Automotive

Freight & PDI On New Car - Is it ever waived?

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  • Jul 19th, 2017 1:53 pm
[OP]
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Nov 23, 2010
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Freight & PDI On New Car - Is it ever waived?

So I been shopping around for a new car and thought that freight and PDI are pretty standard.

I noticed one dealership was having a "sale" and (for example) said that the price was $22000 on a new Corolla.

I emailed to ask what other fees there would be and what would the out the door price be.

The person emailed back saying it was just the listed price + HST/Licensing

I checked the unhaggle thread, and $22000 is about $1000 above the invoice price. So the price they are listing it as is a pretty fair one.

Im just a bit confused as I always thought freight and PDI are either always charged, or some how worked into the total price. Im not sure how they can sell it for $1000 above the invoice price.

Can I be missing something?
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Because "invoice" is NOT how much the dealer paid for the car.

Manufacturers want to empower the purchasers with these "invoice" numbers through places like Unhaggle so the consumer gets the illusion that they are getting a great deal by paying just over invoice or the well publicized invoice + 3%.

In your specific case there might be some incentives from manufacturer to purchaser or to dealer that is factored in.
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The "invoice" pricing (from unhaggle, etc.) are not actual dealer invoice pricings, they are just buzzwords used to convince a buyer they're getting an exclusive insider deal relative to the standard negotiation pricing.

Exactly what X24Secret said.
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OTR price...who cares about the other BS.
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Dealers have volume deals based on their dealer rating and their financial worth that they arrange B2B financing with manufacturer's financial arms for the cars on the lot.
So what's the sticker price they pay on individual car is a fuzzy question as they essentially lease the cars on the lot until they sell ...

Most of the smart dealers in Toronto use yield management practices - means in slow times better to move inventory than to sit on it
Which means on that odd configured car sitting on the lot you might get a great deal if it undesirable configuration (color, options etc) at the right moment, but generally dealers do not order such to be on the lot.
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vkizzle wrote: OTR price...who cares about the other BS.
This. People are too fixated on all the fees. The only thing that matters is the OTR cost. Negotiate after all fees lumped in.
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X24Secret wrote: Because "invoice" is NOT how much the dealer paid for the car.

Manufacturers want to empower the purchasers with these "invoice" numbers through places like Unhaggle so the consumer gets the illusion that they are getting a great deal by paying just over invoice or the well publicized invoice + 3%.

In your specific case there might be some incentives from manufacturer to purchaser or to dealer that is factored in.
Squirtle wrote: The "invoice" pricing (from unhaggle, etc.) are not actual dealer invoice pricings, they are just buzzwords used to convince a buyer they're getting an exclusive insider deal relative to the standard negotiation pricing.

Exactly what X24Secret said.
What's your source? What manufacturer?

I've only worked for / managed at (2) brands, so maybe my experience is more limited than you guys but:

Ford:

Invoice
Hold Back
Dealer Reimbursement

I'll admit that I've never run an Unhaggle report on a Ford unit (recently anyway), so I can't comment if they disclose any of this or not. Luckily for the guys in the GTA, most of the dealers advertise with all of this profit backed out & use their sales departments as a loss leader to fuel parts / service.

Toyota / Lexus:

Invoice

Yes, there is profit on the freight but did you know that the manufacturer charges per vehicle for national advertising? Or that the cost to clean / PDI the vehicle is subtracted from the Freight profit? How about fixed costs like dealer side advertising or commission? Here is a real cost breakdown for a 2017 Corolla LE Standard Package which you can confirm with Unhaggle (which is correct.. there is no illusion here):

MSRP: $20,690.00
Freight MSRP: $1,615.00

Cost: $19,237
Freight Cost: $753

So we've got $1453 profit in the car and $862 profit in the freight - great. Let's assume we sell the vehicle at cost to confirm the Unhaggle invoice (so no $1453 front end profit).

Toyota Canada National Advertising Fees: $200 / Corolla (this is more for different models up to $400)
PDI / Delivery Cleanup (dealer level): $275
Dealer Advertising: $150 / Corolla (again this is normalized based on the price of the vehicle)
Commission: $150 (we are using the example of no profit - you still have to pay someone to work, in a typical deal this would be 25% of the profit)

Total: $862 - $775 = $87; this is without even considering other fixed costs such as salaries, mortgages, interest payments, floor plan, taxes, etc, etc, etc. If we want to get a little more particular and say we shouldn't be paying anyone because stealerships are just the worst etc, then call it $87 + $150 = $237 without consideration of fixed costs or employment.

