What else do you want to know about the inner workings of a car dealership? Let me know and we'll be sure to cover it in the near future. Thanks for watching.

Keep making videos, the general public needs to know the real deal.

This explains a lot. I haven’t been in a dealership in 8 years. I had heard they make money off the loans but guess I just figured they had to chose the lowest rate as like some fair business practice. But today they only offered me a 8.99% which was double what I expected. Then told me I could not buy the car with my own bank loan. Had to be secured by them which seems a little unethical. Of course they changed their numbers as I was walking out but I just find it all so off putting now.

Wow, this is the most comprehensive explanation I’ve ever heard. You are a great educator Ray! Thank you 🙏

The real cost of car ownership is interest paid and the depreciating value of the asset, plus maintenance. Live below your means, save money every month, pay cash for a car.

Spot On Sir! I spent over 50 years in sales, the greater majority in the Automotive and Truck business and you telling it like it is.

This is really fascinating to learn. Also, you are great at explaining these concepts in a way that's easy to understand. Thank you for helping people learn more about how to approach the car buying or leasing process! It often feels like an intimidating process and your videos help a lot.

Very informative thx Ray. Service absorption- and that's why they send you msgs that it's time for servicing and give you breakdowns of how your car is looking to get you back in there spending more money on servicing.

Bought my first new car in '69, next in '72 then used till '77. None of the new cars needed service, except the '72. It was a Vega. Blew a head gasket (aluminum block and heads) at 14,000, Chevy replaced the engine for free with an improved aluminum block with steel sleeves in the cylinders, still aluminum heads. Blew another head gasket at 26,000. Same deal, Chevy replaced the entire engine again (free to me). Drove it til 76. At the end it was using half a quart of oil for every fill up. Traded it for a used '76 Civic which I later found out the Consumer Reports rated in their Top Ten Worst Used Cars (along with Chevy Vega) and boy were they right. Bottom line, I only use dealer service if the car is in warranty.

Very informative videos I definitely enjoy watching !

The service department makes the dealership a fortune. They use a labor book. I had to replace a side mirror assembly on my Honda Pilot. I called the dealer the assembly was $325.00 and the labor was $ 150.00 to put in. I went on Amazon and got same assembly for $55.00 and someone else I knew install it for $ 50.00. Stay away from the dealership if you can.

I just came across your video and I love your personality and the content of all of your videos. I subscribed before you even ask us too. I really enjoyed listening to you plus I learn a lot from you. Please continue to make more videos and I'll keep watching them. Thanks!

PS I sure liked your letter to the Dealers inviting quotes on an Odyssey I think. That open manner and straightforward approach sure appeals to me and I'm sorry you discontinued the service. I'm terrible at negotiating and quite willing to pay for that service. Thanks for your previous prompt reply!

Good info, that's why it takes so long to get appointments for servicing my Ram!

Found this very valuable!! Thank you!

Interesting about the business office. Where we live (British Columbia , Canada) the business office isn’t allowed to sell insurance by law. They insurance is sold by an outside company that comes on site to sell car insurance and vehicle replacement. The dealer is only allowed to sell extended warranties for vehicles ( for any brand even if it they didn’t sell the car).

When I used to sell VW’s in 05 the dealer would receive a “bonus” from the manufacture based on if he sold X amount of cars for the month. He would make say $100 per car if he sold 10 cars that month and it would go up from there. Some months it would be as high as 300 a car so if we were 1 car shy of hitting our goal we would do anything to sell that final car even at a loss to not miss out on the bonus money. It’s a crazy job. To stressful. Glad I don’t do that anymore.

This is FANTASTIC information. Love the content and the presentation. Keep up the great retirement work 😂. Subscribed!

Trying to learn more about car dealerships as me and my brother look to niche into the industry with our video business. This was super helpful! Thank you!

Great video, content and format

Guys, I am addicted to your channel. I started watching a few weeks ago and can not stop! Thanks for ALL the topics that you cover. It's the most interesting, no b.s., thing on KZfaq. Wish me luck, as I'm going to my lease dealer tomorrow to purchase my 2017 F150. Residual is $27,200....11,200 miles. Positive equity this time around. Hope I don't screw it up when the hard-sell F&I guy has HIS turn!

