Just about every car dealer in history has used this stupid line in their advertising, and I have summarily ignored it. I guess my dumb question is…do dealerships ACTUALLY ever get overstocked with cars? I know it must be hard to exactly anticipate how many cars to order if you are the buyer at the car dealer, but somehow I doubt that every month the manager has to fire their buyer, get a new one, and says “damn, this overstocking of cars has happened AGAIN! I better mark these down EXTRA low to get them off the lot to reduce my inventory carrying cost. I sure hope this doesn’t happen again next month!”
IMHO, it is a silly ploy to lure buyers to the lot and sell them cars at a price that they could buy them for at any time if they knew how to buy a car.
How about the classic “Inventory Reduction Sale”? Isn’t EVERY sale an “inventory reduction sale”?
It happens. Usually, it happens right around this time of the year or a little later, when next year’s models start rolling in.
The primary objective is to get last year’s cars out the door at this year’s prices, so they can concentrate on selling this year’s cars at next year’s prices. But storage can become a major problem if the inventory hasn’t moved as expected.
More than just storage. Car dealers get the cars from the factory as sort of a loan; they are required to pay a monthly interest cost for each car on the lot until they sell it. If you have a lot of stock on the lot, you’re paying more in interest costs and it’s worth your while to cut prices to move the cars out.
BTW, part of the profitablity of a car dealership is what’s known as “service penetration.” The money made by servicing cars helps to pay the interest on the cars for sale. The better the service penetration, the lower a dealer can sell a car for.
Their ability to move their inventory might also affect their allotment from the factory as well - if they don’t move 'em, the factory won’t give them as many.
BTW, this fact is one reason why the dealer is handing you BS when they point out that x% is not a profit margin a business can survive on. If the actual dealer cost (not invoice!) was $50000, and you offer them $53000, they aren’t making 6% - they never plopped down $50000 to buy it from the factory in the first place, they just paid interest on it while it sat on the lot. If it didn’t sit there very long, the $3000 may be a very healthy return on their money.
I don’t think a dealership could survive long by selling cars for a 6% return on investment. Beyond whatever inventory carrying cost they are paying (even if discounted by the factory), I would think they do have pay for the car from the factory at some point in the transaction to be able to sell it. In addition there are are hard costs for the dealership - personnel- salespeople-real estate-franchise fee… etc etc etc.
Unless you’re selling them in volumes of 100 at a crack, straight from the factory, working out of your parent’s basement, 6% strikes me as an absurdly small return on investment for a complex product like a car that takes lots of money and infrastructure to market effectively from a retail point of view.
Since I work at a new car dealer, I’ll add my 2 cents worth. New car dealers get the new cars from the factory and they pay what is called “flooring”, which is basically interest. This is usually carried by a bank or a finance company like GMAC. As soon as the new car is sold, the dealer has to pay for the car, to the finance company or bank. But, if the sticker price is $35,000 for example and the actual invoice is $30,000, the dealership will probably pay, in reality, around $27,000. This is due to what is called “hold-back”. Sort of a built in profit so that they will make something, even if they sell it for “cost”.
The “inventory clearance sale” is nothing more than a gimmick. It’s just another way to get you to the dealership.
Also, in case anybody doesn’t already know it, that little sticker they put in the window right next to the factory sticker, that says something like “additional dealer profit” is nothing but that. Additional dealer profit. Period. If you go into a new car dealership and look at a car that the actual sticker price (before the ADP) is $25,000, and you PAY $25,000 for the car, the dealership is probably going to make around $5,000 to $6,000 profit all together. Add on the $3,000 ADP and they make a killing. Don’t fall for the “Additional dealer profit” game. It is a legal scam.
Exactly my point. They’re making a lot more, since only paid the interest. I was pointing out the fallacy in the “we couldn’t operate on a 6% margin” line you’re likely to get from the dealer.
If you could make 6% off every new car you sold, you’d be on the road to profit. There are a dozen different ways the dealer makes profit, and the difference between the dealer cost and selling price of a new car is one of the smaller ways. There’s profit on “make ready,” financing, extra things that are not worth it (like undercoating), service agreements and holdback.
