Warranties are a 3rd party product that the dealer sells. It’s a huge profit center for them. There are basically 2 sides of a dealership. The fixed ops side which is parts and service, and the variable ops side which is sales. In a car deal, it is a 3 legged stool basically the dealer makes money on. First is the gross on the car. Next is what they will make on your trade. And finally is F&I. This is when you are in the box after negotiating the price and they sign the paperwork. This is really just another sales session where they sell you aftermarket’s and warranties. This is also where they make most of their money if they are not making all that much on the front end. Also, they make money on the financing. Let’s say they hang your paper at a local credit union, bank, or even a national lender. That lender comes back at 3% on the deal and they allow a 2 point markup. Dealer can then sell it to you at anywhere from 3-5%. So if dealers signs you at 5% they are making 2 on your loan. Also depending on the situation if you are a prime customer different lenders may also pay the dealer a fixed amount to send them the deal which the F&I manager typically pockets. If you are subprime, the dealer might actually have to pay the lender a fee to get the deal bought. That’s why you might see cars listed for x amount but when somebody with low credit wants to buy it, not only are they going to pay a higher interest rate they also raise the price of the car in order to cover the fee.
In other words, there is a lot involved in a car dealership and a lot of crooked stuff happens. Even if the dealer is not crooked, they are making money every step of the way. In normal time, a dealer would gross maybe $1500 on a used car. On new sometimes they didn’t make anything except the hold back, which is a fixed among the OEM pays the dealer per car sold. Sometimes they might make $400. Now days the average gross is $5-6k in the front end, not including the back end gross which could be another $2k or more. Some of these stores are doing over a million a month in gross, not even counting fixed ops. Sent from my iPhone > On Jun 16, 2022, at 1:53 PM, Donald Snook via Mercedes > <mercedes@okiebenz.com> wrote: > > I imagine most people on here wouldn’t buy an extended warranty. And I have > never bought one before. But, back in September I decided I needed an SUV. > We went on a family vacation and taking the dog, kids, stuff, etc we didn’t > have much room in my car. > > I bought a 2014 Lexus GX 460. It’s not the biggest SUV, but it is still full > size and three rows. I bought it with only 39,000 miles from the local BMW > dealer. They offered to sell me an extended warranty and I immediately said > no. Then, I wondered what crazy number they were going to quote me. They > said $2000 for 4 years and 48,000 miles — on top of the miles it already had. > I started thinking with an 8 year old vehicle things like an alternator or a > starter or power window motors are going to fail. None of those are > outrageous, but a few repairs here and there and it’s not hard to get to > $2000. This is the zero deductible top of the line coverage. > > I got an oil change last week and they called me and said the timing cover is > leaking oil and said $3000 to fix. BUT, I had the warranty. They covered > it. I watched the video on how to do it. ALL the stuff in front has to come > off. It’s a huge job. > > I picked up my car at lunch and it’s all done and it cost me nothing. I only > mention this because it is so rare that a car extended warranty (other than > CPO) actually works out. > > Donald H. Snook > > > _______________________________________ > http://www.okiebenz.com > > To search list archives http://www.okiebenz.com/archive/ > > To Unsubscribe or change delivery options go to: > http://mail.okiebenz.com/mailman/listinfo/mercedes_okiebenz.com > _______________________________________ http://www.okiebenz.com To search list archives http://www.okiebenz.com/archive/ To Unsubscribe or change delivery options go to: http://mail.okiebenz.com/mailman/listinfo/mercedes_okiebenz.com
