Archive for January, 2012

The life of a business will depend on how much profit is made. If a business is not earning profit, then there is no point in doing business at all.

Car dealers run a business. They are here to sell cars.

It is only natural for car dealers to earn money from every car sold. But did you know that your friendly neighborhood car dealer earns money on a lot of ways?

Here we will discuss the top 3 ways on how a car dealer earns money:

1. Car dealers earn money on the mark-up.

When the car dealer purchases the vehicle from the factory, they buy the cars at wholesale price. Of course, when the car is now displayed on the showroom, the car dealer will not indicate the wholesale price of the car: they will put the sticker price, or MSRP, in which the amount already includes the mark-up.

How much is the mark-up? The average is between 5% to 10%, but luxury automobiles will enable the dealer to charge more. Do you think that a 10% mark-up on a new car is not enough? If the car costs $25,000, then the markup will be $2,500. If the dealer sells 100 automobiles in a month, then they earn a profit of $250,000. However, the mark-up is not the only way that a car dealer earns money.

2. Car dealers earn money on interest.

If you choose to finance a new car, it will be helpful if you check the finance rate that is issued by the bank. This holds especially true if you finance a new car directly from the dealership.

It is a common fact that car dealers can ‘push’ the interest rate by as much as 2 points. In simple terms, if the bank issues an interest rate of 6.7%, the dealer can charge you a rate of as much as 8.7%. The interest rate is often called the ‘buy rate’ by your finance manager. Ask the dealer about the ‘buy rate’ so you’ll know if you are getting a fair rate.

3. Car dealers earn money on the holdback.

Have you heard about the dealer holdback? This an amount that the manufacturer will ‘pay back’ to the car dealer after selling the car. The holdback is used by the dealer to pay for advertising and other incremental costs. It is also used to increase the car dealer’s cash flow.

This is the reason why you will need to determine the true dealer cost of the car. By simply referring to the true dealer cost, you will prevent the car dealer from earning too much money on a new car.

This means that you will save money, while the dealer still earns a marginal profit.

Date: January 31st, 2012

Consumers can expect a further rise in car prices starting 2015, as the California Air Resources Board proposed tighter emissions laws to reduce the amount of pollutants in the air.

Chairman Mary Nichols of the California Air Resources Board wants new cars to emit at least 75% less pollutants by 2015. Furthermore, Nichols is hoping that this move will lead other states and the rest of the world in the fight against global warming.

The new rule also states that at least 1 in every 7 new cars sold by 2025 will hopefully be either a plug-in hybrid or zero-emissions car. Hydrogen technology is not far away, but the world is still waiting for the first true Hydrogen powered car.

The board is hoping that California will have 1.4 million plug-in hybrids and zero-emissions vehicle by 2025. Take note that hybrid cars and pure electric vehicles are more expensive than a regular car. The most popular hybrid car in America will have to be the evergreen Toyota Prius.

The newest Prius in the market is the plug-in hybrid. With a base price of $32,000, it is hard to argue with the fuel efficiency and green factor of the Prius plug-in hybrid. However, compare the cost of the Prius plug-in to a conventional car such as the Camry with a $21,995 base price; can car buyers afford paying a premium for a cleaner car?

In order to make a car more clean-burning and fuel-efficient, the technology utilized will not only focus on enhancing the properties of the internal combustion engine. The cars of the future will also have to be lighter in weight, but strong enough to protect the passengers in a collision.

This is easier said than done. Developing the kind of technology that will produce cleaner cars will cost a lot of money. Car makers will need to invest a lot of time and money in coming up with solutions on how to cope up with stringent emission laws.

The director of the National Automobile Dealers Association was right when he said that while new emissions regulations are good for the environment; this will also result in extremely unaffordable cars. Forrest Mc Connell further stated that adding $3,000 or more to future car prices will make consumers shy away from car dealer showrooms.

Hybrid cars, ever since being introduced to the US market 13 years ago, only account for 2.1% of vehicle sales in the national market, with California having a 4.1% market share.

If this means something, then it is proof that Americans are still not sure if the acquisition price of a hybrid car is worth the fuel savings in the long run.

The goal now is to come up with the technology that will make future cars cleaner and more responsive, while remaining exciting to drive.

The true dealer cost of the car of the future will increase, but we make sure that you still get competitive new car prices with a simple and free online quote.

Comments Off on Expect New Car Prices to Go Up as California Adopts Tighter Emissions Regulations
Date: January 27th, 2012

google plus