The inside scoop of buying a NEW car

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If they don't give me my license or keys back imediately, we are going to have a problem. Number 1, I'm not test driving your car until you give me my license back. Number 2, I'm not talking any deals until you give me my keys back. If you don't give either of them back it won't be long before I'm on the phone threatening to call 911 for a theft. I hate car dealers. Half the practices they employ should be outlawed. And, there is no way a car deal should take three or four hours. They know what they have in the car and what they can sell it for. Skip the BS and get to the bottom line. My next purchase is going to be through Costco.
I stopped by Scott Clark Honda to look at a new Accord. Their first offer was $4k OVER sticker! I walked right then and they have been calling me every week since. Sorry Scott but I'm not playing that game.
I had a similar experience with Scott Clark Toyota. I think it was like $900 in paint protection, nitrogen, tint. I laughed, said get me one without that crap and we can talk, they pushed it to the side and we ran into a wall on price otherwise.

Crazier still was helping a friend buy a VW Jetta, you know, like a $13k base model car. VW in Huntersville added $1400 in little BS add-ons that "every car gets when they receive it" and would not budge. They basically try to guarantee themselves $1k+ profit on a $13k car, which are damn good margins, or in this case they shoved a qualified buyer out the door to buy a Hyundai elsewhere.

The "ugly" add-ons as @larryh1108 calls them are in deed the thing I hate most, with financing games being a close 2nd. It almost boils my blood that they even TRY that. I view it as assuming everyone is an idiot and you just told me you think I'm an idiot. Good luck getting my money, or my friends' when I'm helping them buy. Tinting 2 windows with basic 3M tint isn't $400, nitrogen is of little utility and doesn't cost $20/tire, running a vehicle through a machine wash isn't "paint protection" and a hand wax by your lot guy isn't worth $600, and finally trying to force people into extended warranties by putting them on the sticker and calling it "Mr Nice Guy's Life-Proof Package" isn't giving anyone the warm and fuzzies.
 
I just wish they still made a small car with no a/c, mt, plain old radio, plain old manual windows, no tech crap, etc. Most of the time I just need to get from point A to point B without being connected to the outside world, or the car performing basic functions that I haven’t gotten too lazy to do for myself, yet.
 
I just wish they still made a small car with no a/c, mt, plain old radio, plain old manual windows, no tech crap, etc. Most of the time I just need to get from point A to point B without being connected to the outside world, or the car performing basic functions that I haven’t gotten too lazy to do for myself, yet.
I can't state it as fact but I'd bet those cheap cars are still out there. Maybe not the popular brands but some smaller companies. It will usually be their entry level cars (think small and cheap). Off the top of my head I'd bet that cars like the Mazda 3, Kia Rio or Spectrum, Ford Focus (and similar) have the no frills, base cars for the purpose of advertising a cheap price to draw interest.
You may have to search a wide area but there should be some out there. A dealer will make nothing if they sell it at MSRP (no features to add profit) so don't expect them to fall over
themselves to help but to some, a sale is a sale.
 
I just wish they still made a small car with no a/c, mt, plain old radio, plain old manual windows, no tech crap, etc. Most of the time I just need to get from point A to point B without being connected to the outside world, or the car performing basic functions that I haven’t gotten too lazy to do for myself, yet.
Those are called Kias.
 
Those are called Kias.
Yeah right. Every Kia Soul I have seen is over $20K, and the Optima is $35K fully loaded. Maybe the Rio can be found under $18K.

In 2014 I bought a Nissan Sentra SR for my wife and it was right around $20K. It was a cheap CVT underpowered car and mostly styrofoam and plastic. Glad she got rearended lightly and all that plastic rear was totalled.
 
@larryh1108

Thanks again for all the enlightenment.

Let me re-cap here a bit before I get to my next questions. Correct me where I have gone astray.

Setting aside the service department and looking just at the new car sale, the dealer has 4 major areas of profit margin.

Sale Price of car. The difference between what his net cost is and what the customer finally agrees to pay for the car. As you have said, this could be just $100, could be several hundred over cost, or could even be less than the dealer's cost.

DOC fees. This is virtually 100% profit for the dealer, as I understand it.

Extended Service Contracts. These typically range from 50% profit for the dealer on up to stupid levels, I believe you said.

Trade In Allowance. Here is where I have a couple questions.

The dealer is either going to put the trade in on his lot and retail it or he's going to wholesale it and get rid of it.

Is there a "break point", let's call it, where the dealer is looking at it as a "keeper" vs. a dog that will be wholesaled? I mean, mostly, in terms of age and mileage. I assume anything in poor condition is going down the road regardless of age and mileage.

This leads me to the 2nd question. If it is a "keeper", what sort of profit margin is the dealer looking to make on the sale of it......... percentage-wise?

And same question for the dog that goes to the auction.
 
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@larryh1108

Thanks again for all the enlightenment.

Let me re-cap here a bit before I get to my next questions. Correct me where I have gone astray.

Setting aside the service department and looking just at the new car sale, the dealer has 4 major areas of profit margin.

Sale Price of car. The difference between what his net cost is and what the customer finally agrees to pay for the car. As you have said, this could be just $100, could be several hundred over cost, or could even be less than the dealer's cost.

DOC fees. This is virtually 100% profit for the dealer, as I understand it.

Extended Service Contracts. These typically range from 50% profit for the dealer on up to stupid levels, I believe you said.

Trade In Allowance. Here is where I have a couple questions.

The dealer is either going to put the trade in on his lot and retail it or he's going to wholesale it and get rid of it.

Is there a "break point", let's call it, where the dealer is looking at it as a "keeper" vs. a dog that will be wholesaled? I mean, mostly, in terms of age and mileage. I assume anything in poor condition is going down the road regardless of age and mileage.

This leads me to the 2nd question. If it is a "keeper", what sort of profit margin is the dealer looking to make on the sale of it......... percentage-wise?

And same question for the dog that goes to the auction.

Profit centers:
Sale Price:
Correct.

DOC Fees
: Correct. 100% pure profit. (yeah, it pays the people processing the documents but that is part of running a business. I would bet a lot of money that the DOC fees they take in every month far surpasses what a dealer pays for paperwork processing.

ESC Profit
: Since I sold ESCs I do not relate the profit in percentage terms. I relate it to bottom line profit dollars. The cost of an ESC is so spread that it's hard to nail down a specific percentage (I know it can be done with math but there is a lot of price variables). e.g. A good purchase for the buyer for a new, everyday car is $995 for the factory ESC.
The cost varies from $400-$800 or so. A Focus probably comes in at $400 and a hi tech car with all the electronics and power packages could be $750+. I say that $200-$250 max profit is acceptable. Your local Finance Guy will surely disagree. He (literally) wants $2,000 profit on an ESC and starts there and goes down as the buyer resists.
If you want a percentage then I'd say it averages out to about $25% for a good deal to you. That's a fair price, IMO. Finance Guy wants 500%. If you want a true average for the entire sale then you have to add the total cost together (for the car and the ESC) and then the total retail for both. If a dealer makes 3% front end on his car and you have a 25% ESC profit, the total may only go to 4% total profit on the deal.

