$500 over invoice a good deal? (selling, biggest, cost, Ford)
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The dealer gets a kickback from the manufacturer, anywhere from 1 to 3 percent, so invoice is not the bottom line. And never buy anything extra from them. Also, if you're selling them your current car, know how much it's worth before you walk in. And know how much a car loan from your own bank or credit union would be, before you finance it with them.
All that being said, $500 over invoice might be a good price on a car in very high demand, or a terrible price on a car in low demand.
If they hit their volume target. And they need to watch that number every month like a hawk. If they totally miss it, they'll not lose money on the car. And if they've already hit it or are close enough its a sure thing, they won't make an unprofitable deal. and 1-3% isn't much...$250-750...
Quote:
Originally Posted by justanokie
Dealers make way more than $500 on a $25K car. If that was all they made then they wouldn't be in the business.
No business runs on a 2% margin...especially not one with high overhead like a dealership. Well..maybe grocers do.
New Car sales are second only to grocers for thin margins. For a store to be profitable, it needs solid used car sales, a profitable service department, and a good F&I department. If all they did was sell new cars they wouldn't make much money at all. New car sales serve as a driver for first crack at used cars (before an auction,) a stream of customers that become accustomed to going in for service work and prefer the "name brand" repair, and money selling extended warranties, etc, in the finance department. F&I add ons (not loans or leases,) but things like warranties and Gap insurance, etc, are the highest margin center for the dealership.
Where are you folks getting information these days about dealer costs? It used to be all over the internet, but I could not find anything the last time we bought a new car. We wanted a specific make/model with specific/rare options, so I felt rather unarmed in my negotiations. I'm quite sure we left a significant amount on the the table when we drove away.
In a vacuum, its not a bad deal. But its never a vacuum. If that price includes all of the factory incentives, then its not a smoking good deal. If its $500 over invoice, AND you get $1000 from the manufacturer, its not so bad.
Dealers get rebates/commissions whatever from manufacturers based on volume. Towards the end of the month they might make a bad deal if they're just that close. But if its the last Saturday of the month and the dealer only needs to sell three more cars that month, he knows he'll get that and isn't going to take the loss unless he has to.
Wrong on most counts. They might have different invoice prices based on when they were made (a production run in June might be cheaper than that same one built in November,) but not drastically so.
They do own the cars, as much as anyone that finances anything owns the cars. The dealers buy the cars on a floorplan, which is an industry term for "line of credit." Some companies, like GM or Chrysler (at least historically,) have really generous floor plans for their dealer networks. Others, (Honda comes to mind) hardly floorplan anything for their dealers, who must find someone else to do it for them.
Yes, true.. Check an invoice amount in Los Angeles compared to Omaha, NE and they are waaay different...
AND line of credit does not mean they OWN them.. Far from it.. It means they have a certain amount for inventory and nothing else....
If they hit their volume target. And they need to watch that number every month like a hawk. If they totally miss it, they'll not lose money on the car. And if they've already hit it or are close enough its a sure thing, they won't make an unprofitable deal. and 1-3% isn't much...$250-750...
New Car sales are second only to grocers for thin margins. For a store to be profitable, it needs solid used car sales, a profitable service department, and a good F&I department. If all they did was sell new cars they wouldn't make much money at all. New car sales serve as a driver for first crack at used cars (before an auction,) a stream of customers that become accustomed to going in for service work and prefer the "name brand" repair, and money selling extended warranties, etc, in the finance department. F&I add ons (not loans or leases,) but things like warranties and Gap insurance, etc, are the highest margin center for the dealership.
I know for a fact that they are making about 10% on avg, just on the sale.
No know doubt what separates a dealership that makes money from one that doesn't is volume, keeping the right kinds and amounts of cars on hand, dealer add-ons, extended warranty, and dealer servicing. This comes down in a large part to the finance guys ability to sell those extra products.
