Cars and trucks, what’s the real dealer cost?

Omega Man · Feb 25, 2021

I’m not sure what is going on with motor vehicle sales.....but the ads have gone crazy and confusing.
It seems I have to be really rested before I attempt to run the”gauntlet” that has become the norm on a vehicle purchase.
No doubt that the overhead at a modern dealership has become massive and they need to make enough money to stay in business. I don’t understand the geometric equation that has to be run through to complete the purchase.
And, all the additional fees once you think you have made the “deal”. Maybe it’s because the other local dealerships do business in a way that encourage all the area dealerships to figure confusing ways to get to the same result?
I still don’t get buying a vehicle on line as the “new/best” way to buy your next ride.
We probably have some members that have been involved, perhaps they have more knowledge on the way vehicle sales are headed.
OM

8ninety8 · Feb 25, 2021

Selling stuff is about lending capital. Just sayin.

royce · Feb 25, 2021

Omega Man said:
I’m not sure what is going on with motor vehicle sales.....but the ads have gone crazy and confusing.
It seems I have to be really rested before I attempt to run the”gauntlet” that has become the norm on a vehicle purchase.
No doubt that the overhead at a modern dealership has become massive and they need to make enough money to stay in business. I don’t understand the geometric equation that has to be run through to complete the purchase.
And, all the additional fees once you think you have made the “deal”. Maybe it’s because the other local dealerships do business in a way that encourage all the area dealerships to figure confusing ways to get to the same result?
I still don’t get buying a vehicle on line as the “new/best” way to buy your next ride.
We probably have some members that have been involved, perhaps they have more knowledge on the way vehicle sales are headed.
OM

Thx for your post OM. I am interested in this topic also; this is the year when I'm gonna buy a new car and it does seem more confusing than ever before. I thought I was just getting old.

Omega Man · Feb 25, 2021

8ninety8 said:
Selling stuff is about lending capital. Just sayin.

I don’t think it’s that cut and dried- for smart shoppers.
For example-
“No interest/60 month free financing or $5,000 off sticker savings”. BTW, usually some of that total savings is option package discounts one would get anyway.
Smart money would take as large a bulk discount and finance through a local known source like a credit union.
OM

akbeemer · Feb 25, 2021

I bought a new truck last August and my experience was satisfactory. I got a price that I think was fair after checking online sites such as Consumer Reports and Edmund's, and I got a price that was well below what was being offered through buying services such as COSTCO or USAA. There were no additional fees or other costs except what the state charges to register and license the vehicle. I decided I wanted an extended warranty a few days after the sale and went back to the dealer. When I bought the pandemic was well underway. I assumed that the dealers would be struggling for customers, but that was not the case. Sales were booming and they were down on inventory, so not inclined to offer super deals. So all in all I have no complaints.

I had a ten year old Tundra with 93K miles that I sold prior to buying my new truck. I checked an online site that buys used vehicles and went through the process of generating an offer. I was offered $15K for a truck that according to NADA was worth $18.5K. I put it on the local Craigslist at 1PM and it was sold for $19.6K by 5PM the same day. I had 13 calls that afternoon, including one from a local dealership wanting to buy the truck.

I am also surprised at the growth of the online car business. I doubt people are getting cars for less than at a dealership. My best guess is that they are selling primarily to younger people who are averse to any form of confrontational interaction, and buying a car the old fashioned way is a type of confrontation. Being assertive and demanding is not something viewed as positive these days. Another factor I think that is at work is the growing lack of interest in anything to do with automobiles among young adults. This puts them at a disadvantage when dealing with dealers and makes buying a car a scary somewhat humiliating process

jerryab9rj · Feb 25, 2021

We bought a new tow vehicle about a year ago. Traded in my old truck with 140K+ miles for a "new" used one with 12K. Did an internet search to understand what my truck would probably sell for and figured the dealer would need a few thousand $'s to make it worth his while. Knowing they probable got the used truck for a good price I started at 60% of what they were asking. It seems they like to make a lot of their money on selling the extended warranties and other stuff like that so throw that into the negotiation and it worked well for me. I was happy with what I got. All the offers are pretty confusing, but you can assume they will make money with all of them. I have no idea how it all works, but if you're happy with what you sold your old one for and you're happy with the new one, you can call it a good day. I looked at the online stuff, it seemed more expensive than in person, so I didn't go that route.

