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Re: Dealers Invoice ...... long long long!
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Posted by Ron (more from Ron) on Thu, 19 Jul 2007 20:46:07 Share Post by Email
In Reply to: Dealers Invoice ...... A Joke ?????, CNTDRV55, Thu, 19 Jul 2007 19:03:17
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Some of what you’ve been told is correct and some is BS. I would suspect some of the BS is because they really don’t understand how invoice pricing works. Let start off by saying that I have sold cars and managed sales floors for years. GM is one of the brands that I have experience with and can give you information that may be helpful.

First of all the salespeople you’re dealing with don’t know anything about true cost of a particular car. They are there for one reason only and that is to put a face on a product and to close you on the purchase. A better description of a typical salesperson should be negotiator/closer. The sales manager knows his cost on a car but rarely knows the true cost as well. The reason for this is confusion is Money, Money, and Money!

I know this is long, but bare with me and you just might learn a little about how the car business works.

Who gets paid & what amount?

I’ll give you an example sale:

2007 SAAB 9-5 AERO
MSRP – 35,790
Rebates – 8,000
Total – 27,790 full dealer profit

Sales Invoice – 33,643
Rebates – 8,000
Total - 25,643

Let’s say the customer buys the car for $26,143 with all rebates given. The total front end profit is $500.00 US salesperson commission average is 25% and in this case the salesperson would make $125.00 for whatever amount of time they spend with you working the deal.

The sales manager would get paid on the $500 and the dealer hold-back (which is 3% for GM cars). However he or she gets paid on the total of all cars sold for the month at the middle of the following month. And yes there are deals that sales managers take which dip below the sales invoice amount but rarely.

We also need to discuss charge-backs. Charge-backs are money that the dealer must pay back to either banks or insurance/warranty companies. A charge-back occurs if the customer trades or cancels insurance/warranty. Dealer has to pay back money they were given when you bought products like insurance and extra warranties.

Buy-rates are rates that Banks give dealers to gain their business, however if the customer sells or trades the dealer will need to give a portion back (charge-back). Most dealers make a point on you financing your car. For example you sign at an interest rate of 7% and the bank gives the dealer your rate for 6%. This can equal to several hundred of dollars or even in the thousands range depending on the sales amount and financed amount.

Now lets look at what Saab has going on now with the extra $2,000 rebate/cash back on certain vehicles. This is true and happens all the time, but they usually don’t give the money to the customer. Meaning that not only do dealers get hold-back but in some cases they get extra monies on old-age vehicles. They also do this based on previous sales or lack of certain cars.

There are from time to time unit bonuses based on simply selling a set number of cars. One time we needed to sell 20 Yukons and if we could meet this goal GM would give the dealership and additional $2,000 per vehicle. Needless to say the last several customers got great deals on their Yukons.

The dealers are the ones making the money! They make money on back-end money and something many of us don’t engage in and that is the (SERVICE DEPARTMENT). I think if you buy very close to invoice minus rebates you’ll always be in good shape but you need to also be aware of everything that goes on behind those closed doors or glass walls.

Good Luck!


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