What % is the dealer making?
04-12-07, 02:36 PM
#2
Lexus Champion
Depends on how much they sell the car for above the actual dealer cost of the vehicle. Invoice that you find on the internet is NOT what the dealer paid for the vehicle. On top of that what they make on an individual car changes depending on much profit they changed on the other cars they have sold. Its all a big game. There is no one set precentage.
04-12-07, 02:47 PM
#3
First things first, just be concious of the terms below:
Invoice Price is the manufacturer’s initial charge to the dealer. This usually is higher than the dealer’s final cost because dealers receive rebates, allowances, discounts, and incentive awards. Generally, the invoice price should include freight (also known as destination and delivery). If you’re buying a car based on the invoice price (for example, “at invoice,” “$100 below invoice,” “two percent above invoice”) and if freight is already included, make sure freight isn’t added again to the sales contract.
Base Price is the cost of the car without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker.
Monroney Sticker Price (MSRP) shows the base price, the manufacturer’s installed options with the manufacturer’s suggested retail price, the manufac-turer’s transportation charge, and the fuel economy (mileage). Affixed to the car window, this label is required by federal law, and may be removed only by the purchaser.
Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.
And now the answer to your question:
As far as I know, the dealer cost is aprox. 3% below invoice. So any price higher than that is the basic profit to the dealer. There is a 2% of MSRP hold back that Lexus pays the dealers and some members has stated here @ CL that there is also a couple of months of inventory fee that is reimbursed as well (something like $300-ish total maybe).
Other means of income for the dealers:
People are often surprised to hear that a dealership's financing and insurance (F&I) department, or "business office," is a profit center. Reality check No. 1: Everything dealerships sell you represents a profit opportunity. And the financing and insurance provided by the dealer is not exception. With few exceptions, the dealer is a middleman.
Sometimes, dealers offer very low financing rates for specific cars or models, but may not be willing to negotiate on the price of these cars. To qualify for the special rates, you may be required to make a large down payment. With these conditions, you may find that it’s sometimes more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment.
Back-End Products and Services
The F&I manager is also responsible for selling additional products and services, which are a significant source of dealer profit. They include:
service contracts: Often referred to as extended warranties, these plans are meant to take over when the manufacturer's warranty runs out and/or cover repairs not accounted for in the manufacturer's warranty. Consider your needs carefully before purchasing a service contract for a new car. While the cost of new cars has risen, so has their reliability. The period between purchase and major scheduled service is longer than ever. And experts say the parts of a car that are most likely to break after the factory warranty expires are typically not covered by third-party service contracts, though there are exceptions, such as four-wheel-drive systems and turbochargers. If you consider a service contract, bear these issues in mind:
* Some contracts have deductibles, and some do not. Amounts vary, and you may have to pay a deductible for each claim or even individually for unrelated repairs in the same claim. Get the details.
* Don't assume your contract will transfer to another dealer if you move. And if it can be transferred, is there a fee?
* The contract also may not transfer to another owner. An extended warranty is a nice selling point — but not if it's tied to you rather than the vehicle. Check for owner transfer fees.
* Sometimes one of a car's parts or systems will be responsible for damage to another part of the car. The best example of this is a timing belt. In certain engine designs, when this part breaks it causes catastrophic (and very expensive) valve damage. A timing belt may cost $20. Which will the service plan cover? Some service contracts stipulate that the insured cannot collect for damage to a part covered by the plan if it was caused by an uncovered part, negligence or some other hard-to-define condition.
Service contracts represent a significant profit source for dealers, so expect the hard sell. The price and all the terms above are negotiable, and again, you can comparison shop the service plan at multiple dealerships even if you're not buying the car there.
Vehicle repair is big business. Thanks to the complexity of modern vehicles, dealer service departments are guaranteed a steady flow of profit that might otherwise go to independent repair shops.
In terms of the dealership's bottom line, the service department can contribute a healthy percentage of the profit. In 2001, the National Automobile Dealers Association reported that service and parts departments made up 48 percent of total dealership operating profits. This further illustrates how the profit has skewed away from the vehicle sale and toward the products and services that follow. It also explains why dealers are sometimes willing to sell at extremely thin profit margins.