Jerry

adamchandler · Feb 25, 2021

https://www.thecarconnection.com/new-cars

You can see invoice pricing here. A lot of people are saying "invoice is the new MSRP" because so much of dealer profit is end of quarter incentives that they get as checks based on how many they sell. If you're buying American, I'd lurk around the forum dedicated to the car you want to buy and see what people are paying. there are often threads (like this one for RAM 1500 Trucks) https://5thgenrams.com/community/threads/price-negotiated-from-msrp.274/ that talk about what people are paying, posting build sheets, invoice, friends & family and employee pricing and on a new Ram 1500, people are getting 15-21% less than MSRP.

On German cars, I'm finding it's a lot harder to negotiate down from what the sticker says.

If you can get 15% off a truck today, you're almost ahead of depreciation.

Regarding online buying, I've owned 9 cars at age 34 and 7 motorcycles. I've never bought anything in person. I love fly & rides so I cast a very wide net. I find the dealers with the vehicle I want in stock, ask them the price, go back and ask for a better price out the door and whoever is cheapest, I buy it from them even if it's a plane ride.

Realshelby · Feb 26, 2021

I have years in the car business. From sales person to GM.
Online car shopping/sales is booming because many people don't like to go to a dealership and feel like they have vultures hanging around them ( sales staff ). I won't get into the reasons that exists here. Except to say a reputable sales person is going to HELP you in ways that can save money or increase satisfaction with purchase.....
IF you know exactly what you want, online is a good way to do business.
BUT...how can you spend $50K and not sit in, look over, drive vehicles that might be of interest to you? You are making a BIG mistake not test driving different vehicles/brands.

So, to the price. There is actually less "profit" between sticker/retail price and "invoice" than there was many years ago. Invoice IS what dealers pay for the car....up front. This is paid before the vehicle actually arrives at the dealer. With interest rates low that isn't a big factor. BUT...there was a time it was a very big issue. BTW, manufacturers give the dealer a finance payment to cover the cost of interest paid on the vehicle. This is a percentage and amounts to a few hundred dollars. Not always shown on actual invoice paperwork ( dealer can hide these amounts ). Then there is "holdback". Usually around 3% of invoice. This is "held back" until the vehicle is registered as sold. There is also money for inspection, prepping, servicing the new cars as they come in. This is money the service department gets....and honestly isn't something they make much profit on as costs to do this right eat that all up.
Now to the hidden money everyone knows must be there. There are programs that promote vehicle sales in units. But not every quarter or month. Not from the manufacturer. These are usually a couple times a year and can add up to hundreds, even thousands on certain vehicles. But not all and you have to meet your quota before you can count on getting anything at all. There may be some manufacturers with programs that run more often or are run differently, but there isn't a $5000 pot of gold per vehicle from any manufacturer.
Rebates are given to the customer, and the manufacturers have ways of making sure that is not kept by the dealer and not offered to the customer ( unless the dealer is committing fraud ). BUT, there is also Dealer Cash. Which is a rebate to the dealer internally to promote selling that product. Usually on vehicles that need a bit of extra promotion. In todays world, you can find out about dealer cash on websites that also give rebate amounts. This should be YOUR money if you negotiate properly.
So now you have negotiated what you think is a fair price ( you done your Edmunds/Kelly, etc research on pricing...) and wonder why you cannot just buy it and leave with it.

Financing. This is where dealers have gone to make up for the profit they used to get by selling vehicles for over invoice. Extended warranties can make more profit than the vehicle sale. Especially when you buy a non branded ( not the manufacturers extended warranty. ONLY buy a manufacturers extended warranty if you just have to waste money ) warranty. Interest rates are low. But adding 1% to the interest rate offered by a lender nets big profit for a dealer! So be sure of what you qualify for and don't be afraid of going outside the dealer for financing. Buying protection packages for glass, tires, dents, etc is simply handing over money in a sack to the dealer. Period.

Manufacturer financing. We all see the 0% for even 84 months. Or usually some amount of a cash rebate. Or sometimes both a low rate and cash. These are "safe" in that the dealer cannot screw with these. But know the difference, in that getting financed with a manufacturer is the same as a back or credit union if it is NOT one of the advertised 0% 1.9%, etc rates.
Don't ever take 0% for long terms if there is any cash rebate available instead. You finance less up front. Yes, on paper 0% for 72 months might/could show a slightly less per month payment. But if you qualify for good rates ( well under 3% now ) then you are not paying much in interest anyway. Why not 0%? Because few ever keep a vehicle 6 years. Or 5 years. They want to trade it in. And guess what, you owe more on it than it is worth. Taking the rebate up front is a big factor in helping to not be "upside down".

