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Old 10-14-2010, 06:18 PM
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What is the "real" dealer price?

OK, so we know about invoice price. But some dealers sell under invoice even when there is no incentives. I don't believe they are losing money on the deal. So real dealer price has to be under invoice.

Can anybody in-the-know share some insider knowledge on what is the actual dealer profit on a single new car sale (in %)? Let's speak about Jeep GC because things may be different for other brands/price ranges.
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Old 10-14-2010, 06:34 PM
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Re: What is the "real" dealer price is?

Joe,

Here's what I got from Consumer Reports. "Invoice + destination charge" is what the dealer gets billed, but when they pay that invoice, they are allowed a "hold-back". For each of the models, here is the invoice + destination charge (and holdback):

Laredo 4wd $31,381 ($966) = Total $30,415
Limited 4wd $37,751 ($1,176) = Total $36,575
Overland 4wd $40,203 ($1,275) = Total $38,946
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Old 10-14-2010, 07:22 PM
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Re: What is the "real" dealer price is?

Yeah, I knew about holdback but forgot to mention it. It is 3% for Jeep. So it's about $1,000 on $30,000 car. And when they sell under invoice they lose some of it. So let's say there is $500 left. I just can't believe dealership can survive on this.

My only explanation (and this is well-known I guess) that dealers really make money not on new car sales but on used car sales, service and financing.
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Old 10-14-2010, 07:23 PM
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Re: What is the "real" dealer price is?

Plus another thing I didn't really think about - probably not every new car is sold at or under invoice. Some people are less informed and if they are willing to pay close(r) to the sticker price - the better it is for the dealer.
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Old 10-14-2010, 08:48 PM
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Re: What is the "real" dealer price is?

They bend a few people over here and there, so you and I get a better deal.
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Old 10-14-2010, 09:22 PM
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Re: What is the "real" dealer price is?

Not everybody gets a fantastic deal on a new car, but you are correct- dealerships don't make their money on new car sales. They make their money on used cars (trade ins, others bought at auction), service, and parts.

There's occasionally other incentives given only to dealers and hidden from the general public, but those aren't on everything. Generally, I consider the dealer needs to make something on the deal, but I'm not interested in getting screwed. If they try to make too much off me up front, they lose the ability to make more off me in the long run, since not only will they not sell me any other vehicles, but they won't see my vehicle for service.
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Old 10-14-2010, 09:23 PM
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Re: What is the "real" dealer price is?

plus some dealer charge for "documentation", another $500. and they make money on the "Paint Protection" package as well as "Service Contracts".
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Old 10-14-2010, 09:37 PM
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Re: What is the "real" dealer price is?

Quote:
Originally Posted by JoeSchmoe007 View Post
And when they sell under invoice they lose some of it. So let's say there is $500 left. I just can't believe dealership can survive on this.

My only explanation (and this is well-known I guess) that dealers really make money not on new car sales but on used car sales, service and financing.
Correct. Dealers make most of their profit from the service department for maintenance and repairs, including warranty work that is paid by the manufacturer. Some dealers use a volume sales business model to make up for the "invoice" or "below invoice" price that yields the subsequent small margin. This benefits the dealers who can handle the volume and obviously the consumer as well as the manufacturer; the manufacturer likes it because they require a volume-critical sales channel to make running their plants cost-effective. If it didn't work, we'd be paying $60,000 for a JGC rather than $40,000.

Don't believe dealers if they cry poor. There are other non-publicized incentives for dealers doled out by the manufacturer or their financing partner. No dealer is actually losing money on a new-vehicle sale. The manufacturers budget for the extra public&private dealer incentives for dealers so they move the metal.
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Old 10-14-2010, 10:23 PM
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Re: What is the "real" dealer price is?

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Originally Posted by Bmwister View Post
...
Don't believe dealers if they cry poor. There are other non-publicized incentives for dealers doled out by the manufacturer or their financing partner. No dealer is actually losing money on a new-vehicle sale. The manufacturers budget for the extra public&private dealer incentives for dealers so they move the metal.
Do tell more about these non-publicized incentives.
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Old 10-15-2010, 02:03 AM
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Re: What is the "real" dealer price is?

Quote:
Originally Posted by JoeSchmoe007 View Post
Do tell more about these non-publicized incentives.
There's incentives for everything. I'd imagine that there's even one for Jeeps in winter season, to push the 4x4s out the door. Aged Inventory is a good one most dealers get if a particular vehicle has been sitting on a lot for a few months. (Exactly how long, I forgot). My dealership recently gave me the whole $1000... likely because they know I'll be back for service.

It's funny when I go there too. First thing I say is

"What's on the Aged Inventory list?"

Salesguy usually asks

"How do you know about that?"

I say

"No worries about how I know about it, what's on the list?"

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Old 10-15-2010, 05:41 AM
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Re: What is the "real" dealer price is?

Quote:
Originally Posted by JoeSchmoe007 View Post

My only explanation (and this is well-known I guess) that dealers really make money not on new car sales but on used car sales, service and financing.
Most dealerships make their money in the service department. New car sales isn't nearly as profitable. The ratio at the dealership I used to work at was about 4:1.

On the other hand, don't think that all dealerships are always making a big profit. Look at all the dealerships that have closed their doors in the last two years because of the crappy economy. Only the strongest dealerships have survived and most of their weaker competitors are already out of business.
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Old 10-15-2010, 08:13 AM
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Re: What is the "real" dealer price is?

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Originally Posted by MSCA View Post
...Look at all the dealerships that have closed their doors in the last two years because of the crappy economy. Only the strongest dealerships have survived and most of their weaker competitors are already out of business.
Was that really all because of the economy? I thought GM and Chrysler reduced the number of dealerships as a part of bankruptcy proceeding (however it is unclear to me why less dealerships is better for GM or Chrysler).
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