BTW., just curious - is there any data and break-down available on how much money ICE dealerships earn on their various business fields: sales of new cars, maintenance plans, body shops, warranty and recall repairs, etc.?
There are extensive data available for US, slightly less for a number of European and Asian countries. There is quite a lot of variability, but here is the data for one US dealership network ( one of the US five largest). This data is accurate, but I cannot state the name of the manufacturer.
Some background:
All other things remaining equal ;
1.The larger the dealership the more complex the structure so some or all of the following activities are excluded from reported dat because they are housed in legally independent corporate entities):
-parts of Finance and Insurance (F&I), most often extended warranties, dealer financing, dealer leasing, service contracts,
-body shop revenue (if they have such; about 30% of large dealers do have owned or controlled body shops)
2. Large dealer groups tend to appear to have lower F&I income than do smaller ones, but;
-they have a higher percentage of leases, which give much higher GM than do cash or loan sales.
-they have, typically, better sales demographics than smaller dealers, but;
-a smaller group of large dealers, mostly not public, emphasize poorer demographics and have much higher sales GM’s but also much higher losses.
3. Fleet sales concentrate in a small number of dealerships which nominally report negligible profit on sales. They are among the largest dealers by volume, but lowest in terms of GM and other income.
4. The manufacturer financing for dealerships includes the following:
-floor planning (may finance entire inventory, new and used. Includes extensive auditing processes);
-facility finance- includes all capex categories, often subvened by manufacturer, can be loans and/or leases;
-leasing- consumer, business and fleet- each distinctly different and with different manufacturer involvement;
-loans- nearly always consumer, but also can be for some businesses.
Now the numbers, all of which are for a total dealership network, including small and large dealers, all geographic areas. They are common in that they all deal with the manufacturers captive finance company for some purpose. Remember these are mean values, with huge variance and typically two to three large modes correlating with dealership size and location:
1. New vehicle sales. .06% net margin (i.e. just about break even)
2. Profit on used vehicle sales. 11.4% (never tell a dealer you don’t have a trade until you’ve agreed a deal);
3. Warranty repairs. 14.2% (dealers adore recalls );
4. parts and service 16.0% (wonder why dealers hate BEV’s- no oil changes!);
5. F&I 24.8% (Never tell a dealer you’re making an all-cash deal until you’re closing an agreed deal);
-F&I includes average markup like this;
Loans- 300 basis points (inversely correlated to borrower credit quality, margin roughly 50% higher for used vehicles, subvened markup ~25% higher);
Leases- 420 basis points (depending on both credit quality [money factor] and residual value and capitalized cost). In both subvened paper is average 40% higher profit);
Extended warranty- average of 100% markup, often the maximum permitted by lenders;
Trash and Trinkets (T&T)- includes aftermarket adds like rustcoating, wheels, pinstriping, protective coating etc: usually 200-500% markup, but highly variable
Obviously F&I is by far the most profitable part of dealership operations. Manufacturers cooperate by selling extended warranties and numerous aftermarket adds with the manufacturer brand. Notably F&I income is much higher for leases (with ‘capitalized cost’ the most often secret sauce), and the higher end dealers make most of their income on leases, extended warranties and officially branded dealer adds.
Bluntly, Tesla understood all of this and, by owning the distribution network has effectively increased GM by ~30% or so. The only downside is that they now can record sales only on end delivery rather than on shipment to dealers, plus they must fund inventory directly. Because there are so many components much of these costs are never publicly visible.
All this money flowing though dealers does give much more political power than even cynics imagine. In particular, the nexus of dealer financing operations with local banks, credit unions as well as captives produces more cash flow than does the entire mortgage industry. The symbiosis is really quite remarkable, especially because most participants are not even aware of how all the pieces fit together.
A quick look at these numbers explains why dealers hate BEV. Mostly BEV buyers are better educated than the average buyer. Better educated buyers are hard to make large F&I profits, and BEV's cannot be convinced to pay for oil changes, spark plug replacements and so much more. However, better education buyers do step up for extended warranties and dealer adds, but even those are harder sales with BEV. There is one major exception to the rule: well educated sophisticated people are prone to make poor lease deals because few understand what capitalized cost, money factor and residual value actually mean, partly because disclosures are carefully placed in very fine print without explanation.
Those are a few of the basics…
