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Old 03-06-2012, 12:28 PM   #1
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How Much do you think the dealership is actually making?

How much do you think a dealer ship is actually making when they sell you a brand new 201X JK.

For instance,

Sticker:

Base Price: $ 33,500
TOTAL PRICE:* $ 40,270

Total out the door with no money down.....

You pay:

$ 36,500

In your Opinion, how much is the dealership making off of this deal?

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Old 03-06-2012, 12:38 PM   #2
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Great question. I was poking around the internet last year looking for numbers and found some data hidden in a .pdf on some stat site of sorts. If I remember correctly something like.

manufacturer cost 50% of MSRP. (there's a number I forget for warranty costs).

Something like if

MSRP is 40,000 dollars, it cost them 20,000 dollars, they sell it to the dealer for 30,000 dollars. Dealer tries for 40,000 dollars etc etc.

(actual number can be worked out from stated invoice). But from the factory side, they're playing with 10,000 to move it to the consumer, whether offering from that 2000 dollar rebate + 1000 hold back to the dealer, they're still doing quite well, 7000 per vehicle. Warranty factor was minimal.

Let me see if I can find that file, all the numbers are there and elsewhere to guauge it all. I was at the time trying to figure out what it costs to fix things vs. doing the job right the first time around.

memory and numbers are all off, here's the data I was thinking of:


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Old 03-06-2012, 12:40 PM   #3
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Maybe Pat @ fields Jeep will chime in on this, as he is a saleman for wranglers and such : )
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Old 03-06-2012, 12:51 PM   #4
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Just check out 100% Haggle-Free New Car Price Quotes from Local Dealers - TrueCar.

It'll give you "dealer cost" for any new vehicle with any options. It doesn't account for any sales quota, or other manufacturer-to-dealer, incentives.

Chrysler "holdback" is 3% of (MSRP minus delivery charge.) So, basic dealer cost is factory wholesale price ("invoice") minus holdback. Pretty easy to calculate.
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Old 03-06-2012, 01:06 PM   #5
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The USAA price is almost always 3.3-3.5% under invoice so I highly doubt the dealer's actual cost is more than the USAA price unless USAA is cutting them a VERY large check every month. I think the dealer cost is quite a bit lower than 3% under invoice.
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Old 03-06-2012, 01:10 PM   #6
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Quote:
Originally Posted by j0nx View Post
The USAA price is almost always 3.3-3.5% under invoice so I highly doubt the dealer's actual cost is more than the USAA price unless USAA is cutting them a VERY large check every month. I think the dealer cost is quite a bit lower than 3% under invoice.
And, employee pricing is 5% under invoice. But, Chrysler reimburses the dealer in lots of the special pricing deals so the dealer still makes sufficient profit to stay in business....
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Old 03-06-2012, 04:26 PM   #7
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Quote:
Originally Posted by j0nx View Post
The USAA price is almost always 3.3-3.5% under invoice so I highly doubt the dealer's actual cost is more than the USAA price unless USAA is cutting them a VERY large check every month. I think the dealer cost is quite a bit lower than 3% under invoice.
It's not. The way the sales department makes money is by volume. If we hit our monthly and quarterly objective then we get $x back from the manufacturer. Chrysler is the one making the money.

The only other thing a dealer gets is a percentage of the dealers advertising costs back. I don't knw the exact percentage, but from what little talk I have heard it's under 10%. So if a dealer spends $50k a month they get back under 10% of that.

If there was more than 3% built into invoice then everyone would want to be a dealer.

That's a neat file above, but that doesn't represent any domestic manufacturer that I know of.
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Old 03-06-2012, 04:43 PM   #8
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Agreed
Net Profit at a Dealership as a WHOLE for all Departments is only 1% to 1.5% in recent times.

Fact:$xx,XXX invoice price is higher than their true Cost of Goods Sold, everyone wants "the Holdback" but remember, that holdback essentially lowers their COGS, and remember they have Operating Cost, Advertising, Commissions, Salaries and a lot to pay out of that when they open the doors everyday. To assume they'll take a break even isn't fair.

Pat is correct. They do end up living on the volume reimbursement from the MFG.

They would be lucky if they made $1,200 Gross Margin on a $30,000 vehicle. They might, just might make 1pt on financing, but that's even cut throat, again they are paid by banks in volume of loans printed through them. So call it another $300 bucks. Big Deal $1,500 and that's without a trade. Over allow on the trade by $500 that's down to $1,000. New Car Departments usually eat the overallowance in the new car sale. If they steal your trade and undervalue the trade they at best might split that with the used car department. Or the Sales Manager is payed on New and Used Margin. This ensures 1 department doesn't screw the other.