Thank God someone finally told the whole story, we really don't make much at all on the new car market. Thank you from myself and Sparks Nissan and Kia brother.

This was so informative. And gives me confidence in buying a new car. I now understand where the dealers are targeting me. So if I get a extended warranty through the dealer they will want me to get serviced there thus making more money.

I appreciate the info thumbs up and subscribed

Great content, thanks

In this day and age I don't understand why people buy new cars, buy any car at a dealership, or get their cars serviced at a stealership.

Good stuff to know for my next car!

I've been searching for cars on the internet. I narrowed it down to a few in my price range. But also my credit isn't strong. So I'm already assuming they are going to ask for a bigger down payment, last time it was at 20% which is quite high. After you mentioning about how banks cut the dealer a lower percentage rate, I feel I can negotiate a lower percentage rate on my end. Any tips or advice on doing that?? By the way great video. Very informative... Subscribed. 👍

This was excellent.

I live in the Philippines. Wish i could use a lot of your information here. I find it interesting and informative. Buying cars here is another whole story. Will be looking for a new Honda BR V later in 2023, so I'm starting my research now. Again, thanks for the information and insights.

Very helpful thanks sir!!!!

I grew up in Detroit in the '50's and '60's. NO one ever went to the dealer for service after the warranty ran out. Everyone knew that dealers WAY overcharged for service. I learned to do my own service, basic stuff ( plugs, points, wires, oil changes, carb rebuild, changed shocks etc). I have never gone to a dealer for service. Find a local mechanic (use the internet to find a reliable one) and read the reviews.

Ray, I really enjoyed your presentation and explanations in this video. As you may remember from previous comment exchanges, the two of us go way back in the car business. They way it operates today, me being so far removed from my days in the trenches, I hardly recognize it. I hadn't bought a car in a decade or two and within the past several years, went on a flurry buying several cars for my kids from the walking distance from home, fixed price, no add-on's nor dealer fees, local, honorable, oldest Ford dealership in Alabama. Who more could you trust? Then it was my turn. For the first time in my 70 years, I leased a Ranger not sure whether I would like it or not as limited availability in early 2021 made it impossible to try out the one I was most interested in. Initially I was very happy, but after a time, I came to realize the attractive details changed once I decided to lease. My detailed questions about 'money factor, residual buy-out, etc. were simply buzz words I was throwing around not really knowing what I was talking about. Oh boy. I was then introduced to the 'big guy' to explain the interesting aspects of the lease. He was a total 'pro' and knew exactly what he was doing. He told me they didn't use 'money factory' rather APR at 4%. Also the cash incentive were not available on a lease. I could have and should have written a check for the damn thing in retrospect. My intent was to hedge my bet in case I didn't like it. The more I have reflected on the deal after the last year and half of having it, I feel worse and worse about it. But that's on me. No question about that. My confidence was years of knowledge of how it was, not how it is. They got me. I have no doubt about that. 🙁 Edit: My first few new cars were negotiated with the owners of the respective dealerships. I had connections in those days. LOL In fact when I wanted to order a new mini-van for my wife, the dealer invited me to his home. He handed me a blank order sheet, and said, "Johnny, I'm sure you know more about filling this thing out than I do, so just check off what you want." I completed the entire factory order on his kitchen table. 🙂

Regarding extended warranties and service contracts, the finance agent I worked with at AutoNation Chrysler in Phoenix worked me over for 20 or 30 minutes trying to get me to buy one. I was almost in tears saying no.

this is 1000% actuate. the dealers don't make money in sales. they make it in the finance, & service departments. the labor rate is $110-250 a hour depending what part of country you're in. theres dealerships out by my dads farm, where the only reason they're still in business is because they've invested heavily in the service department, so the dealership can stay open.

