OT: how much do stealerships mark up new cars by?

dealers buy cars from manufactures (franchise thing)usually through things like for example Chrysler dealer credit they pay loan on the car. so the longer a car sits on lot the worse it is for the dealer. the dealer is also expected to meet sales expectations therefore the manufacturer sends them say 50 sx 2.0 and they must sell them and they must pay for them.

usually mark up is 10% so say a 20K$ sx 2.0 they will make 2000$ the dealer gets 1800 and the sales guy gets what's left. it's all percentages. also the end of the month is best to buy as credit payments must be made usually the beginning of each month. to pay for all those new cars on the lot that the dealer is expected to sell. this is also the best time to buy used as that money pays the credit on the new cars on the lot.

there is not a certain % they mark them up... 4 cyl wranglers have about 500 between invoice and sticker rubicons have about 3000 all are different.. Here's how to find out what real invoice is and any rebate money if it is offered...***** what ever car you want to buy example 05 unlimited rubicon....call a Jeep dealer near you and ask for the new car manager.. tell him you are from abc motors and are trying to trade for an 05 unlmtd rubi with 2500 miles.(people dont like it anymore) ask what invoice is with all options and ask if there are any rebates?? he will think you are a dealer...then ask "are you a buyer if I trade for it" & what price... he will spill his guts on invoice rebates and all so you will have a good idea what to pay for a new one!!!! should I write a book or what!!!!

-- Jarod Sprauer

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281-807-JEEP (5337)

Do dealerships basically buy their cars from manufacturers?>

This is a bit complicated, but, yes, of course, they buy the cars from manufacturers at whatever the mfr. sets as the "invoice" price. However, that's obviously not where it ends.

Mfrs often give dealers incentives (discounts off invoice, called "trunk money") on certain cars & trucks that aren't selling well, plus there's something called "holdback", which is a certain percentage of invoice (usually 2 - 5%) that's paid to dealers for each car they buy from the mfr. Mfrs pay this to dealers on a periodic basis. Thus a dealer can sell you a car for "Invoice", i.e., what he technically paid the mfr for it, but still get paid whatever the trunk money is, plus 2-5% holdback. It varies frantically, manufactures change this stuff weekly or monthly, based upon what's selling & what's not. This is why you'll see crazy swings in advertised prices, goofy rebates, etc.

So, a simple answer to your question is hard to provide, however if you figure 10% off list is the invoice price, you'll be pretty close. Figuring out the invoice price is easy, just check out the National Automobile Dealers Association (NADA) website. It shows invoice & retail for any car you can think of.

(Why would dealers tell potential customers what they paid the manufacturer for the product? Simple, that ain't what they paid once you figure in holdback & trunk money/incentives.)

You can often check them and other sites for current incentives (rebates) for both customers and dealers. It helps when negotiating to let the dealer know flat out that you know what the invoice price is, and what any rebates are, and you can grill them on the holdback %.

It also helps to know that dealers generally don't buy their inventory, but instead finance it on something called a "floor plan". It's an open-ended line of credit the dealer's bank or captive finance company gives them, with which the dealer pays the factory for the cars. Dealers then pay monthly payments comprised of accrued interest on anything being held in stock, plus the cost of anything they sold during the month. (Dealers who don't pay the bank back promptly owe more to the bank than the value of the inventory, it's called being "sold out of trust".) Thus, it often pays for the dealer to get vehicles on & off the floor plan quickly, as the finance charges escalate and eat into whatever profit there may be on any given model. It's often in a dealers' interest to get rid of a car that's been in inventory too long at a paper loss, just to save the finance money, which can be applied to something else that might make a profit. Dealers fight with manufacturers for cars that sell, versus having to take stuff that doesn't. Manufacturer sales reps often make a dealer take five "stiffs" just to get five hot models, so a Jeep dealer may get stuck with five Libertys just to get five Rubicons.

If you think this is complicated, it is. This is why dealers get so aggressive & have bad reps, they work on incredibly skinny margins in terms of the capital outlays involved, and the manufacturers don't do much to smooth this crap out for them, Further, if the dealer goes broke, the manufacturer is out absolutely nothing. They just go looking for another dealer / investor in the area to pick up the franchise.

(Oh, I worked in retail for a number of years, then spent twenty years with two manufacturers in Service....I hate the car business!)

I think you are living on a different planet from me ;)

Go to

and read up on the new car buying process. There are plenty of other good resources on the Internet.

Here's an example for a new Rubicon: MSRP $27,365 Invoice $24,850

That's a $2515 (10%) profit if they sell for list price, which isn't usually the case except for hard to get vehicles.