Invoice Price is the manufacturer’s initial charge to the dealer. This usually is higher than the dealer’s final cost because dealers receive rebates, allowances, discounts, and incentive awards. Generally, the invoice price should include freight (also known as destination and delivery). If you’re buying a car based on the invoice price (for example, “at invoice,” “$100 below invoice,” “two percent above invoice”) and if freight is already included, make sure freight isn’t added again to the sales contract.
Base Price is the cost of the car without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker.
Monroney Sticker Price (MSRP) shows the base price, the manufacturer’s installed options with the manufacturer’s suggested retail price, the manufac-turer’s transportation charge, and the fuel economy (mileage). Affixed to the car window, this label is required by federal law, and may be removed only by the purchaser.
Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.
And now the answer to your question:
As far as I know, the dealer cost is aprox. 3% below invoice. So any price higher than that is the basic profit to the dealer. There is a 2% of MSRP hold back that Lexus pays the dealers and some members has stated here @ CL that there is also a couple of months of inventory fee that is reimbursed as well (something like $300-ish total maybe).
Other means of income for the dealers:
People are often surprised to hear that a dealership's financing and insurance (F&I) department, or "business office," is a profit center. Reality check No. 1: Everything dealerships sell you represents a profit opportunity. And the financing and insurance provided by the dealer is not exception. With few exceptions, the dealer is a middleman.
Sometimes, dealers offer very low financing rates for specific cars or models, but may not be willing to negotiate on the price of these cars. To qualify for the special rates, you may be required to make a large down payment. With these conditions, you may find that it’s sometimes more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment.
Back-End Products and Services
The F&I manager is also responsible for selling additional products and services, which are a significant source of dealer profit. They include:
service contracts: Often referred to as extended warranties, these plans are meant to take over when the manufacturer's warranty runs out and/or cover repairs not accounted for in the manufacturer's warranty. Consider your needs carefully before purchasing a service contract for a new car. While the cost of new cars has risen, so has their reliability. The period between purchase and major scheduled service is longer than ever. And experts say the parts of a car that are most likely to break after the factory warranty expires are typically not covered by third-party service contracts, though there are exceptions, such as four-wheel-drive systems and turbochargers. If you consider a service contract, bear these issues in mind:
* Some contracts have deductibles, and some do not. Amounts vary, and you may have to pay a deductible for each claim or even individually for unrelated repairs in the same claim. Get the details.
* Don't assume your contract will transfer to another dealer if you move. And if it can be transferred, is there a fee?
* The contract also may not transfer to another owner. An extended warranty is a nice selling point — but not if it's tied to you rather than the vehicle. Check for owner transfer fees.
* Sometimes one of a car's parts or systems will be responsible for damage to another part of the car. The best example of this is a timing belt. In certain engine designs, when this part breaks it causes catastrophic (and very expensive) valve damage. A timing belt may cost $20. Which will the service plan cover? Some service contracts stipulate that the insured cannot collect for damage to a part covered by the plan if it was caused by an uncovered part, negligence or some other hard-to-define condition.
Service contracts represent a significant profit source for dealers, so expect the hard sell. The price and all the terms above are negotiable, and again, you can comparison shop the service plan at multiple dealerships even if you're not buying the car there.
Vehicle repair is big business. Thanks to the complexity of modern vehicles, dealer service departments are guaranteed a steady flow of profit that might otherwise go to independent repair shops.
In terms of the dealership's bottom line, the service department can contribute a healthy percentage of the profit. In 2001, the National Automobile Dealers Association reported that service and parts departments made up 48 percent of total dealership operating profits. This further illustrates how the profit has skewed away from the vehicle sale and toward the products and services that follow. It also explains why dealers are sometimes willing to sell at extremely thin profit margins.
Last edited by warrionex; 04-12-07 at 02:50 PM.
04-12-07, 03:04 PM
#4
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[QUOTE=ben_r_;2547765]Invoice that you find on the internet is NOT what the dealer paid for the vehicle. [QUOTE]
When you said that, do they usually get it lower than the internet price or higher?
When you said that, do they usually get it lower than the internet price or higher?
04-12-07, 03:15 PM
#5
Lexus Champion
[quote=jimjaix;2547819][quote=ben_r_;2547765]Invoice that you find on the internet is NOT what the dealer paid for the vehicle.
When you said that, do they usually get it lower than the internet price or higher?