Trade in value
(not allowance): I will be discussing (in great detail) the trade in values and retails in the Used Car thread.
It is very detailed and has a lot of different ways of looking at things.

For a brief answer, the car itself (trade in) has a lot to do with whether the dealer keeps it or sells it. This will be a huge discussion in Used Cars.
If the Used Car Manager likes the trade in, he decides what to do with it and if he took it in "right".
Some dealers and dealer groups have a line they draw for used car sales - Nothing over 3 years old and nothing over 50,000 miles (or similar).
These are usually higher end dealers who do not want their reputation sullied by selling a bad used car. These dealers really only want to sell new.

Other dealers are known for selling nice, used cars and push them. As we will discuss, there is a lot of money in used cars... a lot.
So, a smart dealer who has a reputation of selling nice, used cars can get very rich, very fast. Notice I used to wording of "nice" used cars.
We will also cover that.
 
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Ok, let's wrap up the New Car Sales thread so we can get to the Used Car thread. I believe it will be much more interesting!

Let's Talk Leasing!

You never see much talk or discussion about leasing yet it accounts for over 50% of new cars sold in the import and luxury lines.
That is an amazing number if you think about it,
Millions upon millions of people lease a new car every year. Why would they do that?

If you really think about it, you are really renting the car for the term of your lease. For simplicity and because it is the most popular term, let's discuss the 36 month lease.

First, you do not own this car. You are leasing it. The leasing company owns it. The leasing company is usually the finance company that the factory owns (like Ford Credit, Chrysler Credit or GMAC or whatever they call themselves today). The leasing division is a separate entity but it's all one pocket.

When you lease, you agree to pay (for example) $400 a month for 36 payments and then give the car back. If you abuse it above and beyond "normal wear and tear", you will receive a detailed list of extra money you have to pay to close the lease. If you agree, up front, to drive it no more than 12,000 miles a year, then when you return it, every mile over 36,000 (3 years). It is a hefty fee per mile.

However, if you want a new car every 3 years (or 2 years or 1 year) then leasing is the way to go because new car depreciation is a killer.
Successful people who have disposable income and have an image to maintain like leases because every year or two has them driving the latest and greatest car on the road. The luxury brands, especially, draw a lot of leases. Many time the average new car has a lower monthly payment than buying it does. This is an effective tool for when a buyer cannot afford the payment discussed in the finance office. Since all the info is in the computer, a simple screen switch can bring up a lease payment.
e.g. A buyer cannot (will not) pay over $400 a month for that great car they've been drooling over all day. He loves that car. He will not consider getting the same car with less options or a different, cheaper car. It's that car or no car today. (It really happens).
So, the payment is at $475 per month spread out as far as possible and the buyer won't do it. No room for rent and food too.

So, that same car with a 48 month lease may come in at (conveniently) $399 a month!
SOLD!
He then asks what if he wants to keep it? Can he extend the payments?
Well, no, but he can buy it at a pre-determined price (residual value) in 4 years. If he loves the car and it treated him good he may just buy it in 4 years but since 4 years is a long time away and he can get it for under $400/mo today.... heck, why not?

I am not here trying to say leasing is bad or wrong or even stupid.
It is none of the above.
Different people have different needs and leases fit many people's needs (as evidenced by the large amount of leases out there).

If you always buy a new car and drive it until the wheels fall off, you should not consider a lease. It's not for you.
If you consistently trade in your car every 3 years because you hate high miles on your car and you just like anew car every 3 years (and why not?) then you should consider a lease even if you pay cash for that car. (Leases offer the same thing, kind of)
They do offer a lease one-pay (like paying cash). If your lease payment is $200/mo for 36 months then you can write a check, right there for the $7200 and pay them once (one-pay lease) and have no payments for 3 years. When the 3 years is over, you can write another check for the cash value or walk away and find another car to lease. No financing your remaining payments, no upside down on your trade in. You are free and clear to do it again (pending any issues you caused and have to pay for).
If you don't abuse your cars, drive moderate miles (you can get 15k/year mieage, 18k/yr and even 10k/year if you want).
Return the car with no damage, excess mileage or obvious abuse and you are good to go. Many people love how that works.

Ok, how do leases work.
In the simplest term, you are only paying for the difference between the selling price and the value the car is assigned at the end of the lease (determined by the leasing company). This is called the Residual Value at lease termination.
In short, the lender assigns a residual value percentage that is used to figure the depreciation of the car you are buying.
Let's use a Ford F150 that has an MSRP of $50,000. You want a 36 month lease. You have $2000 down and the dealer has a rebate of $2000. The residual value of this F150 is figured to be 40% (all numbers made up for ease of discussion) of MSRP.
at the end of the 3 years (this number is NOT negotiable). So, the lender is saying that in 3 years, this truck will be worth $20,000. (40% of $50,000). It loses $30,000 in value. You pay that $30,000 in equal monthly payments plus the interest (money factor number), plus taxes, title, tags and (of course) DOC fee., less your down payment ($2000 cash and $2000 rebate).
So, if the interest rate is 3.9% and sales tax is 7% and DOC fee is $595 the monthly lease payment would be about $850
A 72 month loan at 4.9% would come in about $800 a month.
At the end of 3 years you can walk away from the truck (if you want to) for the lease.
It will take 6 years to pay off the truck but it is all yours with no more payments due.
If you want, after the 3 year lease, you can buy your same truck for the residual amount of $30,000 plus, plus, plus.
You can pay cash or finance it, your choice, just like a regular purchase (because it is).
Now, in 3 years, will that 2019 F150 with 36,000 miles on it be worth $30,000? More? Less?
That is the gamble the lease company makes when it assigns that percentage residual. It is their problem, not yours.
Well, if you do like it and it is sweet and trouble free and is worth close to what others like yours are worth, you may decide to buy it.
If they redesigned it and you love the new body style and you just like a new truck every 3 years, you can lease the new model.

Nothing bad about leasing. Millions do it. Companies lease a lot for their sales force and executives. It has it's advantages.
However, it is not for everybody.



 
All good information - thank you.
Is the residual on the leased car set equally no matter who the buyer is?
At my old company, i got a company car as part of my compensation (I was not in sales). The residual on the leased company vehicle was lower than what the car will sell for. I paid the residual and sold the car to friends.
One more thing I noticed on the leased vehicle is that tax is only paid on the leased portion not the MSRP - correct?
 
Leasing Part II....

Ok, we discussed how leases work.
Bottom line, you pay for the depreciation, figured by the lease company, over the term of the lease plus tax, title, tags and DOC less your down payment and any rebates.
Simple concept.
Now the seamy side of leasing.
Wait, there's more and it's sneaky?

