Prices that make you scratch your head

[robinson46176]

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.

Good post...
Also in the repair business you have to allow for the periodic job where you "need" to take a bath in order to preserve your reputation or take care of a good long time customer.

When we were in the vac business we paid about .09 cents for most upright sweeper belts. We sold them for a buck. If a customer came back in with a broken one we NEVER questioned whether it was a bad belt or if the customer picked up something that broke it. Never... We immediately handed them a new belt and an extra one to boot. We told them the extra was for the inconvenience. We could have given them 4 or 5 and still been ahead.
If you really care about your customers it is easy to build than a good reputation but nothing is harder to rebuild than a tainted reputation. A big ego is a very expensive thing behind the counter. I have seen guys drive customers away over a quarter. You almost never really win an argument with a customer. Even if you win the argument you lose...


.

[damagi]

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.

Another careful thing to consider with cars is also the value of your trade-in. Remember that the value of your trade in is what you give you plus the taxes on that value (since you only pay taxes on the delta). If you drive down the price of the vehicle they will often try to drive down the value of your trade-in to compensate.

[Ed in Tampa]

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.

You are right with your formula but there is more to it.
Invoice - rebates - hold backs - floor plan

Some hold backs are defined a 1.5% for advertizing and 1.5% for mechanical handling. But there is insurance hold back, incentative hold backs, volumn holdback and financing hold back.

Floor plans are a whole other world and I don't profess to know much about them but it is my understanding it is the real money the dealer uses to stay open. This is what pays the light bills, the staff costs, and puts the smile on the owners face. Everything else is just iceing on the cake and from hat iceing comes the salesman's salary.

In my opinion Edmunds is very far off the mark. If they were correct most dealers would not be able to pay their office staff or their swanky dealership.

My daughter worked for a dealership and got top pay, her job was to make sure all the paper work was complete and to get the right piece of paper in the right persons hand. She wasn't the finanical guy that filled out the paper nor was she the title person that file for title transfers and regisitered new titles, nor was she the person that made sure the money got where it was going. All she did was made sure the forms were complete and got to the person that needed them. Like I said she got top pay. No dealer can afford to pay like that and work at the profit margins Edmunds claim they are.

It is bull.

Your right about repairs. Most do work at book prices and mechanics also but what you fail to mention is if the car comes back under repair warrantee the original mechanic must work on it for free. So if it took a mechanic 2 hours to do a job that the book says takes 4 he still has the exposure that he may have to redo the job under the original 4hr allottment. In other words he can work for free. I dont' blame them from wanting book and being able to beat the book.

[letterk]

You are right with your formula but there is more to it.
Invoice - rebates - hold backs - floor plan

Some hold backs are defined a 1.5% for advertizing and 1.5% for mechanical handling. But there is insurance hold back, incentative hold backs, volumn holdback and financing hold back.

Floor plans are a whole other world and I don't profess to know much about them but it is my understanding it is the real money the dealer uses to stay open. This is what pays the light bills, the staff costs, and puts the smile on the owners face. Everything else is just iceing on the cake and from hat iceing comes the salesman's salary.

In my opinion Edmunds is very far off the mark. If they were correct most dealers would not be able to pay their office staff or their swanky dealership.

My daughter worked for a dealership and got top pay, her job was to make sure all the paper work was complete and to get the right piece of paper in the right persons hand. She wasn't the finanical guy that filled out the paper nor was she the title person that file for title transfers and regisitered new titles, nor was she the person that made sure the money got where it was going. All she did was made sure the forms were complete and got to the person that needed them. Like I said she got top pay. No dealer can afford to pay like that and work at the profit margins Edmunds claim they are.

It is bull.

Your right about repairs. Most do work at book prices and mechanics also but what you fail to mention is if the car comes back under repair warrantee the original mechanic must work on it for free. So if it took a mechanic 2 hours to do a job that the book says takes 4 he still has the exposure that he may have to redo the job under the original 4hr allottment. In other words he can work for free. I dont' blame them from wanting book and being able to beat the book.