I would hope so considering that I got my IS250 $1200 below the internet listed invoice price. Not to mention (like I mentioned before) all the suckers that pay MSRP for a car give the dealer tons of profit that help give them more wiggle room to sell cars for much less than MSRP to more educated buyers like us.
When you said that, do they usually get it lower than the internet price or higher?
I would hope so considering that I got my IS250 $1200 below the internet listed invoice price. Not to mention (like I mentioned before) all the suckers that pay MSRP for a car give the dealer tons of profit that help give them more wiggle room to sell cars for much less than MSRP to more educated buyers like us.
04-12-07, 07:02 PM
#6
Lexus Champion
I would hope so considering that I got my IS250 $1200 below the internet listed invoice price. Not to mention (like I mentioned before) all the suckers that pay MSRP for a car give the dealer tons of profit that help give them more wiggle room to sell cars for much less than MSRP to more educated buyers like us.
Last edited by Evitzee; 04-12-07 at 07:06 PM.
04-12-07, 08:27 PM
#7
Lexus Champion
You may be a good negotiator, or just reaping the market price for a car in oversupply in your area (CA). Try getting $1200 below invoice on an IS350, a BMW 335i coupe, or a new G37 (when they arrive) and you'll get thrown out of the showroom. People who buy the three above mentioned cars at a price between MSRP and invoice are not suckers, they are just buying the vehicle that they want at the time they want, and are willing to pay for that privilege. Yes, the dealer makes a good profit on a highly desirable car, nothing wrong with that. That's business and marketing.
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04-12-07, 10:25 PM
#9
Monroney Sticker Price (MSRP) shows the base price, the manufacturer’s installed options with the manufacturer’s suggested retail price, the manufac-turer’s transportation charge, and the fuel economy (mileage). Affixed to the car window, this label is required by federal law, and may be removed only by the purchaser...
I'm sure you meant Manufacturer's Suggested Retail Price...Oh, and the rest of your post seems an awful lot like the this article... Warrionex, you might want to just provide a link next time instead of plagiarizing someone else's work, or at least cite a source.
Javier
04-12-07, 10:56 PM
#10
You may be a good negotiator, or just reaping the market price for a car in oversupply in your area (CA). Try getting $1200 below invoice on an IS350, a BMW 335i coupe, or a new G37 (when they arrive) and you'll get thrown out of the showroom. People who buy the three above mentioned cars at a price between MSRP and invoice are not suckers, they are just buying the vehicle that they want at the time they want, and are willing to pay for that privilege. Yes, the dealer makes a good profit on a highly desirable car, nothing wrong with that. That's business and marketing.
My buddy got his 2006 IS350 (second one they had ever seen on that lot when they first came out) from Lexus of Roseville for 500 under invoice. Cars at these price ranges are only "rare" when they first come out usually, and dealerships that are interetsed in volume sales arent going to hussle you into paying more when you are an educated buyer and they know youll buy today. Especially when they (and you should too) know that cars are only rare for a short while. They know in 2 or 3 months there will be 30 of them on the lot and not in as huge a demand. Its all about dealerships that are looking for volume over high prices. If you go to Best Buy to buy the same computer you can get at Fry's for 200 bucks less you havent gotten an advantage by buying from Best Buy, you just got ripped off. But, whatever lets you sleep at night I guess, to each their own.
put yourself in the position; if you had to sell your car/house ect, and could get more than reg market in cali what would u do..say aww no i couldnt take that, do you now how much they are in cali!
....dont get me wrong now, a little research helps you find what your market is, and should give you confidence in your dealer/salesperson when they are in line with that..but there are few reasons why ne1 will sell nething for lower that its market.
04-12-07, 11:44 PM
#11
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I'm sure you meant Manufacturer's Suggested Retail Price...Oh, and the rest of your post seems an awful lot like the this article... Warrionex, you might want to just provide a link next time instead of plagiarizing someone else's work, or at least cite a source.
Javier
04-13-07, 03:16 AM
#12
You may be a good negotiator, or just reaping the market price for a car in oversupply in your area (CA). Try getting $1200 below invoice on an IS350, a BMW 335i coupe, or a new G37 (when they arrive) and you'll get thrown out of the showroom. People who buy the three above mentioned cars at a price between MSRP and invoice are not suckers, they are just buying the vehicle that they want at the time they want, and are willing to pay for that privilege.
