Minis.

Do u work there?

 

[veron]

Used to dude.

 

[Simon998]

Whoever sold my uncle his Porsche a few weeks ago had the easiest sale of his life. He accepted a deal on his 2013 TT, 2 grand less than book price, then he paid the £25k asking price for the Porsche. All because sales men make him feel awkward. Eejit.

 

[Gaz]

I don't think so, at the bottom of it the dealer wants to buy a car in as cheap as possible, spend as little time and money on it as possible and get it away for as much as possible, it's just a fast profit to them. They are not the owner from new who has looked after it and is maybe genuinely sorry to be selling a car for various reasons, it's a private seller like this I like to deal with.

These days however, with so many issues selling a car privately there are less and less people selling privately as they have got fed up and just sell to the trade or just trade in, that plus the fact that no one seems to actually buy and own a car any more, (except weirdo's like me!) they all lease them.

That's my summation anyway!

Not a fan of generalisation at all I see.

The proliferation of internet car adverts (and the Gumtree 'car dealers' who all work from their front garden) has given rise to the notion that everyone is it in for a fast buck. Buy a car cheap, hide the faults, sell it on at massive profit. That's maybe true for those who run it as a sideline, but equally there are many long standing car dealers (both large and small) who have a reputation to uphold and do take some pride in both the vehicles they offer, and the service they offer. Ultimately they're running a business and not a charity so of course there's going to be a profit margin, but any car dealer who persistently and aggressively pursues that approach of maximising profit at the expense of quality will find that their reputation suffers and they'll lose out in the long run. There are plenty of car dealers out there who take in trade-in vehicles, service them and carry out repairs, fit new tyres, get them detailed and present them for sale in a much better shape than they were in originally.

Can't say I agree with the notion that there are less people selling privately either, given that the sheer amount of car ads on the likes of eBay, Gumtree, Usedcarsni, Pistonheads and so on is higher than ever - people have many more avenues for selling privately now. Equally, leasing may be the hot topic at the moment and always guaranteed to be heavily discussed on any car forum, but the reality is that even in the US where leasing is a major segment of the car industry and has been prevalent for much longer than in the UK, it still only accounts for 25% of new car sales - and the UK is trailing the US in that segment.

 

[Mark_C]

My experience of a reasonably well known dealer - we bought the wife's 'mint' XC90 from one. Now it's fixed though, I like it so much I'm on the hunt for a V8 petrol one! I have to admit I was really sickened because the wife trusted the dealer and I was happy to let her tear on. I didn't bring it back because I wouldn't have been able to stop myself from having a go at them and making it worse.

When I got to give it a proper going over on the lift and with Volvo DICE (A lot of these faults admittedly needed my DICE interface to find and you wouldnt spot on a normal test drive)

4x4 wasn't working (Put right with a new haldex pump, sensor and oil)
Recently 'fully serviced with timing belt' - I had to change cabin filter, air filter, fuel filter and timing belt kit
Air quality sensor not working, replaced that last weekend
Injector number 1 had an intermittent fault, replaced it with a spare I had at home
Throttle body failed a week after getting it (Covered by warranty however)
Swirl flap actuator rod was broken off, easy fix
Front driveshaft carrier wasn't bolted properly to the engine
Parking brake wasn't working properly - anyone who knows XC90's knows the adjuster is under a carpet panel near the gear lever - these clowns had Stuffed folded up pieces of metal in the handbrake levers inside the drum to space it out
Turbo resonator had been 'fixed' by wrapping self amalgamating tape round it, and clamping it with a large jubilee clip
ONE of the nivomat shocks had been replaced with a normal shock, I replaced it with a nivomat.

 

[Father Stack]

My experience of a reasonably well known dealer - we bought the wife's 'mint' XC90 from one. Now it's fixed though, I like it so much I'm on the hunt for a V8 petrol one! I have to admit I was really sickened because the wife trusted the dealer and I was happy to let her tear on. I didn't bring it back because I wouldn't have been able to stop myself from having a go at them and making it worse.