They don't make much and if most people said, "I want you to make $1,000", they would be shocked at how much they actually pay for the vehicle.


Quote:
Originally Posted by pat@fieldsauto.com View Post
It's not. The way the sales department makes money is by volume. If we hit our monthly and quarterly objective then we get $x back from the manufacturer. Chrysler is the one making the money.

The only other thing a dealer gets is a percentage of the dealers advertising costs back. I don't knw the exact percentage, but from what little talk I have heard it's under 10%. So if a dealer spends $50k a month they get back under 10% of that.

If there was more than 3% built into invoice then everyone would want to be a dealer.

That's a neat file above, but that doesn't represent any domestic manufacturer that I know of.
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Old 03-06-2012, 08:30 PM   #9
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$5G

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Old 03-06-2012, 09:08 PM   #10
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Quote:
Originally Posted by positrak View Post
Great question. I was poking around the internet last year looking for numbers and found some data hidden in a .pdf on some stat site of sorts. If I remember correctly something like.

manufacturer cost 50% of MSRP. (there's a number I forget for warranty costs).

Something like if

MSRP is 40,000 dollars, it cost them 20,000 dollars, they sell it to the dealer for 30,000 dollars. Dealer tries for 40,000 dollars etc etc.

(actual number can be worked out from stated invoice). But from the factory side, they're playing with 10,000 to move it to the consumer, whether offering from that 2000 dollar rebate + 1000 hold back to the dealer, they're still doing quite well, 7000 per vehicle. Warranty factor was minimal.

Let me see if I can find that file, all the numbers are there and elsewhere to guauge it all. I was at the time trying to figure out what it costs to fix things vs. doing the job right the first time around.

memory and numbers are all off, here's the data I was thinking of:

Your reasoning is flawed. The chart you provided gives a breakdown of what contributes to the MSRP for a vehicle. Manufacturing is 50%, yes, but all those other factors make up the other 50%.

If the MSRP for a vehicle is $40,000, the automaker isn't selling it to the dealer for $20,000 or even $30,000.
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Old 03-07-2012, 06:58 AM   #11
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Well, as I said, SOMEONE is cutting the dealer a check or else they wouldn't be selling it below cost which in the end makes their total cost well below 3.x% under invoice after all is said and done.
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Old 03-07-2012, 07:34 AM   #12
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Just for the hell of it I used USAA to price a 2012 Rubicon Unlimited with similar options to what my 2011 has.
MSRP = $36,065
Dealer Invoice for my Zip Code: $33,919
USAA Target Price: $33,619

Difference between Dealer Invoice and USAA Target Price = $300 or less than 1%.

Can a dealer sell a new Jeep at invoice and make money? Sometimes.
When you factor in holdback fees and floor plans, the dealer may make a small profit because their cost for the Jeep is slightly below invoice. But like Pat said, they stand to gain by meeting monthly and quarterly sales incentives.

The majority of Jeep dealers in the Denver metro/Colorado Springs area also have an agreement amongst themselves. Regardless of the final selling price agreed upon by the salesperson and customer, $490 is added as dealer profit. So even when selling a Jeep at invoice, the dealer makes a little something.
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Old 03-07-2012, 08:38 AM   #13
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I got mine for the USAA price of 3.3% under invoice last September. The price depends on your zipcode and the amount of dealers and how much volume they do. I also agree that the $399 dealer fee we get here in my state is a joke. It's just pure profit for the dealer beyond the $50 or so it costs them in labor and fees to process your paperwork. That prep fee is one thing they won't budge on though as I've walked out before disgusted with paying it but they said they wouldn't remove it.
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Old 03-07-2012, 09:47 PM   #14
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Of course I was looking for a good price as everyone else, but you have to remember your dealing with a big business with HUGE overhead expenses. Most of the day, those salesmen are just standing around, all those cars are sitting out there needing to be cleaned, snow removed, electricity half the night, vandelism worries, and on and on and on and on. I certaintly hope the place I bought from made a profit, and are still in business when I come back to buy another one in a few years. Profit aint no dirty word.
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Old 03-07-2012, 10:17 PM   #15
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$1000.00

