Prices that make you scratch your head

[heathicus]

I am. She said she was going to start a blog chronicling her experiences and giving her a way to share them with others. I'll talk to her about it tonight and see if she minds if I post them here, or if she's really going to set up that blog and wants me to just link to it.

[heathicus]

I asked my wife if she was going to set up that blog and she said she already had!

http://makingchanges4good.blogspot.com

[JPG]

I asked my wife if she was going to set up that blog and she said she already had!

http://makingchanges4good.blogspot.com

Where did you find that treasure?;)













Keep er happy!!!!!!:rolleyes:

[Culprit]

Awesome - thank you. That's just the type of stuff my wife is interested in. She has been making her own deodorant for a few years and has started making her own baby food this week. I just told her about the blog.

[dforeman]

All comments made on buying bulk in the big box stores (economics 101) are understandable. Though they don't immediately make sense. But, I also thought I'd throw out another scenario for why bulk costs are different. This is based on a discussion I had last year with a manufacturer while trying to find a replacement for a molded fender part. The manufacturer made these parts for Coachman over 10 years ago. They basically told me that they could look into producing the item for me if they still had the machine and had a sheet of the composite material lying around the shop. However, I would have to pay their standard set up fee for the equipment of $500 (not including time, labor and material costs). Thus, it turns a product that once was sold for $300 into something around the $1000 mark. It just wasn't worth it for them to offer/produce replacement parts and they have since moved onto other production opportunities. Therefore, my point being it is cheaper and more cost effective for a company to tool-up and produce a 1,000/50,000 etc pieces than produce a few pieces which in turn is passed onto the end customer. Bolts for instance that are sold by company A are produced by a sub contractor (company B) and packaged into either a single pack or contractor pack by company D and E (which they also do in a bulk process as sub-contractors). Some of the discrepancies (when contractor packs will sell for more by the piece than singly) is because company E who packages the contractor packs has a higher operation cost than company D who packages by the piece (could be due to their equipment, labor costs, location, etc). So, until company A can negotiate a better deal (either through the same sub-contractor or another) for packaging the multiple packs they just pass forward the costs with their standard mark-up to the end user/purchaser. In the end, it really just doesn't make a lot of sense but that is how corporations have evolved to do business in the world economy where every aspect of production/packaging/transportation/sales are broken up into many different companies (thus creating corporations).

[Ed in Tampa]

In some cases the price discrepency is due to no one noticing or questioning it.
I used to do cash register programming for a major hamburger chain.
Frequently I would get a price update from a regional director that would have a combo priced more expensive than the individual items.
A phone call would usually get a "that's not right" response and a change to the change request.
Other programmers I worked with, never questioned the change and just sent them out.

Exactly most consumers don't question things we have been programmed to unthinkingly go to the store and buy it. I was probably guilty of it myself when I was working. However once I got on a fixed budget I started watching prices on everything. And folks I'm here to tell you unless you watch what your doing you are been robbed blind.

And it doesn't take much. My wife shops and that allows me to wear $100 dollar shirts that we paid $15 for. She doesn't look for bargains in Walmart or even Penney's she looks in upscale department stores. They begin to rotate stock out of the store about a month or two after it starts in preparation for the next season. By watching their sales she is able to get them when they are at the bottom price. So I benefit by wearing designer signature shirts at walmart knock off shirt prices.

It took me 2 years to buy a car but by doing what I did I got a deal that bested my previous best offer by $4000. And all my previous best offers on cars were "at or below invoice" and at or below the prices at those "car price" sites on web and I always heard that the dealer wasn't making a cent.
If all that previous bull was truth this dealer went $4000 into the hole to sell me a car. Does anyone believe that happened?

Back to my fathers adage "more money than brains" I was one of those people until one day I didn't have more money than brains. Now I use my brain and baby I'm living a whole lot better.

[Ed in Tampa]