Yep, you are correct and knowing the business, I wouldn't be surprised if something new is introduced just to keep one step ahead of the public.

I don't profess to know all about the dealerships since I didn't work in one. I just worked in a job with many different dealerships. I do remember that one got a break for the first 90 days financing which meant they were ahead if they could turn cars over quicker than the 90 days. Probably was worth more in the days of high interest rates.

Their is a lot of money in the business when times are good and top selling people can make a very good living. Like I said, one had a big enough bonus it was worth buying a car so she would get the bonus.

I know the advertising plan for one brand and for them it was a flat amount per car sold the previous month as a reimbursement when they spent an equal or greater amount. As for other brands it might not necessary be the same.

I've had good luck with Edmunds TMV, but like I mentioned, with the advent of fixed price dealers, it doesn't hurt to look at their prices and go down the road and see if you can beat the price with a haggling dealer.

I had a realization after my last used car purchase. Usually if you are too low they'll scoff at your offer. If they play the close the gap more than a round or two, I would bet they are fine with the amount, but know the natural inclination is to keep raising your counter offer to get to a agreed upon amount. It's probably an easy way to squeeze another several hundred out of every customer.

The whole car negotiating process is a tried and true game. The wait and talk to a Sales manager is just a negotiating tactic. Keep the customer waiting in suspense. The salesman is your best friend trying to get you the car, but the mean sales manager just says no. The best response word in negotiating are "it just not good enough." The sign your offer, which means nothing is to make you feel more committed to the deal.

[letterk]

You are right with your formula but there is more to it.
Invoice - rebates - hold backs - floor plan

Some hold backs are defined a 1.5% for advertizing and 1.5% for mechanical handling. But there is insurance hold back, incentative hold backs, volumn holdback and financing hold back.

Floor plans are a whole other world and I don't profess to know much about them but it is my understanding it is the real money the dealer uses to stay open. This is what pays the light bills, the staff costs, and puts the smile on the owners face. Everything else is just iceing on the cake and from hat iceing comes the salesman's salary.

In my opinion Edmunds is very far off the mark. If they were correct most dealers would not be able to pay their office staff or their swanky dealership.

My daughter worked for a dealership and got top pay, her job was to make sure all the paper work was complete and to get the right piece of paper in the right persons hand. She wasn't the finanical guy that filled out the paper nor was she the title person that file for title transfers and regisitered new titles, nor was she the person that made sure the money got where it was going. All she did was made sure the forms were complete and got to the person that needed them. Like I said she got top pay. No dealer can afford to pay like that and work at the profit margins Edmunds claim they are.

It is bull.

Your right about repairs. Most do work at book prices and mechanics also but what you fail to mention is if the car comes back under repair warrantee the original mechanic must work on it for free. So if it took a mechanic 2 hours to do a job that the book says takes 4 he still has the exposure that he may have to redo the job under the original 4hr allottment. In other words he can work for free. I dont' blame them from wanting book and being able to beat the book.

I don't profess to know all about the dealerships since I didn't work in one. I just worked in a job with many different dealerships. I do remember that one got a break for the first 90 days financing which meant they were ahead if they could turn cars over quicker than the 90 days. Probably was worth more in the days of high interest rates.

Their is a lot of money in the business when times are good and top selling people can make a very good living. Like I said, one had a big enough bonus it was worth buying a car so she would get the bonus.

I know the advertising plan for one brand and for them it was a flat amount per car sold the previous month as a reimbursement when they spent an equal or greater amount. As for other brands it might not necessary be the same.

I've had good luck with Edmunds TMV, but like I mentioned, with the advent of fixed price dealers, it doesn't hurt to look at their prices and go down the road and see if you can beat the price with a haggling dealer.

I had a realization after my last used car purchase. Usually if you are too low they'll scoff at your offer. If they play the close the gap more than a round or two, I would bet they are fine with the amount, but know the natural inclination is to keep raising your counter offer to get to a agreed upon amount. It's probably an easy way to squeeze another several hundred out of every customer.

