Sr. Citizen's Question On Car Pricing ?

It's rather common for people that have paid more than others to make up
stories such as this.

It's much more than that. As in nearly all businesses, the same product
is sold at different prices to different customers, often wildly varying
prices. We all know people that have paid MSRP, or over MSRP for a new
car, simply because they were unaware of how the process works.

What many people are unaware of, and the manufacturers and dealer want
to keep it that way, is how many people believe the "invoice" is some
sort of holy grail.

Honda and Toyota don't liking cutting production levels except in
drastic situations. They'd rather offer incentives to dealers to sell
more product. This is why you often see "all in stock at this price" ads
(not the come-ons of "1 at this price") at prices significantly under
invoice. One dealer near me recently had an "all model 2532 Camry
Automatics in stock" for $18,588, with the note "93 in stock." The
invoice is $19,174. The dealer receives about $950 back from Toyota for
each vehicles sold, plus any factory to dealer incentives, plus that
price included $500 in a factory to buyer incentive. This represents
$864 over cost, even though it's $586 under invoice. If the dealer is
getting more incentives from Toyota, good for him or her, that's not my
concern.

It's quite amusing to see people all concerned about whether the dealer
is making enough profit. No dealer is going to accept a deal that is bad
for them financially. They hold most of the cards. What they don't know
before agreeing on a price is how much extra crap they can sell the
customer in the finance department. The high margin items like
warranties, financing, and WAO (worthless add-ons) are sold in the
finacne department by high-pressure professionals.

No one ever said they made 0.5% mark up on any vehicle, let alone every
vehicle. But it is true that they often accept deals that they couldn't
do if they were to sell every vehicle at that price. There will always
be another customer along later, and there is no shortage of vehicles to
sell to them.

 

who wrote:
"No one made that claim. Sales people are paid for sales. It's much
better to go home with $100 in your pocket from a $500 over deal than
to go home after working 10 hours with nothing."???

er, you're the one arguing the above. as if dealers sell for some
minuscule profit after paying "dealer invoice".

it's a separate profit center - it doesn't pay any sales dude's
commissions. again, how are you going to pay overheads and commissions
on $100? [rhetorical] answer is, you're not - so "dealer invoice" is
bullshit. that's my point. and thats the point you just don't seem to
be able to grasp...

again, you just don't read what i say - "dealer invoice" is a fiction
designed to deceive - and successfully so if you believe a dealer makes
a profit selling at a price that alleges to be some skinny margin of
this number. and successfully so given that you're /still/ stubbornly
clinging to its comfort!

 

Exactly, the deal was $500 over, salesman $100, dealer $400+Back
end.

You say dealer can't cover overheads on $100 and again, NO ONE
mentioned it or suggested it, even the example I gave has the dealer
making at least $400 off the vehicle alone. Your $100 dealer profit
was a total fabrication on your part.

 

but those were /your/ numbers. and all this time, apparently without
your understanding, i've been saying those numbers are bull because
they're _too low_.

 

So you just pulled the $100 dealer profit out of thin air, gotcha.

My numbers for "some" deals are not too low, what you don't understand
(or are simply ignoring) is back end.
Even when I provided a link that backed up my statement, you blew it
off as "PR". You want to dismiss what I am claiming by saying I "feel
warm and fuzzy about what a great deal I negotiated" when I never buy
new, in fact I never buy from a dealer. I'm basing what I am posting
on past experience when people bought cars FROM me.



http://www.heavens-above.com/finance/auto/automotive_finance.html

"Majority of dealers these days rely on the back end profits because
the front end profits are getting harder to maintain with increased
competition. They will take a "short offer" on the front and make it
up by making a killing on the back end. "


http://www.cars.com/go/advice/Story.jsp?section=buy&story=ngProfit1&subject=negotiate

"With the widespread availability of invoice pricing, it's harder for
dealers to squeeze margin out of the new-car transaction. Much of the
profit has shifted to the "back end,"


http://www.dealix.com/Corporate/shownews.aspx?pressID=317

"As a result, because of the relationship we develop, we make up for
any lost margin on the back end."


http://www.carclicks.com/financing.html

"The financing "arm" of a new car dealership is a prolific profit
center--dealers will often take smaller profit deals when selling the
car (the "front-end" profit) if they know that they are going to make
a nice profit on the financing of the car (the "back-end" profit)"


http://ganskyconsulting.com/theories.html

"Back end...These profits are very often more than what the dealer
made on the sale of the vehicle."

 

I've seen these kind of claims made by dealers, and repeated by
customers that paid too much. You'd be surprised at how many customers
get taken in by sales people and sales managers that start up with the
"I can't take a deal that's only $100 over invoice, you have to let me
make something." They also try to add on various bogus fees like
"advertising fees" as some sort of non-negotiable official fee, when in
fact they've already been reimbursed for cooperative advertising
expenses by the manufacturer. They can charge whatever they can get for
the vehicle, but they can't represent these fees as some sort of
non-negotiable add-on.

