Inside the industry: What makes luxury car dealerships so special?

What makes A good car dealership? Does a glass-fronted, two-storey facility with lights ablaze, new cars neatly aligned and a barista to serve you a latte as you’re guided to a contemporary seating area float your boat? Does it reassure you of first-rate customer service and a brand experience into which you want to buy, or does it ring alarm bells about who ultimately pays for it all?

Hitting the right note is a delicate balancing act with massive business implications, a point made by a recent What Car? poll of almost 5000 car buyers. It highlighted that 28% think there’s 10-20% profit margin on a new car sale and 46% think it’s more than 20%. Some 2.6% reckoned that there’s a 75% mark-up, even.

The implication was that he public thinks dealers are making a quick buck. The real margin is somewhere between 5-7%, although it varies dramatically by brand and model type – and typically is around double that on a used-car sale.

Dealers do typically make good money; more than enough, evidently, to meet manufacturer demands for everything from new multi-million-pound buildings to a stream of facelifts as new corporate looks roll through. But you can understand their frustrations, as well as those of their customers, at having to push ever harder.

One Autocar source estimates that the vogue for new logos designed for a digital age would cost the manufacturer and its UK dealer network in excess of £1 million per brand to implement in signage alone.

That’s all very well if it pays back (which you have to assume is documented), but further challenges come from the perception such facilities create among customers versus the reality of what will be delivered. Few want or expect to buy from Arthur Daley’s parking lot, but fewer still want to feel their money is funding someone else’s good time.

The problem is more acute in different parts of the market. Lexus aside, it’s quite common for premium brands to languish down the order of customer satisfaction surveys. Do the scores represent genuinely poorer experiences, or do they reflect high-end customers’ expectations being higher? And then you have to ask just how critical the dealership experience is as a differentiator, and if there’s a risk that these gin palaces could convey that prices are simply too high.

It’s time, surely, to draw a finish line, not least as it’s a race that nobody can win. Your average Ford showroom is probably as smart as a BMW one of 10 years ago, ratcheting up the cycle again. We all want to do better, but when dealers are giving off the impression that they’re raking it in, the model is surely broken.