Well, yes. Afraid so.
As we've discussed, we have good, fair and honest dealers and we have those that push the envelope to make as much money as possible.
(Really? A car dealer that is less than honest?)
In the example above, we mentioned how the residual dollar amount is figured as a percentage of MSRP.
(Above example was 40% of the $30,000 MSRP).
If the salesman gets you into a lease, he gets paid on the MSRP (less pack, of course).
If it is a $3000 markup on the $50,000, he gets his 25%. Payable commission would be $700.
Not bad! I bet he loves to see leasing! It's all about the payment, baby! Out of his control. All finance office stuff.
Find the right car, do the walkaround. Get the necessary paperwork, run the credit report (Leases require very good credit).
If the credit checks out, off you go to finance (unless they work lease payments on the floor which is rare but not impossible).
(You went in to lease, in this instance). Easy as pie for the salesman. He loves it and gets $700 to boot!
He's going to try to get everybody to lease!

Ok, when they work up the lease payment, they start at the MSRP to work the deal. That's how they figure out the payment.
Right?
Well, right. That's HOW they do it but is it the only way to do it?
You can't touch the residual. It is set in stone.
What about the MSRP?
Technically, you are paying MSRP to lease the truck.
Why?
Well, the dealer says why not?
Lease, finance or cash, the dealer gets paid the same.
They get what they charged you for the car or truck.
You get it for MSRP? They get paid for MSRP.
You get it for $100 over invoice? They get paid for $100 over invoice.
It does not matter if you paid cash, financed or leased.
They get what you paid for it.

So, if the MSRP is $30,000 and it has a $3000 markup (profit) and they would discount it $1500
if you paid cash or financed it, why can't you get the lease payment for the same $1500 discount?
Well, you can but very few people ask.
The lease itself is very confusing.... residual percentages, money factors (interest), penalties, etc.
Since you aren't buying the car, there is no Bill of Sale breaking down the figures.
You get a contract showing the total of all the costs (price, taxes, DOC fee, tags, etc, all rolled into 1 price.
Who knows what you paid just for the truck? You don't, I guarantee it.
Since there is no Bill of Sale, they could have charged you anything they wanted for the truck.
Literally.
They can print a Bill of Sale, if asked. They won't want to. They'll say leases don't have a Bill of Sale (true) but the computer is programmed to pull numbers for specific fields so if you tell it to print a Bill of Sale, it will spit it right out. You will see what the Sale Price was.
A good dealer will charge MSRP.
A slimy dealer will charge whatever they think you will pay.
If they charge $2000 over and quote you a payment (like $975 for the $850 lease above) and you
agree, what do they lose? You will never know what you paid. They charged $32,000 for the $30,000 MSRP truck.
Is this illegal?
Well, no. They are selling a lease payment, You are not buying it. The lease company is buying it, not you. You lease it from the lease company for $XXX dollars a month.
Nice, huh?
So, if you are leasing and you reach a payment that works for you and he prints out all of the paperwork, before you sign a single piece, ask him to print out a Bill of Sale OR a worksheet (a worksheet spells out the specifics)
When he says he can't, he is lying. He can, he just won't.
Ask him again to print out a Bill of Sale.
If he says a lease does not have one tell him you know but the printer doesn't know that. Order it to print a Bill of Sale and it will. Usually Form #2 or 3.
If he continually denies the ability to print one then he is hosing you.
Tell him to show you the screen. In the upper left is usually the sales price and MSRP.
They should be the same. If not, Get up and leave.
If he starts typing really fast and sweating, he is changing the MSRP to the right number, will print the Bill of Sale and then change it back to the number he charged. The Bill of Sale does not show the payment.

Pretty slimy, huh?
 
I don't get the Salesman, manager, other guy thing. The salesman having to go talk to the manager to see if he can do this or that. Just let me talk with a guy who can run the sale from beginning to end, without having to go to someone else. Just get me that someone else from the start.
 
All good information - thank you.
Is the residual on the leased car set equally no matter who the buyer is?
At my old company, i got a company car as part of my compensation (I was not in sales). The residual on the leased company vehicle was lower than what the car will sell for. I paid the residual and sold the car to friends.
One more thing I noticed on the leased vehicle is that tax is only paid on the leased portion not the MSRP - correct?
Very good questions!
The residual is set in stone.
Everybody gets the same residual.
As you saw, sometimes the residual value is less than the street value at lease end.
They guessed wrong 3 years ago.
However, since the lease payment is figured on the residual value, you may have paid $10 a month or more for the lease. No hanky-panky there. They just guessed wrong 3 years ago.
On the flip side, if they guess wrong the other way and offer you your old car for $2000 more than it is worth, you can politely decline. You are under no obligation to buy. However, the lease company knows this so they will come down on the price to get close to the real value. Saves them handling and auction fees. SO, if the come down $1500 from the residual value, you may just buy it.

The sales tax is something I wanted to address but didn't.
IN THEORY, you pay sales tax on the portion of the car you are leasing (the depreciation).
Why pay tax on the residual value if it isn't your car and it will be taxed again when sold again?
Well, most states figure out the payment, before tax, and then tax the payment.
Some states tax the entire amount you are paying and charge tax on that.
It works out the same but the actual lease lists it different.
A lease contract is very complex and really shows very little useful information.
Like all legal documents it is full of legalese and double talk.

Now, there are states that tax the entire price of the car (Sell Price plus DOC fee) and add the total tax into the payment. IL does this. If you know IL, you are not surprised
However, there is a tax credit that is tied to the car at lease end. The residual value should not have been taxed so states like IL attach a tax credit for the overpayment to the VIN number on the car. If a dealer that does leasing buys that car at auction, the tax credit goes with the car. This tax credit can be applied to any other lease that dealer makes (as a tax credit). (Same state only).

So, when you turn in a lease and don't buy it, it is owned by the lease company, not the dealer.
The lease company sends someone to inspect the car for excess mileage and/or excess damage of any kind.
If there are charges, the lease company will send you a bill. You are required to pay it or they will mess up your credit report. Since you did not finish paying for the lease, per the lease agreement, (excess damage), and you refuse to pay it for whatever reason, the lease company will show it as a charged off lease agreement.
Basically it is reported as a repo since the verbiage is the same. Not good! If you are buying another car, this damage bill can be rolled into the payment of the new car (like a trade in payoff) so if you have a $2000 bill for damage and excess miles you can take care of it.

Once inspected, the lease company picks it up and sends it to the auction. Lease turn-ins are a great source for new car dealers to get same make late model turn ins. If you are an IL dealer and lease cars, these lease turn-ins come with the IL tax credit (if sold in IL)
So, if you, the original owner, did not lease another car, you cannot get the tax credit. It follows the car.
If you decide to keep the car you leased you will not have to pay tax on that purchase, since you already did.
If you buy a car you cannot use the lease tax credit because you did not lease a car.

Now, to take it further, the dealer specifically looks for IL lease turn ins if he is an IL dealer.
Lease turn in sales can only be attended by dealers who use the same leasing company (like Ford for Ford Credit, GM dealer for GMAC, Chrylers dealers for
Chrysler Finance, Nissan Dealers for NMAC leases, etc.

