Automotive News reports a larger number of dealers are scaling back the markup on their finance and insurance products as well as aftermarket service plans in an effort to avoid the ire of regulators. There are no industry numbers on how many dealers use self-imposed caps on how much they can charge their customers for these services, but Automotive News polled dealers in an independent survey. Of those who responded, around two-thirds say they use caps, with two-thirds of those who do attributing the restrictions to ethical concerns. Gouging a customer invariably has a negative impact on store reputation, and dealers aren't keen to encourage an increase in government oversight.

Some dealers can mark up financing and insurance products by 100 percent, but most prefer to use sales volume to boost their bottom line. Doing so builds consistency and credibility among new buyers by eschewing large discounts or markups. Even so, several of the respondents in the AN survey reported record finance and insurance revenue through the third quarter of 2012, with dealers seeing over $1,200 per vehicle.


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  • 44 Comments
      Caddy Daddy
      • 2 Years Ago
      Never ceases to amaze me how people can't carry on a decent conversation any longer without getting nasty, calling names, etc., etc..
      richegolf
      • 2 Years Ago
      The average profit on a auto transaction is $1973. If you spend $200 per week on groceries your local store makes more on you per year then a car dealer. Theives? The average transaction price for a new vehicle purchase is $26000. What business gives you $26000 worth of goods or services at a profit margin of 7.5%. The grocery stores work on a margin just under 51% profit, so on the same amount of purchase your paying them almost $12450 in profit. Theives? How about Dr's, what does it really cost them to hand out a couple asprin? Theives? Think about all the companys you people work for, are they all non profits? Please someone give me an example of an industry that is more scrutinized for less profit.....anyone? You people are complete morons! Jewlery, 1000% markup, should it be goverment regulated? Is it unethical that they make that type of profit? The most profitable business in the world is religion. My church charged me $1200 for me to be married there. The church wasnt being used, the preist was there anyway, why so much? 100% PROFIT!
        rjmccomas
        • 2 Years Ago
        @richegolf
        That is an easy answer Richegolf, try the oil industry. Low margins and grief 24 hours a day 7 days a week.
        brewfangrb
        • 2 Years Ago
        @richegolf
        If you think grocery stores make a 51% profit margin, it's YOUR adivce that is worthless. You are right about jewelry, however. But come on--51% profit on groceries. That takes the cake.
        mcc077
        • 2 Years Ago
        @richegolf
        You riche, and morons like you, are what give the car dealerships a bad name.
        genowhitaker
        • 2 Years Ago
        @richegolf
        I think you are forgetting that most dealers also get co-op advertising funds from auto manufacturers that can get as high as 26% of invoice value of vehicle sold.
          richegolf
          • 2 Years Ago
          @genowhitaker
          co op funds for General Motors range from 1 1/2% to 3 1/2 %. so between 3 and $500 per vehicle and it has to be spent on advertising. GM rep comes in monthly and reviews the ads to make sure they are compliant and that the bills match up. You only get paid what you spend.
      TubGirl
      • 2 Years Ago
      Also, the dealer i bought my car from charged me 74.90 to let the summer air out of my tires and put winter air in. I found this a tad unusual.
      TubGirl
      • 2 Years Ago
      Every time I go to the mechanic he charges me for blinker fluid. What when I look in the store i cant seem to find it.
        mcc077
        • 2 Years Ago
        @TubGirl
        Once again....your an idiot if you paid for these things.....which I highly doubt you did.
      sportsjunky0073
      • 2 Years Ago
      It's pretty simple. As a consumer in a car dealership, all you have to do is say "no" to the extras that are offered to you if you don't feel comfortable or don't want them. It is not like they have a gun to your head making you buy their product. Also, I get a kick out of the people on here saying not to finance at a dealership. I don't know of to many banks and credit unions offering 0% or .9%. And sorry if you are not "well qualified" to get these good rates, that is nobody's fault but your own in most cases. You earn your good credit so you should be rewarded for it.