Buying a car is changing. Big corporations are buying up all the dealerships. They cut costs by paying less or no commissions to sales staff. Same with finance staff. All used car appraisals are done by a handful of appraisers at the corporate office in another state. Cost cutting. But profits from consolidating all the accounting, much of the management, and cutting overhead by reducing labor costs have made the business model attractive.

There is no loyalty built in. So shop wisely. Do your research. Check on your own financing in case that is better for you. Drive some vehicles.

Then buy online from whomever offers the lowest price!

Omega Man · Feb 26, 2021

I always felt in “out the door terms” that if I paid retail and received retail for my trade (or wholesale-wholesale), it was a pretty fair deal.
OM

jerryab9rj · Feb 26, 2021

Realshelby said:
I have years in the car business. From sales person to GM.
Online car shopping/sales is booming because many people don't like to go to a dealership and feel like they have vultures hanging around them ( sales staff ). I won't get into the reasons that exists here. Except to say a reputable sales person is going to HELP you in ways that can save money or increase satisfaction with purchase.....
IF you know exactly what you want, online is a good way to do business.
BUT...how can you spend $50K and not sit in, look over, drive vehicles that might be of interest to you? You are making a BIG mistake not test driving different vehicles/brands.

So, to the price. There is actually less "profit" between sticker/retail price and "invoice" than there was many years ago. Invoice IS what dealers pay for the car....up front. This is paid before the vehicle actually arrives at the dealer. With interest rates low that isn't a big factor. BUT...there was a time it was a very big issue. BTW, manufacturers give the dealer a finance payment to cover the cost of interest paid on the vehicle. This is a percentage and amounts to a few hundred dollars. Not always shown on actual invoice paperwork ( dealer can hide these amounts ). Then there is "holdback". Usually around 3% of invoice. This is "held back" until the vehicle is registered as sold. There is also money for inspection, prepping, servicing the new cars as they come in. This is money the service department gets....and honestly isn't something they make much profit on as costs to do this right eat that all up.
Now to the hidden money everyone knows must be there. There are programs that promote vehicle sales in units. But not every quarter or month. Not from the manufacturer. These are usually a couple times a year and can add up to hundreds, even thousands on certain vehicles. But not all and you have to meet your quota before you can count on getting anything at all. There may be some manufacturers with programs that run more often or are run differently, but there isn't a $5000 pot of gold per vehicle from any manufacturer.
Rebates are given to the customer, and the manufacturers have ways of making sure that is not kept by the dealer and not offered to the customer ( unless the dealer is committing fraud ). BUT, there is also Dealer Cash. Which is a rebate to the dealer internally to promote selling that product. Usually on vehicles that need a bit of extra promotion. In todays world, you can find out about dealer cash on websites that also give rebate amounts. This should be YOUR money if you negotiate properly.
So now you have negotiated what you think is a fair price ( you done your Edmunds/Kelly, etc research on pricing...) and wonder why you cannot just buy it and leave with it.

Financing. This is where dealers have gone to make up for the profit they used to get by selling vehicles for over invoice. Extended warranties can make more profit than the vehicle sale. Especially when you buy a non branded ( not the manufacturers extended warranty. ONLY buy a manufacturers extended warranty if you just have to waste money ) warranty. Interest rates are low. But adding 1% to the interest rate offered by a lender nets big profit for a dealer! So be sure of what you qualify for and don't be afraid of going outside the dealer for financing. Buying protection packages for glass, tires, dents, etc is simply handing over money in a sack to the dealer. Period.

Manufacturer financing. We all see the 0% for even 84 months. Or usually some amount of a cash rebate. Or sometimes both a low rate and cash. These are "safe" in that the dealer cannot screw with these. But know the difference, in that getting financed with a manufacturer is the same as a back or credit union if it is NOT one of the advertised 0% 1.9%, etc rates.
Don't ever take 0% for long terms if there is any cash rebate available instead. You finance less up front. Yes, on paper 0% for 72 months might/could show a slightly less per month payment. But if you qualify for good rates ( well under 3% now ) then you are not paying much in interest anyway. Why not 0%? Because few ever keep a vehicle 6 years. Or 5 years. They want to trade it in. And guess what, you owe more on it than it is worth. Taking the rebate up front is a big factor in helping to not be "upside down".

