Online calculator to determine the home, car within your budget
These simple tips can help you understand your budget if you are considering buying a home or car.
The problem has been resolved
When I’m negotiating with customers, we sometimes get to a point where we can’t discount the vehicle any more and tell them we’re already losing money at the price we’re giving them. The customer always smiled deliberately and said, “Don’t try to fool me. You’re not losing money. You couldn’t stay in business even after losing money.”
But we do. Auto dealers always lose money on individual sales. The reason people don’t believe me is first of all, I’m a car sales person and everyone thinks we’re lying all the time. But the main reason they don’t believe me is that they don’t understand how car sales work.
Frontend vs Backend
The selling price is just a part of the equation. It is called the front-end for car trading. The other part is fundraising, or backend. And finally, there is the overall benefit made by the dealer over a month. This is the only thing that the dealer’s principal or owner really cares about. Consumers make a big mistake when focused and price alone.
Let me give you an example. Recently I took four fresh “UPS” (aka customer) and walked the door without a reservation. The first three didn’t buy it. The fourth did that. The dealer, overall, sold only seven cars that day (we are relatively few dealers). My deal was number 7.
Of my previous six deals, the dealer lost about $5,000 on the front end because the car was so big discounted. Yes, you read it correctly – we sold six cars and lost $5,000. But in my deal I was able to “hold gross” or sell the car at the asking price, earning $8,000 on the front end. You’re going to pat it on the back, right? Then my client funded the purchase and we made money from it. Adding everything, the dealer won around $3,000 on the front end of seven cars. That’s not very good, but at least we weren’t red. But what’s important is that I made $19,000 on the backend thanks to funding. So, looking at the big picture, the dealer made $22,000 that day. It’s not tattered.
It’s all about fundraising
Most consumers don’t realize this is happening. They have been taught to focus solely on price and price, but real money is made in fundraising. People argue with me for hours over hundreds of dollars Thousands The backend when they fund with us. That’s insane.
When you pay in cash, the only thing a dealer will abandon is the difference between the true cost of the car and the MSRP. This is a very small pie. Most bills incorporate a profit margin of about 3-10%, with trucks and luxury cars looking up to 15%. So if you’re looking at a $20,000 vehicle, the biggest discount you can get is between $600 and $2,000. This isn’t $5,000. And it’s just profit. Subtracting the operational costs of dealers, such as employee pay, interest payments, insurance, advertising, utilities and other expenses, the net profit margin is much lower, about 1-2%. This means that every $20,000 in sales, the dealer could make a profit of just $200 to $400. Simply put, if you are bent hell with lowering prices and paying in cash, you are missing out on winning the best deal.
If you know that dealers can make money on the backend, it will be happy to give up more on the frontend. It might go into red to sell you a car. So, if you want the best price, tell them in advance that you are willing to raise funds with them – and pay back your loan after a few months so that you don’t pay a lot of interest. There are no penalties and everyone is profiting.
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