So many things factor into what a car truly costs a dealer that the only people that know for sure is going to be the dealer. First they don't even look at it that way. They look at the monthly totals for an avg per car margin. How long a car sits on the lot, how many cars sold, customer satisfaction and other factors determine it.
I was a GM at a franchised dealership, as well as doing some consulting work for dealers.
There were many times we only 'made' $100 over true cost.
However, many things came into the consideration whether that deal was accepted. First of all, was there a marketable trade we could make money on. Secondly, were we doing the financing or was it cash. Thirdly, how far did the buyer live from the dealership, as we wanted the service work (we gave free oil changes for life on cars we sold so they would come back).
After looking at the whole picture, we might sell it at only $100 over. But the reality was, we made an average of $2,000 profit through financing, warranty and other add-ons after the sale.
So, yes, you could get a great price on the vehicle. But we wanted the whole deal, not just the new car sale.
I get all that has been said and I try to drive the best bargain for myself as well, but I find it interesting how people think dealers are ripping them off if they make $500 profit on a $25,000 car but don't care the least that a clothing store makes $500 on a $1000 suit or that Apple makes $500 on a $800 iphone. In what other industry do consumers demand to know the retailers' cost and begin negotiations there? Do you go into Best Buy, tell them you know that big screen TV costs $400 wholesale so you'll give them $425?
How many times do you go and get your iPhone serviced? Warranty repair on a suit? A dealer that only sold would be out of business. Parts & service is where they make money.
Yes, true.. Check an invoice amount in Los Angeles compared to Omaha, NE and they are waaay different...
AND line of credit does not mean they OWN them.. Far from it.. It means they have a certain amount for inventory and nothing else....
California might be different only because of stricter CA emissions standards that require additional stuff.
Otherwise its illegal to charge dealer A $19,000 for the exact same car they're charging dealer B $20,000. I can't find the law but it is a federal regulation.
RE: Financing and ownership...That's a different philosophical debate. If you steal a car off the lot, who presses charges? The dealer or the floorplan company? How is it different than "owning" a car you have a loan on? How is it different than any other collateralized debt?
Quote:
Originally Posted by justanokie
I know for a fact that they are making about 10% on avg, just on the sale.
No know doubt what separates a dealership that makes money from one that doesn't is volume, keeping the right kinds and amounts of cars on hand, dealer add-ons, extended warranty, and dealer servicing. This comes down in a large part to the finance guys ability to sell those extra products.
So many things factor into what a car truly costs a dealer that the only people that know for sure is going to be the dealer. First they don't even look at it that way. They look at the monthly totals for an avg per car margin. How long a car sits on the lot, how many cars sold, customer satisfaction and other factors determine it.
Not in gross margins on new car sales alone. Meaning, if everyone came in, wrote a check for their new car, and bought nothing in the finance office.
If they capture the loan, get a warranty sale, capture a marketable trade, then yes, probably so.
Do your research. Who knows what the real invoice price is. I have to buy a car soon--I am dreading the games.
Correct.
Invoice. Dealer cost. 3% Holdback. All different numbers. Then there are hidden money incentives - local, regional, or nationwide. Then there is rebates open and hidden. And other incentives for volume.
When anyone states that they got new car $100.00 or whatever below invoice - jut nod (or laugh).
I was at a Toyota dealership in Mesa, AZ. Asked what the dealer cost/invoice was. Got a number. Then called my guy who is a high executive in the car business. He just laughed. And no, he will not "get" me a car at any price. He doesn't sell cars. Dealers do.
Where are you folks getting information these days about dealer costs? It used to be all over the internet, but I could not find anything the last time we bought a new car. We wanted a specific make/model with specific/rare options, so I felt rather unarmed in my negotiations. I'm quite sure we left a significant amount on the the table when we drove away.
Vehicle Invoice does not equal dealer cost.
Dealer costs have never been "all over the internet." People may think that is the case but it's not.
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