Sr. Citizen's Question On Car Pricing ?

Hello,

Real amateur when it comes to negotiating for a new car.
In my 70's now, not that sharp with negotiating, and would appreciate any
opinions on this:

I see in the various Forums and newsgroups that an "appropriate" first offer
on a new car would be perhaps 500 max. over the Dealers Invoice. Seems to
be a magic number.

How is the Dest. charge handled ?

Would this 500 over invoice offer figure include the destination charge
which seems to run about 700 these days, or is the dest charge (usually)
added on to whatever price you and the dealer agree upon ?

Thanks,
B.

 

It's an absolute; it has to be listed on the sales paperwork directly.
The car price, invoice or otherwise, is separate from the destination
charge.

Thank you, unions.

Added on.

http://www.edmunds.com even shows it that way in their listings.

 

"dealer invoice" is a ridiculous price fixing mechanism. reality is,
there's no way dealers can pay their real estate costs, advertising,
sales staff and cost of inventory for a mere $700. absolutely no way.

 

The April issue of Consumer Reports has info on this.
April's issue is always the annual "car buying" issue.
Public libraries keep these at the reference desk or in the
magazine section.

 

Agreed.

I'm amazed at people who swear by a number that's written on paper.
"I'd never pay sticker, by definition that's a ripoff." Well.....with a
high demand car, it may reflect the market value of the car. Hell,
sticker may be UNDER market value!

Those same people swear by "I'll pay $200 over invoice, nothing
more"--without realizing that they've conditioned the carmakers to
"release" this number they call "invoice" price, which in reality is--ta
daaa--just another sticker price.

 

Waiving the right to remain silent, "Elmo P. Shagnasty"

You'd need to be the accounant at a dealership to know what they really paid
for a car...

 

Sounds like you might want to take someone with you-- a shrewd
relative/friend, etc.

 

as i understand it, they don't even pay, they just sell it, then remit
an agreed amount back to the manufacturer.

 

That would depend on the dealer's contract with the manufacturer. I could
see some of them even being on COD if their credit isn't very shiny...

 

why would they bother with cod if that dealer isn't much good? surely
they'd want to retain ownership?

 

Not magic at all. The dealer doesn't pay the manufacturer the "invoice
price," and you routinely see dealers advertise "under invoice." The
last two cars I purchased we paid well under invoice. Clearly the dealer
wasn't selling these vehicles at a loss. Between holdback, factory to
dealer incentives, and other kickbacks, selling at invoice is very very
profitable for the dealer.

You want to go up from dealer cost, not up or down from invoice or MSRP.
Unfortunately determining dealer cost is very difficult. You need to
know all the incentives for a specific vehicle in a specific region of
the country.

Offer $500 over dealer cost, if you can figure out dealer cost.

 

$500 over cost doesn't cover overheads, commissions, anything. there's
no way they'd sell for that.

 

If profit (or not) made on the front end won't cover it, profit made
on the back end would. Some dealers make more on financing and/or
service than sales.

 

don't believe it. all that fancy real estate, and all those sales dudes
with all their gold jewelry getting fat on $500? no way. and there's
no way the sales dudes get a share of selling you a $900 timing belt
replacement.

bottom line, the myths about minimal margins in car sales have to be a
complete crock - otherwise car sales would be mail order or from some
dirt lot three hours out of town. basic math.

 

Yet they do that all the time. Of course they're not selling every
vehicle on the lot for $500 over cost, you're correct that this would
not cover their overhead. You have to look at the big picture like the
dealer does. A dealer views a $500 (or less) over cost sale in several ways:

1. As pure upside revenue that they would otherwise not have, because
the potential customer will leave.

2. As an opportunity to sell financing, an extended warranty, paint
protectant, fabric guard, glass etching, Lo-Jack, and a long list of
other very high-margin dealer installed, mostly worthless, options.

3. As future potential revenue for the service department.

Of course they're not going to sell a vehicle that is in short-supply
and high-demand for $500 over dealer cost, or even $500 over invoice,
but there are very few vehicles that fall into that category. The Honda
Odyssey used to be in that category, now the Prius and Civic hybrids are
probably in that category now. If you have to have the hot car of the
moment, you'll pay more (have patience, supply will catch up with
demand), but you can easily buy high-volume vehicles like the Camry and
Accord for $500 over dealer cost (or less), depending on the time of year.

