new car pricing, is invoice really invoice?

[1 FMF]

my understanding is the invoice price of a car is what the dealer pays for it. So if I get a car at invoice, then the dealer makes no money. And if I get it below invoice, then the dealer theoretically should lose money. However, my b.s. meter is buzzing on this one.
Anyone work for a dealership and know the scoop on new car prices?
I think invoice is nothing more than msrp is, just lower and less "profit" for the dealer.
I got a new car at 200 over invoice, I asked how much they want to make on the car and I could tell they realized I've bought a car before. So they said 300 over, I said how about 200, and they readily agreed. I ended up getting it a couple hundred less with a corporate discount, supposedly 2% under invoice.

So how much is the dealer making selling a car at invoice?

 

[medic]

A dealer selling a vehicle at invoice cost will make absolutly no profit from the actual vehicle. But, the manufacturers pay the dealers to sell the vehicles. If a large volume of vehicles are sold, the dealership gets a bonus. The dealship will also make $$$ on your trade-in. If they get a good rating from their customers, the manufacturer will reward the dealership with a bonus.

A volume dealership can lose thousands of dollars on every new vehicle they sell and still make plenty of cash.

Some volume dealships tell you to bring the vehicle back when you receive a questionare from the manufacturer. They tell you to bring it to them, not filled out, and they will fill your gas tank, chnage your oil, and detail your vehicle. They take your questionare and answer every question with an excellant regarding your experience with the dealship. This is one way of keeping those bonuses rolling in.

 

[1 FMF]

ok,
so where is the manufacturer getting all this money from?
they make cars, and make money by selling them. The dealers sell them and pay the manufacturer "invoice" cost for each one. Where's the manuf. getting the money to pay the dealers to sell cars?


so what should I get out of the dealer for the questionaire?

oil, filters, detailing, ** ?

> that was bravo joliet

 

[ToyotaNSaturn]

Invoice is not invoice. Conventional thinking is that "Invoice" is the price "they pay". They don't pay that. That't the publicly-advertised "cost" figure. There's lots of things we don't see as consumers. Years ago I saw some of those numbers...they're not a lot, but the dealer still makes money.

Makes me wonder how much $$ the dealers are making from these special invoice prices lately.

 

[Drew99GT]

There's also this thing called dealer hold back which is essentially a payment from the manufacturer to the dealer so the dealer can finance inventory. So invoice is not really invoice! Manufactureres/dealers started the holdback BS essentially to strip salespeople of commisions. They sell a vehicle at invoice ("technically"), salesperson doesn't get a commision or a really low one, dealer still gets his holdback and actually does make a decent profit on a car that sells for invoice. Check out edmunds; they explain all this stuff in great detail and actually have current holdback rates to give people better bargaining power; although I've mentioned the word to a salesperson before and that basically ended our conversation!

 

[oilguy3]

Ok, I worked for a Toyota dealership for 2 weeks and I learned a ton of in's and out's of the car business. I was trained by the most senior manager they had as the real training guy was out with back problems, somehow I got the big-wig with loose lips.

Here's the deal with invoice...the invoice you see is the real invoice, but the deal is doctored by the manufacturer! the invoice you see is what the dealership "paid" for the vehicle, however it does NOT include the holdback that the dealer has negotiated with the manufacturer. For instance, at my dealership Toyota SouthEastern held back 3% for all vehicles they sold to my dealership. Meaning, Toyota S.E. upcharged all cars by 3% on the invoice and sticker and at the end of the month Toyota SouthEastern cut my dealership a check for 3% of the total ammount of all the cars they sold!

They also don't show dealer fees on the invoice, which at most dealerships are between $300 and $600. Another rip-off is the delivery charge on the invoice/sticker. Toyota negotiates a "kick-back" on a per car basis. For instance, XYZ Truck Co. charges Toyota S.E. $500 to deliver a car but gives them $100 back per car if they have over X cars delivered per month (and of course this number is very small so they always make it). The dealership charges you $500 for the delivery but only had to pay $400 for it. Delivery charge also includes detailing the car and they can charge what ever they want for that.

If you're going to buy a car always be the fisrt person at the dealership on a Saturday morning. All dealerhips have "spiffs" on certain cars being sold that day and on certain positions of sale. For instance, the 1st, 15th, and last cars sold that day will net the salesman $1000 per deal and the pea green Carola will net who ever sells it $1500. You can always make a good deal on the spiff car and if you tell the salesman you want the spiff deal they will typicaly split it with you (tell them this after you have finagled the final deal!) and they will fight like **** to make the spiff deal. You can also get tons of free stuff thrown into the deal if you make it to the spiff spot.

Assuming you financed your new car through the dealership they also made a kick back from the financing company.

Doesn't it feel good to be shafted?!?!

 

[eljefino]

Also if you're helping the dealer get an allocation of a profitable car by buying that "pea green corolla" you are indirectly helping their profits.

For example if a toyota dealer has to sell eight corollas to get a Prius that they can charge $4000 over invoice for, and you buy that corolla, they have $500 to play with. Finding the slow movers is your challenge.

A guy at my work got a brand new Plymouth Sundance really cheap that way when the Neon was new and "hot". And I recall BITOG member FL400S got a new cavalier when the chevy cobalt came out for $7995 minus approximately four grand in GM card rebates.

 

[Shannow]

I was wondering too about this, seeing the "deal" that my parents in law got on their Honda.