These customers are the legal prey of dealers that are able to convince
them of "that which is not so." Sounds like Jim has fallen for it and
now has to convince others that it just isn't possible that he paid more
than he had to. Thanks Jim, you make it possible for those of thus that
do some research prior to going into a dealer get better deals. Well
actually the last three vehicles we bought were "all in stock at this
price" deals, at significantly below invoice. In one case the dealer was
very unhappy that we didn't finance or buy a warranty, and tried to back
out of the deal, but in the other cases they were not unpleasant at all.
More like, 'let's finish this up quickly so we can move on to the next
customer who's willing to pay more.'

I only know one car salesman personally. and you'd never believe he was
in that line of work if you met him at a party. Very well educated and
very personable. He said that the commissions on new car sales totally
suck, and the first month he thought he was making about $1200 based on
selling nine vehicles. What doesn't suck are the bonuses for sales
volume. He made over $10,000 the first month because the dealer rewards
the sales people based on volume at the end of each month. This is in
Silicon Valley where the populace is generally well educated, and a
dealer doesn't have a big pool of naive buyers to draw from.

 

eh? what part of "those are /your/ numbers" is hard for you to
understand? particualrly when i quote your exact words.

 

Eh? Eh? My exact words show I said the deal was for $500 with the
SALESMAN making $100, not the dealer.

Here it is:

" SALES people are paid for sales. It's much
better to go home with $100 in your pocket from a $500 over deal than
to go home after working 10 hours with nothing."???


I wrote a SALESMAN makes $100 and you keep going on about the DEALER
surviving on $100, hence, YOU pulled that $100 DEALER profit figure
out of your ass.

 

they're /your/ numbers! they're just made-up crap based on your naive
gullible acceptance of "dealer invoice" as a legit number that the
dealer pays. it's not. how many more times are you going to defend a
fiction?

 

The problem for dealers is that at the time the price is agreed upon
they _don't know_ whether or not the buyer is going to finance, purchase
a warranty, or buy high-margin items like glass-etching, fabric-guard,
undercoating, Lo-Jack, or whatever other worthless add-ons (WAOs)
they've come up with. That all takes place in the finance office after
the sales manager agrees to the price.

You can lead them on during the negotiations with questions about WAOs,
and by letting them do their whole "monthly payment" sales job. If
paying cash you can finance and simply pay the loan off when the first
statement comes (or before) (make sure that there is no pre-payment
penalty). Whatever you do, don't walk in with an Excel spreadsheet, or
waving cash, or waving a voucher from your bank. They instantly know
that you're unlikely to be providing any back-end profit. Also, never
refuse to fill out the credit application that they always shove in
front of you, with a brusque statement of "I'm paying cash."

Dealers sometimes will try to back out of a deal when they find that the
buyer isn't providing any back-end profit, and the negotiated price is
very low. It's illegal to do this in most states, but they know that
very few buyers are going to sue them over this. This happened to us,
with 'Oh, something happened and we can't sell that car. It was damaged
on the lot, it was backed up with the door open and hit a post, and it
put pressure on the door, but our body shop fixed it, and we're waiting
for it to be cleared by Toyota.' Yeah right. The next day we went back
and bought the car, financing it, and paying it off two weeks later,
paying less than $100 in interest. Sometimes I think I should write
"personal injury attorney" as occupation on the credit application.

 

One thing you should do before going into any dealers is to check the
prices from carsdirect.com for both your own metro area, and any nearby
metro areas (the larger the better). At least you'll know the maximum
you have to pay. I've found that the carsdirect.com prices range from
$200 to $1500 over the lowest available price.

In my area there is very highly rated buying service run by a
non-profit, and they will refund the cost if you are able to buy the
same vehicle for less than they can find it for,
"http://www.checkbook.org/auto/carbarg.cfm".

 

Siskuwhane, Jim Bean & SMS--Please take this to e-mail, this is not helping
the original poster who asked for pricing help.

Thank You.

 

Siskuwhane, Jim Bean & SMS--Please take this to e-mail, this is not helping
the original poster who asked for pricing help.

Thank You.

 

It's quite helpful to the original poster, as well at to others, to
dispel the misinformation regarding vehicle pricing that was (is) being
promulgated by Jim.

 

but /you/ are the guy propagating the bullshit about "dealer invoice"
and skinny profit margins!!!

i looked up penske automotive group's [ticker: pag] public account
filings. what do you think, based on your blind and unthinking
acceptance of "dealer invoice" is their average gross profit margin on
selling 297,000 vehicles in 2007?

is it:

a: 0.5%
b: 2.5%
c: 5.0%
d: 16.2%

for bonus points, how much is your answer in average dollars for a $20k
vehicle?