I.e., the last Camry we purchased had an MSRP of $20,728, and invoice of
$18,551 (including destination), a factory to dealer incentive of $1000,
factory kickbacks (holdback plus advertising subsidy, plus WFR) to the
dealer of 5% of the base invoice ($928) (Toyota bases this on invoice,
not MSRP like most manufacturers). The dealer cost was $16,623. The
price they were selling them at was $16,988, and this wasn't a
negotiated price, it was "all model 2532 in stock at this price."

Of course it wasn't as simple as walking in and plonking down the money.
When it became clear that we weren't buying a warranty, or financing, or
digital floor mats, the vehicle suddenly became "unavailable," with a
bizarre excuse about how it had been damaged on the lot and then
repaired, and how it needed to be "cleared" by Toyota before it could be
sold. However returning the next day, we worked around the dealer's
shenanigans by financing the vehicle then paying off the loan a week later.

In my experience, the best deals are found during, and right after the
XMAS season (when many people have no money to spend, and the excitement
of the new model year has worn off) and in the summer before the next
year's models come out. National sales figures show December and January
as the slowest months, and it's been that way for a long time.

To me, the most amusing thing is when perfectly mediocre vehicles like
the PT Cruiser are hyped beyond belief and dealers are able to charge
thousands over MSRP to dumb people.

 

no, you're getting suckered by this "dealer cost" crap. that's an
entirely fictional number that [apparently successfully] helps you feel
better.

car rental agencies buy vehicles direct from manufacturers at abut 50%
of sticker. that implies that dealers do also. that means the "$500
over dealer cost" translates to about $10k for your toyota. thus the
fancy real estate and the gold chains.

looking at it from another perspective, 100% markup over cost, or more,
is absolutely the norm for low volume, high cost retailers. the idea
that car dealers should somehow be different, and that their spectacular
overhead should be paid for out of these so-called incredibly skinny
margins, is naive in the extreme.

 

I don't believe it was stated anywhere that every vehicle was sold at
that price. Not everyone who walks into the dealership knows what they
are doing so vehicles get sold at many different price points. The
fact is cars do get sold at $500 or less over invoice all the time.

And they would be serviced in that same dirt lot or by mail? Financed
from that same dirt lot or by mail?

 

-

Having worked for a Hertz Licensee, our vehicles were sold to us
through a dealer and never for 50% of sticker, if it worked that way
(not saying it doesn't for corporate owned locations but 50% sounds a
little steep) the employees would have been buying them too.

 

That's the key point the Jim doesn't understand. BTW, don't get suckered
by "$500 over invoice." the last car we purchased had an invoice price
of $18,551, and a dealer cost of nearly $2000 below invoice. There's a
_huge_ difference between dealer cost and invoice, they really bear
little relation to each other. In fact invoices has become the defacto
retail price for many vehicles, with dealers thrilled to be able to sell
as many vehicles as possible at invoice.

The last Accord I helped someone buy (Autowest Honda in Fremont) was
about $1200 under "invoice." I don't remember the dealer cost. This was
a "six at this price" sale, and indeed they did have them on the lot but
they were all black (black doesn't sell well in my area). They wanted
$750 more for a different color, and settled for $250. Naturally there
was the high pressure for extended warranties and other crapola, but
it's not hard to resist.

Invoice is just a bogus concept these days. Don't think buying at
invoice is some sort of spectacular achievement, it isn't. You see
people that paid too much insisting that it's just not possible for a
dealer to sell at $500 over cost, but what they really mean is that it's
not possible for the dealer to sell every vehicle at $500 over cost.

Now OTOH, one sister-in-law went into a Honda dealer for a repair on her
Accord and walked out with a new CR-V at significantly over invoice,
complete with a non-Honda extended warranty and 100% financing by the
dealer. Now she wants to let them repossess it because the payments are
so high, but it's not that simple as they'll come after her for the
difference between the wholesale value of the vehicle, and the balance
of the loan amount. I guess it's just morally wrong to allow a sucker to
keep their money.

 

It was about 80% of MSRP, and it's gone up. Plus the rental agencies
tend to buy the stripped down vehicles, as well as the vehicles that no
one else wants to buy. Sometimes there are vehicles manufactured solely
for rental car fleets.

The problem appears to be that Jim got ripped off by a dealer at some
time in the recent past, and he actually believed what the car
salesperson told him!