It's a construct to keep car prices up.

Dealer pays x thousand for the car, and makes very little.

Manufacturer gives dealers kickbacks and free cars.

A free car is an entire car's worth of profit for the dealer.

 

[Pablo]

I had a guy show me a 3X5" card with the "invoice" price typed on it. Unhuh.

More kickbacks than a hooker at a night rodeo.

 

[Gary Allan]

My BIL (I got him started at the job) wangled his way up to head of transportation for the institution that my wife (and myself at the time) work at. He revamped the aging fleet of fullsized vans.

For him it was like buying tires ..or just about anything else (autoparts, etc.). He got something like a "less 20% - less 10%-less-less 10% deal. It ended up being about 30+% off for the E250 12 passenger vans (taxi-limo package). All the % were termed "hold back". The list and invoice is just sales fudge.

 

[vicmackey]

Some of you guys are pretty far off.

Dealers do NOT pay invoice for cars. Invoice is the internally generated "value" of the car and does NOT represent investment by the dealership. They "floor plan" the cars. Think of floor planning like renting the cars until they sell.

Very, very few dealerships actually pay for their cars up front. The ones that do pay up front only do so because they have a history of not paying the manufacturer on time.

It would take me several hours to fully explain this but I have read what Edmunds had to say about the issue and it is quite different from the places I worked when I was in the car business (DC and FMC).

Not a single person on this thread has mentioned back end profit. The dealer NEVER loses money on a car in the front of the store and the profit keeps on growing in F&I.

On average at a domestic new car store a car with an MSRP of 25K that sells for invoice minus all rebates will yield about a $1,000 true gross profit. They screw the salesman by saying he made no profit (commissions are always figured on profit above invoice) so he gets a $50 "mini deal" and the store pockets about a grand.

 

[frank1]

There are some internal figures that are hidden. It depends on the car.

Floor Plan Assistance is money the manufacturer pays a dealer to keep a car in inventory, or on the floor plan. The money to buy cars for inventory is all on a loan in the bigger dealerships, and Floor Plan Assistance helps cover the finance costs. It could total a few hundred dollars, and if the inventory turns over fast its more profit.

Then there is Hold Back, another figure not disclosed, and is about another $200.00 or so. Depends on the car.

All total figure about another $500 profit hiding there after "dealer cost".

I sold cars for a few years and can write a book on how dealers screw the public and salesmen!!!!!

There are figures and terms used to screw salesmen, (Pack, Burn, Bruise to name a few).

Quote vicmackey: On average at a domestic new car store a car with an MSRP of 25K that sells for invoice minus all rebates will yield about a $1,000 true gross profit. They screw the salesman by saying he made no profit (commissions are always figured on profit above invoice) so he gets a $50 "mini deal" and the store pockets about a grand.

That's called a Flat. The dealer pockets a grand, the salesman gets a whopping $50.00.

Rant off.
Great site thanks for allowing membership!

 

[vicmackey]

I guess the terms may be regional. A flat is new to me but I was very familiar with the mini deal.

Either name you call it it sure did suck.

 

[frank1]

quote:

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Originally posted by vicmackey:
I guess the terms may be regional. A flat is new to me but I was very familiar with the mini deal.

Either name you call it it sure did suck.

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It did suck. That and a pay plan that changed monthly is what drove me back to contracting!

 

[oilguy3]

quote:

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Originally posted by vicmackey:

Not a single person on this thread has mentioned back end profit. The dealer NEVER loses money on a car in the front of the store and the profit keeps on growing in F&I.

On average at a domestic new car store a car with an MSRP of 25K that sells for invoice minus all rebates will yield about a $1,000 true gross profit. They screw the salesman by saying he made no profit (commissions are always figured on profit above invoice) so he gets a $50 "mini deal" and the store pockets about a grand.

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Assuming you financed your new car through the dealership they also made a kick back from the financing company.

Seems like maybe I did mention the back end...

 

[vicmackey]

Yeah you mentioned about 1/10th of the back end juice bringing up financing. I guess this is as far as you got in two weeks.

 

[frank1]

quote:

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Originally posted by oilguy3:

Originally posted by vicmackey:
[qb]
Not a single person on this thread has mentioned back end profit. The dealer NEVER loses money on a car in the front of the store and the profit keeps on growing in F&I.

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Back end is a whole new story, and very profitable, especially if the buyer of the car has less than perfect credit. The kick back or reserves can be more profitable than the sale of the car.

Dealers don't like cash sales, not at all. They want you "In the box" with the F& I manager. Many times they ask the bank for more money on your behalf so they can sell a warranty and other goodies, and really hit a homerun.

 

[oilguy3]

quote:

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Originally posted by vicmackey:
Yeah you mentioned about 1/10th of the back end juice bringing up financing. I guess this is as far as you got in two weeks.

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Ewww, burn on me.

 

[Gary Allan]

quote:

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Think of floor planning like renting the cars until they sell.

Very, very few dealerships actually pay for their cars up front. The ones that do pay up front only do so because they have a history of not paying the manufacturer on time.

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I don't know about the semantics on the terms ..but my Chevy dealer was charged 1% per month after 60 days from GM for an unsold car. This was in 1977 ..but I don't see that changing much except in terms of rate or date theshold.

The idea then evolves to turning as much inventory as possible every 60 days. You then get to us OPM (other people's money) for everything.