Yes, Canada's new car dealers are more profitable than ever, notes auto analyst Dennis DesRosiers of DesRosiers Automotive Consultants. That said, being a profitable dealer isn't as easy as many consumers might think.
The average dealer profit margin in 2012 hit 2.25 per cent. If you know business, you can see that car dealers have very little margin for error in their business. To put that 2.25 number in perspective, note that the very most profitable auto makers are able to generate low double-digit profits, not profits in the low single digits.
For instance, Audi AG just reported its annual results, noting that for 2013 the German luxury brand is aiming for an 8-10 per cent operating return on sales this year, versus 11 per cent in 2012. Better to be a car maker than a car seller, it seems.
Nonetheless, DesRosiers notes that net dealer profitability grew 17.7 per cent in 2012, "generating a record $1.89-billion across 3,492 individual stores. While some dealers obviously are more profitable than others, the average profit per dealer came to $542,100 in 2012, a 16.9 per cent gain over 2011, says DesRosiers in a note to clients. Such profitability sounds good in raw dollars, but is less eye-popping when put in the context of that 2.25 profit margin.
The point is, car dealers have to be pretty savvy about their business to stay in business. That's why shoppers often find that dealers are tough negotiators. To get the best deal possible, it's critically important to be aware of the factory offers and programs designed to keep the metal moving off dealer lots. The less of that you claim, the more the dealer keeps in those factory-to-dealer incentives we outline here at Deals of the Week.
This brings us to Acura, where you'll find some pretty impressive factory deals. In fact, Acura has the richest offer ever on the MDX SUV – $10,000 in cash rebates for cash buyers. The $10,000 comes in the form of two incentives: a $5,500 before-tax rebate to dealers (for which you can negotiate) and a $4,500 after-tax dealer rebate.
Now for those who need to finance or lease and who are also existing Acura owners, the $4,500 sales sweetener is not available, however, Acura has in its place a $1,000 discount. Acura also has finance rates as low as 0.9 per cent for four years and a 0.5 per cent lease rate for 30 months.
The Chevrolet Cruze compact sedan is an example of how car companies and their dealers can be creative at deal-making even when the cash discount is unimpressive or even non-existent. General Motors Canada doesn't have a cash handout on offer, but buyers are eligible for up to 3,000 Air Miles reward miles, 0.0 per cent financing for up to 72 months AND a $500 pre-paid gas card. The latter is as good as cash for gas purchases, but that amount does not come off the purchase price.
Subaru has a completely re-styled and re-engineered Forester wagon coming for 2014, so it's not surprise to find a $2,500 rebate in play on the outgoing 2013 version. That's for cash purchases only. However, Subaru Canada also has a long list of other offers in play for those who need to finance or lease – including a 0.5 per cent finance rate for 36 months and a 0.5 per cent lease rate for 39 months.
Finally, the Volkswagen Golf four-door hatchback. This is really quite an excellent small car, though by no means an inexpensive one. Still, VW Canada has a $1,000 rebate in play and it can be combined with a 0.9 per cent finance rate for up to five years. That's not bad, given VW does not make a practice of slapping fat sales sweeteners on its Golf.
As usual, Deals of the Week obtained pricing information from www.carcostcanada.com, among other sources. Consult your dealer for all the details.
2013 Acura MDX Elite Package
- MSRP: $63,390
- Freight, dealer prep, air conditioning tax: $2,045
- Dealer discount (estimated): $2,500
- Factory rebate: $5,500 (Stackable Trading Dollars factory-to-dealer rebate)
- Taxable subtotal: $57,435
- Total price with 13% HST: $64,901.55
- Factory discount: $4,500 (Non-stackable Trading Dollars factory-to-dealer rebate)
- Final price: $60,401.55
2013 Chevrolet Cruze LS
- MSRP: $14,995
- Freight, dealer prep and air conditioning tax: $1,650
- Dealer discount (estimated): $50
- Taxable subtotal: $16,145
- Total price with 13% HST: $18,243.85
- 0.0% financing for 72 months
2013 Subaru Forester 2.5X
- MSRP: $27,095
- Freight, dealer prep, AC tax: $1,695
- Dealer discount (estimated): $1,000
- Factory discount: $2,500 (Alternate Cash Back factory-to-dealer rebate)
- Taxable subtotal: $25,290
- Total price with 13% HST: $28,577.70
2013 Volkswagen Golf Comfortline 5-door Auto
- MSRP: $24,425
- Freight, dealer prep, AC tax: $1,495
- Dealer discount (estimated): $700
- Factory discount: $1,000 (Dealer Cash factory-to-dealer rebate)
- Taxable subtotal: $24,220
- Total price with 13% HST: $27,368.60
Pricing information source: www.carcostcanada.com. Calculations based on Ontario customers. Please note that while the information above is accurate at the time of publication, incentives are given at the discretion of individual dealers, and may be changed or discontinued at any time. Dealer discounts are negotiated with the customer on a case-by-case basis.