Toyota dealers complain about lower gross profits

Article by Christian Andrei, on October 27, 2010

Because of the recall crisis, Toyota went through a long and difficult process for its conquest rates to return to pre-recall levels but to continue to sell cars, its dealers are having to accept lower gross profits.

TrueCar and Edmunds.com said that Toyota's transaction prices on new 2011 models are the lowest, as a percentage of sticker prices, of all mainstream brands.

A portion of the discounting is covered by higher factory incentives, but Toyota still spends considerably less on spiffs than other brands. This means that dealers would have to spend more to sell the cars.

Jack Wilson, president of Toyota of Vallejo, north of San Francisco, said that the pressure is “definitely on the bottom line, the gross line.” He pointed out that it’s a result of the recall situation but that the issue has to be discussed nevertheless.

Double-digit percentage sales gains through September were posted by Ford, Chevrolet, Nissan, Hyundai and Dodge. Meanwhile, Toyota brand sales increased by 1%.

According to Jesse Toprak, TrueCar vice president of industry trends and insights, Toyota's transaction prices traditionally start the model year much stronger.

He explained that each Toyota brand model sees weak dealer gross margins. Lexus discounting has also increased but not at the same levels as the Toyota brand. [via autonews - sub. required]

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