How Car Dealers In San Luis Obispo Make Their Money

by | May 21, 2013 | Automotive

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Buying a car through Car Dealers San Luis Obispo means that you have a one stop shopping trip for your car needs. There is however, certain expenses that you will have to pay for this convenience. Consider the value of convenience and determine if it is enough to pay for the mark-up, advertising, undervaluing a trade-in if you have it, customer service fee, service contract, gap insurance and the down payment you will owe.

Typically, Car Dealers in San Luis Obispo will have a mark-up fee of anywhere between 5% and 10% of what they paid for the vehicle. The dealer cost is the invoice and the MSRP, Manufacturer’s Suggested Retail Price, is the mark-up. This may sound like a reasonable price considering the overhead that a dealer has to cover in order to sell vehicles. Marketing and advertising can be categorized under the overhead expenses.

Next, expect that if you have a trade-in, it will be undervalued. For starters, a dealer will never use a commonly Kelly Blue Book value. What they will use are the Black Book and NADA guides to give you a starting estimate. From there they will tack on additional fees, taxes and charges. The dealer may give you a credit of $10,000 on your vehicle but after service inspections and possibly a used car warranty, your car can be sold on average of $4,000 more that it was purchased for.

Then you have the paperwork, tag fee, title work, contract fee, loan application and all the additional charges that will be worked up under the standard customer service fee. Again, you will be paying for the convenience of doing all of these transactions in one location at one time. All of these charges are worked into the price of the vehicle.

The service contract and gap insurance are handled in the finance and insurance department of a dealership. This is where extended warranties are discussed and insurance in case you should total your vehicle. The extra insurance is called gap insurance because it covers the difference between what you owe and what an insurance company will give you in a settlement. Often in a new car, you will owe more than the car is worth driving it off the lot.