The inside scoop of buying a NEW car

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larryh1108

larryh1108

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There is another thread about automobile service departments and how unscrupulous they are. I do not wish to hijack that thread as it has gone to the car buying experience. It is a topic that affects many/most people who own and need a car.

Owning a car is a huge expense. Most people need a car for their daily lives. There are so many ways to get ripped off in the automobile industry that the average buyer is very likely to waste money when they do buy or service a vehicle. Some times a lot of money

Last year I retired and my last 25 years was spent in the retail automobile industry. I mainly worked in management after selling for the first few years. I was the manager who came and sat down with you when your salesman struggled. I was the guy in the finance office who did all of the paperwork when it was time to buy. I was the manager who handled a complaint or service issue that came from the service department. I was the guy who answered the BBB complaints from an unhappy buyer. I was the guy who knew the true, bottom line cost of a vehicle. I was the guy who got you a loan when no one else could. I wore all the hats except being an owner. I never wanted to be an owner. No thanks. I don't have the ego to be that guy. I like sleeping at night. I always called myself "That honest car guy" because I was. I took pride in it and often times I left a dealership because we didn't see eye-to-eye on being honest with the customer.

Since I am retired and have some time, I've decided to share the inside scoop of buying (and selling) a NEW car. Not used, at this time, because that is a totally separate type of transaction. I will create another thread about buying a USED car to keep them separate. They differ a great deal on the selling end. I'm sure I'll jump around and throw out random thoughts. I'm just going to write what pops into my head and I know I'll ramble some like I am now.

I encourage other people in the business to offer their insights. I do not claim to know it all nor do I claim to be the final word. All I can write here is my 25 years of actual experience. Others have a different perspective.

It would be nice to make this an inter-active thread. Ask questions. Challenge something I said. Share something you found that works. If one reader here saves $1000 from reading this then it is well worth our time. Who knows, if the mods think it is a useful tool they can make it a sticky.
 
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.
 
I sold for a few years. I worked in the truck department of a Chevy dealer with a great reputation, long history and better than good service department. This was in a city - Lansing, MI - with 6 GM plants at the time...so practically every customer had essentially fixed price employee discounts. It couldn't have been a more beneficial win-win car sales environment.

I hated every minute of that job. It's the only job I ever SHOULD have been fired from.

Aside from maybe being a lawyer, it's the only job I can think of where the customer walks in EXPECTING to get screwed and behaves accordingly. Car customers were absolutely ridiculous - and I've spent a lifetime in sales of one form or another.
 
I have owned 107 vehicles in my life. The vast majority were new. I have purchased 7 new Jeeps in the past 7 years. Along the way a couple of Corvettes several Mustangs, and many SUVs. That just in the last 7 years.
I expect my dealer to make a profit. Just like I want one on my product. In all my dealings I never bought a car that I wasn't comfortable with the price. I can not be SOLD is what I am getting at. I have left many deals.
 
New car sales from the dealer's view.

Consumers love buying a new car. Some 15 million to 17 million are sold every year.
The average cost has risen to almost $30,000. That's a lot of money.
We hear so many horror stories of buying a new car that the average consumer is scared to walk into a dealer.
Notice I said "average" consumer. This does not apply to the buyer who has educated themselves enough to not get taken at the dealer. You understand how it works.
Believe it or not, we prefer to sell to the educated consumer. We both speak the same language and can move thru the process quickly and fairly. It can be a pleasure.
Those who are new to the process or equate new car shopping to going to the dentist then take notice. Not being intimidated when you walk in the door is step #1.

Why did you go to that specific new car dealer? Is he local? Did a friend or relative recommend them? Did you see an ad? Did you buy there before?
Why you go to a specific dealer means a lot, believe it or not. A dealer who has been there for 30 years (a specific owner, not a specific brand) usually has a good reputation and treats their customers right. Your dad or grandfather may have bought from them and were happy. You may have a salesman who you bought from before and treated you right. This type of dealer has a sales staff of veterans who have been there 15, 20 years or more. They don't take walk ins because they have a book of previous customers who seek them out and referrals from people like you who ask for them by name. If this is you and your guy, you are usually good to go. There are still things to watch for which we will cover later.

Is it a local guy? Let's use Ford for an example. That Ford dealership may have been there for 40 years. You drive by it every day on your way to work. It being there is a fixture like the old library building, huge oak tree or police station. It has always been a part of your community. However, did the small dealer name change recently? Was it the large FORD sign with a name under it like Smith, Jones, Happy, Friendly, your town name, etc? Was it Springfield Ford 5 years ago and last year it was Smith Ford and now it's Monroe Ford? Does is have huge signs saying "Under New Management"? If this is the case then these are transient owners.
For whatever reason, the name still says Ford but the ownership changes. For some reason the old owners went out of business. Why? Who knows but it's usually mismanagement and/or a greedy owner who tried to get rich quick. They probably used every tactic you've read about to squeeze as much money out of you as they
can and make a terrible buying experience for you. Yeah, the new guy just may be the next, honest dealer. Do you want to be the guinea pig?

Did you see an ad?
Let's talk about the art of the new car dealer ads.
We'll do that in the next post.
 
BatteryOaksBilly said:
I have owned 107 vehicles in my life. The vast majority were new. I have purchased 7 new Jeeps in the past 7 years. Along the way a couple of Corvettes several Mustangs, and many SUVs. That just in the last 7 years.
I expect my dealer to make a profit. Just like I want one on my product. In all my dealings I never bought a car that I wasn't comfortable with the price. I can not be SOLD is what I am getting at. I have left many deals.
Click to expand...
Ok I'm bad but this is just amazing! Makes me want to get a different daily driver.
 
One thing I will mention is if you are looking for a loan, be sure to bring a calculator and double check the amortization numbers. A friend of mine did this and saw they were trying to get him on an 8% interest loan claiming it was like 2%. He called him on it and they doubled down. It wasn’t until he showed them the calculation and numbers that they fessed up. They count on people focusing entirely on the monthly payment.
 
Invoice....minus "rebates" ...minus holdback normally gets you a good price... correct??


Thanks for starting this thread OP.

DS

Sent from my XT1575 using Tapatalk
 
noway2 said:
One thing I will mention is if you are looking for a loan, be sure to bring a calculator and double check the amortization numbers. A friend of mine did this and saw they were trying to get him on an 8% interest loan claiming it was like 2%. He called him on it and they doubled down. It wasn’t until he showed them the calculation and numbers that they fessed up. They count on people focusing entirely on the monthly payment.
Click to expand...
People get fixated on the monthly payment. I’ve only bought 2 new vehicles in my life and they were purchased a month apart from the same dealer. Both times I brought a check from my credit union. All I needed from the dealer was a VIN and final number. To their credit though they made the process very easy and I am likely a customer for life. I drove past a couple of dealerships of the same mark to get to Shelor in Christianburg to buy.
They didn’t focus on the payments and were straight with me I felt. I walked out on a deal at a dealer much closer to where I live to go there and won’t hesitate to go again. Recently thought about trading my truck locally with another dealer and in our conversation I mentioned how easy they made the process there and the sales managers response was how much business they took away from them. I’ve always believed that if you have to run someone down that maybe you’re lacking. Long story short is we couldn’t get together due in large part to them wanting to up sell me on some accessories I didn’t want.
 
Can we start at the bottom?

Dealership claim that they make little to nothing on the sale of a new car. They claim that they make their money on service and warranty work.

I believe the second statement is true, but that the first is simply a lie. In your experience, what is the margin on new car sales, and what are the revenue and cost elements that make it up?
 
One tactic that gets my goat is “Trade Allowance” and actual trade value is not offered unless you specifically ask. I had a salesman dodge that question several times until I made a move for the door.
 
