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‘Profit’ Isn’t a Bad Word

So another round of studies claiming to know what car buyers want has breached my inbox of late. We featured one of them in Industry Trends last month, and, as you’ll read on Page 44, Jim Ziegler all but called us out for doing so.

See, Jim took exception to anyone who took DMEautomotive’s recent survey results as fact. He didn’t disagree with its conclusion that customers are visiting fewer dealers. But he wasn’t fooled by one of the study’s other findings: Four in five vehicle shoppers are using the Internet to visit 10 websites as part of their shopping process.

If you weren’t aware, Jim is suspect of any study that points to dealers needing to pay third-party lead providers to connect their inventory to buyers. He simply believes a dealership should own its own market, not cut into its already thin margins to pay outside companies to drive business its way.

Well, it appears at least one firm has been paying attention.

In March 2011, TrueCar released results from a consumer study it conducted the previous October. It showed that more than 50% of respondents believed dealers made about $4,000 or more on the sale of a $40,000 vehicle, a profit of about 10%. But according to the National Automobile Dealers Association (NADA), gross margin on the sale of a new vehicle didn’t even crack 5% that year.

Last month, TrueCar released results of a similar survey conducted this past February. And, well, the situation seems to have worsened. Consumers now believe that dealers are making a 20% profit on the sale of a $30,000 new car. That’s about five times what the NADA said dealers made on a new-vehicle sale last year.

What I found interesting was how TrueCar presented its new data. In its March 2011 press release, the firm said it had determined that consumers preferred to know the true price paid by others purchasing the same type of car in the last 30 days. You may recall that knowing what others are paying was TrueCar’s main selling point before Ziegler started taking shots at the company in blogs and magazine columns later that year.

“We believe this study, which we plan to conduct annually, illuminates the way in which the market is headed and how cars must be sold in the future,” TrueCar Founder Scott Painter stated in that March 2011 press release. “We hope the automotive industry will see this data and understand what consumers desire and adjust business practices accordingly.”

Painter chose his words a little more carefully in this year’s press release. “If consumers believed that they were getting information they could trust as part of a more transparent process, they would be willing to pay the dealer more,” he stated. “These survey results are consistent with the idea that increased transparency in the car-buying process can result in higher margins for dealers and greater customer satisfaction.”

When TrueCar asked consumers back in 2010 what they thought was a fair profit, 53% said between $1,000 and $3,000 — $1,800, or 4.5%, being the average. In this year’s survey, consumer said a fair profit margin on a new-car sale should be between 10% and 12%.

Well, it seems like we have a lot of work to do, because we’re not even coming close to hitting that, at least according to the NADA.

So we at the magazine decided to do our part by introducing a new feature for this year’s Industry Summit. Basically, we’ve invited Jim Ziegler to run an all-day event on Monday, Sept. 8. It will focus on selling profitability both in the showroom and in the F&I office.

So if you’re a dealer, general manager, general sales manager, sales manager or F&I director, and you’re not happy with your store’s front-end profitability, you need to be at the Paris Las Vegas on Monday, Sept. 8. We’ll be posting more details on www.industrysummit.com.

Now here’s the really cool part: A purchase of a full conference pass to Industry Summit is all you need to gain access to Ziegler’s event. And this year, our annual conference will feature four education tracks: F&I, Special Finance, Used Vehicle Retailing and Dealership Sales & Technology. Group discounts are also available.

Now here’s what you want to do: Schedule your flight so you’re in Las Vegas on Sunday, Sept. 7. Make sure you’re there before 5 p.m., because that’s when we’re kicking everything off with a special registration happy hour. It’s basically a networking event that will put you in front of many of the summit’s speakers and workshop presenters.

So, yeah, we here at F&I and Showroom magazine don’t believe profit is a bad word. And from the studies I’ve seen, neither do customers.


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