We have a 2014 Honda Odyssey EX-L whose lease is expiring. The minivan has only 22,400 miles on it. The dealer says that it is worth $21,000 as a trade-in. kbb.com estimates $21,507 (range of $20,652-22,361). The dealer says that he can sell it for close to $26,000 with a short warranty. kbb.com says that we could sell it to a private party for $23,335 (minimal warranty required in Massachusetts for a private transaction) and that a “fair purchase price” from a dealer is $24,304 whether “certified” or not.
Let’s assume that what the dealer sales manager told me is the best information. He’s planning to make about 24 percent gross profit on the sale while taking a minimal risk of warranty expense (a three-year-old Honda with 22,400 miles shouldn’t melt down). Isn’t this kind of a fat margin for American retail?
[As evidence for the “fat margin,” the actual owner of the dealership keeps a “business” jet at our local airport (his dealerships are all local, so it is tough to see how the jet could be used for business) and has a Bell 407 standing by for shorter hops.]
Separately, as part of the new car shopping process I test-drove a 2018 Honda Odyssey Elite with acoustic side glass as well as the acoustic windshield that comes on the EX-L. It seems to measure roughly 1 dB quieter than the cheaper EX-L model. On smooth pavement at 70 mph, therefore, the meter was showing just 63-64 dBA. It is definitely quieter than the 2014 model, but I am not sure that it is noticeably quieter than the EX-L. The cost of ownership is about $2,000 per year higher. The rear entertainment system (low-res screen that flips down from the middle of the ceiling) adds some annoying complexity to the user interface. Turning it on disables the main audio system from playing in the middle or back of the vehicle. Turning the rear entertainment system off, however, does not automatically restore audio to the middle and rear seats. The enormous alloy wheels on the Elite are polished to a shine that would appropriate for driving around during Reno’s Hot August Nights. I prefer the more understated look of the EX-L, not that anyone is likely to be looking at us in our minivan.
Related:
Factory audio/video will always be hopelessly behind non-automotive equivalents. Also – if you think those margins are high – do an analysis on parts/service work at any dealership.
It is a fat margin because wholesale price of a bumper-bumper warranty to 50K miles from a 3rd party insurer (thus exempting him from any further costs) for that low-mileage and that new of a vehicle would be very inexpensive, far less than $1000.
Why don’t you just buy out the lease and keep it. A Honda with 20,000 miles on it has a lot of life left in it. I would buy some kind of extended warranty on the transmission though – the automatic transmissions on Honda vans are a weak point because they were not built to shlep such a heavy vehicle.
Jackie: Given that the new ones offer essentially the same function (and gas mileage) as my 1998 Toyota Sienna, why not buy the 2014 from Honda and drive it into the ground? As more Americans transition either to desk jobs or SSDI, I think it will get tougher to maintain stuff. With a new vehicle there are fewer maintenance interventions required.
The 2014 Odyssey had one problem: a stuck rear brake caliper. It took five trips to the dealer, I think, to get it resolved. I already have to manage maintenance on a bunch of aircraft, so it would be nice to have a car that is essentially maintenance-free.
The dealer would much rather sell to a third party with financing, he will get a fat fee for placing the loan in addition to the fat margin. New auto sales franchises are about as close to minting money as one can get. A few failed in the debt crisis but the survivors are bigger and more lucrative than ever. Car dealers are very big players in local affairs and politics; one in Miami owns Marco Rubio.
Phil,
I met a truck dealer flying a new Pilatus recently and I know an auto dealer who owns a King Air. He told me each dealership he owns nets him over a million per year. This dealer is located in a growing college town near Roanoke, VA.
So yes, fees and profits are fat in autoville.
Personally, I think you’ve picked the wrong make of minivan. I’d go with Toyota.