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Dealer's Cost=Invoice-Dealer Incentives-Holdback=$32755
Posted by Mike (more from Mike) on Thu, 5 Dec 2002 12:29:01
In Reply to: And what's wrong with $500 over invoice?, phred, Wed, 4 Dec 2002 20:49:10
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Fully loaded Aero invoice - $37,605
Factory to Dealer Incentives - $ 4,000
Holdback (2.2% of base MSRP) - $ 850
Dealer Cost = $32,755
Now if you're paying $500 over invoice, or $38,105, that's a $5,350 (16.3%) dealer profit!
Now to be fair, you need to reduce the holdback amount or even eliminate it entirely if the car has been on the lot for more than 3 months. The holdback covers most of, if not all, the dealers variable costs of doing business for that car.
What you need to discuss with the dealer is how much you want to contribute to his/her fixed costs of doing business. This needs to be enough to keep the dealership in business and to provide a profit margin high enough over competing investments (i.e. treasury bills).
If a dealership has fixed costs of $1 million and sells 600 cars per year, then you would need to add $1,667 to the dealer's cost. That takes the price up to $34,422 and keeps the dealership in business. Now add a 4%-5% profit over this and you come up with about $36,000 for a fair profit.
posted by 67.35.16...
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