All comments made on buying bulk in the big box stores (economics 101) are understandable. Though they don't immediately make sense. But, I also thought I'd throw out another scenario for why bulk costs are different. This is based on a discussion I had last year with a manufacturer while trying to find a replacement for a molded fender part. The manufacturer made these parts for Coachman over 10 years ago. They basically told me that they could look into producing the item for me if they still had the machine and had a sheet of the composite material lying around the shop. However, I would have to pay their standard set up fee for the equipment of $500 (not including time, labor and material costs). Thus, it turns a product that once was sold for $300 into something around the $1000 mark. It just wasn't worth it for them to offer/produce replacement parts and they have since moved onto other production opportunities. Therefore, my point being it is cheaper and more cost effective for a company to tool-up and produce a 1,000/50,000 etc pieces than produce a few pieces which in turn is passed onto the end customer. Bolts for instance that are sold by company A are produced by a sub contractor (company B) and packaged into either a single pack or contractor pack by company D and E (which they also do in a bulk process as sub-contractors). Some of the discrepancies (when contractor packs will sell for more by the piece than singly) is because company E who packages the contractor packs has a higher operation cost than company D who packages by the piece (could be due to their equipment, labor costs, location, etc). So, until company A can negotiate a better deal (either through the same sub-contractor or another) for packaging the multiple packs they just pass forward the costs with their standard mark-up to the end user/purchaser. In the end, it really just doesn't make a lot of sense but that is how corporations have evolved to do business in the world economy where every aspect of production/packaging/transportation/sales are broken up into many different companies (thus creating corporations).

When I made my statement about buying in bulk I took into consideration setup times and mold cost and such.

What I'm talking about is where a product is manufactured on a continuing basis and manufacture has a zillion in inventory. When there isn't any packaging and no real reduction in handling or shipping. Why should we believe the manufacture can offer us a bulk rate if the rate on one is fair?

[letterk]

If all that previous bull was truth this dealer went $4000 into the hole to sell me a car. Does anyone believe that happened?

That actually is probably what happened. It is also why it is best to buy a car at the end of the month when incentives programs are expiring. Motivated sales people and payday are probably why 75% of cars are sold in the final week of the month.

I worked with a car dealer when the factory thought a 2 month incentive program was a good idea. They needed to sell 140 cars in 2 months to get a $1,000 per car incentive.

At the end of month one they had sold 32 car and were 38 cars below the pace they needed to be. Within the last week of the two month period they called everyone who had come in with the last 4 months and sold many cars for a loss of $2,500 per car. Anything they could that would cost them less than the $140,000 bonus they were looking to get. Besides moving cars is looked on favorably by the manufacturer who is more likely to treat a dealer well with popular models. There is a lot of "we need to you take these vehicles" in the biz.

I've also know someone who was a car salesperson who bought a car just to get her incentive because she was one car short and it was worth the money to do so.

[heathicus]

So is "invoice price" the actual real price that dealerships pay for a vehicle? Or do they get incentives and discounts and special pricing from the factory that results in the vehicle actually costing the less than invoice price?

The reason I ask is when we bought our F-150, after negotiating and knocking the price down because of a scratch and some other issues, we paid $100 below "invoice price." But I can't believe the dealership really lost $100 on it. I've always assumed it was an accounting gimmick to make us think we got it below their cost.

(And I love your avatar, "letterk." I'm a huge Dukes Of Hazzard fan!)

[letterk]

Invoice price is the official cost of the car. It is what the dealer shows you as a negotiating tool. However, there are incentives, such as rebates and holdbacks. Commercials and ads often have the language of "rebates to dealer" since they apply them to reduce the cost of the car.

Holdbacks are the incentives they receive from the manufacturer. They could be an absolute number, like $500 per car, or $500 per car over XX amount sold or they could be sell 100 cars and get $500 per car. It can also be a fixed percentage of the price of the vehicle. When you are taking large dealers, it is probably where the big money is made.

Here's a good link about holdbacks
http://www.edmunds.com/car-buying/dealer-holdback/

Cars are essentially commodities when you look at one make or model. Dealers can't mark them up too much or you will go down the road. Find a fixed price dealer and use that price to go to a negotiating dealer and get a lower amount. Edmunds.com True Market Value is a good starting place too.

My goal in buying a car is to get under the invoice amount and you usually can except for the newest hottest car that might not have good incentives or be in demand. You probably won't get under invoice much more than $300-$500, unless they are desperate or the incentives are good. The person selling the car, probably doesn't make more than a few hundred dollars and the dealer either until the holdback money comes in to play.

Here's the formula:
Invoice - Rebates - Holdbacks = true cost of car. No dealer is going to tell you there holdbacks or want to give you the holdback unless they are desperate.

The bread and butter to a dealer is the used market where they pay someone less than the car is worth, put a little money refurbishing it and mark it up. That is where they can make several thousand in profit per car. Or they buy it from the auto auction for cheap.

Also the second profit center is the repair business because the labor rates are high. Much of the work is billed by the book, which means they charge the amount of hours the service guide says it will take and not the actual hours. They get it done the majority of the time is less time than the book says. The argument saying why should we be penalized since our mechanic is so good he gets it done quicker.