So, when someone leases a car in their dealer and they have lease purchase tax credits in store, they can use these tax credits to pay the tax owed on your lease, that you paid the tax on. You pay $2000 in taxes on your $25,000 MSRP lease and the dealer has a $1000 tax credit from buying a lease turn in, he can apply the tax credit of $1000 and only pay the balance of $1000 of the $2000 you paid.Tax credits are legal. Nothing wrong about this but IMO it is slimy because the dealer picked up an extra $1000 profit which no one gets paid commission on. Of course, he may have paid
an extra $500 for this car knowing it had a tax credit of about $1000. Who knows?

Nice, huh?
 
I don't get the Salesman, manager, other guy thing. The salesman having to go talk to the manager to see if he can do this or that. Just let me talk with a guy who can run the sale from beginning to end, without having to go to someone else. Just get me that someone else from the start.
I get that, I really do.
However, keep in mind that a sales manager has up to 10 salesmen under him.
If he sat down with you and worked the deal, 2 or 3 other salesmen would not get the answers they need.
Also, as mentioned, the new car salesmen are usually newbies, guys on probation or guys just out of probation. They would not know how to structure the deal to maximize profit, which is what their goal is. He has the salesmen do the preliminary work and running around and then comes in when the salesman starts to struggle.

Also, if it looks like he is just sitting there, he is probably doing other important things that need to be done to make it run as smooth as possible.
 
I’ll cut to the chase:
I know it likely varies on make, model, trim, and probably even dealership name, but what is the typical mark-up on a vehicle? 10%? 20%

We just bought a new Jeep Grand Cherokee after much haggling and frustration. Finally got the dealer to honor the “web” price. His last comment to me was “I want you to know I lost money on this deal.”

I almost nut-punched the guy right there.

Heh...I believe it was Navy Times I read once, in an article about buying a car (new or used) from a dealer, which said that there are three rules about buying from a dealer:

1. The dealer will NOT lose money.
2. The dealer will NOT lose money.

and most importantly:

3. The dealer will NOT lose money.

If they're going to lose money, they won't sell. It's that simple!
 
Correct!
However, I can understand not buying that New Car ad car due to not being equipped as wanted or not qualifying for all the rebates applied (see above) but I cannot, for the life of me, understand how any buyer can go in for an advertised used car (that includes the stock number) and sits down to buy it and the salesman/manager slimes around the sales price. If there is a trade involved, that clouds it up a lot.
If it's a cash deal and they don't just write down the ad price, +++, why would anybody put up more than 5 minutes of BS to buy this car? I've read here more than once where a dealer refused to sell it at the advertised price and the buyer hung around for whatever reason. IMO, it is illegal (meaning civil suit) to not honor an advertised price (of course, you need hard proof).
 
Any questions on leasing? Does anybody lease here?
Nope. Worst monkey math financial shenaniganry there is. "Lease" is foreign for "can't afford it so I'll compromise for a crappy deal."

Seriously, I have never seen the math "work" as touted in commercials and from the guys pitching it at the dealer. Nothing infuriates me more than a salesman pushing it after I've said no and debunked their math. I might as well go do a long-term car rental from Budget.
 
I will fully admit that unless you are leasing a car or truck thru an ad that specifically lists a payment (with fine print) that leasing any other car exposes you to allowing the dealer make a ton of money that they would not get if they retailed the same unit.

If a national TV ad shows a new 2019 Honda Civic for $299/mo. lease, that means the factory is subsidizing it to get to that payment.
The same theory as the factory offering a $2000 rebate AND a 1.9% financing for 72 months. As a matter of fact, that is what the factory does do here.

Bottom line, the factory would offer the customer a $2000 rebate that is applied as part of the down payment. The MSRP is the MSRP and the residual is figured off that number no matter what you sell it for (Selling Price). Now, the factory uses the selling price to reduce the (usual) markup to perhaps $500 over invoice. The factory then gives the dealer $500 cash back (as additional profit) bringing it back to a $1000 over invoice profit.
Nice deal, per se, but the Hondas usually get a better Selling Price than $1000 over invoice but this is an advertised sale. In order for the dealer getting the $500 dealer cash and the $2000 customer cash back in a check, the dealer must submit proof that these numbers were (indeed) given to the buyer (no fudge factor allowed). The factory may also increase the residual by 1% or 2% over the usual 36 month residual which lowers your payment because the depreciation is less. Remember, your payment is depreciation plus profit (plus, plus, plus). A simple concept.
So, the factory now figures how much cash down payment you need to put down to get to that $299/mo payment, Plus, plus, plus.
So, let's say that the factory figures that all of this adds up the the customer putting $3000 cash down (plus the rebate) to get to $299/mo.
Ok, so it's $3000 down and the payment is $299/mo for 36 months. Got it.
Well, not so fast. Every state has a different sales tax rate for cars. Some states charge sales tax on the entire Sale Price (see IL). Some states charge sales tax on the portion you are "buying" (depreciation plus profit plus DOC fee) and some states tax whatever the payment is; payment is $300, tax rate is 5% so the total payment is $315. Every state charges a different title and tag fee, There is no way to standardize a monthly lease payment with so many variables and the factory just doesn't care, govt taxes and fees aren't their problem. You live where you live.
So, the fine print says "$299/month payment for 36 months with $3000 cash down plus tax, title, tags and DOC fee.". Typical legalese in a lease payment ad.

Money factor: The term they use to tell you how much interest that you are paying but the number means absolutely nothing to you. I'm sure it has to do with an algorithm that figures the payment but it can easily be converted to the more familiar APR. The lease screen can do this simple multiplication to tell you what the rate is but that would be too easy and would tell you too much.

Example as follows: (from LeaseGuide.com)

Car lease rate is called money factor and is expressed as a very small number, such as .00220, which is equivalent to 5.28% APR annual interest rate.
Convert money factor to interest rate by multiplying money factor by 2400. Or convert interest rate to money factor by dividing interest rate by 2400.


So, for the lease screen to show you the actual APR that you are paying, a field could be created to take the money factor shown and multiply it by 2400.
Complicated, huh? Well, now you know to have your calculator handy if you plan to lease.

So, a New Car dealer (mainly an Import dealer up to and including the luxury lines because well over 50% of their deals are leases) can charge whatever he wants as the selling price for the car being leased as well as/or raising the money factor up as high as the bank will allow (financing detailed later) and as long as the lessee is happy with the payment, all is good. Seriously. If the lease is a factory sponsored and published payment and rate, the dealer is bound by the payment and money factor authorized. Bottom line, if you want to lease, wait for a published lease ad. No ad means not a good idea to lease.

So, lets finish the Civic lease above. The $299/month lease payment is figured on a cash down payment (from you) of $3,000 plus tax, title, tags and DOC fee.
So, depending on your states tax rate and licensing and tag fees, to get that $299/mo payment you have to put down the required $3000 plus whatever the tax, title, tags and DOC fee charges are. To make it simple lets say the total tax for the lease is $800, title and tags comes to $150 and the DOC fee is $595, you have to put an additional $1545 down or a total of $4545 down to have a payment of $299/mo. If you put down $4545, your payment better be $299/mo.
So, the lessee usually doesn't want to put down more than he planned so these expenses are rolled into the payment. So the extra money leased comes to about
$50 a month so the total lease payment comes to $349 a month with $3000 total out of pocket which gets the advertised lease payment.