Believe it or not if you like RFD, at the end of the day it's your money and we all work hard for it. I am not trying to argue with anyone on here, but spreading misinformation like it's fact can cause guys like the OP issues when they're shopping for a car.

Actual factual source: Sales Manager @ Toyota sitting at his desk before it gets busy on a Saturday.

Edit:

Lastly, as other people have mentioned, focus on the out the door or on the road price + licensing... it all comes from the same pocket whether you're negotiating from the MSRP, freight, free oil changes, etc.
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xjesterxx wrote: What's your source? What manufacturer?

I've only worked for / managed at (2) brands, so maybe my experience is more limited than you guys but:

Ford:

Invoice
Hold Back
Dealer Reimbursement

I'll admit that I've never run an Unhaggle report on a Ford unit (recently anyway), so I can't comment if they disclose any of this or not. Luckily for the guys in the GTA, most of the dealers advertise with all of this profit backed out & use their sales departments as a loss leader to fuel parts / service.

Toyota / Lexus:

Invoice

Yes, there is profit on the freight but did you know that the manufacturer charges per vehicle for national advertising? Or that the cost to clean / PDI the vehicle is subtracted from the Freight profit? How about fixed costs like dealer side advertising or commission? Here is a real cost breakdown for a 2017 Corolla LE Standard Package which you can confirm with Unhaggle (which is correct.. there is no illusion here):

MSRP: $20,690.00
Freight MSRP: $1,615.00

Cost: $19,237
Freight Cost: $753

So we've got $1453 profit in the car and $862 profit in the freight - great. Let's assume we sell the vehicle at cost to confirm the Unhaggle invoice (so no $1453 front end profit).

Toyota Canada National Advertising Fees: $200 / Corolla (this is more for different models up to $400)
PDI / Delivery Cleanup (dealer level): $275
Dealer Advertising: $150 / Corolla (again this is normalized based on the price of the vehicle)
Commission: $150 (we are using the example of no profit - you still have to pay someone to work, in a typical deal this would be 25% of the profit)

Total: $862 - $775 = $87; this is without even considering other fixed costs such as salaries, mortgages, interest payments, floor plan, taxes, etc, etc, etc. If we want to get a little more particular and say we shouldn't be paying anyone because stealerships are just the worst etc, then call it $87 + $150 = $237 without consideration of fixed costs or employment.

Believe it or not if you like RFD, at the end of the day it's your money and we all work hard for it. I am not trying to argue with anyone on here, but spreading misinformation like it's fact can cause guys like the OP issues when they're shopping for a car.

Actual factual source: Sales Manager @ Toyota sitting at his desk before it gets busy on a Saturday.

Edit:

Lastly, as other people have mentioned, focus on the out the door or on the road price + licensing... it all comes from the same pocket whether you're negotiating from the MSRP, freight, free oil changes, etc.
So which dealership can we find you at?
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Aug 19, 2011
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xjesterxx wrote: What's your source? What manufacturer?

I've only worked for / managed at (2) brands, so maybe my experience is more limited than you guys but:

Ford:

Invoice
Hold Back
Dealer Reimbursement

I'll admit that I've never run an Unhaggle report on a Ford unit (recently anyway), so I can't comment if they disclose any of this or not. Luckily for the guys in the GTA, most of the dealers advertise with all of this profit backed out & use their sales departments as a loss leader to fuel parts / service.

Toyota / Lexus:

Invoice

Yes, there is profit on the freight but did you know that the manufacturer charges per vehicle for national advertising? Or that the cost to clean / PDI the vehicle is subtracted from the Freight profit? How about fixed costs like dealer side advertising or commission? Here is a real cost breakdown for a 2017 Corolla LE Standard Package which you can confirm with Unhaggle (which is correct.. there is no illusion here):

MSRP: $20,690.00
Freight MSRP: $1,615.00

Cost: $19,237
Freight Cost: $753

So we've got $1453 profit in the car and $862 profit in the freight - great. Let's assume we sell the vehicle at cost to confirm the Unhaggle invoice (so no $1453 front end profit).

Toyota Canada National Advertising Fees: $200 / Corolla (this is more for different models up to $400)
PDI / Delivery Cleanup (dealer level): $275
Dealer Advertising: $150 / Corolla (again this is normalized based on the price of the vehicle)
Commission: $150 (we are using the example of no profit - you still have to pay someone to work, in a typical deal this would be 25% of the profit)

Total: $862 - $775 = $87; this is without even considering other fixed costs such as salaries, mortgages, interest payments, floor plan, taxes, etc, etc, etc. If we want to get a little more particular and say we shouldn't be paying anyone because stealerships are just the worst etc, then call it $87 + $150 = $237 without consideration of fixed costs or employment.

