We have all seen them advertised online, huge car dealerships, with sometimes over a thousand cars at one site.
With so much to choose from why go anywhere else? They have almost every make and model, in almost every colour. When you view their adverts online, they are usually the cheapest too.
The clue is in the name supermarket and in the words of the founder of Tesco’s “sell them cheap and stack them high”. The same logic applies, apart from the stacking part, that would be disastrous.
There are some dirty tricks involved and some hidden secrets. On this page I am going to explain to you, why they are so cheap and what tricks they will play on you.
Where do they source their cars from?
Car auctions, Super markets will have buyers that attend auctions, five days a week and will buy almost everything there. The buyers don’t even look around the cars, just simply read the catalogue and bid. Any repairs mechanical or cosmetic will be done at their site.
Ex Motability cars, if you are registered as disabled in the UK, you are entitled to a Motab car. The government will either give the car for free, or contribute to the costs. Without sounding horrible, I am just stating the truth, usually these cars have had more hits than Elvis. Most of these cars are handed back with damage on almost every panel. Super markets, will repair the damage then sell the car on. It’s very rare to find an ex Motab car, that has its original paint. So, when looking at cars at a supermarket, inspect the paint work, to make sure it has been repaired professionally.
Ex Lease cars, when cars are leased and reach the end of their contract, they are offered to dealers. A large proportion of super markets stock will be ex lease cars. There is nothing wrong with these, as almost every new car is bought on finance.
What margins do they have?
It can be very difficult to haggle a supermarket, due to their profit margins. A lot of super markets operated on a £300 profit margin, so haggling can be difficult, as they just don’t have the margins in the cars. Appling the same logic as Tesco, how they make their money is by selling in volume.
As their profit margins are so little, they have a few tricks to increase their profit margins.
Admin Fee’s, most supermarkets will have a “admin fee”, on top of the price of the car. This fee can range from £99 – £250. As an ex dealer, the admin involved is tiny, mainly sending the logbook off to the DVLA. They use this as a profit tactic, so if you asked for a discount they may remove the admin fee or part of it. The admin involved, will still be there for them, regardless if you pay the fee or not. So, paying this fee is a joke.
Addons, when you have agreed to buy the car, the salesman with bombard you with addon products and will not stop until you buy them. These products can be useful and some can the useless. Here are some of the products they will try and sell you.
- Gap insurance
- Tyre insurance
- Paint protection
- Scratch insurance
- Alloy wheel insurance
- Break down cover
- Extended warranties
Every time you buy one of these products, the supermarket will get a commission. Now I’m not saying they are all useless, but it is very important to read the fine print. For Example, the scratch insurance may only cover a scratch up to 10cm long and not on every panel. So, if you have a scratch 11cm long, or on a panel that’s not covered, the insurance won’t pay out. This is why it’s vital to read the fine print on all of these products.
Finance APR Rate, this is where they make the majority of their money. If you’re a cash buyer, you may notice they are not interested in selling to you. When they sell you finance, they get huge commissions off the finance company. It is vital you check what percentage the APR is, before signing.
Sometimes the rate is so high, that buying a new car is cheaper. I have seen this as high as 45%. Imagine if your mortgage was at 45%, you would never pay it off. The average rate of car finance is around 9 to 12% and if you really shop around it can be as low as 4 – 6%.
If you’re planning to buy on finance, I recommend looking elsewhere, as their rates are just so high.
Why do they have so many cars?
Ironically, the vast majority of their cars are on stocking finance. There are a few stocking loan companies out there, one of the biggest is BCA partner finance. The super market will simply buy a car on finance ,at very low interest rates.