The whole car negotiating process is a tried and true game. The wait and talk to a Sales manager is just a negotiating tactic. Keep the customer waiting in suspense. The salesman is your best friend trying to get you the car, but the mean sales manager just says no. The best response word in negotiating are "it just not good enough." The sign your offer, which means nothing is to make you feel more committed to the deal.

[Ed in Tampa]

Yep, you are correct and knowing the business, I wouldn't be surprised if something new is introduced just to keep one step ahead of the public.

I don't profess to know all about the dealerships since I didn't work in one. I just worked in a job with many different dealerships. I do remember that one got a break for the first 90 days financing which meant they were ahead if they could turn cars over quicker than the 90 days. Probably was worth more in the days of high interest rates.

Their is a lot of money in the business when times are good and top selling people can make a very good living. Like I said, one had a big enough bonus it was worth buying a car so she would get the bonus.

I know the advertising plan for one brand and for them it was a flat amount per car sold the previous month as a reimbursement when they spent an equal or greater amount. As for other brands it might not necessary be the same.

I've had good luck with Edmunds TMV, but like I mentioned, with the advent of fixed price dealers, it doesn't hurt to look at their prices and go down the road and see if you can beat the price with a haggling dealer.

I had a realization after my last used car purchase. Usually if you are too low they'll scoff at your offer. If they play the close the gap more than a round or two, I would bet they are fine with the amount, but know the natural inclination is to keep raising your counter offer to get to a agreed upon amount. It's probably an easy way to squeeze another several hundred out of every customer.

The whole car negotiating process is a tried and true game. The wait and talk to a Sales manager is just a negotiating tactic. Keep the customer waiting in suspense. The salesman is your best friend trying to get you the car, but the mean sales manager just says no. The best response word in negotiating are "it just not good enough." The sign your offer, which means nothing is to make you feel more committed to the deal.

As I said there is a lot more money in car than Edmunds and others suggest there is. I worked at GM, Ford and Chrysler plants and saw the execs get delivery of their employee discount cars. These guys could sell their cars after keeping them for some period of time. I was never able to find a car to buy. Why? Because the prices even with the exec making money was so good that most had their allotment sold 4 and 5 years out. It other words the savings was a lot more than a few hundred bucks under invoice that Edmunds suggest is the dealers profit.

Best way to buy a car is never let any suspense build. Always start yourcar buying before you need a car. Then you can walk out knowing you have a reliable car and don't need to replace it.

If you wait until the car needs a major repair and you are not sure how long it will last then the dealer has you right where he wants you. You are desparate and he can build suspense on it.

[letterk]

As I said there is a lot more money in car than Edmunds and others suggest there is. I worked at GM, Ford and Chrysler plants and saw the execs get delivery of their employee discount cars. These guys could sell their cars after keeping them for some period of time. I was never able to find a car to buy. Why? Because the prices even with the exec making money was so good that most had their allotment sold 4 and 5 years out. It other words the savings was a lot more than a few hundred bucks under invoice that Edmunds suggest is the dealers profit.

Best way to buy a car is never let any suspense build. Always start yourcar buying before you need a car. Then you can walk out knowing you have a reliable car and don't need to replace it.

If you wait until the car needs a major repair and you are not sure how long it will last then the dealer has you right where he wants you. You are desparate and he can build suspense on it.

I think we are on the same page, just not talking about the exact same thing.

I don't doubt that there is more profit built into the cars, but Edmunds is more of a value on what you'll be able to negotiate the car for. The dealerships has overhead and need that profit to stay in business and make money. They are going to be very resistant in giving customers any of the holdback if possible.

Yes, you are right, the best tool in negotiating is your two feet.

[dforeman]

Sorry, I wasn't trying to offend Ed. I was just throwing out one possible explanation as to the differences in prices that make you scratch your head (so to speak).