Extended warranties provide HUGE commissions to the seller. I've seen stories where the seller gets 50% commission on extended warranties. That can't be a good value for the buyer. I always decline extended warranties. The factory warranty will cover just about anything that becomes a problem within the 1st three years. I take good care of my cars and I can fix most issues myself.

a good service department is worth its weight in gold, my local toyota dealer just lost me as a customer. over wet seats, went in for an oil change got into a car with wet seats from snow that was on the roof . i don't know how or why and got no answers.

Good stuff. Thanks.

Thanks very much for the explanation -- too often business is presented like the movies, where nobody ever stops to pay for the cab, or pays a bill. And you wonder, "but how does this really work?"

Never EVER buy any backend...Always negotiate you rate down at least 1%, because your dealer is most likely quoting you 2% higher than they can close.

Fantastic information. Thank you for the video. Unfortunately I live in an area where most of the population is uneducated on the inner workings of new car dealers. All vehicles are sold well above MSRP. Customers are happy to finance for 6+ years. This makes it very difficult to get a good deal. Use course even at the end of the quarter, I've had car salesman. Tell me they don't care to make a deal. They'll just wait someone else to come in and pay what they want.

When I bought my Range Rover, they tried to sell me these very nice wheels for $9,000 I told them I don’t want them, I went to eBay bought exactly the same wheels for $1,100 and brought back their wheels after driving the car for a week. Basically, they sold me a car without wheels

Order my 15 c7 i take it to my dealer that I trust but would not want them to go out of business they know the car and thank you for doing a good job of explaining

the way he asked you to subscribe though. you can tell this guy was in sales!

Gr8 information sir... So many other ways to get profit ...

If you were a buyer of a high end car, with access to quality car repair and willing to pay cash. My question is not paying cash off the lot (I know you can fill a book, however) but in the long run: certified vs non.

You can always register at an auto auction or pay a dealer and buy a good car for a reduced cost.

I have only bought one car from a broker here and that was in 1978. It was a Toyota Celica fastback. At that time some of the "rules" were you had to send a $500 non refundable deposit. You didn't get to see or drive the car until you arrived and paid the balance. There were no hidden extra fees. You just paid the taxes, license and insurance. Being a Toyota it turned out to be one of the best cars I bought. Times have changed as I think they may now take trades and allow you to see your purchase first. We have another service called Car Cost Canada where they do the shopping around for quotes for you for a reasonable fee. I keep my cars a long time as I'm driving a 1998 Accord EX V6 as I do a lot of my own maintenance. It's not worth anything on the market but when I'm ready for a new car I'll give it to a family member. I'm not very popular with Dealers though but can't stand the BS and games.

Warranty work is used as a Christmas tree effect to add on more customer out of pocket services

I just discovered your show and subscribe as well, can you please let me know how much percentage should i ask off on the brand new vehicle price. Thank you in advance

the problem with dealerships now days is that you have people that, fire the good people and keep young toxic start up tech who friend up and wanna bully other people car bussiness has dissapointed me too many techs that instead of helping they dig others just the other day i seen a state inspector and his helper get someone fired just because they wanted that extra car bay

Hi Ray, another informative straight forward video on something 95% of retail automobile buyer don't know but should; how a car dealership makes money. FYI. REITs (Real Estate Investment Trusts) can be privately held or publicly traded entities and are owned by the investors/shareholders of that particular REIT just as other businesses entities are.

very interesting! about the new car market not being profitable.

I think my wife and I should take you with us next time we go car shopping. We'll buy your lunch. LOL We don't want to get taken to the cleaners. On a side note, you are exactly right about the Mini Cooper dealerships that seemed to spring up over night. A third generation, very successful Cadillac dealership family where I live decided to buy an old GMC etc dealership on a very upscale side of town and refurbish it. They sold Minis. Very nice property. It lasted maybe 18 months, and then as quickly as it sprung up, it was gone. Scratching my head. You're right though. They didn't have any other income than the new minis. From what I understand they are pretty reliable cars.

With how much electric bicycles cost I wondered if their was any profit in car sales given the're so much more complex and heavier. Good insights.