Dealers don't buy the cars, but they do to pay charges on cars that sit on the lot over a certain time.

John Davies

I was just wondering how much the markup was from say, the cost to actually manufacture the vehicle (labor and parts but not R&D).

Yes, dealerships buy their cars from the manufacturers, and as far as I know, they are the only ones that can.

American cars are about an 8.5% markup, and the trucks are about 12 to 14%. Japanese cars are about 12% markup, and their trucks are 12 to 14% - generally. This is from the sticker price to the invoice price. No...there's not 3 invoices, either. The US government started requiring car companies to publish invoice numbers because of past complaints of fraud by dealerships.

A bottle of shampoo in the store is about 100% markup. With that in mind, it seems that Biggs is ripping you off worse, doesn't it?

Now, the average car/truck nowadays sells at invoice unless its a new/hot vehicle where the demand outweighs the supply, as in the new Mustang GT. This means the dealership gets 3% holdback, assuming it hasn't been on his lot more than 90 days because holdback is what pays for the floorplan (money borrowed to have the car on the lot). If it has, interest starts to eat at the holdback. They also often get advertisement reimbursements that's designed to be spent promoting the product by the dealership. Of course, they try and pocket as much of that as possible. However, we're talking about $200 to $300 or so.

Now, your biggest, most aggressive dealerships have the slimmest margins of all. They usually try and roll as many cars as possible to be the king of the hill. They try and get more traffic in service, body shop, and used cars to make up for it and the high number of new cars they sell generates that traffic. You see, there are many dealerships in your area that likely have the same cars on their lots, and so the product isn't unique enough to command a good profit. It's too easy for Joe Consumer to go down the street and bargain a little more. Therefore, many dealerships don't make much, if any, profit from new cars after they've paid their salesmen, finance guy, office people, general manager (if the owner doesn't run it), sales manager, and any assistant sales managers. Believe it or not... This is especially true today, where sales are difficult to get. It's a buyer's market.

The opposite is true for used cars. They are unique. Your chances of finding the same model, with similar mileage, with the same options, and the same color, in the same condition are about as good as hitting the Powerball. Therefore, the profit margins are much better. However, with 0% financing and massive rebates on new cars, this market has taken a hit. With used car interest rates at 5% and higher, it's often cheaper to get a new car that's a few thousand more, but at 0% interest you'll pay the same or less for it. Therefore, the used car market has taken a beating.

About 10 years ago, the new car sales, on average, netted the dealerships about $1100 a copy. That's including everything before paying the help. I'd say that due to the current market, where cars are routinely sold at invoice, it's probably something more like $600 to $800 a copy.

Believe it or not, the manufacturer doesn't make that much profit per vehicle, either. In 1997 they reported that GM had the highest profit per vehicle at somewhere around $850 per vehicle. That doesn't sound like much, but if you consider that GM produces about 3 million vehicles a year in the US alone, that's a staggering $2,550,000,000, not to mention large/medium commercial truck sales, GMAC, profits from foreign operations, and other ventures. Of course, as most of you probably know, GM is now losing money and their cars aren't selling anywhere near what they did in 1996.

They made about $150 from the buyer (yes, that's from actual, bottomline cost), but DaimlerChrysler probably sent them a check for about $450 more through the fleet program.

And you wonder why used car salesman are amongst the least trusted of all professions? I hope you are more honest with your customers than you are with your peers.

-Brian

wraithyjeep wrote:

Huh?

In most dealerships that go off of a commission based selling model, if the car has say 10% markup, which is over invoice, and if they could sell it for full sticker (say it's a new Mustang GT convertible), then here's how it gets broken down.

First, the owner puts a "pack" on the car. This can vary. Usually, there's a common amount on all cars, but very well selling cars get a higher pack. This is what the owner skims off the top before he pays any commissions. So, the commission is based on a number something less than what the car sold for over invoice. Now, slow selling cars often have small and sometimes no pack at all, but it doesn't matter because those cars almost always sell for invoice, negating a pack anyway. Often with a hot selling car, the pack is very steep. I knew someone that worked at a Chrysler/Plymouth dealership when the Prowlers were new, and there was a $4000 pack on it (it sold for something like $4000 over sticker). Some dealerships put a pack on based on a percentage...something like 4% of the purchase price. Some dealerships have a set pack. The dealership I used to sell for had a $700 set pack. Then, there is usually a fee taken out for dealer prep. They used to add this into the car's price years ago, but now it gets taken off the margin made on the car. Usually, this is something like $150. Now, it doesn't cost them $150 to prep the car, even if the thing sat on the lot for 6 months getting washed quite a few times. Then, what's left, the salesman gets a commission off of. This varies based on a number of variables. Usually, more expensive cars that command a higher profit get smaller commissions. I had a friend that sold BMW's and his rate was 18% and it was a static rate, meaning the rate didn't increase after a sales goal has been achieved. That brings me to the second variable: graduated commission rates. Many dealerships have graduated commissions, meaning that after a predetermined sales goal, the salesman gets a higher commission. Some dealerships have retroactive rates, where after meeting that goal, all of his cars sold are based on the higher rate. Some, however, do not.