If you understand how a lease payment is calculated and you are savvy enough to tell them no deal until you see ALL the numbers, leasing is only for people who don't REALLY care what the payment is, they just want THAT car. If you like leasing, wait for the ad that spells it out and read/understand the fine print.

One other thing to remember is that the average lease (and ad) figures the mileage at 12,000 miles a year (36,000 total miles in a 36 month lease). If your history shows you actually drive 15,000 miles per year, you have to tell them that up front or you will be charged an obscene fee for every mile over the 36,000 mile cap. If they know up front and they change it to a 15,000 mile per year / 45,000 mile total, the residual will change (be lower) because the depreciation will be less due to the 9,000 extra miles. Since you pay the depreciation, your payment will rise $20, $25 even $30+ per month. Very important to understand that up front.

Simple, right?
 
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If you understand how a lease payment is calculated and you are savvy enough to tell them no deal until you see ALL the numbers, leasing is only for people
who don't REALLY care what the payment is, they just want THAT car. If you like leasing, wait for the ad that spells it out and read/understand the fine print.
Reference my above post about it being monkey math shenaniganry.
 
Correct!
However, I can understand not buying that New Car ad car due to not being equipped as wanted or not
qualifying for all the rebates applied (see above) but I cannot, for the life of me, understand how any
buyer can go in for an advertised used car (that includes the stock number) and sits down to buy it and
the salesman/manager slimes around the sales price. If there is a trade involved, that clouds it up a lot.
If it's a cash deal and they don't just write down the ad price, +++, why would anybody put up more than
5 minutes of BS to buy this car? I've read here more than once where a dealer refused to sell it at the
advertised price and the buyer hung around for whatever reason. IMO, it is illegal (meaning civil suit)
to not honor an advertised price (of course, you need hard proof).

The bold part here actually brings to mind a deal a shipmate of mine told me about years ago where the dealer may have actually lost money.

He and his wife were in themarket for a used SUV. Doing their research, which involved the internet, they found one that met their criteria...but was REALLY underpriced for the market value. THOUSANDS underpriced, in fact.

They printed out the page and went to check it out, figuring maybe it had been in an accident or something.

Got to the dealership (it was an actual Ford dealership, not a used car lot dealership), and asked to see the vehicle.

It was a trade in vehicle (duh...at a new car dealership), low milage, couple years old...an Expedition, if I recall correctly. But the actual sticker price was a round $10,000 higher than advertised on the website.

The salesman said there was no mistake on the sticker price and asked if they had printed out a copy of the web site page, because that price was incorrect. They showed him the printout and off the salesman goes.

He comes back smiling...the internet price is, in fact wrong. If they want to buy the vehicle they can have it at that price because that was the advertised price. But if they don't, as soon as they walk off the lot the website will be corrected to reflect the actual sticker price.

I'm betting the guy who maintained the dealership's website was NOT a happy camper that day!
 
Last car I bought from a dealership was a used car...and I made the deal as painless as possible for both me and the salesman.

I called the dealership and asked for sales department and got ahold of a salesman...I made him my point of contact, and told him so straight up.

I told him exactly what I was interested in, verified the car was still available. Set up a time to come in and look it over. Told him if I was interested, and any issues which needed to be dealt with were handled to my satisfaction, I'd have a check ready to go.

My one caveat: I deal with HIM. Not his manager, not anybody else. I told him if he's a salesman, then I expected him to do all the selling and no running back and forth for "approval"...either he knows the value of the vehicle and can swing a sale, or not.

Now, between the lines it was understood that all sales are, in fact, going through a manager at some point. However, I just don't want to hear "I need to get this approved", like he's nothing more than an ignorant sockpuppet with a hand up his keister. If he's the salesman, I expect him to be the one conducting the sale to my face, not some hidden entity behind the scenes.

We got along great...me because I dealt with him without feeling like he was an intermediary jerking me around, him because he had a customer who knew exactly what he wanted and fully intended to buy the vehicle in question if it met his approval.

I imagine for a salesman that's somewhat of a dream sale scenario, because time is money and the less time he has to spend on one customer means more time to be spent on another.
 
Personally, I think the most important part of buying a new car is agreeing upon a value for the old car that is being traded in - the ACV, as @larryh1108 calls it. The price of the new car, with all the discounts or rebates plus miscellaneous fees and charges, is gonna be whatever it is. Period. If I don't like it then the buying process stops right there. Doesn't even get started really.

So now we are negotiating over what I will get for my old car when the new car dealer buys it from me. And that is what is actually happening. He's buying my car. But instead of me putting a price on it, he's making me an offer on it.

(Now, before anyone says I can sell it out of my driveway for more money -- yeah, I can. I've done it. Don't like to do it for a variety of reasons so I'm gonna wholesale it to the dealer. My choice.)

But I have to have a price in mind that is acceptable to me before I walk in the door, don't I?

As much as I would like to say I don't give a flying squirrel what the dealer gets for it or what he thinks it's worth I'm, by God, not gonna take less than $100,000 for it or I will walk out right after I nut punch him............ that's just not reality.

My old car is going to change hands 3 times........ that's reality. I'm gonna sell it to the new car dealer. He's gonna sell it to the used car dealer. And that guy's gonna sell it to some poor bastard who thinks an 8 year old Subaru with 80,000 miles on it is just the car for him. And that poor bastard is the guy who, ultimately, will set the price on my old car. That's another reality.

KBB says my old car has an average trade in value of $6,100. NADA says $6,850. They can't both be right. So that doesn't really help me get a price in mind for when I go arm wrestle with the appraiser at the new car dealership.

So let's look at it from the other direction. KBB says retail on my old car is $10,300 and NADA says $10,025 (with an allowance for relatively low mileage). Well now, they are getting closer together.

What about real world pricing? Aaaahhhh - Auto Trader. Look up 8 year old Foresters and find that in the 70,000 to 90,000 mileage range they are being advertised for $10,000 to $11,000. Asking price, of course. So that $10,000 selling price on average is looking more solid now. So let's assume that is reality.

If the poor bastard is gonna pay $10,000 for it --- what's the used car dealer gonna pay for it?

Well, Larry says the used car dealer wants to make $1,500 to $2,000 profit on the car. And he's gonna assume $500 for reconditioning (even if he doesn't put that much into it). But my car has a defect. There's a very light but noticeable scratch on the driver's side where I brushed up against a branch on a bush that had been cut off. Ooops - there's another $500.

So the used car dealer says he's not willing to go more than $7,000 for my old car. Maaaaybeeee $7,500.

Now, the used car manager / appraiser at the new car dealership wants to make $500 for making that phone call to the used car dealer. He's gonna make an offer of $6,500. Sure, he's gonna whine and cry about the scratch and the mileage and start at $6,000 or maybe even less because he wants to hold back another $500 to make a little more on it but, when push comes to shove, he will go the 65 rather than queer the deal on the new car.