When I got to give it a proper going over on the lift and with Volvo DICE (A lot of these faults admittedly needed my DICE interface to find and you wouldnt spot on a normal test drive)

4x4 wasn't working (Put right with a new haldex pump, sensor and oil)
Recently 'fully serviced with timing belt' - I had to change cabin filter, air filter, fuel filter and timing belt kit
Air quality sensor not working, replaced that last weekend
Injector number 1 had an intermittent fault, replaced it with a spare I had at home
Throttle body failed a week after getting it (Covered by warranty however)
Swirl flap actuator rod was broken off, easy fix
Front driveshaft carrier wasn't bolted properly to the engine
Parking brake wasn't working properly - anyone who knows XC90's knows the adjuster is under a carpet panel near the gear lever - these clowns had Stuffed folded up pieces of metal in the handbrake levers inside the drum to space it out
Turbo resonator had been 'fixed' by wrapping self amalgamating tape round it, and clamping it with a large jubilee clip
ONE of the nivomat shocks had been replaced with a normal shock, I replaced it with a nivomat.

Did you bring all this to the dealers attention? That's extremely dishonest, coming from a well known dealer. Different if it's a private sale, the owner might not know it had these problems. But a well known dealer should know what they're selling.

 

[KevM]

A lot of loans I have come across have penalties where you effectively end up paying most or all of the interest that would have been payable without the early payment.

It is the first thing I would ask if taking any finance - what happens if I pay early. For all sorts of reasons when you might want to end the finance before the full term.

Since last year, the FCA put a stop to that. Regulated Finance Agreements now are fully flexible in that you can make as many part over-payments as you like, which come off the amount borrowed and not the amount payable. The agreement can be settled at any point with out paying forward interest.

 

[Crow555]

When I went to view the Civic I was driving a yellow Ibiza 1.4. I didn't think anyone would want it so opted to just trade it in. I was offered £2.4k and I thought that was fair. Kinda wish now I'd haggled a bit on the price of the Civic but it was £500-£1000 cheaper than any others nearby.

About a week later, the Ibiza appeared on the dealer's site and autotrader. £3,800. Either a massive buffer for haggling for I underestimated the wee car's value.

 

[Neil_M]

Any car sales guys I know have mentioned alot of money is made on finance packages and servicing. A cash deal isn't always that lucrative.

Eitherway buying cars and dealing with dealerships is always fun, take anything they say with a pinch of salt .

Their profit margin is irrelevant to you, its the cost to change for you. Compare the used car to the new car with its "special, unique, one time only (this week) offer", warranties, service plans etc etc.

 

[KevM]

When I went to view the Civic I was driving a yellow Ibiza 1.4. I didn't think anyone would want it so opted to just trade it in. I was offered £2.4k and I thought that was fair. Kinda wish now I'd haggled a bit on the price of the Civic but it was £500-£1000 cheaper than any others nearby.

About a week later, the Ibiza appeared on the dealer's site and autotrader. £3,800. Either a massive buffer for haggling for I underestimated the wee car's value.

In theory....

Yellow Ibiza - £2400
2 tyres & service - £170
Valet - £40
Fuel - £20
Paint smart repair - £100
Wages,rates,elec etc - £200
Warranty - £250
----------------------------------------------
= £3180
----------------------------------------------
Margin = £620
Negotiation discount - £150
----------------------------------------------
Profit = £470
Vat on profit - £94
----------------------------------------------
Actual Profit £376

 

[tim]

You don't know have to know their margin to negotiate. In fact their margin is irrelevant.

The car could be on their forecourt for too long for their liking and you could bid them a price and they let it go for a loss. Or you could bid them and they laugh at you because it's guaranteed to sell and you don't get the car.

Like any negotiation it's a dance, and he who needs the deal more than the other guy loses. Simple.

 

[Jason]

In theory....

Yellow Ibiza - £2400
2 tyres & service - £170
Valet - £40
Fuel - £20
Paint smart repair - £100
Wages,rates,elec etc - £200
Warranty - £250
----------------------------------------------
= £3180
----------------------------------------------
Margin = £620
Negotiation discount - £150
----------------------------------------------
Profit = £470
Vat on profit - £94
----------------------------------------------
Actual Profit £376

Your VAT margin is incorrect on that.