Okay, so I always hear car commercials that say they will sell you a car for whatever it says on the invoice (or $4 over invoice) or whatever, but today I notcied that at the beginning of one of these commercials they said, invoice does not represent acutal dealer cost. My questions are, 1) what does it represent? 2) why the disclaimer?
Formerly known as Nec3f on the AOL SDMB
The invoice represents the value of the car as it stands on the dealer’s lot. It’s largely an imaginary figure that takes into account the expenses involved in maintaining a dealership, in addition to the cost of the vehicle itself.
(Warning: Above statement is a WAG, and should in no way be considered absolutely factual.)
The invoice is what the dealer actually pays for the car. What they don’t tell you is the dealer gets a large “payback” (rebate) on each car he sells based on the volume and dollar amount of sales. This payback very effectively lowers the actual “invoice” cost of the car while maintaining the ruse at the public level.
There are also quarterly and yearly bonuses, as well as the fact that dealerships make money on the “back end” or the financing. The invoice is the actual cost, though.
Which reminds me, get a real invoice from say, Customer Reports or www.edmunds.com [?]
then take it with you when you shop.
Dealers, we all know how honest they are, probably make their on invoices at the shop.
Any retailer buys the goods it sells from a manufacturer with whom they make a deal for the invoice price; part of the deal involves money back for damaged goods, rebate programs, volume discounts, advertising money, and whatever else the manufacturer’s salesperson and the retailer’s buyer agree to call what is effectively a large or small discount off the invoice price (I’ve seen it called, quite blatantly, “clout money”). “Invoice price” is what they’re billed; what they actually pay is less, depending on the contract (assuming they’re a large enough buyer to negotiate the invoice price).</P>
I work for a manufacturer, and the deals our salesmen make run as high as 26% off the invoice price, if they’re not careful. In our business, 5-10% is average for our large customers (and their average markup is 40-50% of the invoice price); they take the discounts as deductions from money owed, rather than money back. These deductions can get contentious, because the customer takes as much as possible (e.g., 1% volume discount off of pre-damage volume, rather than post), and we have to haggle over a couple of percentage points every time.</P>
I doubt that car dealers have to make up their own fake invoices. Salesmen increase the price of goods to cover these deductions, so, in effect, the buyer and the salesmen agree to a very high invoice, then return the profits to the dealer as deductions.</P>
I guess there’s nothing wrong when I haggle with the salesman over the price. Sometimes these negotiations can get pretty intense. And I always buy the guilt trip that the salesman lays on me, you know, “we’re not making any money from this sale.” If that 40-50% markup is true, then I really shouldn’t buy that guilt trip.
I always give them back the guilt trip, and say, “Man, I really want this car but I really can’t afford it, I guess I gotta work harder, save more money, eat really cheap food, keep catching the bus, and come back next year, if I’m lucky.” But secretly, I always felt a little guilty about getting low prices. I guess I shouldn’t, eh?
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Beeruser
If the salesguy will let you have it at whatever price, he made what he needed to make on the deal.
Beatle is mostly right: if he accepts the price, he’s making money. However, it’s possible to shave it a little too close, too often, and come out negative at the end of the year. Our company’s salepeople have done it to us two years running. It’s gotten to the point where our cost analyses are structured to hide profit from our own salesmen in the Purchasing department.</P>
40-50% is standard in our company’s industry, which is plastic injection molded housewares. Cars probably have a much smaller markup because they’re big ticket items. That said, you should never feel guilty in negotiations. Know what you’re willing to pay, and walk away if you don’t get the price. The tears and “my poor family” bit are for show. If they can’t make money, they shouldn’t be in business.</P>
hansel, sure they make their own invoices. It’s been covered on the tv a lot. They pad them, ‘padding’ with items they make up, like say, ‘dealer profit margin’ or whatever.
Still if I have to buy a new one I would just go to the factory. In california, there is a Toyota Factory near San Jose. I wonder if it’s better buying right from the factory?
Back in march I bought a new truck ended up with a Silverado. Whenever I went ot test drive a vehicle I took the Edmunds report for that model with. Anyway I went to the local Jeep dealer and test drove a Cherokee and the salesman printed up a price list for that particular vehicle with the sticker prices for base and the options on one column and the ‘invoice’ for the same in the other column. After taking some time to add up Edmunds numbers I found that the Jeeps dealers ‘invoice’ was exactly $1000 over Edmunds, 'nuff said.