On a pure car-by-car situation more profit is generated on the used car lot.
As to the OP’s question: a lot of local car advertising is generated by a general manager who may have a great reputation when it comes to moving the metal but may not be the most creative person around. Look for a lot of outright stealing.
–If you listen to only one advertisement today, make it this one!
–Every credit application accepted!
–Only $25 and a job.
–Right on the corner and right on the price!
–These cars are priced to move! (versus priced to sit there?)
–Use the theme from Rocky, 2001, The Twilight Zone or any other copyrighted source that will be a cold day in hell we report to BMI or ASCAP.
–It’s Christmas in July!
–When this sale is over, it’s over!
–When these cars are gone, they’re gone!
–Due to overwhelming customer response we’ve extended this sale fill in the blank!
Besides, why should you care if their business is not making money? Heh, take the sweetest deal you can find. These guys are in business to rip you off. 
When I bought my new car back in November, I took advantage of the power of the internet.
http://www.edmunds.com/edweb/holdback.html
and
http://www.fool.com/Car/BuyingaCar.htm
contain loads of information to beat the dealership at their own game.
I was able to get a new Mazda 626LX for literally only $300 over the invoice price. (I knew it had been sitting on the lot for months and they were desperate to clear inventory). I overheard the Sales Manager tell the General Manager that I was a “f-cking math whiz who knew too much about invoicing and holdback” and basically had the upper hand throughout the whole negotiation. But, I’m sure they still made their profit, cleared out some floor space, and I had a new car. So everybody wins.
Knowledge truly is power.
Phouchg
“Ball, get out of my nachos!” - Biff Henderson
suppose you decide to buy a make that isn’t poular…and that you buy at the end of a model year…and you go in to the dealer at the end of the month…and you know the invoice cost…etec., etc.,…
why won’t the jerks change the registration for you to read “used”? this dodge will save you hundreds in excise tax (at least in Massachusetts/taxachusetts)…if the dealer just added 50 miles to the odometer statement, and changed the classification to “used” he could save you a bundle!
Perhaps because “criminal fraud” comes to mind? for the comsumer, the state could charge penalty and interest on top of the taxes not paid, the dealership could loose its business license.
He has no desire to lose his business or go to jail for fraud to help you weasle out of a couple of hundred dolars in state taxes. 
Before I get slammed, let me make a disclaimer:
[sub]sdimbert is not a car salesman, is not related to a car saleman, does not know any car salesmen personally and has no plans to ever, ever, ever be related to, know or become a car salesman.[/sub]
That said, comments like occ’s piss me off.
Car salemen are not out to “rip you off.” They are out to sell a product at profit. Just like suit salemen. Or potato salemen. Or crack salesmen.
I mean, really now, there are a lot of car lots where I live. How about your hometown? There’s a whole strip of 'em right on a major road - They don’t behave like they’re doing anything illegal! Know why?
Because they aren’t.
I recently bought a car and, before I did, I bought one of those “Dummy” books, called something like The Complete Idiot’s Guide to Buying a New Car. It was pretty informative; an ex-sales manager wrote it.
The most valuable fact I learned is the one I am trying to express here: Car salesmen are not thieves. They are (for the most part) honest businessmen trying to make a buck in an industry chock-full of confusing regulations, stiff competition and a general distrust by the public.
It’s true that salesmen try to make as much profit as possible on every transaction. But that’s hardly illegal… hell - it’s the cornerstone of out economy!
People who buy cars feel like they are being ripped off simply because they are in an unfamiliar environment; We only buy a new car 4 or 5 times in our lives while salesmen try to sell that many every month! When people are uncomfortable, they rely on defense mechanisms and become defensive and hostile.
That hostility is most often directed at the salesman. That’s too bad… after all, all the poor guy wants to do is sell you the car you told him you want at a price you and he can afford.
They may not be thieves, but they will do whatever they can in a confusing situation in order to make an extra buck.
I bought a new car about 2 years ago, and in general it was a pleasant experience. I bought a '98 after the '99’s had come out so I knew they would want to deal.