New Car ads.
Again, these are different from used car ads.
They cost a lot of money to put out there.
It could be print ads, internet pop ups, mailers, tv, radio, etc.
These aren't meant to be confused with the TV commercial ads paid for from the main company.
The Ford, Chevy, Honda, Toyota, etc general ads showing their products are not what we are talking about here.
The local dealer may pay for his name to pop up at the end for the local place. They may show a special financing deal or $2000 rebate or whatever. Those ads are not what we will talk about here.

Ads from your local dealer are specifically for you. Let's use Nissan this time. You are looking for a new Nissan Altima, a very popular and decent car.
You local Nissan dealer has been there for 2 years. He runs splashy ads all the time. He has those annoying air blown gorillas. You know the guy.
Those local ads are expensive. Thousands of dollars. Those gorillas are expensive. Set up, tear down, delivery, etc. More money.
They have a big "Sale" going on. Usually around a holiday but whenever works.
So, to entice you in, they run a Hot Special for a brand new Altima for only (numbers made up for ease of writing) $16,000. All the ones you've seen
are $20,000 so you save $4,000! Great deal! I gotta go there!
Ok, the fine print says "All rebates applied". Fine, you say. All dealers give those rebates. The TV said so on the national ads.
$1000 cash back (rebate) or special financing of 2.9% for 66 months. Great deal! Did you see the "OR" there? You want the $1000, you don't get the 2.9%.
Which is a better deal? A calculator can tell you but you don't see the "or", only the 2.9%.
OK, all rebates applied. Let's see what that means.
Many manufacturers offer (published) rebates other than what the national ad says.
$1000 customer cash (rebate) everybody.
$500 for first time buyers (first time buyers only)
$500 recent college grad (not everybody gets this)
$500 active military (obvious who gets this)
$500 owner's loyalty (proof you owned this make previously)
$500 first responder or active law enforcement
etc.
So, if you are an average guy with none of the additional rebates listed, you qualify for the $1000 dealer cash rebate. Your other $2500 in rebates does not count.
The $17,000 (all rebates applied) means your cost is $19,500 and the further away but 30 year dealer has the same car for $19,000. ($20,000-$1000 rebate).
You find this out when you are getting ready to sign the buyers order. You are blown away but sign because you don't deserve the other rebates and have been there 5 hours already. You are tired and cranky.
*TIP- Plan to spend 5 or 6 hours there. Bring a snack. leave the kids with family or friends. Go prepared for a long day. It does take time to buy a car.

Ad #2. You see that new Altima for $1500 less than everyone else. Ad states "Fully Factory Equipped". Well, who else installed the equipment?
You read "fully loaded". Stock# 1920770. 32 Altimas to choose from!
Dealer reads "manual transmission, no A/C, no floor mats, no power windows, no power locks, no cruise control, etc.
The stock# states only this unit is available at this price.
You read 32 Altimas available at this price. The dealer says they have 32 Altimas in stock but only 1 at that price.
So, you go for the ad car. It is either sold or you realize you want an auto transmission and A/C, etc. Add in the extras and you are more than the competitor who listed a fully loaded car.
Bait & switch or did you not read the fine print?
You decide.
 
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Sandman_NC said:
One tactic that gets my goat is “Trade Allowance” and actual trade value is not offered unless you specifically ask. I had a salesman dodge that question several times until I made a move for the door.
Click to expand...
Let's talk about the Trade Allowance in buying any car since you brought it up.
The "Trade Allowance" is the amount they SHOW YOU, on the bill of sale, for your trade in.
Many say to with hold mentioning a trade in until you make a deal on the new car.
You will be asked, up front, if you have a trade in. Say "no" and you are lying. Say yes and the game begins.
Do you want to start this process by lying? Is that how you want the entire process to work? Both parties lying to each other?
Yeah, the guy who pops the trade in at the end gets the surprise. You surprise the salesman and then he surprises you back.
Yeah, that's how we want to treat each other. We'll cover that later.

Trade Allowance is there to make the buyer feel good. A better phrase would be "Trade In Value".
As mentioned, Trade In Allowance and Trade In Value are 2 different numbers.

When a trade in is part of the deal from the beginning, the way the deal is structured is different. If there is a payoff on the trade in, it gets
even more convoluted. Let me explain:

No trade in deal (simplified);
MSRP $20,000
Factory Rebate -$1000
nice guy discount -$1000
Sale Price $18,000
plus tax, title, tags and DOC (we'll talk about DOC later)
Simple.

Trade In (paid) deal
MSRP $20,000
Trade In - $5000
Cash Difference $15,000 (difference between the sell price and than trade in)
Factory rebate -$1000
Sale Price $14,000 (after trade in)

Looks good? Maybe. However, you thought your trade is worth $7500 since that's what they sell for on Craig's List.
Well, trading in is a wholesale transaction, Craig's List is selling it retail.
So, the dealer likes your trade in so he bumps the trade in to $5500. (What a guy).
Your Trade In ALLOWANCE is now $5500 instead of $5000.
Price now $13,500 after trade. Plus, plus, plus.
"Not bad" you think. We are close. "Give me $5750 and we have a deal" you say.
You sign your offer and he takes it to the manager for approval.
The salesman goes back to the manager knowing he'll say yes but this is the process.
They shoot the crap a few minutes, the manager signs the offer and a deal is made.
$13,250 plus, plus plus and your trade in.
Deal!

So, you ended up paying more for the same car than if you didn't have a trade in.
How, you ask?
 
larryh1108 said:
Let's talk about the Trade Allowance in buying any car since you brought it up.
The "Trade Allowance" is the amount they SHOW YOU, on the bill of sale, for your trade in.
Many say to with hold mentioning a trade in until you make a deal on the new car.
You will be asked, up front, if you have a trade in. Say "no" and you are lying. Say yes and the game begins.
Do you want to start this process by lying? Is that how you want the entire process to work? Both parties lying to each other?
Yeah, the guy who pops the trade in at the end gets the surprise. You surprise the salesman and then he surprises you back.
Yeah, that's how we want to treat each other. We'll cover that later.

Trade Allowance is there to make the buyer feel good. A better phrase would be "Trade In Value".
As mentioned, Trade In Allowance and Trade In Value are 2 different numbers.

When a trade in is part of the deal from the beginning, the way the deal is structured is different. If there is a payoff on the trade in, it gets
even more convoluted. Let me explain:

No trade in deal (simplified);
MSRP $20,000
Factory Rebate -$1000
nice guy discount -$1000
Sale Price $18,000
plus tax, title, tags and DOC (we'll talk about DOC later)
Simple.

Trade In (paid) deal
MSRP $20,000
Trade In - $5000
Cash Difference $15,000 (difference between the sell price and than trade in)
Factory rebate -$1000
Sale Price $14,000 (after trade in)

Looks good? Maybe. However, you thought your trade is worth $7500 since that's what they sell for on Craig's List.
Well, trading in is a wholesale transaction, Craig's List is selling it retail.
So, the dealer likes your trade in so he bumps the trade in to $5500. (What a guy).
Your Trade In ALLOWANCE is now $5500 instead of $5000.
Price now $13,500 after trade. Plus, plus, plus.
"Not bad" you think. We are close. "Give me $5750 and we have a deal" you say.
You sign your offer and he takes it to the manager for approval.
The salesman goes back to the manager knowing he'll say yes but this is the process.
They shoot the crap a few minutes, the manager signs the offer and a deal is made.
$13,250 plus, plus plus and your trade in.
Deal!

So, you ended up paying more for the same car than if you didn't have a trade in.
How, you ask?
Click to expand...

I suppose it depends on what you can sell your car for if you don’t trade it, but presumably you can do better than what they offer AND you retain the $1,000 good guy discount.
 
JimB said:
Can we start at the bottom?

Dealership claim that they make little to nothing on the sale of a new car. They claim that they make their money on service and warranty work.

