Take it from somebody who works in the municipal fleet world... "dealer invoice" is NOT the cost of the vehicle to the dealership.
And MSRP is way off in left field compared to the actual invoice value of a vehicle on the dealer's lot.
In all honesty, if the general public actually knew what the invoice prices of some vehicles really were... they'd throw a fit.
But I'm really not at liberty to talk on behalf of the vehicle manufacturers, and I don't really want to open a can of worms with my suppliers either.
When someone tells me that something is below cost and they are suffering... Usually an indication that the are lying. If something was below cost? They wouldn't really stay in business for long. It's really at the profitability threshold and that is something completely different.Great info and all true. Worth noting that government fleet is a different world. I manage a small government fleet myself and sit on the multi-state fleet council. The prices we pay are often really sweet. I can order a 2017 Dodge Durango that lists for about $33,500 (net invoice price of about $29,800) for a little over $22,000. We also get amazing deals on tires through our multi-state purchasing compact. We pay about $440 installed for a set of top end, state-patrol-approved, Goodyear M+S tires. My Goodyear shop always tells me this is far below their cost.
The Goodyear guy isn't lying. The part you're missing is that my actual cost isn't the same as his actual cost.When someone tells me that something is below cost and they are suffering... Usually an indication that the are lying. If something was below cost? They wouldn't really stay in business for long. It's really at the profitability threshold and that is something completely different.
I hear ya and I know how it works. Hence why I said what I said. If he gets $100 from goodyear and it costs him $100, then he lost nothing, especially if you (your company) pay for the installation.The Goodyear guy isn't lying. The part you're missing is that my actual cost isn't the same as his actual cost.
He buys a tire for $100 and sells it for $150-$200. I buy the same tire directly from Goodyear for $90, which is below his cost. He delivers the tires to me through his retail store and earns profit on installation, but he gets nothing from the tire sale. Goodyear pulls it from his inventory and credits him his cost ($100) and then sells it to me (for $90).
This is also how we buy fleet cars: We buy from the manufacturer but local delivery is handled through a local dealer's fleet section. The dealer doesn't get much markup from the car, usually a flat per-car amount. But he also gets paid to prep and deliver it to me. It's usually called a "courtesy delivery."
I manage a small government fleet myself and sit on the multi-state fleet council.
I find it amazing what the public thinks car "should" cost. The Suburban, Tahoe and Expedition government prices would make the retail purchaser cry.Take it from somebody who works in the municipal fleet world...
Dealer profit is mostly derived from holdback. I believe Subaru pays their dealers 2% of MSRP in holdback for every unit sold, even if the car was sold at or below "invoice."Thanks to what I learned in this forum, I was able to buy a Forester Premium with eyesight for $25400, or $1353 below invoice. It didn't even take much haggling. So what are the elements the go into dealer profit?
Not to mention the ancillary stuff they try to sell you on in the finance dept., such as extended warranties, service plans, paint sealant (aka $800 wax jobs), underbody rust protection packages, window etching, etc. Those are all major profit items for dealerships.Dealerships have an inventory on hand so that consumers can browse and ultimately choose a vehicle. Dealerships pay for this inventory when they obtain vehicles from the manufacturer. The amount the dealer pays is the price reflected on the invoice from the manufacturer to the dealer. This is the so-called "invoice price."
Now the twist: With the introduction of holdbacks some years ago, most manufacturers inflated the invoice prices for every vehicle by a predetermined amount (2-3 percent of MSRP is typical). The dealer pays that inflated amount when it buys the car from the manufacturer. But later, at predetermined times (usually quarterly), the manufacturer reimburses the dealer for the excess amount. This is the "holdback," so named because funds are "held back" by the manufacturer and released only after the vehicle is invoiced to the dealership.
Same in the US.Not sure how it works on America, but in Australia dealers make little if any money on new cars. Their profits come from used cars, the service department, and the big ones, accessories, paint protection, window treatments, etc, and finance and insurance kick backs.