If I hold my breath and stamp my feet and make a fuss in the showroom could I get $7,000 for it? Possibly. And I'll surely try for it. But I won't really hold my breath.

Cuz Mr. Poor Bastard that ends up with it is the ultimate price setter and everyone in between my driveway and his driveway is gonna take their bite along the way.

And that's reality.
 
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Well worded, notso, well worded.

And your analogy is EXACTLY why I am writing this encyclopedia.
If it helps anyone who reads this how the dealer looks at things, so he won't take it personally when he thinks they are lowballing him.
He (dealer) just wants to sell that new car and buy (from the seller) his trade in, which the dealer really wants no part of.
Breaking even on any transaction does not pay the bills so when he buys your car (trade ACV) he has to allow room for the $500 profit he needs to get rid of your trade in. Well, why does he need that $500 when all he did was shuffle around some papers?
Well, that is coming soon. That $500 wholesale profit is needed for when he has to take aged inventory to auction. Taking old inventory to auction (the 80+ day old units) generally costs them thousands. (See: Used Car thread; Auctions)

Always keep in mind that when you walk in to a dealer to sell your car (or gun) that he will not offer you anything close to the retail value. The difference in the prices (his vs yours) is his money, not yours. It all depends on how much of his money he is willing to give to you. You may be a nice guy but his bills are more important (to him) than your bills. You always have the option to get closer to retail by selling it yourself.

More to come on this topic.
 
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This has been an interesting thread. Here is my take on buying a new car. I have only bought a new car twice in my life. I am on the verge of buying another one but that is another thread. :( One was a Ford F150 truck where the cost of the new truck with incentives with full factory warranty was a better dollar to cost ratio then buying used. The second was a BMW M3 which the wife wanted. We bought this new because of the warranty and maintenance that comes with a new BMW. You lose maintenance on a CPO and the CPO does not cover everything that the original warranty does. Another consideration was with a high performance street legal race car like the M3 they guys who lease them drive them like they stole them and the long term life of the CPO tend to suffer from it. Other low mileage examples have been tracked and there is no way to know how that race car was actually driven by th previous owner but odds are is was driven hard and fast.

For me the buying approach for new and used cars is very similar. In my experience new has advantages because it is easier to figure out the MSRP vs the "invoice" cost of the car. We all know that "invoice" does not equal exactly what a dealer has paid for a car but it is as close to an objective number that one can work with.

First I do a lot of research before I set foot into a dealership. I research the cars I am interested in. Look a the models, trim levels and options that I want. Once I have narrowed it down to a few cars I go and drive them. I sit in them. I sit the all the seats. I look at the trunk and get a feel for the car not just the driving part but the total car. I look over the options. Use the tech in the car if I am not familiar with it. Today like it or not the infotainment system is a major part of interfacing with the car. Some are better than others. Some are total crap and others are elegant and intuitive. It will matter down the road IMHO. I personally hate the one in my F150. It is a POS but I knew that going in. Try to be efficient in this visit. Try not to waste their time. Their time is literally money.

When I go tell them I am looking but am not ready to buy today. I am looking to narrow down the options. Once I know "which"car I am going to get I will contact them and other dealers to find that car. I get the salesman's or saleswoman's card upfront if I think I can work with them. I am honest and tell them that if I end up wanting a car they sell I will give them every opportunity to sell me that car. I do not talk price at this time. I don't care about price at this point I am trying to find the right car. If they try to talk to me about payments financing etc... I simply tell them I am not ready to discuss those things yet. I am not going to talk numbers about a car I have not even picked out yet.

Once I have found the car I want after test driving and putting my hands on the prospective cars it is then time to do a deep dive into the pricing of the car. First I look at somewhere like Edmunds for all of the incentives that are being offered in my area. Edmunds allows me to put in my zip code and will give me the incentives based on the location that the car will be registered in. It is my understanding that incentives often vary by region so what they are offering in CA may not be the same as NC. Once I have that I try to figure out which ones I qualify for. Sometimes you will get lucky and can save yourself some $$$ before you have made your best deal. Here are some examples of incentives. Loyalty credits, cash back for using manufacturer financing, cash back, changing brand credits (mainly high end cars like Audi,BMW, MB etc...) and of course manufacturer financing incentives. Look closely and see if I can stack any of the incentives.

Lots of brands will not let you take cash back and their low APR deal. Others will. If they only let you take cash back vs low APR I price it out against my bank or local credit union etc... I know the number I can get from them and run the numbers to see which nets me the best deal. With good credit I can often take the cash back and get the same APR from another source basically stacking the two by bringing my own financing. If I pay cash I take the cash back unless they will offer me additional $$$$ to use their financing. I look at the terms and conditions regarding early or prepayment of the note. If there is no penalty for early payment I can take their incentive $$$ for financing make X number of payments and then pay off the note in full pocketing the incentive cash for financing while never really paying that much interest.

Once I have the incentive part down go to an enthusiast forum for the car brand I am looking at. Most will have buyers guides and I can find out what the true dealer markup is. For example BMW is 7% on the car itself and 8% on options. Then I look at the inventory of the dealer or dealers where I test drove cars. If they have the car I am looking for in stock and I liked the sales person I call them and ask for the build sheet which will show the MSRP of the car and its options. From there I work the math and I now know that the "invoice" price is. I look online and try to determine how long the car has been there. Time is your friend here. Cars are like cattle on the feed lot. They cost the dealer $$$ everyday to "feed" them. At some point if its been there too long they have to cut someone a deal and move it or risk losing more money.
 
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Part #2


I then start the negotiation. ALWAYS NEGOTIATE FROM A POSITION OF STRENGTH. I have to be willing to walk away from the table if I am not getting a fair deal. This does not mean I am unreasonable but I am not going to be weak. I do my best to not be emotional about the car. I ask them for their best price on the car I want. I let them make the initial offer. Even with all of my research I may have missed something that would make this car cheaper than I think. When I request a price I have 2 other numbers already in my mind. The first is the "ask" price which will be my first counter offer. The second number is my goal price which is what I am willing to pay for the car. This is the number where I will stop negotiating and setup up taking delivery. I make sure I know their processing fee, their title and lic fee and all taxes etc. The number I am looking for and working with is the total cost of the car after dealer concessions, incentives and discounts. You have to take those into account. Fees vary from dealer to dealer. Do not accept any of their "standard" add ons like tint, gps location, nitrogen tires, undercoating etc.... refuse those if they are already on the I car ask them to be removed. If they won't remove them I ask for them for free. Most dealers will not remove them or give them away but will offer a discount. That discount will have to be huge or I will walk because each of those are hidden profit centers for the dealer.