I believe the second statement is true, but that the first is simply a lie. In your experience, what is the margin on new car sales, and what are the revenue and cost elements that make it up?
Click to expand...
I mentioned this fact in the other Service thread. It is very true.
How is that possible when you hand them $20,000?
Believe it or not, the profit on a new car is ridiculously low.
Throw in the "negotiating" and you MAY make $500 on a new car (excludes luxury brands).
How?
Well, we all know about "Invoice" on every car.
This is how much the factory charges the dealer for every car on their lot.
Kelly Blue Book publishes them. Why? I don't know. Does KBB list the cost of that new computer, TV or Refrigerator?

When a dealer orders a car from the factory (usually a few months out) the invoice amount is what the dealer "owes" for that car once it is shipped. The dealer does not cut a check for this car (usually, unless he is loaded and flush with cash).
Every car is "charged" against the credit limit with the factory (just like a charge card for you). The factory, when they approve a dealer to carry their product line (Franchise), also approves a Floor Line (credit line) for the new cars. New dealers with no
track record may get $500,000 or $1 million dollars as a credit line, depending on the dealer's credit rating. To make it simple, let's say he get a credit line of $3 million dollars. Like a credit card, they pay interest. Like a credit card, the interest varies per dealer per credit worthiness. Some large dealers open an account with their own money and allow their dealers to use that account for their
inventory. They still pay interest but they pay it to themselves instead of a bank. 90% of the dealers use the factory credit line.
So, Ford Dealer X has a $3 million dollar credit line. Let's keep it simple and say the average cost of a new car is $30,000. He has a credit line of 100 cars. Not a lot but not bad for a new dealer.

So, if a dealer keeps 100 cars in inventory and pays 5% APR interest on his credit line, he pays $150,000 a year in interest (about $12,500 a month).
Just for his inventory, not counting his used cars. Some cars sit on the lot for 200 days. To make it simple, assume a car sits an average 100 days before
being sold. $30,000 car at 5% APR for 100 days comes to about $400 per car. Some dealers figure this at a cost per car, some figure this as a part
of doing business (ads, etc). Makes no difference, it is a real expense that figures in the bottom line.

Many of us hear about "holdback". When you see the actual invoice there is a "cost" listed as holdback or similar verbage. This charge is listed on the
invoice and the total invoice (cost) includes holdback and interest is paid on the holdback and when the dealer cuts a check to pay off the credit line
for that car the holdback is included in that check. This is usually around 2% of the cost of the car before transportation and other misc fees).
However, this amount is refunded monthly when a vehicle is paid off and listed as a sold unit. A $30,000 car may have a $500 holdback. This generates a check from the factory each month for $50,000 if he sells 100 cars at $30k per.
The theory is that dealers agree to and must advertise their cars locally to satisfy the factory and to survive. They know dealers are whores and will
spend this money elsewhere or give it up to cut the legs out from his competitor (good for the buyer, bad for the overall business). So, a check for $50,000
each month is SUPPOSED to be used to pay for their advertising and special promotions. Yes, sometimes you hear of dealers "going into the holdback" to
make a deal at the end of the month to hit certain sales goals or to move a year old unit. It happens but they are giving up money they already spent on
advertising and promotions. Of course, some dealers see the holdback check as their salary for the month because they "earned" it. Well run stores use
this money properly and other dealers need a yacht to play playboy.

So, is holdback profit? The invoice price included holdback but it is supposed to be used for advertising. Should we count holdback as profit?

Also, the invoice cost is that and the MSRP is posted on the car's sticker. You can always ask for more than sticker but unless it is a limited production
car or a car so hot that they are sold before the truck arrives, getting over MSRP isn't going to happen. I was shocked at how little mark up there is on
a new car (non-luxury). Some average, middle-class, run-of-the-mill boring cars have a markup from $600 to $1200. Trucks a little more. Fully loaded,
fancy wheels, sunroof, leather, GPS, etc has maybe $2000 markup. Each additional item has it's own markup. A $50,000 fully loaded pick up may
have a $3000 mark up. However, when a buyer asks for a discount, it comes from this markup. If you want $1500 off a car with an $1100 mark up, it
isn't going to happen. If you want $3000 off a truck that has a $3000 markup AND they sell all they get, nope, you won't get it. Why should they give
you a $3000 discount when they can sell that same truck to somebody else who just wants what he wants and pays MSRP. You want a car that's been sitting on the lost for 300 day due to color, not automatic, no A/C, etc., yeah, you will get it at invoice. A truck that just came off the transporter yesterday and has all the bells and whistles will sit at MSRP for at least 30-45 days. That's how it works.

To answer the question asked here, it is true. When you add in advertising (holdback) and slim markups as well as the credit line interest and the dealer
cannot pay more than his sales staff for the new car sales (non-luxury brands). That is fact. However, there are other ways to make profit which is the
sucky part of buying/selling a new car. We can discuss that next unless another question comes up. You need a well run and profitable service department to pay the rent/mortgage and utilities. If your service department sucks you will not survive. The service dept pays the bills.
 
I asked about margin because I don’t really care at this point about all of their overhead, including interest, advertising, buildings, staff etc. I understand that they pay those, but just in terms of setting a baseline, if MSRP is $30,000 I’d expect that the cash cost to the dealership (wholesale cost minus holdbacks and cooperative advertising and monthy/quarterly/annual incentives, etc) for that vehicle is close to $20k.

Car dealerships are in business to make money, and they generally seem to make a ton of money. Don’t hold that against them, but it just feels like they are inherently untrustworthy because they’ve created such an adversarial environment and they clearly benefit from that.

I’m about to buy a new car or two, I do this about once a decade. I’m going to try telling the sales guy that I’m happy to have the manager come talk to us, but if his butt leaves the chair so will mine. They have a process, I don’t care, I want out in no more than a couple hours. I swear that the drag it out to create deal fatigue so you’re more likely to buy more stuff from the contract signing guy.
 
JimB said:
I suppose it depends on what you can sell your car for if you don’t trade it, but presumably you can do better than what they offer AND you retain the $1,000 good guy discount.
Click to expand...
Correct. There was no mention of the "Good Guy Discount" with the trade involved.
It gets lost in the confusion. That's why the "clever" guys springs it at the end of the deal.
We make a deal, no trade, then he says he wants to trade in his car.
It's the end of the day, everybody is tired. The managers are cranky from a few customers that think they know how to get one over on the dealer and then
you throw in a trade at 9:00 at night?
Well, I can tell you that if your car was actually worth $2500 at noon and you lie to us, your car is now worth $1000 because you were a jerk. Ok, whine a bit and
we'll give you $1500. Otherwise, you can sell it for the $4000 you claim it's worth because your buddy says it is. After you made a deal, reneged on the deal by throwing
in a trade and jerking the salesman (who only gets paid if you buy a car) around for 6 hours, guess what? We don't want your trade. Stick with the deal you made
or go to another dealer to jack him off. Your choice.
Yeah, you clever guys think you got us. Well, you just lost $1000 or more by being a jerk. Yeah, you can leave. So what. We were selling it at cost anyways. No loss on
our part. Now you have to take another 6 hours of your valuable time to actually buy a car somewhere else.
 
larryh1108 said:
Yeah, you clever guys think you got us. Well, you just lost $1000 or more by being a jerk. Yeah, you can leave. So what. We were selling it at cost anyways. No loss on
our part. Now you have to take another 6 hours of your valuable time to actually buy a car somewhere else.
Click to expand...
Goes back to the post I made further up: https://www.carolinafirearmsforum.c...-scoop-of-buying-a-new-car.44782/#post-774423

Why play the game on their turf? Why pick a dealer and go haggle in their Office? Let them come to you and play the dealers in your region against each other.
 