Buying a car is changing. Big corporations are buying up all the dealerships. They cut costs by paying less or no commissions to sales staff. Same with finance staff. All used car appraisals are done by a handful of appraisers at the corporate office in another state. Cost cutting. But profits from consolidating all the accounting, much of the management, and cutting overhead by reducing labor costs have made the business model attractive.

There is no loyalty built in. So shop wisely. Do your research. Check on your own financing in case that is better for you. Drive some vehicles.

Then buy online from whomever offers the lowest price!

------------------------------------------------------------------------------------------------------------------

That was a lot of helpful info. Thanks!!

Jerry

Rinty · Feb 26, 2021

I bought a new car yesterday in 20 minutes, over the phone. I knew exactly what I wanted and the salesman was very knowledgeable; a positive experience.

Realshelby · Feb 26, 2021

Let me add something about Used Cars and Trucks.

ACV=Actual Cash Value. Every dealer operates off this when buying your used car. Because they ARE buying it from you. You TRADE your used car...but that simply means you are offsetting the purchase cost by what the dealer pays you for the used unit. Then there are the sales/vehicle purchase tax savings most states give where you pay only on the "difference" in what you pay for the new car after "trading" the used car. ACV is what your car is ACTUALLY worth. Not what you think it is worth, nor what the dealer wants the next person to pay for it. ACV is what the car will sell for at an auction or through a wholesaler. Converted to cash. Sometimes dealers have to get rid of stuff to make cash, and the certainly get rid of cars they don't have a good market for. Or that are having problems. Of course NO ONE would trade in a car and not tell the dealer it is broken.....

Dealers make more on used cars than new cars. That is one big reason someone actually puts up with the headaches of a new car franchise. There is little to no competition, that dealer has the only unit exactly like the one you want. Usually. Unless it is something they purchase from an auction, meaning you are buying a rental car from Enterprise or others. Executive demos? Utter BS 99.999% of the time.

Certified Pre-Owned. That term exists for one reason. Manufacturers have programs where they work with the dealer to "inspect" ( wink, wink ) cars to certify they meet a high standard. Maybe new tires even if not really needed, all maintenance accounted for, cleaned up better than others, and so on. These also come with an extended warranty of some order and sometimes they qualify for low interest financing. The REASON this all exists is to raise resale value of 2,3, and 4 year old vehicles. This makes a LOT of difference to a manufacturer and selling these vehicles for a couple thousand or more over similar vehicles makes the newer models sell better ( lease values really become more attractive ). I don't tell people not to buy these units. Sometimes they ARE the cream of the crop. But a value they are not.

Used cars are the better value compared to new. With careful shopping. After all, they are ALL used once you get them home! But sometimes you just have to have a new one!

pglaves · Feb 26, 2021

Rinty said:
I bought a new car yesterday in 20 minutes, over the phone. I knew exactly what I wanted and the salesman was very knowledgeable; a positive experience.

They must do things differently in Canada than here in the U.S. I am sure there are people who have good experiences but I would rather prep for a colonoscopy or get a root canal than deal with a typical new car salesman. They are like sharks circling their prey at most dealerships. And for any such folks on this forum, of course you are the exception to my perception.

Realshelby · Feb 26, 2021

Omega Man said:
I always felt in “out the door terms” that if I paid retail and received retail for my trade (or wholesale-wholesale), it was a pretty fair deal.
OM

Let me say that if you think you are treated fairly and are happy with everything that is indeed a good deal. I can tell you that the people that obsess over looking for the hidden dealer money, chase advertised units/loss leaders, and buy the off market stuff that has sat around for a year are almost never happy or satisfied. They are sure they left $500 on the table and moan about that until the next purchase. Because the next purchase comes sooner than average as they bought something that was cheap and did not meet there needs or fulfill their desires. Buy what you WANT so you can be happy and keep it for several years. THAT is the way to come out ahead of the average buyer. Save up till you CAN afford the Platinum Ford F-150 instead of the XLT.......

As mentioned above, the dealer is buying your used car. It should not have a bearing on what you pay for a new car or truck. So, negotiate the price on the new car/truck to where you want it. Then ask the dealer what they will pay you for your trade. Some balk at that. As a salesperson and manager, I am 100% ok with it. I like to have everything in black and white. Most dealers will have you sign a form showing what the actual ACV of the trade is anyway. Very few dealers work off retail trade values. Now you know EXACTLY what you are paying. Want to switch to another vehicle? Your trade will be the same amount on anything.