How about selling your data? I noticed recently when I bought cars I always got calls for extended warranties from different company. This only happens after buying a car

I purchased a preowned Pathfinder from a dealership, the used car lot was adjacent to the new car lot. There were a few issues that were documented, had to return in 30 days for the work to be done for no charge. While waiting my turn in the new car service bay I walked over to the used car office to say hello. When they discovered my car was in the new car service dept, I thought they were going to have a stroke. I was instructed to immediately drive the car to a nearby service station that services their used cars. I paid a visit to the dealership manager for an explanation. He said their used car lot operates as an independent business and does not have the budget to cover the new car service dept. labor rate. Within a week the car was sold at a loss, no more Nissan. Is this a common practice in the car business?

I like your new channel a lot even though we live in Canada. One question I have is why don't more people buy from a broker where everything is straightforward and up front? It bypasses all the BS and games that the Dealers play.

What is the DIC(not DOC)Fee on the itemize car sale worksheet?

I like this guy.

I get authorization letters from my bank & use only my mechanic, so i do not see dealership ever again after i leave dealers parking lot, am i doing right thing?

I'm leasing a car and it has some front body damage to the plastic. orobaly around 200 to 300 worth of damages. wondering if its worth fixing before I go in to dealer to either lease anything one or trade it. havnt decided on that part yet but really wondering how much they would take off on the valve if the car. hope that makes sense lol.

Awesome info Is there a way to take the profit away from the loan and get a rate very close to their wholesale rate Assuming great credit Does the finance manager care Or does he get a piece of the action

I have a question on credit scores Do you have videos on how high your score needs to be? Covid19 did make marks on my scores

very well thank you

38 years in.. Well said!!

I like this more direct format of video rather than the tag team you've been doing lately, trying to do the comedy act.

Well. If all of this is true, then for sure we are in the last few years of the dealership model. Great info! Thank you "Your Auto Advocate" Tesla's model is the future.

No! If it’s below prime that rate is bought down. That cost in the long run is passed on to the consumer.

If parts and service are so crucial to success, I'm not seeing how selling a used car (which often isn't the same brand as the dealership) guarantees the car will be serviced at that dealer. There are many independent repair shops that can work on a car, and many people go there instead. As far as I know, cars are not tied to where the car is purchased.

Good video

My old finance professor would like you using BPs

Apart from an early first car all my cars have been cash. Finance, just say no. I signed up once but never again. Find yourself a good solid independent mechanic and no need for a warranty. He gets my service business too as many dealerships are overpriced.

My neighbor was a manager of a Cadillac dealership he told me a Salesman can make eight hundred dollars and up on a you card depending on the make and model

Helpful

Can i ask u. Dealers make money on extra points on the financing, but if i find a lower rate from a bank and refi within 30 days does the dealer still make money?

Extended warranties are *never* a good idea. Think about it -- by definition, if every customer made out on the deal, the warranty company would go out of business in no time!

You mentioned that the Dealership makes a lot of money on warranty work. What you didn't tell the reader is that the Dealership Mechanic gets paid a reduced hourly rate and usually a shorter time period based on flat rate to repair the warranted item. So, there's another way the Dealer makes money. Your Sales Persons hawk all the Warranties but your Service Department gets screwed.

They also make money on volume incentives from the manufacturer. It's typically monthly. Now with inventory super low in todays weird covid world it may not be as relevant but once things go back to normal it will be relevant again. Negotiate at the end of the month, not the beginning.

My wife went to a Toyota dealership attempting to trade in her car for a used 2019 .. After HOURS!! of sitting there , the manager says shes approved and can drive off today. But after they come from financing , their telling her she HAS to put down 1000$ even though shes trading in her car with a KBB price of 2000$ .. The manager claims he really tried. So we couldn't get car 😞 .. Any advice on any of this?

I was (actually still am) looking for used vehicle. The select makes/models were looked up on ie True Car, that included the rating of price of vehicle.They had the information 'how long they have had the vehicle'. Appropriate, and IF so how, to ask how long the vehicle has been on the lot? And yes I listened to timing for any actual purchase. ty and I did hit the button.

Sooo not true anymore that profits are divided 1/3 parts & Service 1/3 used cars and 1/3 new cars?