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JimB said:
but just in terms of setting a baseline, if MSRP is $30,000 I’d expect that the cash cost to the dealership (wholesale cost minus holdbacks and cooperative advertising and monthy/quarterly/annual incentives, etc) for that vehicle is close to $20k.
Click to expand...
Not even close.
If it is a run-of-the-mill car at a run-of-the-mill franchise that MSRP $30,000 car will have a true invoice of $27,000 to $27.500.
The markup is not there. I know most people believe that it is and it truly is in the luxury lines.... Mercedes, BMW, Lexus, Audi, etc.
In your everyday car it is just not there. Use Kelly Blue Book to look up the invoice of a $30,000 Ford and Chevy and then find the MSRP.
I worked there and I was floored at how little the markup is.
Consumers just won't believe it and think it is trick.
I've been told hundreds of times when I brought out the actual invoice that I could print up anything I wanted. I suppose I could but I never did.
They then asked for the "real" invoice. I said this is it. If I brought out the actual invoice we (dealer) were at the end of negotiating.
I'd put the invoice in front of them, tell them that if they won't pay $100 over invoice then we are done. Of course, they'd get all the rebates available. That is above and beyond the invoice price. The 2% holdback is not profit, in my eyes. It is supposed to be used to pay for the advertising which you are bound to do by your franchise agreement. Let's say it is profit. You sell your car at invoice and keep the holdback. The dealer makes 2%.
How is that fair? A dealer stocks a $30,000 car, pays interest on it until it sells, sells it for 2% or 3% profit and the buyer feels that he paid too much?
Not many businesses would survive with a 3% profit margin.

How do dealers make money?
We will get into that.
 
noway2 said:
Why play the game on their turf? Why pick a dealer and go haggle in their Office? Let them come to you and play the dealers in your region against each other.
Click to expand...
Sounds like a commercial.
You want a $35,000 Ford F150?
You email the 10 closest dealers, tell them what you want... exactly.
You wait for them to fall over each other for your business.
You win!
Sometimes.
You will get legitimate offers.
You will get dealers who want you to walk in the doors.
You can avoid the BS that the dealers have to do to make a deal.
You will probably pay a fair price for your car.
You get what you want.
They get a sale.
Only the internet guy's time is wasted.
Win/win.
Just do not try to renegotiate when you get there.
1 out of 4 people who walk into a dealer leaves with a car (average).
In my experience, 1 out of 20 people who you give a good deal to on the internet actually comes to buy. They want you to quote a better price to take to your local guy, "See what XYZ Ford will sell it for? Beat it by $500 and I'll buy from you.
Sometimes you get a deal.
Sometimes you don't.
I've never put much credence in playing the fight over me for my business types.
You want a car? Come on in. We'll see if we can make it happen.
You want to play the internet games, go to Carvana.
They have those vending machines.
They must be cool!
The internet salesman is usually the lowest earning salesman for some reason.
Maybe because the internet shopper finds it easier to stroke a guy he doesn't have to see face-to-face?
 
larryh1108 said:
Sounds like a commercial.
You want a $35,000 Ford F150?
You email the 10 closest dealers, tell them what you want... exactly.
You wait for them to fall over each other for your business.
You win!
Sometimes.
You will get legitimate offers.
You will get dealers who want you to walk in the doors.(Snip for brevity)
Click to expand...
If I were to do this, I would be serious about buying. I would have financing prearranged by my CU or pay cash. If they tried to play games after getting there, I would call the next guy on the list right in front of them and walk out.

I have no desire to go play their games. As this thread has gone on, you’ve started showing your feelings towards us buyers. You may be retired, but the resentment is showing.

I’ll throw out another one that I ran into. Late last year we were looking to get my wife s new car to replace her 12 yo 4Runner. I started the investigation part of the process by looking on True Car. Put her information in with a fake number. Had one dealer in Durham that I’m pretty sure used their ID verification system that Uncle requires of them as their a “financial institution” that is required to verify who you are use it to get her real contact info. They kept trying to call her real number, though they were never given it. We bought a house instead and won’t by a car until we sell our old house and pay this one off. When we do buy, they’ll probably be excluded.
 
JimB said:
I asked about margin because I don’t really care at this point about all of their overhead, including interest, advertising, buildings, staff etc. I understand that they pay those, but just in terms of setting a baseline, if MSRP is $30,000 I’d expect that the cash cost to the dealership (wholesale cost minus holdbacks and cooperative advertising and monthy/quarterly/annual incentives, etc) for that vehicle is close to $20k.

They have a process, I don’t care, I want out in no more than a couple hours. I swear that the drag it out to create deal fatigue so you’re more likely to buy more stuff from the contract signing guy.
Click to expand...

I wish I could tell you something to make you happy.
It is a process. It takes hours to actually buy a car.
I suggest that you browse the inventory online or walk the lot when they are closed to find a specific
car or two or 3 and write down the stock number. Tell him you are there to see these specific cars. That saves a lot of time and walking, especially on a hot day.
If you know which car(s) you want, have your offer written down.
Know all the rebates available for that car (mfg website has all rebates).
There's customer cash (rebates). There's dealer cash (factory pays dealer for the sale) and the various other rebates mentioned above, The Mfg website has all of this info.

To make this as pleasant as possible do the following things before you walk in the door:
Do not go on a Saturday unless you absolutely have to. If you do, be there when the doors open.
Everyone is fresh and wants that first deal of the day. Often time the salesman who get the first deal
get a cash bonus of $50.
*Call during the week and ask to speak to the Sales Manager. If they ask what it's about, tell them a car purchase.
They won't know if it's a complaint or a future purchase and will hook you up with the right person.
*Tell the Sales Manager that you will be there at X time on X day and are on a tight schedule.
Ask for the most experienced salesman who won't waste time and will take care of you.
Every Manager knows a few guys who they want to sell to their uncle or cousin. Ask for him/her.
If they are good, they will contact you before you come in and do a lot of the "busy work" before you get there.
I know I would!
*If you know which car(s) you want, tell him the stock numbers. A generic color and model doesn't help much.
*If you have your own financing lined up or will pay cash, tell him, to speed up the process.
*Tell him you've bought over 10 new cars and won't jerk him around. You know what you want and what to spend.
The circle jerking and wearing down (It really is deliberate and part of the process) is for people who do not know what they want, how much to spend and sometimes even the model. They want to be sold They aren't there to buy but to rather be sold. These are the ones the salesmen try to find. A guy on a mission who wants in and out is not one a salesman wants.
However, the salesmen who go for volume (there are volume bonuses) know what to do. The Sales Manager will hook you up with them. You want one of them. They get you out the door and have time to take another customer. Win/win.
Seriously, know a specific car or cars when you get there to save the most time. Write down the Stock Number.

When you get to the business office and are paying cash, tell the Finance Guy that if you aren't out of his office in 15 minutes to make an important meeting that you will have to come back tomorrow to do the paper work. They won't want you to leave.
They will get in trouble with management of they don't get your signature. They fear Buyer's Remorse if you leave.

If you are interested in their special 2.9% financing then tell them up front. If it's either cash back or special finance, figure out before you get there which one is better. You can go online and use a payment calculator with an amortization schedule.
e.g. If you go full loan term to pay off at 2.9% borrowing $30,000 you will pay $XXXX in interest. To take the rebate, you will get $XXXX up front. Which is better? All of this is done in the Finance Office and takes a lot of time. DO this up front
before you get there to save time.

If financing, tell him your Credit Union is offering 3.25%(e.g.) and will use them unless he can beat it. He will offer different rates for different months with different down payment amounts. This takes time. Be frank, upfront and don't act confused.

If you do not want an extended warranty, tell him up front that you sell your cars every 3 years and never go out of warranty.
Tell him you have plenty of insurance so don't worry if you die or get injured.

Tell him you don't need GAP insurance. Period. (unless you want it). It is usually for people who finance their trade in payoff and are upside down.

All of this takes a minute or 2. Tell him he now has 13 minutes to get it done or you will be back tomorrow. (BIG no-no in the business).

Lastly, if you know the car you want up front or soon into the process, tell the salesman to have the car cleaned for delivery. This is not a commitment but remind him you have an appointment and need to get out of there. A lot of time dealers don't have the cars cleaned until someone buys it. If you don't end up buying it, no big deal because it gets cleaned anyways.