Now, let's base this scenario on what my particular dealership did. Using your $2000 markup on a $20,000 car, the dealership took a $700 pack and $150 prep fee off the top. That leaves us with $1150 over invoice. The salesman, at the base rate, made 25% of that figure, which would be $288. After selling 8 vehicles (at my old dealership), he goes to 30% commission, and his commission would have been $345. At the top commission level, 35%, he would have made $403. Now, this is all assuming that they had a home run hit on the car, which is very, very unlikely.

An average month for me, during better times would have been about 12 vehicles sold with about 8 of them sold at or around invoice, giving me a minimum commission, which was $100, and I likely had 2 cars that paid a little better and 2 cars that paid very well - which would have been a Ram Air Trans Am (rare back then) and/or a used car. The biggest commission I had ever gotten was about $750 for a 1997 Ram Air Trans Am sold new. That was a rarity!

If any of you think new car salesmen are making a good living, you're highly mistaken. Theres a reason that from year to year almost the entire sales staff has turned over. They usually don't make squat in the larger picture. Sure, the months of March through June are usually pretty good, but September through February are usually pretty rough. Most salesmen that I ever worked with made an average income at best. There's always that one guy, though, in each dealership that makes good money. But, he sees a lot of customers, and works lots of hours to move that many cars. He's been doing it a long time and has slowly built himself up to that point. This isn't the average sales guy, though.

you really are pathetic

Not a chance!

More hopes dashed in an instant. :)

Why do you pe> you really are pathetic

Well, the dealers don't get that profit, the manufacturers do. And they don't make any profit on some cars - the MSRP for the Prius hybrid is something like $5000 LESS than they cost to build. The manufacturers make up for this loss with highly profitable SUVs.

John Davies

lol kinda...... A Jeep salesman get it right!!

About a month ago we got a new truck at work. 2005 Ram SLT. The window sticker that was on it was for $32,000 CDN MSRP. We paid $24,000 through GE Fleet/Capital. The dealer said they onl make $150 on each vehicle they sell that goes through GE fleet. I don't know if this is a standard markup but I'm sure the average Joe couldn't get that truck for the $24,000.

Mort

Doug proclaimed:

By the dealer, not that much. By the manufacturer, considerably more, but why one would exclude R+D from the cost is a bit mysterious and unrealistic. It isn't a non-profit, at least not on purpose.

Are you kidding? They were offering $10,000 off of Chevy trucks in the paper here locally, recently, and $8000 off Fords. That's rebates and all, which is exactly what that dealership gave that company. The fleet program is nothing magical. With a company on a fleet program, they buy lots of vehicles, which is basically buying in bulk. They have to sign up with the fleet program with the manufacturer, and the manufacturer, therefore, gives them a break and compensates the dealerships a little. The purchase price is still above the actual bottom dollar cost to the dealership. There is up to $4500 in rebates on that truck - $3500 on regular cabs and $4500 on Quad Cab.

With the fleet program, they usually pay more than the manufacturer's employees do, which is usually within $1000 of what the average Joe can buy the thing for. A friend recently bought a Chevy truck, and tried to get the GM discount because his uncle was GM, but he didn't qualify. He was put off, but I told him at invoice he'd be less than $1000 more, and at $24,000, it wouldn't make much difference on the monthly payment. It ended up costing him $14 more a month, not qualifying for the GM discount, which is a bit less than the fleet program. Normally, dealerships sell fleet vehicles at invoice less rebates and the fleet discount. I believe when I sold, GM's fleet discount was something like $650 less than what the dealership charged, and he could charge whatever he could get out of the car. Therefore, a fleet customer couldn't walk into a Ford dealership and get a Ford GT for less than invoice. He gets whatever the dealership sells it at, less the fleet discount the manufacturer gives.

But look at how much they would have made if they had sold it to average Joe. He's have to dicker them down $8,000 to get the same price. I've never seen a dealer drop $8,000 on a vehicle in that price range.

By the by, your computer clock is off by 12 hours or your timezone is way off...

Mike

86/00 CJ7 Laredo, 33x9.5 BFG Muds, 'glass nose to tail in '00 88 Cherokee 235 BFG AT's

Ruel Smith wrote: