If all the dealership has to do is fill out some paperwork to direct a Toyota Tacoma fitting my description to its lot, (assuming there are none available in the region) wouldn't the dealorship be more likely to cut a good deal since the truck will only be on the lot for one day?
Basically the expense involved with the truck is filling out the paperwork and pulling the plastic off when it gets there.
I was told the following in this situation
1) We're aren't interested in profit that will show up 60 days down the road. We're looking at this month.
2) Since the truck is not here, we have to make more on it or its not work doingthe deal
3) We don't get dealer holdback unless we hit a quota and we might not hit that quota that month. So we can't negoiate with dealer holdback.
Any of these claims correct?
#1. I cant see how spending 30 minutes to order a vehicle and sitting back and waiting for a guaranted sale is bad busniess. Seems like gravy to me.
#2 Makes no sine bacause the cost in the truck as almost nothing so any profit in the negotiated price goes directly into the dealerships profit.
#3 I've never heard of this. can someone enlighten me of this is true?
The deal I'm offering is 400 over invoice. With the 2% holdback (~500) the profit is $900. That seem sweet for filling out some paperwork.
And doing the pre-delivery inspection and detailing the vehicle, if the vehicle is delivered directly to the dealership. More likely, the dealership would do a search of surrounding dealer inventories and trade one of their vehicles for the one you want. The problem is, if they have a lot of other Tacomas on their lot and few "hot" vehicles, the trading dealer would probably want one of their "hot" vehicles in return, i.e., trading a Prius for a Tacoma.
If there is a factory-to-dealer sales incentive going on and it ends soon, they would naturally be more interested in a sale that qualifies for the incentive than one that does not.
See #1
Pay holdback when they purchase the car from the manufacturer and then get it back on a quarterly basis, kind of like a forced saving account. It does not have anything to do with quotas. On the other hand, the factory often runs factory-to-dealer incentives and those usually have quotas to meet before receiving them. Most likely, this, and not holdback, is what they're talking about.
They may be at or near the objective that gets them a higher incentive from the factory right now with the incentive ending soon but at the time of future deliveries, they would be at a lower tier of any future incentive, if any.
Your points make sense if the dealer does not have an existing inventory of vehicles. Since dealers do carry a vehicle inventory, they have money tied up, either because they have paid cash for the vehicle or they are paying flooring interest on it. In the first case, the money is tied up in iron and not doing anything for them until they sell it or in the second case, they are paying interest on it every month. Either way, their overall profit will be better if they sell from inventory first, especially if he has a lot of Tundras already on the lot or in his pipeline.
Yes, he can make a profit on an ordered vehicle, but it is not necessarily true that the profit will be the same as selling one right now. Also, unless you pay a non-refundable deposit or pre-pay for the vehicle, there is not guarantee that you will actually take delivery of the truck when it comes and then they would just have another truck in stock.
The dealer probably has to pay into the local dealer advertising association so the truck probably costs more than an invoice amount you found in KBB or some other web site.
The holdback comes 2 or 3 months later - that's a long time to wait for money. Let's say the advertising association fee is $350; his gross profit before holdback in your deal is $50.00 If the dealer paid $20,000 for the truck, that is .0025% return on his investment, and after he gets his holdback, it would be 2.75% profit. The truck probably cost more than $20k so the percentages go down accordingly. On top of all theat, the dealer has to pay the salesperson a commission because that is how salespeople earn their living, and if that is $90, then instead of a $50 initial gross profit, he is $40 in the hole and doesn't get in the black until he ges hhis holdback the next quarter. I doubt if the dealer is willing to invest over $20,000 on a money-losing deal.
On the other hand, current factory-to-dealer incentives might make the deal worthwhile today.
Deal with Internet sales dept. or find another dealership with one. No matter how or what happens on the sales floor, you'll never get the truth so doing the math/plan for them is pointless.
The problem is that a dealer wants to get rid of the stock he has. That's what he cares about in the first place, not your 500 dollars. The holdback matters only if the car stays in the lot for a certain amount of time - there is no quota crap.
I think you are missing a key part of the deal, the factory.
The factory -- the marketing guys in particular -- build, or order to be built, a specific fitment of options and accessories, and they can crank these out by the thousands and send them to the dealer's lot and offer the dealer incentives for taking them as equipped. Then, you come along and want a special order that blows off the incentives that the dealer is getting for taking truck loads of cookie-cutter cars and trucks.
My guess is that you will get a better price on the coolkie cutter cars and trucks, and pay a higher price for the special orders.
The expense is the special build. I think you should be able to get the incentive price if there is a truck you want that is on a lot somewhere.
The factory does not produce thousands of the same model/color/accessory combination in order to save money. In fact, for a specific region, the factory does not produce thousands of a model/color/accessory combination unless it is to fill a fleet order. The number of vehicles produced in any particular model/color and accessory combination is probably more in the tens or at the most hundreds. Although the vehicle may appear to be cookie cutter to someone unfamiliar with the car business, they are not even close to being cookie cutter.
Within a series, each cab/bed/transmission/engine/trim level is a separate model, so within the Tacoma Series, there is probably in the vicinity of 25 or 30 different models. Because of the long list of accessories, there are thousands of permutations of model/color/accessory combinations, more than are actually sold in any particular production period. Each region submits their POP (production order preference) based on what dealers have been asking for and what they think will sell most quickly, not because it is covenient to build.
Factory to dealer incentives appear when the aggregate of all dealers' days supply of vehicles exceeds the optimal, usually 60 days supply.
This is true but no because of special orders.
The expense is NOT in the special build. The added expense is due to tiered factory to dealer incentive programs.
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