Believe it or not if you like RFD, at the end of the day it's your money and we all work hard for it. I am not trying to argue with anyone on here, but spreading misinformation like it's fact can cause guys like the OP issues when they're shopping for a car.

Actual factual source: Sales Manager @ Toyota sitting at his desk before it gets busy on a Saturday.

Edit:

Lastly, as other people have mentioned, focus on the out the door or on the road price + licensing... it all comes from the same pocket whether you're negotiating from the MSRP, freight, free oil changes, etc.
With all due respect which part of my post is misinformation?

Your own post regarding the scenario with Ford confirms the so-called invoice is just one part of the three part equation of how much the dealer paid for the car. It's liking buying something with a cashback CC! You might have paid invoice for that item but your true cost is invoice - CB from CC.

As usual the poor old car salesman strikes again with claims of new car sales are "loss leader" which is an absolute joke. I'm surprised there are no mentions of dealer sales people kids who some nights go hungry because evil RFDers spread misinformation that makes folks like OP have "issues" (you meant less $ in your pocket) when shoping.

Just to clarify I'm fully aware that a dealership has overheads and obviously needs to make a buck, my family has owned 2 GM dealers in the past, I was just dispelling the myth of "invoice" being what the car truly cost the dealer since OP was confused how the corolla was being advertised seemingly only $1k over "invoice".
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X24Secret wrote: With all due respect which part of my post is misinformation?

Your own post regarding the scenario with Ford confirms the so-called invoice is just one part of the three part equation of how much the dealer paid for the car. It's liking buying something with a cashback CC! You might have paid invoice for that item but your true cost is invoice - CB from CC.

As usual the poor old car salesman strikes again with claims of new car sales are "loss leader" which is an absolute joke. I'm surprised there are no mentions of dealer sales people kids who some nights go hungry because evil RFDers spread misinformation that makes folks like OP have "issues" (you meant less $ in your pocket) when shoping.

Just to clarify I'm fully aware that a dealership has overheads and obviously needs to make a buck, my family has owned 2 GM dealers in the past, I was just dispelling the myth of "invoice" being what the car truly cost the dealer since OP was confused how the corolla was being advertised seemingly only $1k over "invoice".
If we're working on Toyota specifically, then your statement does not apply.

If we're working on Ford / GM / Hyundai / others that may follow that pricing strategy, then buyer should beware absolutely.

I'll leave the rest be aside from saying that all of my statements on this forum are based upon factual experience.
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X24Secret wrote: With all due respect which part of my post is misinformation?

Your own post regarding the scenario with Ford confirms the so-called invoice is just one part of the three part equation of how much the dealer paid for the car. It's liking buying something with a cashback CC! You might have paid invoice for that item but your true cost is invoice - CB from CC.

As usual the poor old car salesman strikes again with claims of new car sales are "loss leader" which is an absolute joke. I'm surprised there are no mentions of dealer sales people kids who some nights go hungry because evil RFDers spread misinformation that makes folks like OP have "issues" (you meant less $ in your pocket) when shoping.

Just to clarify I'm fully aware that a dealership has overheads and obviously needs to make a buck, my family has owned 2 GM dealers in the past, I was just dispelling the myth of "invoice" being what the car truly cost the dealer since OP was confused how the corolla was being advertised seemingly only $1k over "invoice".
Your family has owned GM dealers, I call BS as you seem to not know what you're talking about. The post by xjesterxx is spot on. It's invoice, holdback and non refundable credits on finance costs for dealer floorplan to offset some of the cost of inventory. Usually provides dealership an interest free floorplan for the first 45-60 days of each new vehicle. In other words the clock starts ticking after 45 days and interest is being paid every day that car remains unsold. Now multiply that by hundreds of cars in stock.

If you're family owned 2 GM dealerships you's also know that most of the gross profit are not in sales but parts, service collision and finance and insurance, yet most of the revenues are in sale. Typical dealership...over 80% of revenues are car sales (new/used) and contributes 35% gross profit. F&I parts, service, collision makes of the rest of revenue (less than 20%) but contributes the remaining 65% in gross profit. How do I know this? I own stock in Autocanada and get their fillings mailed to me. Go see their filings to get a glimpse of how dealerships operate. If they can't sell you finance or insurance (or both) on that Corolla after they give you the unhaggle price, they are making peanuts on that sale. This is a fact.
Last edited by ottofly on Jul 15th, 2017 5:39 pm, edited 2 times in total.
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xjesterxx wrote: If we're working on Toyota specifically, then your statement does not apply.

