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Advertising Charge from Lexus ??

Actually a regional ad fee is a bit of a gray area. You're right in that you look at it as a general "cost of doing business" that should be absorbed in the normal profit margin. But, *just like a destination charge*, it is levied by the regional importer on a per-car basis and it is added on a per-car basis to the invoice price that each dealer pays the importer for their car. It is not like labor, plant, equipment, etc.that is spread across the entire operation and it is not an overhead charge that is paid regardless of how many cars are sold. Now local advertising that the dealer runs (e.g., ads in local newspapers, radio, and TV) are a general cost of doing business and dealers shouldn't be adding these to the "invoice".

98% of the time the customer never knows about the charge - they negotiate a price that provides sufficient profit for the dealer to pay for the charge. But when a customer comes in and wants a rock-bottom deal over invoice, the dealer may need to cover the fee in their invoice to maintain their margin; thus it comes into the deal. That's what happened with your deal, and I continue to not understand why you think this is shady or unfair. And it has been going on for years, and I'm sure you paid it on your 2000 GS, whether as a separate item or as part of the margin the dealer

It really is just a bookkeeping thing. If you properly focus on the OTD price or the price + TTL, then who cares how the dealer divvys up the deal? The hard feelings come in when a customer focus on some magic $X over "invoice" without defining what "invoice" really is.

As per the Edmunds site:

  1. Why should I pay advertising fees?

Most vehicles carry a legitimate advertising fee levied by either the manufacturer or by regional dealer groups. National or regional advertising fees, when charged, should not exceed 1 percent of the vehicle's MSRP. Because individual dealership advertising is a cost of doing business, you should never pay an advertising fee levied by the dealer rather than a regional dealer association or the manufacturer.

- Mark

Reply to
markjen
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One final opinion from one who knows. As being a Manager for various Delaers of various Manufacturers both Domestic & Import, the advertising charge comes from the Manufacturer on the invoice and is really charged by the regonal "Dealer Association" to cover regional advertising costs. When you see Car ad's there are 3 types:

1: National Ads, Part of the actual base cost of the car not itemized out 2: Regional Ads, (i.e. tag lines reading see your local Lexus dealer group) Added as a line item on the invoice because ad cost vary in different regions, it costs more to advertise in Chicago than Milwaukee for example. 3: Dealer Ads, These are paid for by the individual dealer and comes out of his profit, no actual line item on the invoice.

All manufacturers that I have worked for do this and list it on the invoice, usually 1 to 1.5% of base invoice not including options. All dealers have to pay this and there is no negotiation of the cost. Dealers used to be able to opt out of regional ads and not pay the fee. But I don't think that is an option anymore. Just bear in mind that when negotiating from invoice up the ad fee is a ligitimate charge passed on to the delaer from the manufactuer and is truly part of the cost of the car. If a dealer asks you to pay anadditional ad fee that he taks on to cover his own ads then walk away its bulls**t

Thanks for listening ;) Myles

Reply to
msb

The excellent post by Myles explains exactly why.

I think when the day is done, you got into a pissing match with the dealer over terminology rather than price. Unfortunate.

- Mark

Reply to
markjen

More importantly, the buyer also pays for the ads for Windex, Levis, Chef Boy-Ar-Dee, the latest Johnny Depp movie, and Carnival Cruise Lines. With Windex and spaghettios, they just don't itemize your costs on the price tag.

John

Reply to
The Lindbergh Baby

Okay, then name me one other business where the consumer doesn't pay for the advertising budget? (HINT: Just because they don't itemize it doesn't mean it's not in the cost.)

...I'm waiting.

John

Reply to
The Lindbergh Baby

The customer pays for every expense that any company has unless, unless the company loses money to the point that it is using original investment capital that was donated by the founders of the company. That money didn't come from customers. I don't think Lexus will in that condition very soon. If you disagree, then I would be interested in your theories of where the money SHOULD come from.

Reply to
Bob Muse

Okay, say you ran the ad but did not say at the bottom you were adding a customer surchrage. Where would you wind up getting your money to pay for that ad (regardless of whether or not you had a line at the bottom saying it comes from the customer)?

John

Reply to
The Lindbergh Baby

It is not that difficult. All money the company has comes from customers, except for investment capital. If the company spends money on advertising, then the profits from selling product to consumers pays for it. If the company needs more money then they can consider increasing their profit some way, either by reducing operating costs, or raising their prices.

Reply to
Bob Muse

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