LOS ANGELES -- Dealership profit margins for several brands more than doubled during cash for clunkers because many shoppers weren't bargaining as hard as shoppers did before the program, according to a firm that tracks vehicle transaction prices.
TrueCar Inc. says Dodge, Chrysler and Jeep dealers were among the leaders in profit increases per transaction as a result of the program. Kia, Suzuki, Volvo, Toyota, Honda and Hyundai also fared well.
For example, TrueCar says the average margin at Kia stores went from 2.4 percent in June to 5.1 percent during the Aug. 1-24 period. The incentive ran from July 24 to Aug. 24.
Consumers were convinced that a $3,500 to $4,500 incentive to trade in their clunker was a steal, said Jesse Toprak, vice president of industry trends and insights at the Santa Monica, Calif., firm. So they didn't seek to drive a harder bargain on their new-vehicle purchase and left thousands of dollars on the table as a result. That boosted dealer profits, he said.
Toprak said consumers did not understand that the cash-for-clunkers rebate could be the starting point for negotiations, not the conclusion. As a result, he said, profits on some deals were thousands of dollars more than in June. He said dealer profits on compact cars were triple the June level.
"A lot of dealerships had their best months ever in terms of unit sales and profitability," he said. "Also, when consumers think they're getting a great deal, they also drop their guard in the F&I office. They are more likely to purchase F&I products, like an extended warranty, and not question the finance rate."
The TrueCar data do not include profits generated in the F&I office. The firm declined to disclose dollar amounts of the dealer profit increases by brand, citing client confidentiality.
Consumers also were dazzled by manufacturer-to-dealer incentives that were tacked on. On many vehicles, Chrysler Group matched the clunker cash with incentives of its own.
"If a consumer paid $21,000 for a $30,000 Chrysler SUV, they still paid sticker," Toprak said. "Consumers still got a better deal than they would have without clunkers, but left money on the table."
TrueCar's calculation of transaction prices showed that consumers who bought a four-wheel-drive Nissan Xterra, for example, "overpaid" by $3,810 compared with the average transaction price before the clunker program.
The firm said customers left an average of $2,868 on the table for the Mitsubishi Galant V-6; $2,574 for the Toyota Prius; and $1,974 for the Mazda3 sedan. The data come from TrueCar surveys of 8,000 new-car dealerships, covering about 30 percent of all transactions nationwide.