clangjr

Obviously if they sell it for more than invoice, they make money there.

If there is a loyalty rebate, they get that back.

Where else in the sale of a new car does dealer profit come from? Is there any reason a dealer would not be able to sell a car at invoice?

If the car has not been on the lot long, then they have not paid much in interest on the car, and the car would therefore be more profitable, right?

Help me out here, trying to understand where I can squeeze them, how and why.
Thanks,
Chuck

mikeg123

Dealerships also get kickbacks from manufacturers for volume of cars sold. I would say that buying a new car at end of prouct year is best time unless the newer version has options you want. I.E. buy a 03 now, right before 04's hit the lot.

Also heard Dealerships can get 1/4 to 1/2 interest rate discounts from major banks, and thus they may tell you that you qualify for 5% from Citibank, but Citibank only charges them 4.5%, well they make .5% of the interest. (again this discount applies to the volume of loans they give to bank).

GTakacs

Front end:
- Difference between sales price and invoice price.
- Holdback
- The loyalty rebate is for the customer and should come off the price AFTER the negotiated sales price, so the dealer is not making money on that ine.
- The flooring cost is just something the dealers take into account. You are correct that a car fresh off the trailer is more profitable than one that has been sitting on the lot for a while. However on some car that has been a sitting duck and cannot sell the dealer is just ready to cut their losses and sells it for less just to make a sale.

Back End:
- Life Insurance
- GAP insurance
- Extended Warranty
- Window Tinting/etching
- Lo/Jack
- Interest. They usually have a buy rate for the loan from a financial institution. Then they can raise that interest rate if the customer is willing to take it. This is the time when they usually tell you that "your credit wasn't good enough for 1.9% but we can do you at 2.9%". With Audi Financial current promotion loans can be sold 1% over buy rate. I have seen a lot of people paying 2.9% on a 60 month because the dealer told them that is all that's available, 1.9% is only for 36 months or less. While in reality they came up with a story to make the 2.9% sound more reasonable for even someone who has perfect credit yet they just made an extra $1K+ on the back end.
- Loan incentives. Sometimes the banks pay a flat fee for the dealer for every loan they actually close. It can vary from $100 to $500 depending on brand,bank,time of the year etc.

The price difference between the invoice and sales price is generally not even half of the profit that they actually make. If you let your guard down they can squeeze you for a lot more money in the F&I office.

But to answer your question, the only money you can negotiate down is the amount between sales price and invoice. The other stuff is just things you can get ripped on, not something you can negotiate down. Check Edmunds TMV for the vehicle, if you can get it for less than that, you're doing good.

mikeg123

Yup -BTW: you have my car in your picture post!

Meskeetdog

Volume and incentives from factory/Parent company(advertising etc..)

GTakacs

I know, I already told you why.... :-D You asked for a couple of PS from me....

April

signed off by the purchaser, and that flooring costs are usually averaged out and not applied to any one specific car unless it has been there a very long time.

Gap insurance is automatically included in all VWoA and AoA leases. Since AoA offers the most aggressive financing, dealers are doing very little business these days with the other banks unless the consumer credit rating is too low to qualify ( usually require a FICO of 700 or higher ). We charged $200 to 250 per car for tinting. Not that bad given the job was done at the dealer ( in case anything came up like a scratched part ) and came with a limited lifetime warranty. LoJack was offered, but not really pushed. A suprising number of folks in the LA area requested that. We offered Warrentech warranties which are fairly highly rated. We usually advised people not to get it until within a last few thousand miles or months from their factory warranty ending. You never know if you're going to keep the car that long when you first purchase it. Our mark-up was usually 15% ( far below the industry average of 25 to 50% ).

GTakacs

I think the higher you move on the automotive foodchain the less chance there is to get screwed in the F&I office.

Since with Audis they make a fair profit on the front end generally by not discounting the cars heavily there is not that much pressure on the F&I guy to make up lost profit unlike on a Ford Focus where they will add pin striping, scotchguard and paint protectant to every car on their lot essentially.

The interest raising is allowed by Audi Financial, up to 1% AFAIK and right now dealers do make a little extra cash on closing a deal with Audi Financial (between $100 and $250 depending on total amount financed). The extra cash is fair and I don't think any customer is entitled to that money, but raising the interest on anyone is something I really don't like to see.....

As for the rest of the stuff I just e-mailed you....

Zippo

When my fiancee bought her Grand Cherokee, we offered a purchase price of 1% over invoice. I did my homework and had all the figures in front of me from KBB and Edmunds while we were talking to the dealer.

They brought out their invoice and the only additional thing they had that wasn't listed on the ones I had was an advertising charge of 3 or 4 hundred dollars. I tried like Hell to get them to take that off. They didn't do it, so I changed our offer to 1% over the price listed on their invoice. I still wonder if that was a fluff charge or not. The total price even with that charge included was less than $700.00 over the price I had on my downloaded invoices.

The sales guy jumped on it since he didn't have to waste time negotiating and he stated that they didn't try to make money during the sale. He said their philosophy was to treat you good during the sale so they could make money on service.

That's not really money made as part of the sale as you asked, but it all counts toward the bottom line at the end of the year. Plus it was an easy sale to go toward their total volume moved.