need some general guidance re prices (2007 I4 2WD Limited)

I am not the most experienced at buying cars from dealerships (there are some pretty nice perks when working for a car company) but I am familiar with the sales process and how sales managers view the "deal" and have wholesaled around 100,000 new cars over the years.

You will probably get a whole bunch of responses from people who consider themselves experts at getting a great deal, and if everyone is to be believed, not one male buyer has ever gotten a bad deal on a car. Everyone will tell you that the dealer barely broke even or the dealer lost money when they purchased their car, yet dealerships somehow manage to scrape by and make a decent living.

One should remember that dealerships are businesses and are not non-profit organizations that exist solely for the purpose of selling cars at a loss. It is unrealistic to think that Joe the expert negotiator is so sharp that he is going to pull one over on the dealership. IMHO, allowing a dealer to make a $300 or $500 profit is an excellent deal for the purchaser, considering that they probably have to invest over $20,000 for a vehicle like the Rav 4, plus all of the other overhead that goes along with owning a new car franchise. Average gross profit per new vehicle retailed is well over $1,000, so skip extended warranties, rust and dust packages, pin stripes, pre-paid maintenance deals, and stuff that didn't come from Toyota, allow the dealer to make a reasonable profit on the front end so he doesn't have to make it up on the back end. When the deal is done, establish a relationship with the salesperson, send him lots of referrals, and when you are ready for your next new car in 15 years, he will remember the hundreds of referrals you gave him and give you a no-hassle good deal.

I've only bought 2 new vehicles from a dealership, but because I have been sending him 10 ~15 customers a year for about 25 years, he extended to me the same deal that TMD employees get in IL, and we were in and out in about a half hour, since he had ordered the cars for us in advance and called us when it was time to come get them.

Ray - AAA PLeeeese!!!! Just how thick can it get. The dealer gets all his S*** on consignment or credit to be paid at a future date. Don't get sucked into feeling sorry for any scummy dealer or his temporary help. There is one - ONLY ONE price that matters and that is NET (total) price to you in US$. Net plus government fees is the amount you finance or pay. Calculating dealer profit etc. is BS. This has NOTHING to do with you. Cosco or CR excellent price referrals are typically NOT good prices for the consumer.

The best price is stock as is on the lot. Anything special will cost you an arm and a leg. You can look for ads in papers and compare. You can not improve on loss leaders in person. Perhaps on the phone.

KISS - just "keep it simple s*****" accept none of the smoke and mirror 'standard' tactics. Somebody said to have them fax you the total price - (so you can bring a check in the correct amount) and prevent the scum from revising price when you get there. An excellent idea IMHO. Lots of luck.

AT

The dealer does not get anything from the automaker on consignment. According to the terms of the franchise agreement, the dealer must maintain a line of credit, and the dealer's bank must transfer funds electronically when the vehicles are invoiced and the appropriate amount is added to the dealer's flooring. I am not aware of any finance institutions that loan money to businesses interest-free so the dealer starts paying juice the moment the automaker's distribution gets notice that the vehicles have left the POE. When a vehicle is sold, most finance institutions require the vehicle to be paid off by the end of the next business day.

If you assume that the dealership is paying prime or a little below, you can calculate what it costs the dealership per day to keep a vehicle in inventory. Of course, that works both ways, and it is to the dealer's advantage to sell a vehicle sooner rather than later because he will make more money on a car that has been in his inventory for a day than one that has been in his inventory for a month.

I feel no sorrow for the dealership, I'm just pointing out that people forget that dealers are in business to make a profit, not pass cars through their lot for the good of the public. A gross profit of $500 on a car that costs the dealer $20,000 is 2.5% of sales. What is the gross profit a a medium Coke at McDonalds? Why don't people haggle over something with a markup in the hundreds of percent?

That is the point I was trying to make - forget about how much over invoice and just get the best deal.

It depends on your definition of "special." Having to trade vehicles with another dealer costs the originating dealer money, which will get passed on to the buyer. Ordering from future production does not cost the dealer any extra money, and if the customer pays for it the day it arrives, then the dealership will actually make more money than if it sat on the lot for a month.

Also, pass on the paint protector, rust proofing, upholstery protection, and non-factory alarm packages, because this where markup rivals Cokes at McDonald's.

I'm sure - no I know we all have problems. My whole point is that business should not be based on lies, deception and methods that are generally regarded as unethical. That well known shell game of funds that pass back and forth between the dealer and factory is well known. Once again it is only the net amount that matters. Auto dealerships are known to be very lucrative money makers. Why should the customer be dragged into ALL the multitude of problems that any dealer or business has. Many people seem to think so or else business practices would change drastically. On the other hand can you imagine if every customer insisted on 'dumping' all his personal problems and just how hard it was to make enough money for the down payment etc. etc.

AT

That $500 (2.5%) doesn't sound like much. However, if the dealer turns that $20,000 over 12 times a year, that's a 34.5% annual return - not bad! I'm not sure how typical that is (the 12 times a year), but it must be in the ballpark.

I shudder when I think about the return on investment for hot new models the dealer doesn't hold for more than a day or two and adds a dealer markup to the suggested retail :(

Arthur Hass

I would go to Consumer Reports:

Order the Rav4 report for $14 (it contains all the models, options, packages, etc.). Read all the info and determine the "dealer cost" for the car you want with the exact options you are getting (the report has retail & dealer cost). Be sure to subtract dealer hold-back and any current national/regional sales incentives.

This number will be pretty close with the exception of the dealer incentives - Cash the dealer gets at the end of the quarter (or month maybe) for reaching quotas - maybe another 1-4% lower than the cost you calculate depending on the dealer.