Know this, you should research the value of your used car. Kelly, Edmunds, and others will give a "trade in" value. Be honest in listing condition of your car. These values are not exact, but they are relevant to what the market can be. Next, and this is important, check the payoff amount of your trade in unit if not paid for. If you owe a lot more on it than trade value, that is called "upside down". Some lenders will finance part or all of that. Depends on cost of new car and fico scores....and DOWN Payment! There is nothing worse for a sales person than spending a lot of time with a customer only to find they cannot buy due to owing too much on trade in units or bad credit. Be honest with yourself, and be up front with the dealer.

bigjohnsd · Feb 26, 2021

@realshelby provides sage advice and truth in his three posts above.
Everything he says also applies directly to the Motorcycle/Powersports experience as well.

Rinty · Feb 27, 2021

PGlaves said:
They must do things differently in Canada than here in the U.S....

Well, I knew exactly what I wanted, and I was referred to the salesman by a higher up in the dealership. He offered me a fair deal on the car and I didn't try to chase that last $500 that Realshelby mentions.

It was the same thing with the recent purchase of an R1200RS from my local mega dealer. The bike was a clear out item on the floor at an attractive price and I took it.

But I suppose Canada has its share of unsavoury reps.

Thanks for the background, Realshelby; very interesting.

1074 · Feb 27, 2021

I think it all has to do with the salesperson. I used the on line service for my last two cars and was totally pleased with the results. I gave him the exact model and accessories that I wanted on the first car. He grilled me a bit on my buying status to make sure that I could afford the car. Then he gave me a laundry list of discounts that I was qualified for, bringing the price way down, without me having to get excited and use my negotiation skills. We both came to a "screaming deal" agreement! He asked me when I wanted the car and told me that the exact car I wanted was at another local dealer so I could pick it up anytime the following day.
The next time I wanted a new car I called him up and went through the same routine. The only thing different was that this time I could save an additional $500 if I were an Uber driver! That application was free, need I say more? He asked me what condition my trade in was in and even quoted me a value higher than what I was expecting.
Other sales staff in the past have not been quite that honest.

Rinty · Feb 27, 2021

1074 said:
I think it all has to do with the salesperson...

Yes. Over the years, I've had good luck with a number of new car sales persons, and I didn't feel like I had to use my negotiating skills to come up with a deal. I came back to one salesman I used in 1973, about 40 years later, when my brother was looking for a truck.

Omega Man · Jul 18, 2021

Anyone try to buy a new vehicle lately? All the reports have it sounding kinda ugly. I look up a 4 model year old pickup with 40,000 miles locally and pricing was along the lines of what it cost the first owner :hungover

OM

RIP Rinty

PoorUB · Jul 18, 2021

I just bought a new Ram Laramie. Used 3 year old, 35,000 mile trucks are asking price about $3,000-$5,000 less than new, $5,000 more than the truck sold for new and no negotiations, take it or leave it, if you don't buy it the next guy will! I looked at a 2018 F150 with 35,000 that they were asking $5k over what I bought a new 2019 two years ago.

No Fords, Chevys or GMC pickups on the lots and if there is it is either the smallest V6 of a fully loaded $75k truck. I needed some wheels, my last F150 was actually supplied by the company I worked for and I retired. I ended with a Ram because the dealer had a couple on the lot with the options I wanted. Again, no negotiations on the price, window sticker or walk away. I asked if they could sweeten the deal with some mud flaps and running boards and they gave $500 towards them. I asked for a cash price or what the best interest rate was. Cash they would knock of $1200, or zero percent for 48 months, I financed it. I will earn more in my 401K leaving the money there. It is crazy!

I figure in a few months this will turn around and prices will drop some but I wonder how much. Truck salesmen have told me they believe trucks will start showing up in a month or two, but the demand will stay high for months, maybe a year, and I believe them. Pretty much why I bought now because I don't think it will get much better for months.

Cars and trucks, what’s the real dealer cost?

Fortis Fortuna Adiuvat

New member

New member

Fortis Fortuna Adiuvat

SURVIVOR

Member

YouTube Mechanic

Addicted to windshields

Fortis Fortuna Adiuvat

Member

New member

Addicted to windshields

#13338

Addicted to windshields

'21 R1250 GS Adv

New member

Active member

New member

Fortis Fortuna Adiuvat

Active member

Similar threads