Depending on how long the car has been there I determine what my first "ask"is. On avg I think a good ask is about $1000 under "invoice" depending on various factors like brand, time on the lot & options. The more options of can equate to more room because there is more profit for the dealer on those. At this point I can make your offer in person or over the phone or email. I tell them I am bringing my own financing or "Cash" unless I know I am taking theirs for incentives or because I already know its the best rate I can get. I do not have to waste time at the dealership going round and round. The dealer of course wants me in the shop. They want me to be there and make an emotional investment in the car and the purchase. That is one of the reasons the process takes so long IMHO. Once they have me in the seat they have tipped the scales to their advantage. This is why I recommend visiting the dealer early in the process not late. You don't have to show up in the dealership again until you have a deal in place. I look in the local area at other dealers and look for similar or identical cars and make them an offer as well. I am up front tell every dealer I contact who they are competing against. Treat all of them fairly and equally. Most of the time 2 or 3 will rise to the top.

It is rare to get your "ask" so have have a number in mind that is fair. I think of this as my "goal" price. I don't want to lead with my goal price because rarely will they take your first offer and if you lead with the "goal" the price is only going to go up from there. Also there is a small chance that they could have given you your "ask" you left money on the table. My approach to business and sales is that the deal should make sense for everyone involved. It does not have to be a 50/50 split but one side rapping the other is not good business. So I realistically expect and want them to make money while as the same time get the best price I can for the car. Work your way to that goal price. Get as close as you can sometimes you are going to get it other times you are going to have to pay a little more. No one "wins" every time. If your need is not immediate you can always rise and repeat the process on another car. I do not let emotion push me to pay more than a few hundred over my "goal" price.

Once I have a price then I arrange for delivery have my outside financing or cash worked out and go to the dealership. I do not take any dealer add ons once I am in the finance office. I simply decline. If pressed I will illustrate that they are selling me what amounts to insurance. Things like the wheel and tire package, window and road chip coverage, extended warranties etc...are all insurance. I respectfully tell the finance manager I am going to take the cash that I would pay them for that insurance and put it in a savings account and self insure against those hazards. If I never bend a rim and blow a tire then I am way ahead. If I bend 2 rim and blow a tire I am even. If I bend 4 rim and 4 tires I am behind if I am self insuring. By the same token for me to break even on their insurance I am going to need to make a claim of at least 2 rims. The only time I have bought extended service contracts is when I knew I did not have the cash to self insure against the high cost of repairs on used luxury vehicles. I will not buy one on a new car. YMMV. I then sign and drive away with a deal I can live with. It might not be the best deal but it won't be the worst either.

The same process can work for used cars but the value part is harder. KBB, Edmunds, Truecar etc... can help you determine the market valve on a used car but it is more of a guestimate IMHO. Sort of like Zillow is for houses. It can get you in the ballpark but there is a lot more variation car to car in the used market. Anyway interesting thread. These are my $.02 so take them with a grain of salt and remember how much you paid for them. LOL ;)

PS Never trade your car in when purchasing a new car if you can avoid it. It just adds another number to the equation that complicates the deal. It is a way for the dealer to manipulate the transaction in their favor. Sell the car privately or even take it to somewhere like Carmax where you can get a fair price for the car and walk into the new car transaction without the baggage of a trade. YMMV
 
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wvsig, thanks for the excellent advice.
You have shown that the best way to get the best price is to walk into the dealer with 100% research and by knowing which car you want, at what price and that you are paying cash. Even if you don't end up paying cash, that is the best way to open a deal.
So I realistically expect and want them to make money while as the same time get the best price I can for the car.
Wiser words have never been spoken. They aren't there to lose money (and they don't) and you aren't there to pay top dollar. Both sides being satisfied is what makes a good deal for all.
Never trade your car in when purchasing a new car if you can avoid it. It just adds another number to the equation that complicates the deal. It is a way for the dealer to manipulate the transaction in their favor. Sell the car privately or even take it to somewhere like Carmax where you can get a fair price for the car and walk into the new car transaction without the baggage of a trade.
Again, very wise words.
You said, in 2 shorts posts, what took me 3+ full pages to say.
ALWAYS NEGOTIATE FROM A POSITION OF STRENGTH.
And this statement says it all. If you walk in and never give up control of the deal, you will not be taken.
Well said, everything,
 
wvsig, thanks for the excellent advice.
You have shown that the best way to get the best price is to walk into the dealer with 100% research and by knowing which car you want, at what price and that you are paying cash. Even if you don't end up paying cash, that is the best way to open a deal.

Wiser words have never been spoken. They aren't there to lose money (and they don't) and you aren't there to pay top dollar. Both sides being satisfied is what makes a good deal for all.

Again, very wise words.
You said, in 2 shorts posts, what took me 3+ full pages to say.

And this statement says it all. If you walk in and never give up control of the deal, you will not be taken.
Well said, everything,

Thanks I have helped almost every member of my immediate family buy cars at one time or another. I went through this process last year with my wifes car and am doing it myself as I type.
 
Is anyone else of the mind that all these car buying threads should be made sticky?

It would sure make them easily available for quick reference or for new members.

Just a thought.
No.

No disrespect to the original poster, but I’ve not really learned anything. There is no easy take-away. There is no easy to apply methodology. No secrets were exposed. It just furthered my negative sentiment toward buying a new vehicle in that it’s one convoluted pain in the ass.
 
Well I ended up buying an F150 King Ranch V8 fully loaded. This thread helped me educate myself enough to get a good deal on a higher trim level than I would have been able to get. It didn't save me much time tho. I was in the dealer for about 5-6 hours negotiating the deal. It was worth it tho. I went to several other dealerships and walked out before I found a salesman that wasn't a douche.
Thanks to larryh1108 055.JPG
https://www.carolinafirearmsforum.com/index.php?members/larryh1108.1962/
 
I’m looking at luxury sedans, BMW 7, Mercedes S, Lexus LS.

Have had a couple Ubers with the Mercedes and BMW. Have owned a Lexus LS for a decade.

I think the basis for negotiation are the same, but any specific ideas for this class of vehicle which surely has a high profit margin.
 
As we know, the profit margin and markup is higher.
The sales staff at these types of dealers are seasoned pros and usually the best of the best due to the high profit potential.
Several thoughts:
#1 They have to believe you are ready to buy that day. That is important (even if you change your mind later).
#2 They have to believe you are capable of buying the unit you are looking at. (they see a lot of dreamers).

If they believe you can can buy and are ready to buy, they won't let you walk if there is a deal there.
They sell fewer cars then the mainstream dealers. If the normal dealers sell 100 new a month, the luxury brands may sell 35/month.
Walking is the best way to work these deals.
Be professional, not confrontational.
Be firm but not a jerk.
If they let you walk and you've been professional then you've found their limit.
However, they have to believe you will walk and it is not a bluff.
Ask for their card and go to your car. Start it up. Actually leave.
If it is a game of chicken, they will try to stop you.
If you were close, they will follow up the next day.

If you do your homework up front and know the approximate cost (new car) then only you can decide what a fair profit is for the dealer. New trucks go for about $2500 profit on domestic units.
A new luxury car? I would put it at 5% of MSRP. A $70k car, $3500. A 100K car, $5000, etc.
They do have overhead and do deserve profit. How much is up to you.
 
I’m looking at luxury sedans, BMW 7, Mercedes S, Lexus LS.