      GasMan
      • 2 Years Ago
      I find many dealerships are greedy but I just choose not to deal with them. Know what you want, know what you want to pay, make the offer for an out the door price and walk if they don't like it. It is that easy. Don't get mad. Don't get upset and absolutely don't fall in love with the car. Just deal on your terms and you will never have a problem.
      mitchell
      • 2 Years Ago
      I like visiting auto dealerships because they all treat me like a long lost friend who's going to buy a car." There's always free coffee and sometimes other treats as well....such as free test drives." I just love these places because i am a car guy who loves talking about cars."
      gop.hates.america
      • 2 Years Ago
      WHAT? Car Stealerships not gouging their customers because of..... fear of government regulation? "Real Americans" would never allow this kind of socialism.
      Car Guy 81
      • 2 Years Ago
      Why is it that so many people bash dealerships? Name one thing that you do where you do not profit off of someone else. Business is about making money off of other people. You have something you paid for and will sell it for more to someone else. It’s the same deal now as it was with spice and silk traders thousands of years ago. Can you go into Bestbuy and ask to see the invoice on a TV and offer them less than they own it for and expect to buy it? Can you go into Home depot or any other store you buy stuff from and do the same thing? This isn't the old days (70s and 80s) anymore. Reputation and referrals mean very much to dealerships and the manufacturers are all about the image the company represents.If a dealership doesn’t hold up to their expectations then they get fined and penalized. Also do not forget that the person you are dealing with is there to earn a paycheck and make a living. They aren't scumbags and their main goal isn't to rob people. They have mortgages to pay and families to support. Some of the wealthiest people in the country are in sales. Even Bill Gates made his billions selling windows and that's something that is not even a physical thing like a car is. People that buy a car 1 or 2 times a decade tend to feel that they know more than someone who works in sales every day. They know of secret websites or secret kicks backs that the manufacture sends the dealerships. I personally am tired of hearing at my store someone offer me $2,000 or so below my cost on the presence that if I want to sell the car I’ll take a loss. I guess its kinds of like the government the more in the red you get is better it is for everyone?
        Rich M.
        • 2 Years Ago
        @Car Guy 81
        clquake: its called a free market and has nothing to do with race or gender, they're buying a car not applying for a job as ceo. buying and selling a car is no different when people sold camels and rugs. when your mom walked in and got a $2500 discount and an hour later your friend got $3k, its called free market. the car your friend was looking at probably sat there longer than the car your mom was trying to buy, again free market. dealership chooses who gets the bigger discounts based on how well the buyer negotiates not because their gender or race. when it comes negotiating for anything i don't look at the race or gender, the only thing i'm looking at is getting the best possible deal and i could care less if someone before or after me got it better. i have no buyers remorse. if you want to talk about predatory instituitions you should be looking at the real esate industry. at least with a car depending on model its not reaching in the six figure plus range. also your not tied to a car and the lender for 30-40yrs and if does lose value its easy to dump a few thousand dollars into another vehicle and not a few hundred thousand. so instead of the regulators wasting their time on something so miniscule they should focus their efforts on something bigger.
      mcc077
      • 2 Years Ago
      Why are people always picking on the car dealerships? If your stupid enough to buy there, it's your own fault. You give them your business, so stop crying about what they do. If you don't like them go somewhere else!!
      Robert Fahey
      • 2 Years Ago
      Like any other retail product, tangible or intangible, they should be priced at what the market will bear. If that means a big markup, so be it.
      turbomonkey2k
      • 2 Years Ago
      Oh please. I'm supposed to pity the dumbasses that don't show up at the dealership with financing from their own credit union or bank?
        ayyiyicaramba
        • 2 Years Ago
        @turbomonkey2k
        Even after securing your own financing and insurance many dealerships still manage to SCREW car buyers. Check out this thing called "Dealer Vehicle Documentation Fees." It's a RIP-OFF!
          p60342
          • 2 Years Ago
          @ayyiyicaramba
          AMEN... the stealers will claim it's a state-mandated fee to maintain the papers for a period of years. I sure don't see the showrooms clogged with filing cabinets... just some 1980s-style GSA-rejected furniture.
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