hi, got my jeep @ invoice with no dealer fees, i would think they made about 1k they must pay for office cost, sales costs, lights, etc.
plus they gave me 4 oil changes... i was ok with the deal, i also got
16,500 for my 2007 jeep and with the tax gain came out to 17,500. i am
sure i could have run all over the state to save a few $$ but my jeep
order time was 1 hour at the dealership, and 1 hour at pick up time..
i would say that is "PRICELESS". LIFE IS GOOD
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Old 03-07-2012, 10:30 PM   #16
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Invoice is a good deal and keeps both sides happy.
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Old 03-07-2012, 11:23 PM   #17
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I sold cars for 2 different dealerships. There are several ways to make money on a deal. Heavy profit does not come from the sale of new cars. Heavy profit comes from sales of accessories, upgrades, pre-owned cars, warranty plans, service plans, service, insurance, and finance deals. Everyone who stated VOLUME kickbacks from the manufacturer is correct. As for accessories, my Jeep dealer, when I bought my 2012 JK, wanted $797 for MOPAR side steps. Those steps are only $300 bucks or less online and require 15 minutes installation per side. So they would have made minimum $400 profit because they can buy them for cost. The Jeep Slush Mats at my dealer are $120, online only $48, cost even less, so once again crazy profit. Warranty plans, insurance plans, and service plans are all profit. The likelihood of something catastrophic happening to your vehicle is very low (there is a degree for this called Actuarial Science). So if you pay say $1300 for an extended warranty, the likelihood of you even keeping your car that long is probably slim to none, let alone the need to even use that warranty for anything beyond what the factory already covers, once again about $1000 in their profit. And finally finance, here the dealer can make money on the front of the deal AND the back of the deal. Dealers have preferred lenders they work with, they can get a flat fee just for getting you approved through a bank, they can also get another kickback if they get various levels of individuals approved on monthly and quarterly basis.

So lets say you buy a new JK and its (for easy math) $27,500. The dealer invoice is say $26,400. You talk them down to $26,500. They have made a minimum of $100. Next add holdback which we'll say is $600. Then you add floormats $75, side steps $700, a fuel filler door $165, window tint $129, a service plan $375, gap insurance $720, extended warranty $1300. You trade in your car which you owe $9000 on and they give you $8000 for. Then you finance your new JK at say 7.5%. If they sell your trade at auction, The dealer will likely make a shade over $2 grand on your deal when all is said and done ;-) If they sell your trade on the lot, more closer to $3 grand.
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Old 03-08-2012, 12:10 AM   #18
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Quote:
Originally Posted by JeepDude2012
I sold cars for 2 different dealerships. There are several ways to make money on a deal. Heavy profit does not come from the sale of new cars. Heavy profit comes from sales of accessories, upgrades, pre-owned cars, warranty plans, service plans, service, insurance, and finance deals. Everyone who stated VOLUME kickbacks from the manufacturer is correct. As for accessories, my Jeep dealer, when I bought my 2012 JK, wanted $797 for MOPAR side steps. Those steps are only $300 bucks or less online and require 15 minutes installation per side. So they would have made minimum $400 profit because they can buy them for cost. The Jeep Slush Mats at my dealer are $120, online only $48, cost even less, so once again crazy profit. Warranty plans, insurance plans, and service plans are all profit. The likelihood of something catastrophic happening to your vehicle is very low (there is a degree for this called Actuarial Science). So if you pay say $1300 for an extended warranty, the likelihood of you even keeping your car that long is probably slim to none, let alone the need to even use that warranty for anything beyond what the factory already covers, once again about $1000 in their profit. And finally finance, here the dealer can make money on the front of the deal AND the back of the deal. Dealers have preferred lenders they work with, they can get a flat fee just for getting you approved through a bank, they can also get another kickback if they get various levels of individuals approved on monthly and quarterly basis.

So lets say you buy a new JK and its (for easy math) $27,500. The dealer invoice is say $26,400. You talk them down to $26,500. They have made a minimum of $100. Next add holdback which we'll say is $600. Then you add floormats $75, side steps $700, a fuel filler door $165, window tint $129, a service plan $375, gap insurance $720, extended warranty $1300. You trade in your car which you owe $9000 on and they give you $8000 for. Then you finance your new JK at say 7.5%. If they sell your trade at auction, The dealer will likely make a shade over $2 grand on your deal when all is said and done ;-) If they sell your trade on the lot, more closer to $3 grand.
Excellent post, thanks for that.

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