Seriously, if you are a serious buyer and know which car you want you can be out of there in 2 hours if you call ahead like I suggest.
If you walk in off the street and get stuck with a newbie, expect a long day. The veteran sales people very seldom take walk ins because of the process. Newbies have to follow the long, drawn out process to learn the business and any short cuts on their part means they get fired.
Seriously.

Do as I mentioned and you will have a great experience.
Walk in cold and you are in for a long day.
 
larryh1108 said:
Not even close.
If it is a run-of-the-mill car at a run-of-the-mill franchise that MSRP $30,000 car will have a true invoice of $27,000 to $27.500.
The markup is not there. I know most people believe that it is and it truly is in the luxury lines.... Mercedes, BMW, Lexus, Audi, etc.
In your everyday car it is just not there. Use Kelly Blue Book to look up the invoice of a $30,000 Ford and Chevy and then find the MSRP.
I worked there and I was floored at how little the markup is.
Consumers just won't believe it and think it is trick.
I've been told hundreds of times when I brought out the actual invoice that I could print up anything I wanted. I suppose I could but I never did.
They then asked for the "real" invoice. I said this is it. If I brought out the actual invoice we (dealer) were at the end of negotiating.
I'd put the invoice in front of them, tell them that if they won't pay $100 over invoice then we are done. Of course, they'd get all the rebates
available. That is above and beyond the invoice price. The 2% holdback is not profit, in my eyes. It is supposed to be used to pay for the advertising
which you are bound to do by your franchise agreement. Let's say it is profit. You sell your car at invoice and keep the holdback. The dealer makes 2%.
How is that fair? A dealer stocks a $30,000 car, pays interest on it until it sells, sells it for 2% or 3% profit and the buyer feels that he paid too much?
Not many businesses would survive with a 3% profit margin.

How do dealers make money?
We will get into that.
Click to expand...

Say I’m in the business of buying and selling widgets. I buy a widget for $1,000 and I sell it for $1,100. Guy comes in and wants to dicker, I show him $1,000 on the true invoice and say that I gotta make $50, so we strike a deal. I sold 100 widgets this month, as I do every month, and since that’s more than the 20 I’m obligated to sell the widget maker sends me an incentive bonus of $500 per widget. The auto dealer would say that he made $50 margin on the widget, but he’s not being truthful. He made $550 margin on the car and spent a chunk of it to run his business. Call it volume pricing, call it distribution incentives, call is variable cooperative advertising, call it apple pie, but don’t tell me that it’s not a factor in the dealership’s overall profitability.
 
noway2 said:
As this thread has gone on, you’ve started showing your feelings towards us buyers. You may be retired, but the resentment is showing.
Click to expand...
I disagree. He has developed a way of presenting information as a result of being in the business. Hard to change the way to talm after 30 years, but I think he’s sincere.

He may well just be the guy that knows the real story, but has a he k of an uphill battle because of all the misinformation and conspiracy theories.
 
noway2 said:
I have no desire to go play their games. As this thread has gone on, you’ve started showing your feelings towards us buyers. You may be retired, but the resentment is showing.
Click to expand...
You are 100% correct.
The resentment is there for those who feel that they have to get one over on us because they are all that.
We've seen it all. Nothing anyone does is new or special or different.
I survived for 25 years because I was polite, professional and did a good job taking care of the customer.
I never lied to a customer. I don't tell them what they want to hear. I am honest and explain things very well.
Attitude is everything for both sides of the table.
If i sit down with a jerk and he immediately comes across as a jerk who's time is more valuable than mine, I will then give him my (almost) best price. I don't need some jerk showing off to his wife or BIL how great he is at buying a car.
Guys who are there to "help" someone are called Mavens. They have no interest in the process except watching out for sis.
Yeah, sis has a 525 credit score and has a repo 2 years ago and her maven is telling us what she will pay and the maximum interest rate she will pay? Really? Are you going to put the loan in your name to get that rate? No? Then you can sit there and
mind your own business because you don't know what you are talking about.

Yeah there are those guys. There are the guys who know everything yet know nothing. Know-it-alls. Yeah, them too.

I said before and truly mean it. I loved dealing with the prepared and educated shopper. They didn't intimidate me or make me shudder. They were a joy to talk to. They know what they were buying, They knew the financing options. They knew what
options were available. They wanted to see how this color looked in person. They want the cash back instead of financing because they always pay it off early. They know the Honda has a better safety rating than the Dodge they were looking at.
They knew what a good price was because they researched. Educated customers are a dream to us because we remove the tense feelings of being taken or being lied to and we actually shoot the breeze about other things. It is fun selling to the
educated buyer and they usually gave the best rating.

Other than the know-it -all tire kickers, the worst experiences are with the naive people who need you to help them buy a car.
These people are who the predator salesmen look for. These are the ones who are scared shtless to walk in the door but are recently divorced with their tax refund check in their hand and needing a new car to get to her new job. These poor women get raked over the coals but not on my watch unless a pro got her before I could get to her. I would"qualify" her first, before I got a salesperson involved. I would find out her true budget and find a car she could afford best while still filling her needs.
Many times these newly liberated women just have to have that fancy, expensive and flashy car because they were free. They didn't want affordable and reliable, they want THAT car. They didn't care what the payment was. They didn't care what the
insurance premium was. They were free and wanted THAT car. I gladly turned them over to the right guy to get her THAT car.

Yeah, the disdain is for the few. The 25 years is from the many I helped get what they wanted and needed without raping them.
I was THAT salesman. I was that Honest Salesman. I always said that to those who cared. I am proud that I was that guy, However, though every dealer as one or two of that honest salesman and 4 or 5 newbies who have a hand up their backside,
a good half of the sales staff would screw their own mother if it meant a good pay check. I've seen them. They give car salesmen the bad name. They make me sick. On the flip side, I absolutely love asking the jerk to leave or putting him in his place, when he
was clearly out of his place, by asking if I could run his credit so he could cosign for Ms 525 credit score. Ah, the good old days.
 
When I purchase a new car or motorcycle, first thing is to do research, see what vehicle is selling for, what the local dealers have in stock. I know which 2 or 3 vehicles I want (most have their inventory on line), color and options packages, I never trade in a vehicle to the dealership. When I get to the dealership I only deal in OTD (out the door) price, I want the number I'm going to write on the check. In the last 15 years, when I go in I find a salesperson, tell then they have 90 minutes to put me in the vehicle, I tell them I'm not financing through them, I have no trade, I'm writing a check, I'm walking out at 90 minutes. I have only had to walk out of 1 sale. If you're in a good financial state, make the dealership work for your money. I've found it best purchase during the last 3 days of the month, they are really trying to hit the sales numbers.
 
When you get around to talking about service, please mention how much of the cost of extended warranties goes to the dealer and whether they are a good deal for consumers based on the markup for repair services.
 
Ferrisfan said:
When you get around to talking about service, please mention how much of the cost of extended warranties goes to the dealer and whether they are a good deal for consumers based on the markup for repair services.
Click to expand...
Yes please!

I bought an extended warranty on DirtySCREW (17 F150 5.0) as the passenger mirror motor was broken on test drive. The guy pulled out the brochure a d showed me what the regular warranty covered..not much as far as electronic things.
Then he showed me what the extended warranty covered....a whole lot of things. The mirror motor was being replaced as I was doing the paperwork....but for peace of mind....I added it. I may have gotten hosed on that...I may not...I dunno.