If we're working on Ford / GM / Hyundai / others that may follow that pricing strategy, then buyer should beware absolutely.

I'll leave the rest be aside from saying that all of my statements on this forum are based upon factual experience.
I don't know if Toyota specifically gives out holdback or not in Canada, it appears it does in the Sates but perhaps you're right and Toyota Canada doesn't give out holdbacks. I know for certain Nissan Canada has hold backs for example but not sure about Honda either.

However I'm 100% sure you still get volume bonus and the occasional dealer assist even at Toyota. I recall there was a Toyota dealer in Brampton a few years back on RFD that sold quite a few RAV4s at about $200-$400 above so-called invoice and it was explained (or so was said) that they were able to do it based on their volume.
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ottofly wrote: Your family has owned GM dealers, I call BS as you seem to not know what you're talking about. The post by xjesterxx is spot on. It's invoice, holdback and non refundable credits on finance costs for dealer floorplan to offset some of the cost of inventory. Usually provides dealership an interest free floorplan for the first 45-60 days of each new vehicle. In other words the clock starts ticking after 45 days and interest is being paid every day that car remains unsold.

If you're family owned 2 GM dealerships you's also know that most of the gross profit are not in sales but parts, service collision and finance and insurance, yet most of the revenues are in sale. Typical dealership...over 80% of revenues are car sales (new/used) and contributes 35% gross profit. F&I parts, service, collision makes of the rest of revenue (less than 20%) but contributes the remaining 65% in gross profit. How do I know this? I own stock in Autocanada and get their fillings mailed to me. Go see their filings to get a glimpse of how dealerships operate. If they can't sell you finance or insurance (or both) on that Corolla after they give you the unhaggle price, they are making peanuts on that sale. This is a fact.
You can call whatever you want. You're not the first person who read financial statements filed by auto dealers. Face With Tears Of Joy I never contested sources of revenue in a dealership not sure why you got your panties in a twist. I made two statements:

- The dealer never, ever pays invoice for the car, period.

- I took fault with phrasing new car sales "loss leader" which is really not true if you consider the complete lifecycle of the sale and count the annuities from each sale. Loss leader would indicate selling at a loss or a deep discount, which is simply not true with cars, they have a thin margin yes, but I've never either seen or heard of a car that was sold at a loss at a new car dealer save for maybe Lada when they pulled out of Canada?! lol
Last edited by X24Secret on Jul 15th, 2017 5:50 pm, edited 1 time in total.
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ottofly wrote: Your family has owned GM dealers, I call BS as you seem to not know what you're talking about. The post by xjesterxx is spot on. It's invoice, holdback and non refundable credits on finance costs for dealer floorplan to offset some of the cost of inventory. Usually provides dealership an interest free floorplan for the first 45-60 days of each new vehicle. In other words the clock starts ticking after 45 days and interest is being paid every day that car remains unsold. Now multiply that by hundreds of cars in stock.

If you're family owned 2 GM dealerships you's also know that most of the gross profit are not in sales but parts, service collision and finance and insurance, yet most of the revenues are in sale. Typical dealership...over 80% of revenues are car sales (new/used) and contributes 35% gross profit. F&I parts, service, collision makes of the rest of revenue (less than 20%) but contributes the remaining 65% in gross profit. How do I know this? I own stock in Autocanada and get their fillings mailed to me. Go see their filings to get a glimpse of how dealerships operate. If they can't sell you finance or insurance (or both) on that Corolla after they give you the unhaggle price, they are making peanuts on that sale. This is a fact.
Nice post, very informative.
X24Secret wrote: I don't know if Toyota specifically gives out holdback or not in Canada, it appears it does in the Sates but perhaps you're right and Toyota Canada doesn't give out holdbacks. I know for certain Nissan Canada has hold backs for example but not sure about Honda either.

However I'm 100% sure you still get volume bonus and the occasional dealer assist even at Toyota. I recall there was a Toyota dealer in Brampton a few years back on RFD that sold quite a few RAV4s at about $200-$400 above so-called invoice and it was explained (or so was said) that they were able to do it based on their volume.
$200-$400 over invoice is doable for any dealer... Whether or not it makes sense based on the car line is the question. $200 over on a 300 day in-stock vehicle? Sure why not. $200 over on a limited inventory, low volume item? Probably not. A dealer that tells you they can do this type of pricing because they are "the highest volume" such and such is just pulling sales tactics on you.

Unless Toyota pays the money without a paper trail for volume bonus, I've never seen it and I've been with Toyota for 3 years.
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