 

there we go - useful information. thank you.

 

The pricing help was given in the beginning of the thread with SMS's
reply:

"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. "

It was shown how dealers make money on deals through the back end,
sometimes more than the selling price of the car. Examples and links
were given showing how and where that money is made for the dealer.


Anything else was just the same old BS that has become the trend here.

You're welcome.


The OP then can take that information, avoid the pitfalls of the back
end and make his best deal.

 

Wow... what a dumbed down riddle ... I was hoping for something
trickier.... oh, wait a minute, it wasn't supposed to be tricky!

"Dealer invoice" is as phoney as a thirteen-and-a-half dollar bill that
has Bozo-The-Clown on the face side and an image of used car lot
on the reverse side.

The OP would gain some insight into 'the culture of sales' by viewing
the following movies.

'Glengarry Glen Ross'
'Fargo'
'The Sting'
'Tin Men'
'Used Cars'

The best part in 'Used Cars' is when Kurt Russell spots a 'mark' across
the street at his competitors car lot. He stops everything and grabs his
handy fishing rod and expertly casts a crisp $10 bill across the street
(four lanes of traffic or something!), right down at the feet of the
'mark'. The 'mark' sees the $10 bill and tries to pick it up, Kurt starts
reeling in the $10 bill, with the 'mark' stumbling behind it. I can't
remember if Kurt 'closed' the 'mark' on a clunker or not. I was laughing
too hard to observe the outcome.

Below is an excerpt from the "the big weasel sent uptown, to
motivate the 'loser sales slime'" scene, in the movie
'Glengarry Glen Ross'.

"Moss: What's your name?
Blake: **** YOU, that's my name!! You know why,
Mister? 'Cause you drove a Hyundai to get here
tonight, I drove a eighty thousand dollar BMW.
That's my name!!

(Blake sits and takes off his gold watch)
Blake: You see this watch? You see this watch?
Moss: Yeah.
Blake: That watch cost more than your car. I made
$970,000 last year. How much you make? You see,
pal, that's who I am. And you're nothing."

http://www.whysanity.net/monos/ggr2.html

 

It is indeed. It's so much higher than the dealer actually pays for the
vehicle that even many of the dealers use it as a street price from
which to bargain down from.

I.e. in today's paper, one advertisement for a local dealer (actually a
former Penske dealership), there is a vehicle ("all at this price") that
has a $22,370 MSRP, a $20,456 invoice, that is selling for $18,870 minus
a $1500 rebate so it's $17,370 (includes destination charge).

I don't know what the actual dealer cost is. I know that without any
extra spiffs the dealer would pay $18,749 and he's selling it for
$18,870. Obviously he must be making more than $121 per vehicle, but
it's not really my problem how he makes it, or how much he makes. I
don't stay up nights worrying that a car deeler is making enough money.
Maybe there's some big factory to dealer rebate that I don't know about.
Maybe the dealer knows that enough buyers will come in and finance, buy
a warranty, buy fabric guard, alarms, Lo-Jack, paint protectant, glass
etching, or whatever other profit centers that the dealer has come up
with so that it's worth putting up with the occasional customer that
buys none of those items.

Jim is obsessed with the invoice price and believes that it's some sort
of holy grail. Dealers love people like Jim. I love people like Jim.
Without them the dealers might have to implement a one-price, no-haggle
pricing policy like Saturn used to have, and I'd have to pay a lot more,
and Jim would get to pay a lot less. Please Jim, keep believing what you
believe to be true.

 

Do you realize that a customers' factory rebate is nothing more than an
artificial, temporary, lowering of the MSRP? The dealer gets a
corresponding rebate off his nebulous cost price. It is very easy for the
factory to lower MSRP a lot, and get sales moving big time, but a little
increase in MSRP kills sales. Factories don't want to touch the high MSRP.
They prefer gimmicks.

That's because it's nebulous.

See above re temporary lower MSRP.

Jim? Jim who? jim beam? Where's jim beam's obsession with "Dealer
Invoice"? jim beam said "Dealer Invoice" was bullshit... and people
give him an argument. He provided good info about Penske's public
accounts. Check out Honda America's (a public company) financial
statements and see what it costs Honda to build a Honda (it will be hard
digging to find the approximate cost, but it's possible).

Various so-called reputable organizations have been conned (and/or
are shilling) by the marketing concept of "Dealer Invoice".

Jim beam said "Dealer Invoice" was just another form of 'price fixing'.
Saturn's no-haggle price is a form of price fixing, which jim beam
alluded to.

Did you know every unsold car on a dealers car lot is accruing interest,
which is paid by the dealer, until it is sold? That's part of the dealers
cost nebulous.

Rent the movies man... you'll get almost the whole marketing spectrum...
from funny shit to disturbing shit!