I also knew the approximate invoice price, so I pushed them pretty hard. Then, since the interest rate they told me sounded good, I let them arrange the financing. After this they said, how does a payment of X sound, it seemed about right in my estimation, so I said OK.
We left the salesman and went on to the paperwork drudge, and when the papers were handed to me I found out that they had added about $25 per month to pay for an extended waranty. I had said all along that I did not want an extended waranty, but there it was.
It took me about 10 minutes of arguing to get them to take it off. They had some convoluted argument about this being in the price of the car, but I finally got them to take it off.
I think the moral is that dealers try everything they can think of to add to the price, so you have to be on your guard until you drive off the lot.
Well, sdimbert, you may be technically correct in your statement, “car salesmen are not thieves,” but only in a technical sense.
I worked at a dealership that sold only high-line cars (Porsche, Audi, Benz, Land Rover). These were (generally) high-quality products that in large part sold themselves. There were salesmen–and women–there who were of the highest integrity. Usually, they were individuals with large circles of friends who were automobile enthusiasts. There were four or five individuals of this sort out of a total of about twenty. The rest varied from average joe to evil genius.
Our dealership’s income was split roughly three ways: sales, service, and parts. Sales was divided roughly in half between new cars and used cars because the new cars went out the door at a minimum of profit, while a mint used car could command prices far beyond the trade-in rate.
However, all salesmen were under enormous pressure to hawk extended warranties, service agreements, “polymer paint protection” schemes, and the like–that’s where two thirds of the dealership’s money comes from, remember. Some were masters at the art of maneuvering a person of questionable means into an unaffordable car, piling on redundant warranties and service plans, making a guy’s wife cry at the bargaining table or getting the kids to whine for an Audi 5000 like it was a Big Wheel.
Like the film/recording industry, the auto sales biz is ripe territory for sociopathic personalities–I met several guys who might have been Hannibal Lecter in more private settings. For many salesmen, deception, prevarication, and feigned companionship were their bread and butter. Leverage and manipulation were standard tactics in both sales and personal advancement.
The owner of the company fired one of our best saleswomen–who had been at the dealership for fifteen years–when he discovered she had terminal cancer. He didn’t want to pay the insurance costs. I watched her dying in a tiny hospice room, and gave all the money I could spare for morphine because her family was destitute as a result of her illness.
A few salesmen used their automobile sales jobs as a front for other, less legal, activities.
One night a Ferrari was stolen off of the lot. To get it, a thief or group of thieves would have to have access to the key, the padlock to the rooftop parking lot gate, and the code to the alarm. The salesmen had access to all of these. One salesman was questioned no less than four times (that I personally saw) about this. He moved to California shortly thereafter.
I’m pretty certain another salesman was using trade-in automobiles to traffic hashish across state lines.
I’ve had several different lines of work–asst. librarian, park maintenance, paralegal, researcher, low-level IT, construction, ice cream man… none of those jobs exposed me to the corruption and overall dishonesty of auto sales. I do not condemn the industry as a whole. I’m merely saying that I met more dishonest people doing dishonest things in the midst of selling cars than anything else I’ve ever seen, and I’m glad I’m out of it.
Sofa King
Wow.
That sounds like it sucked. 
I notice that auto sales is the only sales position you list. Did you ever work another flavor of sales?
I know that salesmen are often motivated to the sort of scurrilous behavior you describe; I doubt it’s unique to the auto industry.
besides the first hand accounts of car dealer dishonesty and sleaziness perpetrated on customers detailed in this thread already, i found something equally disturbing about these guys when i got a job at a honda dealership a while back.
on my first day, i was approached by each salesman individually who wanted to ‘take me under their wing’ and impart their sales wisdom on me. each one told me not to trust the rest of the group because they’re all dishonest and will try to scam me out of my potential sales. they each wanted me to come to them if i had any questions and not tell anyone else we had the conversation. it was the most back-stabbing, paranoid work environment i’d ever seen. i can’t speak for all dealerships, but this group of car salesmen was the most untrustworthy, sleaziest group of people i’ve ever associated with. even worse than the group at the speaker selling scam job that i did for one summer, who at least had respect for one another.