Actually, on the kind of deal I mentioned, the salesman (me) makes $100. We'll take that kind of deal if there is plenty of similar inventory in stock that has been aging. $100. Before tax. Damn, I'm rolling in it if I sell deals like this all month long. My dealer and I take a deal like that if we've got too many cars (this doesn't happen very often for my particular brand) and it only takes 30 minutes of the dealer's time.
The average sales person sells 8-10 cars a month nationally. I average about 18-25. We are 100% commission. Do the math, spider. Do you really think we can sell every car for such a low commission?
Here's a chance for you to come clean, Bytor (since you didn't make an attempt to address the holdback or dealer rebates I mentioned earlier). Breakdown the scenario I posted above, and if you'd please give a ballpark to what the dealer's profits & your take would be on the following: $30K MSRP sedan, on the lot <12 days. Invoice is $27,500. You've got a stroke--not someone in the business--who is willing to pay you invoice because you've convinced them it's a hot number & another customer was looking at that very model/color earlier today but you like them. Hell, you like them so much you're going to knock $150 off the MSRP & "throw in" the $199 pin striping, $99 VIN etching, some floor mats & a tank of gas. You're giving them almost $500 and your boss is going to tear you a new one but hey...you really want them to be happy in their new car today! Since you sell approximately 2.5x the national average we're going to assume you will make this type of deal @ a higher rate than most & you should calculate in your volume bonus & any escalators you get for selling above your price point (30% of the profit would seem to fit this scenario but if your dealer pays you more I'm sure you'll level with us). To simplify we'll assume they're not going to trade in a vehicle. Care to tell us how much time you'd be willing to "waste" landing that deal & what it would mean to you & the dealer to close it?
GoTJ, I'm not sure where you shop, but that just doesn't sound like a typical transaction at my store. As I may have mentioned, my customers are very educated, very market wise, and have usually bought from my store before. They also know that we're not going to screw them. I do not have to use canned lines to sell them. In fact, they seem to buy from me, rather than my having to ask for their order. There's market value for every car. For some, it is close to invoice. For others, it's close to MSRP. Some cars we sell for more than MSRP, and the customers are very happy. Of course, those are the cars of which that we only get 10 units a year. Market Supply and Demand determines price. Simple, no? FWIW, We're not going to pass on a reasonable offer is a customer really prefers to buy from us. Buying and selling cars should be really fun and really simple for both sides. On that, I think all of us on this post agree. Unfortunately, there are a lot of really bad sales people out there. There are still a lot of really unethical dealerships out there, too. As I mentioned on a previous reply, please don't give those stores and those salesmen your business when you encounter them. When you do, they have no incentive to change their ways. If you do not like, trust, and respect your salesperson, please shop somewhere else.
Ha you still avoid any discussion on dealer profits at invoice or below and instead just keep spouting your same talking points. That's telling. You say the market dictates price but also say that you tend to avoid buyers who use a proven method to get the best price...I guess they aren't part of the market you want to deal with.
So you're not going to attempt to answer the question about what you & your dealership would profit on the $27,500 invoice vehicle that you sell @ the $30K MSRP when it's sat on your lot for less than 2 weeks? You don't even have to divulge your actual holdback percentage. Gee, it's almost like you're being purposely evasive & you don't want people to know just how much money an uneducated consumer stands to lose.
GoTJ, what you're scenario failed to mention was how plentiful or how scarce the vehicle in question is. If Model A is almost completely sold out in the area, and we have the last remaining one on the lot, then yes, we could still make a good profit by discounting the car whatever amount. But if the market is buying the car right at $30k, why sell it at $28.5? The dealership may have profited on the sale, but not as much as we should have. We have cost the store $1500 by not selling it to the next customer. My customers are smart. I've given them ample credit on this post for that. They know that if they see a lot of Model A on the lot, we can be very aggressive on the price. My customers also know that if they see little to no units of Model B on the lot, there won't be much if any movement on the price. We expect customers to want to negotiate, even when a car is complete sold out and on a long waiting list. I don't get a whole lot of unreasonable offers, and 60% of the time we are able to work out agreeable terms on the first visit. It may be that I'm just lucky to be in the right store, but I think that I've worked hard to be good at what I do. Time management is everything when you are a 100% sales person. In other sales fields, you have to determine which markets and customers provide the best return on your investment of time and effort and which ones do not. You can't sell everyone so you have to decide who to sell and who to let go. It's amazing to me that I've been ripped on this thread for investing my time wisely for my company and my career. Fighting chance is alright, I guess, if it works for you. But I recommend that customers should find a store and a person they like and build an ongoing relationship. Feel free to shop to keep that salesperson honest, but keep giving him/her your business in the end.