DS

Sent from my XT1575 using Tapatalk
 
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JimB said:
Say I’m in the business of buying and selling widgets. I buy a widget for $1,000 and I sell it for $1,100. Guy comes in and wants to dicker, I show him $1,000 on the true invoice and say that I gotta make $50, so we strike a deal. I sold 100 widgets this month, as I do every month, and since that’s more than the 20 I’m obligated to sell the widget maker sends me an incentive bonus of $500 per widget. The auto dealer would say that he made $50 margin on the widget, but he’s not being truthful. He made $550 margin on the car and spent a chunk of it to run his business. Call it volume pricing, call it distribution incentives, call is variable cooperative advertising, call it apple pie, but don’t tell me that it’s not a factor in the dealership’s overall profitability.
Click to expand...
Very true, Jim but there's a hook.
Yes, during the year, the factory runs specials on their cars. We see them all the time. $1000 rebates. $2000 rebates. $3500 rebates. $3500 AND 2.9% financing.
These are factory rebates. The dealer has to list the rebate on the buyers order to actually get it from the factory. They can't "steal" it.
The factory also offers what is caller Dealer Cash. The dealer can do whatever he wants to with this cash. It is profit after all. It is usually $500 on a specific model.
Let's talk Ford again.
The Ford factory has an excess of the 4cyl Fusion in stock and are heavy on Fusions in general.
They tell the dealers that they are offering $1000 dealer cash on the 4cyl and $500 on the 6cyl models.
They tell them in advance so they can order them for the sale.
Now each dealer has 20 extra Fusions in stock. The dealer can advertise them for $100 over invoice and pocket the $500 or $1000 dealer cash.
What happens? One local dealer takes out a full page ad and offers New Ford Fusions 4cyl for $500 behind invoice! The actual invoices are taped to the
windows for the no haggling price. Huge Sale but the dealer makes $500 more per car than normal ($1000 dealer cash less the $500 behind invoice).
So, the other dealers now have to match or lower their price for 4cyl Fusions or they will be stuck with 20 slow selling cars. They advertise an inventory
blowout for $1000 behind invoice! Yes, the consumer benefits but the dealers don't keep the dealer cash for negotiating and making money for a change.
They have to be competitive. Word gets out that there is $1000 dealer cash and it's all over. Everyone knows of the $1000 dealer cash so there goes the profit.

John's example above is very real. When a factory wants to feature a specific model on a grander scale, run it with national ads on football games or GoT and move out the old model year inventory to get ready for the new model year stuff (usually August-Sept) they offer factory rebates AND special factory financing AND dealer cash as just mentioned. That is huge for the consumers but the next year models are already on the lot so these cars lose more value when you leave the lot than normally.

Now, to put excitement in the sale, the factory offers Stair Step money for specific models. These are usually over runs and need to go because they are now "last year's" models even though it is September. Let's use Nissans again, They are long in inventory on all Altimas and Sentras, They need them gone now.
Remember, rebates are not profit, they go right to the consumer. Special financing is not profit, the factory subsidizes their finance arm. The Dealer Cash paid by the factory IS profit but competition makes the dealers pass them on to the consumer. Same car, same minimum profit but huge sales volume.

This is where the Stair Step program helps the consumers the last 2 day of the month in a huge factory clearance sale. The factory offers bonus cash, paid to the dealer the next month, depending on the volume you actually sell (not order, but sell). Let's use the Altima. Popular car. Good initial value. Good reliability.
If a dealer SELLS 50 Altimas in a month, they will get cash back (profit) of $200 per car sold($10,000). If they sell 75 Altimas, they get $500 per sold car back ($37,500).
If they sell 100 new Altimes, they get back $1000 per car sold back ($100,000).
Now, selling 100 Altimas is a huge task but there are very large Nissan dealers who can sell 100 with no problem with the right sale.

So, this IS profit. If a slow dealer sells 20 Altimas, he gets nothing. SleepyTown Nissan gets the sale business but can't compete with the big guys.
Now, what if SleepyTown Nissan does well with Altimas and is close to that 50 car payback? He's at 45 sold with 2 days to go. 5 cars will get him a check for $15,000. If he truly loses $1000 per car for 5 cars, he will net $10,000 extra ($15,000 check from factory less the 5x$1000 losers). Yes, some dealers will gladly make a $10,000 bonus. Why not? It's $10,000. It's sad to think a dealer has to sell 50 cars at $20,000 ($1 million) to make a $10,000 bonus but that's the car business. Ok, 3 hours away from SleepyTown is Mega Nissan. He normally sells 70 Altimas a month so making 100+ will be a breeze. Why not go for 150?
So, that dealer know he already has the 75 Altimas sold because he always sells 75 so he "knows" he will get a check for $500 per car. So, Mega Nissan knows, from day 1, that he has an extra $500 to put towards every Altima so he advertises $1500 behind invoice! Everyone else is $1000 behind invoice (the $1000 dealer cash everybody gets) so for a smaller dealer to match the Mega Nissan dealer, he has to gamble he can get to the 75 Altimas for the $500. Now, Mega Nissan has maybe 7 dealers within an hour of his store but none sell what Mega does. So, when the ads break and they see Mega Nissan $500 cheaper then everybody else, people go there for any Nissan they may want because Mega Nissan is the cheapest by far. The other 7 dealers now lose business because everyone wants to save $500.

So, the more successful (read better run) dealers gamble and match the extra $500 (for 75 sold) even though they sell maybe 30 Altimas a month. They have to or they will lose a lot that month (the bills still roll in) and they will be stuck with the old model year Altimas they ordered for the sale. Not good.
So now the anxiety begins. The owner holds the GM responsible for possibly losing $300 per Altima if they come up short. I've seen it first hand.
The last 2 days and they are 10 short of the 75 needed. They'll lose $20,000 if they fall short. They need 10 sales when they would sell 5 on a usual mega sale.
The GM/Owner calls a brief meeting. He offers an extra $500 off to any employee or family member who buys one of the last 5 to make the goal.
The other 5 needed, these people will get the best deal they can ever get. It's a cutthroat business.

So, let's go back to the Mega Nissan. He gets his 100+ Altimas and gets a check back for $100,000. He gave $500 per Altima to make the sale to the consumer and pockets the other $500 for profit above and beyond the usual profit margin. The other guys? The one who stepped up hit his $500 per car bonus. However, to get there he gave up $500 per car to the buyer. If he sold 72 cars, he would have lost a lot of money. The GM would probably be fired. Life goes on.

So, do you get $500 per widget because you met your quota?
I doubt it.
Did you get $500 per widget because you doubled you sales for the past month?
Sure you did!
Did you have to reduce your sale price enough to double your sales?
Yep, economics 101.
Did you sell twice as much and make (basically) the same money but worked twice as hard?
Yeah, probably. But you have the bragging rights of doing it!
Your analogy is flawed because you were being rewarded for doing an average job.
If you sell 100 widgets a month, every month, and you get a bonus of $500 per widget if you sell 20,
then your profit is not what you claimed because unless you ran out of widgets, you will always sell the 20.
Real companies offer real incentives for increasing sales at an almost unreasonable level.
In the car business, if every dealer got an extra $500 per car sold from the factory if they sold 2 cars, a dealer would advertise his cars at $500 below invoice and force the others to match him. They don't get to keep the profit because all owners are whores.
 
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larryh1108 said:
Sounds like a commercial.
You want a $35,000 Ford F150?
You email the 10 closest dealers, tell them what you want... exactly.
You wait for them to fall over each other for your business.
You win!
Sometimes.
You will get legitimate offers.
You will get dealers who want you to walk in the doors.
You can avoid the BS that the dealers have to do to make a deal.
You will probably pay a fair price for your car.
You get what you want.
They get a sale.
Only the internet guy's time is wasted.
Win/win.
Just do not try to renegotiate when you get there.
Click to expand...
First, great idea for a thread and thanks for sharing your experiences and knowledge!

