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Why would dealers sell under invoice?


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Hi,

 

 

I see alot of people on this board talking about getting there GT's below invioce and wanted to know how this is possible?

 

Isn't invoice the actual dealer cost? Why would they sell below their cost?

 

I can get a supplier discount which is invoice but I'm trying to get below invoice and the dealer tells me there is no way any dealer would do that.

 

They told me that SOA gives the dealer 400.00 for every car they sell for the VIP plan. The 400.00 is to make up for not selling the car at a profit?

 

Can any one shed some light on this subject?

 

Thanks,

 

Brian

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I don't know the specifics but I do know that invoice is not what the dealer paid. It is a misconception that a sale at invoice equates to zero profit. Also, the dealer does not only sell one car - what he may 'lose' on one, he should make up on another.

 

The dealer that says no dealer would do that is speaking for themselves (more accurately it is a negotiating move). The bottom line is this - you decide what you want to pay and if you and the dealer can't come to terms, then take your business elsewhere. There are plenty out there that will.

 

-mark

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Guest *Jedimaster*
Dealers lie. They don't pay "invoice". There's more to it than "holdback" too, from what I understand.
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They told me that SOA gives the dealer 400.00 for every car they sell for the VIP plan. The 400.00 is to make up for not selling the car at a profit?

 

so that makes it $400 for selling at VIP price + at least $1200 holdback = $1600, not bad at all!

This Space For Rent

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yeah, seems like there are a lot of variables that dealers can use to sell at a lot less than the invoice price. Currently i've been quoted $1000 off invoice price, AND if I don't take the 1.9% Subaru financing deal, I can get an additional $500 discount. (this is for an OB XT Ltd).
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Have the dealer show you the invoice sheet. In the bottom left corner you will see how much additional room you have to work within. It will say "HB1040" or something to that affect, and it means there is $1,040 in HoldBack before you hit actual dealer cost. If the dealership you are working with doesn't want to deal, go somewhere else. I had three dealerships competing for my business and ended up driving my car off the lot @ Invoice Price Minus Holdback @ 2.9% financing.
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Dealers make a TON of money doing service on your car as well. If they sell it to you at a great price, you will be inclined to go back to them for regular maintenance (if you don't do that sort of thing yourself).

 

There are also plenty of incentives that the dealer fills out themselves - things like mail-in rebates and whatnot that they won't always tell you about.

 

But yeah - I'd find it hard to believe "invoice" is what the dealer actually pays for the car.

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selling a car means more than just making a profit.. it's called "keeping yourself out of the red". It's better for a dealer to sell a car and lose $400 than it is to have a car inventory listed at $27,000. Remember, the dealer had to buy the car as inventory. It's better to be in debt by $400 than it is at $27,000..

 

Keefe

Keefe
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Guest *Jedimaster*
selling a car means more than just making a profit.. it's called "keeping yourself out of the red". It's better for a dealer to sell a car and lose $400 than it is to have a car inventory listed at $27,000. Remember, the dealer had to buy the car as inventory. It's better to be in debt by $400 than it is at $27,000..

 

Keefe

I feel as if there was some sort of Zen moment in that. Like "Spit not in the wind" or something. I feel like drinking Green Tea. I also hear a gong.

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3% holdback plus floor holding costs. The dealers pay interest on the vehicles on their lot after 90 days. so the nearer to the 90 days you go the faster they want to dump the vehicle. They also get a commission on any financing they do that can easy be $1,000. That is why brands like Acura never haggle that much because they turn over their stock very quickly. So they have always sold the vehicle before they have bought it as it where.
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In conclusion: Invoice price is not the price the dealer paid for the car... they still make money, the dealer always wins. If you don't believe me just ask a friendly(somewhat honest) dealer and they will tell you...
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Dealer's for te most part do not "pay" invoice" for any vehicle.

Being an ex dealership owners son this is how it works.

 

1. Dealership orders 10 cars for example. The total invoice price comes to 100k for example.

2. Dealership is afforded 90 days typical for the first payment. (Called a float)

3. Dealer sells you the car at or below invoice.

4. Dealer gets 3% of invoice (called Holdback) either credited or in the form of an actual check from manufacture.

5. Dealer maintains that vehicle sales moneys for 30 days or more depending on the cycle.

6. Upon payment due date, Funds are transferred to the manufacturer.

 

If a vehicle is on the lot for more than 90 days, the dealership pays a "percentage" in the form of interest. This is used to pay down the float that the manufacturer allows. Each dealership is set up with numerous banks and manufacturers for a "floor planning" agreement. Basically, just making an interest payment until the vehicle is sold from the floor.

All dealerships are audited at least bi-monthly for compliance.

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Dealer's for te most part do not "pay" invoice" for any vehicle.

Being an ex dealership owners son this is how it works.

 

1. Dealership orders 10 cars for example. The total invoice price comes to 100k for example.

2. Dealership is afforded 90 days typical for the first payment. (Called a float)

3. Dealer sells you the car at or below invoice.

4. Dealer gets 3% of invoice (called Holdback) either credited or in the form of an actual check from manufacture.

5. Dealer maintains that vehicle sales moneys for 30 days or more depending on the cycle.

6. Upon payment due date, Funds are transferred to the manufacturer.

 

If a vehicle is on the lot for more than 90 days, the dealership pays a "percentage" in the form of interest. This is used to pay down the float that the manufacturer allows. Each dealership is set up with numerous banks and manufacturers for a "floor planning" agreement. Basically, just making an interest payment until the vehicle is sold from the floor.

All dealerships are audited at least bi-monthly for compliance.

 

thanks for the great information!

 

I've always wondered about the inner workings of a dealership.

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Ok, so I was using the invoice price I saw on Edmunds.com for a MT LGT, and then I listed out all the costs for the upgrades I wanted, so here is what it looked like for gt and lgt:

 

MSRP Invoice

$26,095 $24,018

 

L97 Performance Group 1 $601 $392

Includes STi short throw

shifter, STi metal pedal

kit and Momo shift knob.

 

L96 Popular Equipment Group 1 $281 $183

Includes security system perimeter

alarm and auto-dimming mirror

with compass.

 

Subwoofer/Amplifier $273 $178

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

$27,250 $24,771

 

Taxes $2,053

Plates $474

Doc fee $299

====================

Out the door $27,597

 

MSRP Invoice

The limited prices are: $28,595 $26,294

======================

Out the door $29120

 

 

Here is the just of the response I got:

Edmunds prices are accurate, esspecially on the prices they quote for the upgrades. The invoice costs for upgrades is listing installed at factory, so that would not include the dealer's labor costs.

 

So how do you negociate upgrades if the car doesn't come with them, like the subwoofer? I'm thinking for the money they want to charge me for the sub, I could just get it installed myself from a audio place.

 

Any thoughts or input. At what point do you realize you just can't get a lower price regardless of how many dealers you go to?

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I made the dealer lose $2100. I went back to the dealer a week after I bought it, and I ask the sales man that helped me "So, did I really get a deal." He said "Check this out" then he pulled out a pink ticket out of his wallet showing what he made for the week or month for the dealer. Under my name there was a -$2100.
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