GofTJ, To answer your question, I do not know how much the dealership makes per deal. I'm not a manager, and I'm not privy to that information. I could tell you what we made over invoice, or after holdback, but I'm sure you can figure that out for yourself. If there is any incentives, they are almost always onThe Link and the public already knows about them. Factor those incentives in your calculations. If there's any incentives that the public doesn't know about, I won't know about them either. When my kids are older, I'll get into management and find out this stuff. Right now, it's none of my business. I'm a sales rep. That's pretty close to being self-employed. I don't get paid unless I sell a car. At my production level I get paid 35% of the upfront gross profit. Which means that on some cars I get paid a very good commission, and on some deals around invoice I get a flat $100 (no matter what the final price ends up being). I could sell you a car for $500 over invoice or $1000 under invoice and it doesn't affect my commission. It's still $100. I have enough experience to know what deals my manager will take and which ones he won't. I get a lot of aggressive offers accepted by him, because he knows that my customers are 1)present and 2)committed to buy. I don't waste his time with shoppers, and he rewards me by taking some lower than normal deals. I left work a few hours ago, and I don't work again for a couple of days. I don't talk shop on my days off, so I'll see ya'll on the football board.
Unless something has changed in the past decade, not every car manufacturer has holdback, but the 3 US manufacturers definitely have it. I seem to remember that Toyota and Honda did not, but I could be wrong about that. Salesmen also don't usually care about holdback because its not factored into their commission. Lets say the "invoice" is 28.5K but the .5K is the holdback. The salesman's commission is based on the profit after 28.5K. If you get him to sell at 28.5K and he might just get a few dollars in commission. The auto sales world isn't the perfect system for customers, but that is the byproduct of capitalism. If you don't like the deal, go somewhere else. Doesn't mean that any dealer in town will accept your offer. In my experience the biggest ripoff dealerships are the ones where they are the only X dealer in town or perhaps the only new car dealer at all. In other words, small town dealers where they have little or no competition. The other bad dealers are the ones who prey on the elderly or non-English speaking people who are limited to where they can go. I think that most large city, new car dealerships are relatively fair. Don't walk in with a sucker printed on your forehead, but they have enough traffic that the salesman wants to get your deal over with, so he can get back into rotation for the next deal.
You are right that the factory holdback does not apply to every manufacturer. However, if it does have a holdback then you should insist that the dealer at least shares the holdback with you, if not the entire thing. When I estimate the true cost of a car, I always back-out the holdback, among other costs, before I apply a 3-5% profit that I am willing to give the dealer.
Can I use this thread to bash Goodson Honda in Houston? When I bought my first ever new car, I did research on several makes and models before picking the Accord. Edmunds said people in my area were paying about $150 above invoice on average. I went into the dealer, and told the first salesman that approached me what I wanted. He sat me down and haggled for about an hour (he wasted our time, I did not waste his). I got ******** about all the extra fees, his "mandatory commission", yada yada. I stood up and started to walk out twice during this deal. Finally he got his manager to sign off on $150 over invoice. When I got home and went through the financing stuff, he had tacked about $2000 onto the agreed price. We had to go back to Goodson and argue for another hour before they would fix it. F' Goodson Honda.
Bought a car from someone that was a referral. From his end, the price of the car was reasonable. Sit down with financing and it's here we go. The guy walks in and out of the room 4 times, saying "let me check," "I don't think those apply to the jettas," etc. You're either incompetent or you're trying to rip us off. Which is it? You have to be able to walk away. Then, they'll give you what you want, if they can. And to Bytor, as long as you're making some profit, why does it matter? I should get the same service as the dumbass that paid 5K more than I did.
Interesting to me to hear that about Toyota. I have bought a number of Toyota's in Michigan, and the reason is that, along with a good car, the sales process is darn close to perfect. Must be some prob with Gulf States Toyota's sales model. I am convinced that GM's problems aren't merely the sub-par product. Their sales approach is absurd. I tried to give GM my business recently, and I couldn't stomach the foolishness of the sales process. Went to Toyota and had a good deal done in about an hour.
We bought my wife an FJ Cruiser. We did all of our test driving at Don McGill Toyota (they have a terrible terrible reputation) and then bought the car from CarMax in what turned out to be one of the smoothest processes ever. There was no way I was going to put either one of us through the wringer in dealing with your typical car salesman. Oh... and I work with a guy who used to be in car sales - what you read in that Edmunds.com article is true. He told us all about the little four-square exercise they go through and how they low ball on trade-ins, etc.
if all of that is true, then they're running on a bad business model. parts and labor are their profit centers, so starting out with an adversarial relationship with your clients so you can line the pockets of commission-paid salesmen makes no sense. the dealership doesn't make that much and they run the risk of losing the customer's service and parts business in the future. if the salesmen aren't getting paid well and they're unmotivated or only motivated to rip people off and the dealership is making more money on part and service, it would make sense to find a new business model where you get great service at the sale and sell high volume so you can capture the parts and service business for years to come.