With this number, you will have a pretty good idea of the dealer profit margin when they make an offer. Of course, the dealer has to make a profit. You'll have to pay at least $500 over your calculated dealer cost - maybe $1000, maybe $2000. However, you will at least have a pretty good idea of what you are dealing with. Paying more than $1000-2000 over dealer cost is not a very good deal in my opinion. Definitely try more than one dealer.

Hope this helps. I'm pretty sure this response will attract plenty of disagreement.

Arthur Hass

EB wrote:

Yeah, the Edmunds TMV is a good general indicator but there are regional variations. CARMAX sells new Toyotas so you can check, on line, their RAV4 prices. If you plan to use the dealer for service, you may want to wander over to the service desk and check their prices and policies for routine maintenance. You may find it pays to buy from the dealer whose Service Dept. offers you the best value.

Where you bought the car makes absolutely no difference on service care. Any service department of any dealership will take your money or handle a warranty claim.

It hasn't ever mattered for me, and my cars don't have dealer advertising or logos on them. Besides, I only use dealerships for warranty work and to purchase OEM parts. I do my own routine maintenance (with Toyota parts) and use a trusted indie shop (20+ year ex-Toyota ) for out of warranty problems.

Work your best deal on a purchase, then have the car serviced at the shop you like best.

hehe .. yes, that seems to be the prevailing story, at least from what I hear from friends :-)

Agreed, ideally both sides would be happy with the outcome (or at least satisfied). The problem is that terms are so convoluted and hidden behind all sorts of clauses/fees etc .. that some of the dealings are almost borderline deceptive.

Well .. it looks like I will be moving next summer, so the long-term thing will not work in this case, but it's good advice. Esp given your own experience below.

Thanks!

eb

agreed, but they make it very very hard to get some hard-and fast information from the dealer. One I was talking to on the phone kept trying to invite me to her dealership to talk, even though I could hear her loud and clearly on the phone :-) .. and they didn't even have the car I'm interested on the lot.

She said she would e-mail me a price, never happened. As soon as I can figure out what a reasonable price is, I will buy the car, but not there.

Yes, that sounds great .. *if* they are willing to do it.

I got lots of internet quotes that had disclaimers on them, or stated plus xxx, yyyy, zzz, (ie customary = $250 doc fee, etc). That doesn't help me, even though I requested a total out-of-the-door price.

They really wear you down and make it a tedious and difficult process. Of course, now that I have spent all this time and read and learned a lot about how this goes, I could probably buy a new car in a fraction of the time it has taken me to do this one. It might even be fun (well, now I'm getting clearly carried away :-)

eb

Thanks for the URL .. I wonder if the numbers be much different from what I found on say Edmunds?

Yup, in fact I am going to visit another dealer today, who has not responded to e-mails recently, this after spamming me with tons of unrelated mails to my initial inquiry. I will use this dealer to get an idea of what his rock bottom price is and then have that help me determine if my current offer is in the ballpark or not.

At this point I'm pretty tired of the whole process. I don't mind them making a profit, I just don't want to be taken advantage of. I think the whole process is geared to just exactly that.

Thanks,

eb

Thanks, I'll do that .. I have visited so many web sites, I'm not even sure if I've been there ;-)

I will be moving next summer, so the dealership while useful/important for the deal and initial service, will not be much of a factor past that point.

Thanks!

eb

Ok, this is only my 3rd car, I buy one every 13-15 years :-)

The first one a cousin of mine bought for me new (I had just arrived in the US and didn't even speak English well enough yet) - a tiny Honda Civic.

The next one (current 91 Corolla Wagon) I bought with an experienced friend at the side.

So in both cases I was somewhat insulated from the whole process.

However, this time it's me, and to be honest I am just shocked that this process even exists. It seems so convoluted and archaic, I wonder how it has survived this long. It seems like the way business might have been conducted in the middle ages by the free masons (no offense intended to any free masons reading this -- heck I don't even really know who free masons are). But you get my point.

They have a product to sell, why can't there be a simple price associated with it, incl. all fees etc.

When I go and buy a gallon of milk, do I have to worry about subsidies, transportation costs etc? No, there's one price on the product. If I like it I can buy it, if not I can *easily* compare prices.

The car buying process in contrast is obfuscated to the max, designed to confuse and IMHO to take advantage of the buyer.

My questions to everyone:

- do you know if cars are sold this way in Japan and W. Europe?

- as far as the US, do you ever see this changing?? I believe Saturn who had tried no-haggle one-prices has since gone back to the old model of obfuscation/negotiation etc..

eb

They are nearly identical. However, mine are two months old.

AEH

Actually Internet Sales can be quite pleasant, if you find a good dealer that understands why people buy via Internet.

Price and no hassle.

My son and I purchased exactly what he wanted via the Internet.

You have to pre arrange your financing, so you have the money in advance.

You never have to enter into the old fashioned haggle game at the dealership.

When dealers first started selling cars, there was no MSRP, prices were all over the board, and price gouging was common. As a result of all that gouging and deceptive practices, anti-trust laws and a law requiring Monroney Labels (window stickers) were enacted and the result was that contracts are filled with fine print to protect the dealer. There are many opportunities for the dealer to make a profit and if you avoid them, you can keep the deal much simpler. Avoid what is known as "rust and dust" packages - paint and fabric treatments and protectant; avoid aftermarket alarms, remote starters, and other accessories because they are generally much cheaper and poorer quality than factory accessories yet they sell for only a little less than factory accessories; avoid leasing; avoid pre-paid service plans; and if you are going to finance the vehicle, make your own arrangements or at least be aware of prevailing interest rates and loan terms.

As someone else suggested, keep it simple, and just buy the car and skip everything else. People suggest that you avoid paying "doc" fees, and if you don't want to pay them, tell them that you will take the paperwork to get the vehicle registered yourself instead of paying them.

Good luck on your purchase!