Automotive

The truth about dealer profits

  • Last Updated:
  • Oct 25th, 2019 10:34 am
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Deal Expert
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Jul 30, 2007
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hence, that's why nobody, even unhaggle and APA, the likes have no idea on what the "invoice" price is. The best strategy is to shop around for a bunch of dealers and see who can give you the best price otr.
Deal Expert
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May 10, 2005
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The invoice price never meant anything to the dealer. It was a pure marketing tool and sites like Unhaggle and APA take advantage of buyers. It almost seems like AMA and Unhaggle are helping the dealers LOL
The Government cannot give to anybody anything that the Government does not first take from somebody else.
Deal Guru
Feb 9, 2006
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They only touched on it lightly but New car sales are crap for margin. The real money is in selling used cars.
Deal Expert
Jun 30, 2006
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No the real money is in the service and parts.
Deal Expert
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Jul 30, 2007
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... and dealer admin fee (cash cow for providing very little to no value to the purchasers of new & old cars).

for example, euro brands charge between $300 - $500 per car sold. If each dealer moved 100 cars a month, that's $30 - $50,000 in almost pure margin x 12 months ... $$$$
Deal Fanatic
Dec 20, 2018
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booblehead wrote: ... and dealer admin fee (cash cow for providing very little to no value to the purchasers of new & old cars).

for example, euro brands charge between $300 - $500 per car sold. If each dealer moved 100 cars a month, that's $30 - $50,000 in almost pure margin x 12 months ... $$$$
And pdi as well, it's like 1k for a car lot jockey making min wage to wash it and prep . It's like a few hr tops for new car , it's even bigger amt and money maker
Deal Guru
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Mar 1, 2008
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Did you guys read the article?
Holdback: Most automobile makers have used holdback for decades. Simply put, after the dealer has paid invoice for the vehicle, a small percentage of that invoice price or the manufacturer’s suggested retail price, or MSRP — the percentage varies from manufacturer to manufacturer — is returned to the dealer when the vehicle is sold. Holdback or a portion of the holdback money is a potential profit source, but some dealers rely on it to pay expenses.
There is some truth in that if the car is sold at invoice, the dealer makes nothing on the sale. I have some friends whose friend who sells at Honda and Mercedes-Benz. Let me ask them about it and see if they can tell me.
Deal Fanatic
Dec 20, 2018
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geokilla wrote: Did you guys read the article?



There is some truth in that if the car is sold at invoice, the dealer makes nothing on the sale. I have some friends whose friend who sells at Honda and Mercedes-Benz. Let me ask them about it and see if they can tell me.
Sales won't know anything about it

You need to talk to the folks in accounting at the dealer to know
Deal Expert
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Jul 30, 2007
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yup. Talk to the dealership controller and general mgr. It's all in the monthly & yearly financial reporting
Sr. Member
Jan 20, 2012
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Volume discount, marketing fund, sales tier discount, back-end program, etc. All these discounts are between manufacture and dealers. They varies each month. In fact dealer may just make a few % of the standard invoice price on the book. But the true profit are coming from these programs for the dealer owner. Sales has no access to these programs info except for certain bonus after # of cars sold and margin from Admin fee, warranty sell, ect.
Jr. Member
Mar 2, 2012
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MILTON
booblehead wrote: hence, that's why nobody, even unhaggle and APA, the likes have no idea on what the "invoice" price is. The best strategy is to shop around for a bunch of dealers and see who can give you the best price otr.
That is exactly what I did and after going to 5 different dealerships the price difference from the most expensive to the cheapest offer was 7,000$. All 5 dealers gave me their best price.

One dealer called me back and once I told them that I already bought a truck he asked me: Why didn't you say how much you were willing to pay for it?

I wanted to pay the lowest price.
Deal Addict
Nov 10, 2018
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jikiji626 wrote: That is exactly what I did and after going to 5 different dealerships the price difference from the most expensive to the cheapest offer was 7,000$. All 5 dealers gave me their best price.

One dealer called me back and once I told them that I already bought a truck he asked me: Why didn't you say how much you were willing to pay for it?

I wanted to pay the lowest price.
Were any of those prices below dealer invoice price?

Been buying cars for, probably 20-30 years and have never managed to get a dealer to go under dealer invoice price as holdback is ALWAYS not negotiable. Hopefully someone on RFD has managed to do this though.
For legal topics and discussions, the opinion, guidance, and thoughts provided are my own and are not considered to be legal advice, in any manner.
Deal Expert
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May 10, 2005
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geokilla wrote: Did you guys read the article?



There is some truth in that if the car is sold at invoice, the dealer makes nothing on the sale. I have some friends whose friend who sells at Honda and Mercedes-Benz. Let me ask them about it and see if they can tell me.
Did you read the article? Missed this par?
"The dealer may even reveal a dealer document sent by the manufacturer that shows the invoice price, the price the dealer allegedly paid to purchase that car. Sounds good, except the invoice doesn’t necessarily reflect the actual price the dealer paid to purchase the car from the manufacturer."
The Government cannot give to anybody anything that the Government does not first take from somebody else.
Jr. Member
Mar 2, 2012
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angryaudifanatic wrote: Was any of those prices below dealer invoice price?
Yes. Also, I should have mentioned that I traded in the vehicle as well.
Deal Guru
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Mar 1, 2008
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Pete_Coach wrote: Did you read the article? Missed this par?
"The dealer may even reveal a dealer document sent by the manufacturer that shows the invoice price, the price the dealer allegedly paid to purchase that car. Sounds good, except the invoice doesn’t necessarily reflect the actual price the dealer paid to purchase the car from the manufacturer."
I read it and from what my frined's friend told me, it is. Sooooo.
Deal Expert
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Apr 21, 2004
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Up selling may get worst like offering carbon built up cleaning on BEVs.
Deal Expert
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May 10, 2005
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geokilla wrote: I read it and from what my frined's friend told me, it is. Sooooo.
Sooooo, now there is a source. LOL
I hope that person owns the dealership and knows exactly how the business is done? Other than the dealership comptroller and owner know exactly what and how it is done.
The Government cannot give to anybody anything that the Government does not first take from somebody else.
Deal Addict
Aug 19, 2011
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angryaudifanatic wrote: Were any of those prices below dealer invoice price?

Been buying cars for, probably 20-30 years and have never managed to get a dealer to go under dealer invoice price as holdback is ALWAYS not negotiable. Hopefully someone on RFD has managed to do this though.
At the right time, at the right dealer and on the right model you can get domestics for 4-8% below invoice before incentives. It will need some serious negotiating but seen it happen more than a few times.
Deal Addict
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Jul 5, 2011
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Actually a fairly factual article.

What's hilarious is seeing people suggesting dealers confirm, my friend this, cousin works in sales that... You could have the President of the manufacturer in this thread and people would still say they're full of crap, lying etc Smiling Face With Open Mouth And Tightly-closed Eyes
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