Yes, the dealer makes a good profit on a highly desirable car, nothing wrong with that. That's business and marketing.
Yes, the dealer makes a good profit on a highly desirable car, nothing wrong with that. That's business and marketing.
Warrionex
04-13-07, 06:37 AM
#13
Lexus Champion
My buddy got his 2006 IS350 (second one they had ever seen on that lot when they first came out) from Lexus of Roseville for 500 under invoice. Cars at these price ranges are only "rare" when they first come out usually, and dealerships that are interetsed in volume sales arent going to hussle you into paying more when you are an educated buyer and they know youll buy today. Especially when they (and you should too) know that cars are only rare for a short while. They know in 2 or 3 months there will be 30 of them on the lot and not in as huge a demand. Its all about dealerships that are looking for volume over high prices. If you go to Best Buy to buy the same computer you can get at Fry's for 200 bucks less you havent gotten an advantage by buying from Best Buy, you just got ripped off. But, whatever lets you sleep at night I guess, to each their own.
In the market I live in we only have four dealers (two are owned by the same group) to service an area of 4 to 6 million people. From talking to people, and what is on this board, prices are not as keen as those in CA. That's just the status of the marketplace here in Houston. Try finding new, well optioned, IS 350's here and you'll be frustrated. There just aren't any. So are you going to get one at below invoice price? Probably not. I think you are too focused on the price angle. I'd rather pay a bit more for a dealer that is convenient and responsive, then for one that is further away and not as good. That's just me. Price is important, but is NOT the be all, end all factor as far as I'm concerned. I don't know your age, but I suspect it is fairly young, and younger buyers focus a lot of energy on price. I did the same in my youth. But you get to the point that other factors (such as convenience and dealer interaction) become more important as you get older. Your focus might be different at this point in your life. Nothing wrong with that.
I can't agree ! Your remarks does not applies when Lexus has a monopoly in your area. In Hawaii and Puerto Rico (US territory) we only have one dealer available. Since they are the only ones with the product available in our market, they could intentionally set the price unreazonably high to unfairlly benefit from their monopoly. That is illegal !
Warrionex
Warrionex
Last edited by Evitzee; 04-13-07 at 06:45 AM.
04-13-07, 07:00 AM
#14
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Its not even possible in NY or NJ to get the car below Invoice, I only got it for 4300 below MSRP. (Taking the package into consideration as well, which costs about 1976)
04-13-07, 07:26 AM
#15
Lexus Champion
Just FYI for all, I got an email today from a CL user and thought Id post my answer here too incase anyone else was wondering.
Well I bought mine at Lexus of Sacramento, my buddy bought his at Lexus of Roseville. Heres what I did: I got on the Lexus website and sent a prewritten email out to every Lexus Dealership north of Bakersfield (about a dozen) and told them all exactly the config I was looking for and what I found on the internet to be invoice and that whoever was the lowest bidder would be the dealership I would buy the car from. A really cool lady from Lexus of Concord named Debbi Pulliam kept coming back with the lowest offer (around 1500 under invoice if I remember correctly) and kept emphasising that she would beat ANY lower offer I could find. They are apparently a VERY interested in volume sales dealership. So I took her low offer and a couple others I got (from Lexus of Fremont and Redwood City) and told Lexus of Sacramento, "Hey Ill buy the car tonight on the way home from work if you will match one of these offers". Of course they matched the highest of the three I gave them, but that was still around 1200 under invoice. Now the ultimate trick here is that I bought at the end of the month (March to be exact) and that makes a big difference for when they are fighting at the last minute for end of month sales to reach specific numbers. Also, the dealer has to have your car in stock. If they have to order it or transfer it, they probably wont match your price. Crazy custom configs like IS250's with ML and parking assist arent nearly as likely going to come to you for the low prices. Anyway Sacramento said they would match that price, I agreed and it was done. I picked up my car that night from them. Also FYI here is a really cool thread on invoice pricing from Lexus.
Originally Posted by ryguyis300
ben,
i live down in the bay area, could you hook me up with a contact at that dealer where you and your friend bought at in roseville. Your serious below invoice?
Thanks
Ry
i live down in the bay area, could you hook me up with a contact at that dealer where you and your friend bought at in roseville. Your serious below invoice?
Thanks
Ry
Last edited by ben_r_; 04-13-07 at 07:30 AM.