What is your take on tactics like pen striping (when they add those 2 decal pen stripe lines just under the windows to mark up the car a few hundred dollars) or products like Enviroguard? Is Enviro Guard legitimately beneficial or is it more or less a gimmick to add money to a sale.

Hard to find new videos. After hearing that new car dealers are not making any money on the sale I had to look for date of video.Yup...3 years old. Is there a way to get newer videos?

The profit structure is similar to Chinese car dealers. Except for last year, which is under chip lacking situation.

What used car price range produce the most profit margins ?

One way they make money is when you take a vehicle in for recall work and "they find" a laundry list of other issues that "must be taken care of immediately" even though your car is regularly maintained by a reputable local shop. The only way I've found to get around this is to hire my local shop to take the car in for the recall and let the dealer know that if they think they find anything, the local shop will get the work. Since I've started that I've had ZERO claims of issues found by the dealer's shop while doing the recall work. Are there words I can speak to the service desk that will preclude them from "creating work for themselves" and still take my vehicle in for recall work only? Thank you for your time and answer...

Profit is not a dirty word. All successful businesses are profit based and the McDonalds coke you buy for a $1.00 dollar is in actual cost to McDonalds is about 22 cents in cost to the restaurant to produce. NO ONE is complaining how they got taken advantage of. The prices are not negotiable and you pay and walk away. In today's automobile culture the competition is constantly cheap selling the product between dealer incentives, factory rebates and additional qualifying discounts e.g military, college grad, etc. I don't like to dicker over price or trade value but if you don't, you might pay too much. In the F & I office everything is still negotiable, as long as you know what you qualify for. Do your home work in advance and you'll some teeth in your mouth.

How do dealerships afford to purchase used cars from local buyers. Do they purchase the cars with their own money or borrowed money.

Guys I need your opinion and advice. What OUT THE DOOR amount to offer for a new 2021 (not 2022) Mazda 3 2.5 engine sedan ? (RSVP on website : $24,240) PLEASEEE HELP !!! With some help from a few people which I must pay back , I am trying to outright buy a car paid in full, no financing .

Is there any incentive for the dealer to give you a lower price on a car if you decide not to finance through the dealer?

If I ever need an example of a Philadelphia accent to show someone, I'll send them this video

My friend bought a 2019 corvette and they sold her on rustproofing and a bunch of other stuff. Do you think they are legit or worth it?

I know a lot of dealers are dishonest, I just wish you could agree on a price where they weren’t making their mortgage and boat payment when they sell me a car. I realize they need to make a profit, now just hate the negotiating.

Think about being a visiting professor who lectures to new prospective franchise owners. Charge $200 an hour plus expenses with a 4 hour minimum.

I always pay cash for cars. I never want to pay interest on something that is decreasing in value while I own it. Paying interest on a something like a car is something I will never want to do! I always change the car when the warranty is finished. If you trade the car before the warranty runs out you get better trade in value. I always take a service contract with the cars I buy. I pay very little for service this way, and always go to the dealer. During the four years I drive the car I am saving for the next one. When buying a car, I buy it fully loaded. This way I get best and most attractive trade in value. My car is always under warranty. I would not dare keep a vehicle that is out of warranty. For every car I owned, over the four years I got my money’s worth with the service contract, and additional insurance for the tires and etc. With the new technology in these cars most garages cannot afford to invest in the training, buy the updated diagnostics and tools, and pay the cost of qualified technologists to work on the cars. I never buy used. No idea about how it was maintenance and if the oil changes were done on time. No idea about hidden problems, and there is no long-term warranty. You get what you pay for. I don’t like to get stuck on the road, and or having to do frequent repairs. When I was younger, I bought used cars. Everyone was a bad experience.

Thank you , this was very interesting . I have heard a while back that getting a Lexus dealership are the most profitable , is that still true ?

Thankss

EV’s are disrupting the traditional dealerships. EV’s have less parts and less maintenance.

i only work for dealerships who lets me make money for them and also aloe me to make money for me, i hate when they are so strict about you bringing friend or family member cars im glad not all dealers are like that but some shopforemans are straight haters