Tracym

Nope. I paid cash. And no servicing deals or anything.

RoadWarriorFromLP

Others have touched on aspects of this, but the situation is not as you described it:

-Invoice is not the same as product cost. With holdback, an "invoice" price already has at least several hundred dollars of extra revenue built into it. There may additional incentives, some of which are reported and others that are not, that increase this amount, particularly on the slow movers and year-end closeouts.

-The dealer finances its purchase of its new car inventory based upon the invoice amount, so a dealer comes out of pocket for very little money upfront. The effective margin is more accurately understood when it accounts for the economics of the inventory financing. A dealer may be out of pocket perhaps $100-200 for the vehicle while it sits on the lot; a customer who buys that vehicle for invoice is giving the dealer a several hundred dollars' worth of net, in comparison to this financing cost. The margins are accordingly quite good, thanks to the use of debt.

The new car sales business is built on leverage (dealer using debt to operate the business) and inventory turn (turning over a parking space of inventory as fast and as often as possible.) Roll in the profits from used car sales and service, coupled with the fact that many of the staff earn no salary (the salespeople work on commission), and they can be fairly lucrative businesses for those who know how to run them. The ones who know how to manage inventories are those who make the most profits.

You can buy many new cars at around invoice price, less incentives, if you can negotiate effectively, unless the car is a hot item or if you live in an isolated area with few dealerships. Most cars aren't that popular, and allow for that kind of pricing, but you need to know how to get it.

Most of the process of negotiation involves the dealer trying to sort out whether you are a real customer and, if so, what your tolerance is for paying a given price and how easy it is to distract you in ways that will increase profit, such as lowballing your trade or manipulating the financing. So you will generally pay as much as your negotiation style dictates. If you know what you are doing, you may pay hundreds or thousands less than would a less savvy buyer who is buying the identical item.

Tracym

I was no fun at all for a salesman manager (the salesman was laughing at the negotiations).

No financing, no trade.
And while I wanted the car - didn't need it that day. And was tired and grumpy and wanted to go home.
At the end of the month and the end of the day.

I was happy with the result.

lol sales manager kept saying "But you don't understand PROFIT". And I'd say "Nope - I understand CHECKBOOK".

Nice guys actually, they've all been very nice when I go for service.

Jerseygirl

Can't believe folk fall for that one...$200 profit on the sale of a car...as if.

Jerseygirl

Could you please take a look in your little book and see what we should ask for a '04 Jetta, fully loaded, 37K miles...not a mark on it?

Steerpike

Good advice. But instead of wasting your time going in and writing things on bits of paper, I did my entire transaction by email until I got a solid commitment on a price, in writing. I then told them, "I'm coming in at 6pm, and expect to be out by 7pm (going in late helps speed things up because THEY want to go home!). I expect to pay the price we agreed, and have arranged for financing on that amount ( a cashiers' check/cheque). I don't want any options, extended warranty, or financing (I had financing pre-arranged). If you pressure me on paint protection or extended warranty I will leave. Do we have a deal?"

yes, they said. I showed up, sat down, handed over a check, and was in the car in about an hour. I could not believe I actually pulled it off.

As for determining 'what they paid', I did lots of research and used www.edmunds.com to find out dealer invoice AND any local rebates in play. I found out that, for my make / model, there was a $2,000 dealer incentive that the mfr was offering them, so I factored that in. I also used edmunds.com feature to email 3 dealers in the neighborhood, and got three good quotes, which I used as a starting point.

My first offer to all three of $200 over "invoice less rebates" failed, and I waited over a week but they would not bite. I then upped it to about $600, and the closest guy (where I wanted to buy) still refused, but another dealer not much further away said yes, which is when I started the 'no extras' exchange.

Having no financing needs (either paying cash, or, arranging finance ahead of time) simplifies the discussion, as does not having a trade-in. I DID have a car to get rid of, but I handled it separately.

All the above only applies to a car that is in moderate supply. You can't use that technique to buy a mini (back-ordered here in CA) or any car where demand outstrips supply. Wanting specific options can also complicate things. Try to find out ahead of time what their stock level is of the car, esp. in the color you want. If you want red, and they have 20 blues on the lot, you may very well have to pay more because red is a popular color, for example.

Tracym

I never said that was their profit.

I said there were other ways built in that they made their profit, paying significantly over "invoice" was a mistake.

Unless you meant the other poster...

Edit: or someone else.

lol ignore me, now I've confused myself

Jerseygirl

Nope just folk in general...plenty of people believe what the salesmen tell them. All this $1000 cash back etc it's all smoke and mirrors.

Tracym

Oh that's for sure.

Actually just the thought of car buying and bargaining makes me so crabby, by the time I get there I'm ready to chew their ears off.

Probably a good plan now that I think about it....

RoadWarriorFromLP

If you paid $600 over invoice for a car that included a $2,000 factory-to-dealer incentive, then I'm sorry to tell you that you paid a lot. Depending upon the car and circumstances, I'd want to pay about $2k+ under invoice. (For one thing, you can bet that any car with a $2,000 incentive is not hot and is ripe for haggling.)

I doubt that you'll get the best deal possible online. The dealer will not have invested time and effort into securing your transaction for him to be motivated to give you bottom dollar. Whether it's worth leaving money on the table to have a more convenient transaction is a personal choice.

Rushman

Dont take the piss....of course it doesnt.

Rushman

Gimme the full specs..leather,alloys, sat nav etc etc etc in a PM and I'll get back to you.

Steerpike

Sorry, I guess I was not clear. I started off offering $200 over "invoice minus the $2k dealer incentive", and they refused. Several weeks later I offered $600 over the same 'invoice minus dealer incentive' price, and only 1 dealer was interested. So my final price was well under invoice. The car had a $2k dealer incentive (which was not advertized; I learned of it only through Edmunds) because it was late September and the '08 model year version was already trickling in; I forget all the details now, but it was roughly a $35k sticker price, $32k invoice, less $2k incentive. I think I eneded up paying just over $30,600, plus tax.

I concluded along the way that I would never know what the absolute lowest price would be, and I would never know what the dealer truly paid for the car, and what I had to decide upon was, how much was I willing to pay.

I also concluded, along the way, that one particular sales guy was a decent guy and wanted to give him the business because he invested time in me, and didn't hound me like all the others. He was the one guy who honored my request not to keep calling me, and I wanted to pay him back for that.

This car was an Acura TL, which is a good selling car. It is Acura's best selling model and the second best selling model in it's category; the best seller of the category being the BMW 3 series. So while they are eager to sell them, they aren't going crazy to shift them like they do with many GM/Ford/Chrysler lines. Being a good seller, and having virtually zero options, makes comparison shopping relatively easy.

This was my first car transaction in 15 years; I hope to wait another 15 for the next (my last car delivered 15 years of flawless service and I fully expect the same from this one).