Buying a car through Costco, is it worth it?

[FoieGrasIsEvil]

@Spiderman

In my first set of nested quotes (Post #76, which were all taken in order from earlier in the thread) you first talk about a $1000 discount from invoice, then you switch to a $2000 discount from MSRP. A larger discount but from a higher starting amount, which means the car actually costs more. That’s obfuscation!
What percentage of people really pay MSRP? I bet it’s low.

In the second set, you say that invoice is (roughly) the cost to the dealer, but obviously it isn’t once the various holdbacks/kickbacks/rebates are taken into account. You yourself say a good price is $1000 under invoice; how could a dealer sell a car for less than they paid for it & stay in business?

I had said that $1000 behind invoice is a good deal. It is. You replied “not if you’re getting $2000 from the manufacturer”, to which I replied that the two grand you mentioned comes off the sticker price. It does. I compared the two situations to demonstrate that the behind invoice pricing is better than getting two grand off sticker in the form of a rebate. That was all I was attempting to do.

@running_coach

Volume!!!

This is the truth.

@CookingWithGas

Management may have some more information than you do but I find it hard to believe that a car salesman does not have the same information available to the public on the Internet from one of the longest-established and most well-known auto sites. It would seem that’s just basic homework for anyone in retail car sales.

You said unequivocallywhen it is obviously not the net cost to the dealer for any given unit. All the others costs you mentioned (except unsold fees*) are fixed costs, otherwise known as “the cost of doing business” which have nothing to do with how much a dealer pays for any particular car. Bottom line is that my post and others here demonstrate that the invoice price is not the net unit cost to the dealer, but dealers would like the customer to think so. And if you persist in claiming otherwise, then what should I conclude?

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*I have never heard of a manufacturer’s penalty for failing to sell older units. I"ll take your word for it. But it would seem to me that failure to sell a unit is its own penalty since the dealer has to carry the inventory, has cash tied up in the car, and is using space to store a car that he would rather use for cars he can sell. I am also surprised to learn that a dealer would sign a contract that imposes penalties on inventory that the dealer has already paid the manufacturer for. It seems like the manufacturer would have more effective options if it’s in their own interests to move out old stock–like providing an incentive to sell instead of a penalty for not.

Invoice IS the price that the dealer paid the manufacturer for the car to get it to their lot. Once it sells, they get a few hundred dollars back from the manufacturer. So until it sells, invoice IS the price the dealer paid for the car.

[Tired_and_Cranky]

@FoieGrasIsEvil

I had said that $1000 behind invoice is a good deal. It is. You replied “not if you’re getting $2000 from the manufacturer”, to which I replied that the two grand you mentioned comes off the sticker price. It does. I compared the two situations to demonstrate that the behind invoice pricing is better than getting two grand off sticker in the form of a rebate. That was all I was attempting to do.

You don’t know whether $1,000 under invoice is a good deal. If the manufacturer is offering $8,000 in factory-to-dealer incentives, $6,000 under invoice might be a shitty deal. It might be an even worse deal if the dealer down the street is on the last day of the sales month and they have a $75,000 factory bonus riding on them selling just two more cars. It all depends on what deal the dealer down the street is willing to take on that car.

Factory to dealer incentives have no link to MSRP. The dealer gets the same incentive whether they sell the car at MSRP, for $1, or for any price in between.

[CookingWithGas]

@Tired_and_Cranky

You don’t know whether $1,000 under invoice is a good deal.

It all depends on your definition of “good deal.” One definition is that you get consumer surplus, that is, you pay less than what you would have been willing to pay because of the value to you. One definition is that you get a better deal than the next guy, so you feel superior. One definition is that you deprived the dealer of as much profit as possible, so you feel like a winner.

Here is an example of the ideal economic transaction.

[CookingWithGas]

@FoieGrasIsEvil

@running coach

Volume!!!

This is the truth.

It’s an old joke…

[Tired_and_Cranky]

@CookingWithGas

It all depends on your definition of “good deal.” One definition is that you get consumer surplus, that is, you pay less than what you would have been willing to pay because of the value to you. One definition is that you get a better deal than the next guy, so you feel superior. One definition is that you deprived the dealer of as much profit as possible, so you feel like a winner.

Here is an example of the ideal economic transaction.

If I am not getting any consumer surplus in a transaction, why would I bother signing the paperwork?

Getting a modicum of consumer surplus isn’t a definition of a consumer getting a good deal. The absence of any consumer surplus is a workable definition of a coerced contract, like literally making me buy a car at gunpoint.

A good deal, in my opinion, is one that maximizes consumer surplus compared to alternatives. When comparing deals on similar cars, a good deal is the one where the price is the lowest relative to the amount that I value that car. Since I value similar cars similarly, I maximize consumer surplus by getting the lowest price. I think most people would agree that this is a good deal. Whether I got a good deal has nothing to do with feeling superior or depriving the dealer of profit. I don’t care what the dealer makes selling me a car.

[glowacks]

@FoieGrasIsEvil

Invoice IS the price that the dealer paid the manufacturer for the car to get it to their lot. Once it sells, they get a few hundred dollars back from the manufacturer. So until it sells, invoice IS the price the dealer paid for the car.

It’s the amount of money transferred for the right to put the car on the lot. But it is not the amount that they “paid” for it. If there are various credits that the dealership gets for selling it, then the car wasn’t really theirs except perhaps in some legal definitions. Generally we call the price of something the net amount of money transferred in the transaction. When we put a $20 bill in to pay for $10 dollars of stamps, we’re not “paying” $20 for stamps and getting 10 $1 coins as an “incentive” for having made the buy. No, we’re getting the stamps for $10, and the other money is simply changing form.

I don’t know how dealerships do their accounting for sure, though I imagine that at period end any cars in inventory are valued for the books at the total amount of money paid for getting that car on the lot at that period of time. But once the car is sold, and the dealer receives credits from the manufacturer, then the cost of goods sold that is expensed is not equal to the book value that the car was sitting at - it’s reduced by the amount of credits the dealer receives.

So when you show people an invoice and say “this is what we paid for it”, you’re equivocating. You’re making people believe that the amount that you paid for it is the same as the expense you will recognize once it is sold. Usually that’s the case, but the car invoice process is deliberately designed to make that not be the case. It is a game that those involved play with consumers to make them think they’re getting better of a deal than they actually are. Whether it’s a good deal for them or not is irrelevant - it’s playing around with the meanings of the word “paid for” and “costs”, and people are not happy about it.

[CookingWithGas]

@Tired_and_Cranky

A good deal, in my opinion, is one that maximizes consumer surplus compared to alternatives.

I agree, and I have should have said this instead of merely “you get consumer surplus.” But you emphatically say you don’t care how much the dealer makes, which is rational. However, many people think that if the dealer is making a good profit, they are not getting a good deal, even if they are maximizing consumer surplus compared to the alternatives.