i just read a thread that had a comment about when buying a new car, you should negotiate from true cost up, not from invoice or MSRP. Obviously, this would be the smartest and most beneficial way to haggle, but how exactly do we find out what the tru cost was on a particular car without seeing the dealership's soct spreadsheet....i'm sure dealers are not open to the idea of showing this to consumers. is there some kind of website or resource that can help in finding true cost??

Also, is the invoice price that's placed on the window of the car the true invoice that the dealership payed?? i was told that its not. not sure how true that is.

thanx for the help,
-Anthony

 

Carsdirect is the best way to go. Look at the invoice and the Carsdirect price.

 

ya their enthusiast base price is 28k

 

Or edmunds.com. You build the car to your specs and they show you the cost to the dealership, the MSRP AND what people in your zip code are buying the car for. That's what I used to buy my car.

 

The true cost is invoice less holdback and discount for volume purchases, but the number tells only part of the story. Who pays the dealers lease, taxes, utilities and employes wages. You do of course. Dealers are in business to make a profit. And they do. On every car. Every one.

 

1) The price on the window ("sticker price") is the MSRP NOT the invoice price.

2) Invoice price is available at many websites, including CarsDirect and Edmunds. In fact, many dealerships publish invoice prices with the inventory on theri website.

3) But even the invoice price is NOT what the dealer actually pays. In the price range that most Zs fall in, the dealer can sell you one at invoice price, and will still be making $1000 or so.

bill

 

That's not true. Some dealers are willing to lose $100-200 on any given sale to maintain the sales volume. When I say lose, I mean after Invoice minus Holdback minus any incentives for an actual net loss. After the loss, they also pay their saleperson a "mini" commission which is usually another $100-200.

You probably ask why...it's all in the name of market share. Dealers don't want to lose the volume they are used to so they take a few loser deals to keep volume up. They are obviously not doing this on every deal but it happens regularly. They take the deal in the hopes that you will purchase something in finance ie. warranty, gap insurance and/or aftermarket that will help the atleast break even. I have seen plenty of deals where they don't buy anything extra and the deal ends up in the red after it's complete.

 

Invoice is not cost. Invoice minus Holdback is. Holdback for most auto makers is 3% of the M.S.R.P. less the destination charge.

It is illegal for manufactures to charge dealers different costs based on sales volume. Sometime they do offer other incentives that allow them to sell for less without losing money but all dealers get the same incentives.

The reason invoice is considered to be the cost of the car is because manufactures were forced to help dealers make money because before holdback, if they sold for invoice they didn't make a profit. So, they separated holdback and it's used to cover the expenses of operation that the dealer incurs. It covers utilities, bookkeeping, advertising and administrative costs to name a few.

So anything made over invoice is considered profit. Anything under is considered dipping in the the operational expense money.

 

Thanks for the clarification.

 

try consumerreports.org they actually have what the dealer paid for and what not.

 

Does anyone know, do carlots have to purchase every new car they have on the lot outright, or do they not have to pay for them until they are actually sold?

Also what happens to all of those cars that just dont sell, where do they go?

 

That is the biggest expense to most dealers. It's called "flooring." Dealers pay financing charges for vehicles sitting on the lot. This is the biggest reason that they will sell a vehicle for little to no profit if it is not a high demand product. The longer the car sits on the lot the more it costs the dealership.


Used cars are wholesaled at auction or to other dealers. That is one reason that trade value is less that private party. A dealer might buy a trade and spend $1,000 reconditioning it. Then Floor it for 3-6 months and end up wholesaling it for the original amount (or less) that they paid for it.
All the new vehicles are eventually sold. Sometimes we end up selling them to other dealerships at a loss just to get rid of them. Right now we have a new 2006 S2000 on our lot. Trouble is the 2007's have better incentives than the 2006 so you would actually pay more for the 2006. So eventually we'll just bite the bullet and take a big hit on it and someone will buy it for a screaming deal. This is why dealers mark up other cars...cause you gotta make the money where you're can cause you're losing it in other places.

 

Makes sense. Im sure car sales gets all technical, but in the end, its all to make money.
Ive gone to edmunds.com, and they were very helpful.

 

Wow did not know this thanks for the answer.

 

NO. They do not pay for them until they sell. But ther is what is called " flooring " costs. That is the interest on the loan for the amount of the vehicle. This is how the manufacturer makes their money. It is also why once a car has been around for a while, they want to get rid of it more, cuz it has been costing them for too long now. But older units also get "advertising " dollars attached to them.

Blah blah blah
blah blah blah

 

So what did you buy?

 

Outstanding!

 

 

Davidv, although what you say is true for the most part I am going to point out one glaring mistake.

I was the used car manager for 7 years at one of the largest dealerships in all of south Texas. I know a little about this subject.

I would say on average we lost money on new vehicles about 12 times a year. Now that's a very small number in relation to how many units we sold per year. It happened though. Here's how it did happen 6 times in the last year I was there:

We had a rival dealership about 45 minutes away from us that was constantly stealing our in-town customers. Whether it be flying planes over the city with there flags behind it or what not. Their ads in the newspaper were killing us! They were advertising a brand new truck for NEAR true cost. Now even though when customers would get there they would pull the ole "we already sold it" bit it was still stealing a lot of business on our trucks away. So our owner decided that he was going to actually lose money on 1 and possibly 2 trucks a month by offering them at 1k below true cost. Obviously if a customer was going to finance the truck it would be easy to screw them on the APR and make the money back, but in our market there are tons of wealthy farmers and ranch hands that have no need to finance. So we did lose money on a new truck nearly every month for 6 months and they are still doing it. I'm just not there to see it.

We lost money on used units aswell but I think you were refering to the new lots. Used is easy to lose money on though and happens more than once or twice a month easily.

 

Corndog I can tell you have been in the business.