The automotive sales environment has changed dramatically in the last year. Car manufacturers that were once American icons have filed for bankruptcy and needed bailouts from the Federal Government to survive.
General Motors and Chrysler have had to shut down many of their dealerships in order to satisfy the bankruptcy settlement. Between Chrysler and General Motors combined they have ended their vendor agreement with more than 1500 dealerships. In many of the cases, they are a single car make dealership and they have no choice but to close. Some of the dealerships have more than one label and they may still be able to survive by having a greater focus on pre-owned vehicles.
The automotive sales industry has gone from an annualized sales rate of 16 million units a year as recently as 2007 to what should be less than 10.5 million this year, a 34 percent decline. Automotive sales volume is down below 1986 levels in volume. Fewer dealerships are making a profit and they have to make decisions daily about inventory and sales pricing. If a dealership slashes prices they will make a lower profit per car. If they sell a large number of cars, they can make up the total profit number but in this slow sales climate, they may not sell as many as they need to still keep the dorrs open. If they try to sell the cars at a higher profit, they may not sell enough as well due to pricing competition.
No matter how much a car dealer cuts the sales price they CANNOT lose money to sell a car. A dealer must make some sort of profit or they will not be in business. When you make your counter offer at a dealership please remember they want to be here to be of service to you in the future.
The word “profit” is not an evil word. Almost every business is in business today to make a profit.