This is exactly what I did for my 2018 Tacoma. Contacted 16 dealers, leveraged the top 2 offers against the dealers I liked so far, had the winning dealer throw in services to close the deal as I knew the dollars weren’t getting any lower. Only walked into one dealer, still spent about 4hr there including waiting for the service I negotiated, and got a high demand color & trim for 14% off MSRP, well below what I thought was even possible.
Honestly I don’t understand why they went so low, but it was 2 days prior to month end, and I used their financing (1.9%).
 
larryh1108 said:
Very true, Jim but there's a hook.
Yes, during the year, the factory runs specials on their cars. We see them all the time. $100 rebates. $2000 rebates. $3500 rebates. $3500 AND 2.9% financing.
These are factory rebates. The dealer has to list the rebate on the buyers order to actually get it from the factory. They can't "steal" it.
The factory also offers what is caller Dealer Cash. The dealer can do whatever he wants to with this cash. It is profit after all. It is usually $500 on a specific model.
Let's talk Ford again.
The Ford factory has an excess of the 4cyl Fusion in stock and are heavy on Fusions in general.
They tell the dealers that they are offering $1000 dealer cash on the 4cyl and $500 on the 6cyl models.
They tell them in advance so they can order them for the sale.
Now each dealer has 20 extra Fusions in stock. The dealer can advertise them for $100 over invoice and pocket the $500 or $1000 dealer cash.
What happens? One local dealer takes out a full page ad and offers New Ford Fusions 4cyl for $500 behind invoice! The actual invoices are taped to the
windows for the no haggling price. Huge Sale but the dealer makes $500 more per car than normal ($1000 dealer cash less the $500 behind invoice).
So, the other dealers now have to match or lower their price for 4cyl Fusions or they will be stuck with 20 slow selling cars. They advertise an inventory
blowout for $1000 behind invoice! Yes, the consumer benefits but the dealers don't keep the dealer cash for negotiating and making money for a change.
They have to be competitive. Word gets out that there is $1000 dealer cash and it's all over. Everyone knows of the $1000 dealer cash so there goes the profit.

John's example above is very real. When a factory wants to feature a specific model on a grander scale, run it with national ads on football games or GoT and move out the
old model year inventory to get ready for the new model year stuff (usually August-Sept) the offer factory rebates AND special factory financing AND dealer cash as
just mentioned. That is huge for the consumers but the next year models are already on the lot so these cars lose more value when you leave the lot than normally.

Now, to put excitement in the sale, the factory offers Stair Step money for specific models. These are usually over runs and need to go because they are now "last year's"
models even though it is September. Let's use Nissans again, They are long in inventory on all Altimas and Sentras, They need them gone now.
Remember, rebates are not profit, they go right to the consumer. Special financing is not profit, the factory subsidizes their finance arm. The Dealer Cash paid by the
factory IS profit but competition makes the dealers pass them on to the consumer. Same car, same minimum profit but huge sales volume.

This is where the Stair Step program helps the consumers the last 2 day of the month in a huge factory clearance sale. The factory offers bonus cash, paid to the
dealer the next month, depending on the volume you actually sell (not order, but sell). Let's use the Altima. Popular car. Good initial value. Good reliability.
If a dealer SELLS 50 Altimas in a month, they will get cash back (profit) of $200 per car sold($10,000). If they sell 75 Altimas, they get $500 per sold car back ($37,500).
If they sell 100 new Altimes, they get back $1000 per car sold back ($100,000).
Now, selling 100 Altimas is a huge task but there are very large Nissan dealers who can sell 100 with no problem with the right sale.

So, this IS profit. If a slow dealer sells 20 Altimas, he gets nothing. SleepyTown Nissan get the sale business but can't compete with the big guys.
Now, what if SleepyTown Nissan does well with Altimas and is close to that 50 car payback? He's at 45 sold with 2 days to go. 5 cars will get him a check for
$15,000. If he truly loses $1000 per car for 5 cars, he will net $10,000 extra ($15,000 check from factory less the 5x$1000 losers). Yes, some dealers will
gladly make a $10,000 bonus. Why not? It's $10,000. It's sad to think a dealer has to sell 50 cars at $20,000 ($1 million) to make a $10,000 bonus but that's
the car business. Ok, 3 hours away from SleepyTown is Mega Nissan. He normally sells 70 Altimas a month so making 100+ will be a breeze. Why not go for 150?
So, that dealer know he already has the 75 Altimas sold because he always sells 75 so he "knows" he will get a check for $500 per car. So, Mega Nissan knows, from day 1,
that he has an extra $500 to put towards every Altima so he advertises $1500 behind invoice! Everyone else is $1000 behind invoice (the $1000 dealer cash everybody
gets) so for a smaller dealer to match the Mega Nissan dealer, he has to gamble he can get to the 75 Altimas for the $500. Now, Mega Nissan has maybe 7 dealers
within an hour of his store but none sell what Mega does. So, when the ads break and they see Mega Nissan $500 cheaper then everybody else, people go there
for any Nissan they may want because Mega Nissan is the cheapest by far. The other 7 dealers now lose business because everyone wants to save $500.

So, the more successful (read better run) dealers gamble and match the extra $500 (for 75 sold) even though they sell maybe 30 Altimas a month. They have to or they
will lose a lot that month (the bills still roll in) and they will be stuck with the old model year Altimas they ordered for the sale. Not good.
So now the anxiety begins. The owner holds the GM responsible for possibly losing $300 per Altima if they come up short. I've seen it first hand.
The last 2 days and they are 10 short of the 75 needed. They'll lose $20,000 if they fall short. They need 10 sales when they would sell 5 on a usual mega sale.
The GM/Owner calls a brief meeting. He offers an extra $500 off to any employee or family member who buys one of the last 5 to make the goal.
The other 5 needed, these people will get the best deal they can ever get. It's a cutthroat business.

So, let's go back to the Mega Nissan. He gets his 100+ Altimas and gets a check back for $100,000. He gave $500 per Altima to make the sale to the consumer and pockets
the other $500 for profit above and beyond the usual profit margin. The other guys? The one who stepped up hit his $500 per car bonus. However, to get there he
gave up $500 per car to the buyer. If he sold 72 cars, he would have lost a lot of money. The GM would probably be fired. Life goes on.

So, do you get $500 per widget because you met your quota?
I doubt it.
Did you get $500 per widget because you doubled you sales for the past month?
Sure you did!
Did you have to reduce your sale price enough to double your sales?
Yep, economics 101.
Did you sell twice as much and make (basically) the same money but worked twice as hard?
Yeah, probably. But you have the bragging rights of doing it!
Your analogy is flawed because you were being rewarded for doing an average job.
If you sell 100 widgets a month, every month, and you get a bonus of $500 per widget if you sell 20,
then your profit is not what you claimed because unless you ran out of widgets, you will always sell the 20.
Real companies offer real incentives for increasing sales at an almost unreasonable level.
In the car business, if every dealer got an extra $500 per car sold from the factory if they sold 2 cars, a dealer would advertise his cars at
$500 below invoice and force the others to match him. They don't get to keep the profit because all owners are whores.
Click to expand...
Thanks for the comprehensive response!

It sounds like the incentives are both smaller than I thought and more designed for sales performance than just to play games with the “invoice.”

I am most likely going to buy a Lexus LS500. I currently drive a 2007 LS460 and while service is pricey, I’m generally happy with the car. It has been maintained by the dealer. I have purchased 3 cars from the dealer, but didn’t like the last guy who is the only one still there. I think I mentioned in the other thread that my service advisor was recently terminated, hate it but not so much that I’d abandon the brand. I tell you all this by way of asking if you have experience with the luxury brands.
 
What do you think of the “Maven” who is there to ensure his friend who doesn’t understand finance and has a 750+ credit score doesn’t get taken advantage of by the stereotypical sleezebag sales person? Once you begin to talk numbers, that person takes over 99%.
 
Jerzsubbie said:
What do you think of the “Maven” who is there to ensure his friend who doesn’t understand finance and has a 750+ credit score doesn’t get taken advantage of by the stereotypical sleezebag sales person? Once you begin to talk numbers, that person takes over 99%.
Click to expand...
Dude, if you got 14% off a Taco you can be my maven any day!
 
I will be in the market for a new truck soon. I'll have about 48k cash and may be willing to finance an additional 10k. I had planned on waiting until around Thanksgiving or Christmas once the 2020's have been out for awhile and trying to pick up a 2019 on special. Still doing research on the Ram 1500 & Tundra's with F150's coming in a distant 3rd. I want to go test drive them all before making a final decision. How can I go test drive them without pressure from the dealers? Also I learned that Truecar is a creation of Satan. I just wanted to see pricing but did not know that it would unleash the sales calls and emails from hell. Consumer Reports doesn't give you much info you can't find on your own too.
 