Have had a couple Ubers with the Mercedes and BMW. Have owned a Lexus LS for a decade.

I think the basis for negotiation are the same, but any specific ideas for this class of vehicle which surely has a high profit margin.

Every brand is going to be different. They all have different incentive programs and ways to motivate buyers. Since you already own a Lexus look and see if they have a loyalty credit. Then look at BMW and MB and see if they have a "other brands" switching offer. Sometimes people like BMW and Audi will give you cash if you are moving from a competitor brand. BMW calls it a Conquest Bonus Offer. It can be up to $1000 sometimes and Lexus would qualify as a competing brand. Margin on these cars are not as high as people think they will be. Just because the price point is 2X higher it does not mean that the profit is double but like all things there are good and bad deals.

I have never purchased a Lexus so I cannot give you any insight there but the approach to buying one is the same as any car. Look at my posts above. Remember that a lot of the "I got this price" on message boards is crap. It like gambling in Vegas. People tell you about the wins and exaggerate them and never tell you about the losses. Still there is information out there. Look on forums for the brands you are looking at and most of the time there are buying guides.

Mercedes is the worst to deal with. There are almost no incentives beyond 1.99% +/- financing. There is almost never any cash back. The only exception is their holiday savings events which sometimes include cash back incentives. You will basically call the dealer and they will tell you the price based on their "invoice". Normally it is between 0-5% over invoice depending on what you are looking at. The Mercedes will be by far the most expensive of the group. It has been my experience they simply do not deal. They tell you this is the price and you might get a little here or there but not much off. I personally could not justify the their upcharge. I was looking at Audi, BMW and Mercedes. For comparable cars S6, M550ix and the E Class 53 AMG. The E Class was almost $15,000 more.

I have more experience with BMW. I have gone through their buying process twice in the past 2 years. If you are looking at a 7 series click this link. https://www.7post.com/forums/showthread.php?t=1505450 It will bring you to a pricing guide and order guide for current 7 series and Alpina 7. These will tell you the exact retail pricing for the base car and all of the options and packages. It will mirror the build tool on BMWs site but it is easier to see the exact costs. From the pricing guide you can determine the "invoice" cost. Profit is not as high as you might think. Dealers make 7% on the base car and 8 % on options. You can take the base car you want then add the options you want to determine the "invoice" of the exact build you want. Then check the Edmunds site. https://www.edmunds.com/bmw/car-incentives.html You need to put in your zip code and it will give you the incentives for your area. They differ sometimes via region.

I always lead with $1,000-$2,500 under invoice. Before incentives. 99% of the time you are not going to get that. After you have done your research it is best to determine the number that you are willing to pay over invoice. I try to approach it as a % over invoice because sometimes you will find a car with slightly different options on the car then what you originally specd out so you have to take that variance into account. Contact more than one dealer. Do not limit yourself to just your area. You can purchase a car from a dealer in CA and have it delivered to the Performance Center the same as you would from the dealer down the street. If you are shopping one dealer against another be honest and tell them what you are doing. They know who their local competition is and they will either make it happen or they won't. Try to be respectful of their time and don't nickel and dime them over $100 if they are providing you good service. I am always up front and always offer the opportunity for a dealer to make a best and final offer if they are not the lowest. I also tell them why I am not buying the car from them. Sometimes its price other times it something else.

Another factor to consider is that with BMW and some of the other high end brands you can sometimes make your best deal by ordering the car built to your exact spec. Each BMW is built to order for the customer or the dealer or dealer network. They do not build unsold vehicles. The worst thing a dealer can have is a high end expensive car sitting on the lot. The best analogy is that they are like cattle. Once you put the on the lot you have to feed them until you sell/slaughter them. Often people think the longer a car is on the lot the better price you will get. At some point the dealer is going to take a loss because the carrying costs are killing them. This is true to a point but once the car is on the lot and it has been "feed" the real cost of the car to a dealer has gone up vs ordering a car that is already sold and simply delivering it. There is a point where once the dealer has it on the lot they have to maximize the profit and wont deal. They are gambling that selling to the right person will net them more $$. There is a breaking point but only they know where that it. Sometimes we get lucky and hit it a deal that timed perfectly but most of the time we don't we get maximized. Often you can find a dealer with an allocation, a open build order which has not been filled, and negotiate a better deal because there is less "cost" involved for the dealer in this kind of deal. They have no carrying costs. They are not shipping the car. They aren't even delivering the car. Another big plus is if you order your car you can pick it up at the Performance center and get to drive a car just like yours on the track for free. To take it a step further you can even pick up BMWs or MBs in Germany at the factory there. Drive them around in Germany and then put them on a boat and have them redelivered to you in the US. The call this European Delivery. It is cheaper to do this then pick up the car at your local dealer. :eek:

So for the M550ix I bought recently here are the details of the deal I worked out. What I am listing is what I got no BS. It took me more than a month to work this deal and really only seriously engaged 3 dealerships. Bought the car sight unseen as it was being shipped from Germany.

Cash Incentives
-$2,000 in loyality cash because I already own a BMW.
-$5000 cash for finance though BMW @ 2.99% and we can pay it off anytime.
-$500 for a test drive promo.
Total was $7500 cash incentives from BMW.

Dealer Discount. This is what will really differ from dealer to dealer. The guys in Charlotte would not go as low on the same car I end up buying. It was 3rd dealers allocation that all the dealers I worked with had access to.
-$5,200 in dealer concessions=discount. This represented about a 6% discount from MSRP. This was under $1,000 over invoice before the cash incentives.

-$1,000 Rebate from BMW because my wife is a BMW CCA member. There is a deal if you join the BMW CCA for 3 years $134 you are immediately eligible for the rebate program. Yearly members have to be member for a full calander year before they are eligible. The current rebate for a 7 Series is $1,500.

So all said and done I got $13,700 off of MSRP. This was basically 16% off of MSRP or 10% lower than "invoice". This was a decent deal not a mind blowing fantastic deal. One of the reasons I think I got the deal I did is that the dealer who sold it to me never took deliver of it. They never touched the car. There was no carrying cost. They got paid to book the deal and file some paper work. The dealer whose allocation it originally was let it go because they did not have immediate buyer and did not want to put another cow on the lot. Now the part of the equation that I do not know is how much the dealer is getting in hold back $$$ or other end of month and of quarter incentives from BMW on the back end that makes them more $$$ on the car. For all I know they made up the loss on my particular car by hitting a volume number but that is pure speculation and part of the game. I did not take any extended warranties or coverage on the car. I also got them to deliver it to the Performance Center in Greenville and got a free hotel stay with dinner and a day of driving on the race track. Oh and plus a pretty nice car.

Good luck if you want to talk more about BMW I would be happy to talk to you about the process and recommend a few dealers to you.
 
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A great experience and you shared it in a great manner.
Thanks!
I believe you did great.
It proves the point that the more you prepare up front, the more money you will save.
That is the most important point in getting the best deal.

Thanks in the end the most important part is I got the car I wanted for a price I was willing to pay. :)
 
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