Ferrisfan said:
When you get around to talking about service, please mention how much of the cost of extended warranties goes to the dealer and whether they are a good deal for consumers based on the markup for repair services.
Click to expand...
Extended Service Contracts. Ah yes, let's talk ESCs.
This is a new car thread so we'll touch that first.
Do you want an ESC when you buy a new car?
It's a huge profit center for the dealer. The dealer sells new cars at a loss because he depends on the Finance Office to make him some money.
Most factory warranties are great. They cover bumper-to-bumper almost everything for 3 years or 36,000 miles.
New car warranties for the usual mfg only covers some parts for 12/12. Items like wear items. Belts, hoses, paint, seat covers, etc.
Most won't cover items they do not make (over 12/12) like an aftermarket anything like GPS, stereo, satellite radio, etc.
If it says Bose instead of Ford, Bose warranties it after the 12/12.

A lot of cars have the limited powertrain coverage. Limited means it is specific in what they cover. You get paper work telling you exactly what is covered.
If it is not listed as covered, it is not covered. A bumper-to-bumper warranty covers everything (except wear items) from the front bumper to the back bumper.
Huge difference in coverages and cost.

The longest warranties are the 10/100,000 warranties. Limited to the powertrain after 36/36,000. Limited to the original buyer. Any subsequent owner should get the balance of
a 5yr/60,000 mi of the original 10/100 or 7/100. Nice warranty for the consumer. Some luxury models offer a 48/48,000 or 36/48,000 or 5/60,000. Each make has their own policy and transfer to new owner policies.

Do you want that ESC on your new car?
Several things to consider.
Do you trade or sell your cars every 2,3 4 or 5 years? Many people do. Unless you put on a ton of miles, you should not need an ESC. The original factory warranty should cover you until you sell it. Dealers do offer what they call a Wrap ESC. This picks up when the original 36/36 warranty runs out but you still have the 10/100 or 7/100 or even 5/60 powertrain warranty remaining. It takes it to match the remaining miles or time on the powertrain warranty with a factory-like warranty but with a deductible after 36/36. You can also get a $0 deductible ESC Wrap for more money (of course).

The cost of a new car ESC Wrap varies from make and model. Every different make and model has their own risk class and charge accordingly. A dealer usually charges $2495 for a 5/60 wrap with $0 deductible. On a Honda, Toyota, Nissan, etc, the cost may be in the $400 range. The dealer charges as much as $2495 as mentioned.
Add 4x4 or AWD and the cost almost doubles but the dealer tries to get $2995 for this wrap. That is $2000 profit on a new car warranty.
A Ford, Chevy, Dodge, etc cost more but not THAT much more. Premium cars like Mercedes, Lexus, Jaguar, etc and Turbo charged or Super charged have a hefty surcharge because of the cost to fix and chance of breakdown. These become cost prohibitive but if you can afford a Mercedes, what's another $4-5 grand for the warranty.
If you plan to drive it to 100,000 miles and or give it to your kid, $995 for most wraps is fair to the dealer and the buyer. $2495 is ridiculous but a good finance
guy can justify it and get it. Dealers make their new car profit in the finance office.

A limited powertrain warranty, no matter who backs it up, is pretty basic. It covers the engine (block and internal block parts) transmission and final drive. On a FWD car that's the front axles/CV joints. Boots may or may not be covered. See the fine print. In a RWD car it is the drive shaft and rear end/axle. The water pump, fuel pump and oil pump are usually covered because they are critical for operation. timing chains are usually covered but timing belts are not (rubber).

So, it depends on how long you plan to keep your car, how you drive it and if you plan to hand it down. Warranties are a huge profit maker for the dealer and most people will never need it if they trade out frequently. Those who drive them until they die and do not work on cars may consider one if the price is right.

A few mentions about warranty;
*An ESC is an insurance policy. The people who administer them are the same kind as those whose review medical and car insurance claims.
They look for ways to not pay a claim. If it is not listed as a covered item, it is not covered. Period.
*If a non-covered part blows and takes out a covered part, chances are they will deny the claim because the covered part didn't fail, the non-covered part did.
*If you do not follow the mfg's recommended service for your specific car, they can and will deny a claim. If they say change the oil every 3 months or 7,000 miles and you don't (or do it yourself) then don't expect them to cover anything. If your power window is covered and blows and you haven't changed your oil in 4 months and 7500 miles, they can deny the claim even though the oil has nothing to do with window. They look for ways to not pay.
Factory warranties cost more, cover more and are easier to make a claim at a dealer. Most service departments who have proven to be within their
underwriting guidelines are allowed to OK claims that may or may not be covered (judgement call) at the dealer level. Most aftermarket ESCs usually send
out someone to inspect the breakdown and make an on-the-spot ruling. If you can't proved you maintained the car to factory specs, you probably are out of luck.
A receipt for oil and a filter from Walmart will not satisfy them. If you do your own maintenance work don't get an ESC.

I am a huge believer in ESCs for a used vehicle.
They are a necessity if you do not work on cars.
New car ESCs are a different story. Every case is different.
The thing is the price, not the ESC. $995 is a good deal on a new car. $2495 is a rip off.
A finance guy will get fired if 33% (or more) of his customers don't buy an ESC. If it's the end of the
month and a guy is pushing too hard, he is probably close to losing his job from under performance.
That is not a reason to buy something you do not want. It's just explaining why some times you are pushed hard.
 
Partsfreak said:
I will be in the market for a new truck soon. I'll have about 48k cash and may be willing to finance an additional 10k. I had planned on waiting until around Thanksgiving or Christmas once the 2020's have been out for awhile and trying to pick up a 2019 on special. Still doing research on the Ram 1500 & Tundra's with F150's coming in a distant 3rd. I want to go test drive them all before making a final decision. How can I go test drive them without pressure from the dealers? Also I learned that Truecar is a creation of Satan. I just wanted to see pricing but did not know that it would unleash the sales calls and emails from hell. Consumer Reports doesn't give you much info you can't find on your own too.
Click to expand...
Freak, you are in for a rough ride.
I suggest to just be honest, to a point.
Go drive all 3 trucks.
Go on a Tues-Wed-Thur morning at 9:00 when they open.
Most salesmen, on those day,s are just waking up, having a McMuffin and coffee and planning their day.
Walk in and tell him you are expecting "a settlement" soon and will be buying a new truck.
Tell him you are looking at the Dodge, Toyota and F150 and you want a brochure for the (dealer you are at).
Tell him you want to test drive the (dealer you are at).
If he asks what kind of settlement (to establish a rapport) tell him "a settlement".
If he asks how soon? Tell him you are not sure but soon.
You may need to give him you license to copy to test drive a truck (insurance requirement).
Ask for your license back right there. He'll try to keep it to make you come back in. Tell him
he has the copy.
He'll ask for your phone# and email. Give him what you want. Actual? Phony? your choice.
Take the test drive.
When you get back, thank him outside. Go to your car.
He'll try to get you back inside to talk to a manager.
He'll say he'll get in trouble if you leave without talking to a manager.
Your choice. I say tell him you are late for work and are leaving... now.
Thank him and ask him for his card. If it is inside, (to get you back inside) tell him to forget it.
If you got good vibes from him and want his truck, go back when you are ready.
If he calls you and/or emails you, tell him you just found out your settlement is coming in mid-November.
Ask him to contact you in mid-November.
If he becomes a pest, tell him he will lose your business if he contacts you before mid-November.
A good salesman does have a calendar and will get back to you.
A bad salesman will just hang up and you'll never hear from him again.
Be very honest and straight forward (except about the "settlement", that is none of his business).
Don't let a bad salesman ruin a fun experience for you as well as a big purchase.
 
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