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What's a fair and reasonable profit and commission?

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What's a fair and reasonable profit and commission?

 
Old 07-30-2017, 06:12 PM
  #81  
mpuzach
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Originally Posted by 449er View Post
I get so tired of the salesperson running to the general manager's office to see if my offer is acceptable
I'm in complete agreement with you. It's just another example of how many who work in automotive sales aren't qualified to be anything more than trained monkeys. (This is coming from one who's in automotive sales; I prefer to think that I'm not a member of that group.) A little known fact is that in some states, only a "manager" can legally approve an automotive purchase price. Why, I have no idea. It's fact, though.
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Old 07-30-2017, 06:23 PM
  #82  
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Originally Posted by mpuzach View Post
I'm in complete agreement with you. It's just another example of how many who work in automotive sales aren't qualified to be anything more than trained monkeys. (This is coming from one who's in automotive sales; I prefer to think that I'm not a member of that group.) A little known fact is that in some states, only a "manager" can legally approve an automotive purchase price. Why, I have no idea. It's fact, though.
Most all buyers orders have a line for the "manager" to accept the agreement for the dealership. In addition, the finance contract has a place for the authorized representative to assign the contract to the lender. As far as to "legally", the lot boy can sign the buyers order as long as the delership is willing to accept it.
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Old 07-30-2017, 06:33 PM
  #83  
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I'm amazed that people actually think "invoice price" is in any way related to the actual price the dealer pays for the car instead of what it really is, a totally phony contrived number arranged between manufacturers and dealers to sucker the public.
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Old 07-30-2017, 08:48 PM
  #84  
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Fixed, my apologies to Mike Furman...
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Old 07-30-2017, 09:04 PM
  #85  
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Originally Posted by PDCjonny View Post
I'm amazed that people actually think "invoice price" is in any way related to the actual price the dealer pays for the car instead of what it really is, a totally phony contrived number arranged between manufacturers and dealers to sucker the public.
Although I can understand why one might feel that way, it is simply incorrect. There is an MSRP that every car has, an invoice that every dealer pays which is the same for every dealer, and the
"holdback" (which is 3% of MSRP minus freight) that is paid to the dealer periodically.

In addition, there are incentives or rebates that are available for the sale of a vehicle that change on a regular basis. Even the dealer does not necessarily know what these incentives will be until they are announced. They can take the form of customer rebates, dealer incentives, contests, or any number of other programs. This is the manufacturer's way to stimulate sales and maintain production as the market for particular vehicles increases or decreases and as inventory levels change.
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Old 07-30-2017, 10:00 PM
  #86  
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Originally Posted by JALLEN4 View Post
Although I can understand why one might feel that way, it is simply incorrect. There is an MSRP that every car has, an invoice that every dealer pays which is the same for every dealer, and the "holdback" (which is 3% of MSRP minus freight) that is paid to the dealer periodically.

In addition, there are incentives or rebates that are available for the sale of a vehicle that change on a regular basis. Even the dealer does not necessarily know what these incentives will be until they are announced. They can take the form of customer rebates, dealer incentives, contests, or any number of other programs. This is the manufacturer's way to stimulate sales and maintain production as the market for particular vehicles increases or decreases and as inventory levels change.
But then, isn't it true that the dealer may not know the actual cost (to the dealer) of a particular make or model until sometime "later on?" And by later on I mean, later in the model year, or whenever the accounts are finally settled up between dealer and car company.

If a dealer were to "allocate" the specific and general reimbursements from the car company at the very end of the settling up period, any given model may cost less than what the dealer actually paid at the time of paying the "invoice." * Maybe not increasing the dealer's "profit" to $5K on a $50K Corvette, but something.

* And, isn't that why there is a disclaimer frequently shown (but not always) that "dealer invoice" may not be the price the dealer paid for a particular car?
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Old 07-31-2017, 09:18 AM
  #87  
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As a buyer, a $200 commission seems fair, but that's up to the powers that be at the dealership, because I have absolutely no control regarding what your boss wants to pay you.

* The only time I paid MSRP was when I was 23 and stupid.

* I bought my C6 from Tommy Jr. at Macmulkin (NCM delivery) and all it took was a two minute phone call to agree on price, and then an email to him confirming the RPO codes. I spent more time in line at my local tax office registering the car in Texas.
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Old 07-31-2017, 09:58 AM
  #88  
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Originally Posted by JALLEN4 View Post
Not even for one second do you assume Buffet has any idea what price they are advertising a Corvette for?
Not even for one second do I believe that Buffet runs any of his business at a loss, deliberately. He might not know personally what the profit is on that particular car, but he is paying the salary of the guy who does know.

That guy keeps selling cars at a loss, and Buffet gets rid of him.
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Old 07-31-2017, 10:00 AM
  #89  
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Dealers don't make a lot on new cars.
Look out the showroom window.
See the service area? See the used car lot?

That's where the money is

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Old 07-31-2017, 10:01 AM
  #90  
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I will say the best experiences I have had buying cars (and I have bought lots of them) have been working with the Internet sales manager who is salaried and not working on commission at high volume dealers. It is usually a very quick and no-nonsense transaction. They are dealing with volume and don't have time for BS sales and customer tactics, so there is little negotiation. After that you still have to deal with the finance droid who tries to up-sell you accessories, warranties, etc. But that is a whole different animal.
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Old 07-31-2017, 10:21 AM
  #91  
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Whenever the dealer tries to tell me they are losing money on the price I offered, I get glassy eyed, stare just off to the right of eye contact and keep a completely expressionless face.

Then when they are done with their BS, I just repeat exactly what I just told them, which is that my offer is the same. Had to get up and walk out on several dealers over the years.

Didn't have to go through any of that crap on the C7 purchase with Mike at Criswell though.
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Old 07-31-2017, 10:42 AM
  #92  
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Originally Posted by AORoads View Post
But then, isn't it true that the dealer may not know the actual cost (to the dealer) of a particular make or model until sometime "later on?" And by later on I mean, later in the model year, or whenever the accounts are finally settled up between dealer and car company.

If a dealer were to "allocate" the specific and general reimbursements from the car company at the very end of the settling up period, any given model may cost less than what the dealer actually paid at the time of paying the "invoice." * Maybe not increasing the dealer's "profit" to $5K on a $50K Corvette, but something.

* And, isn't that why there is a disclaimer frequently shown (but not always) that "dealer invoice" may not be the price the dealer paid for a particular car?
The dealer knows exactly what he paid for the car and exactly what the current rebates are. Therefore he knows when he sells the car how he stands financially. That is the number he books for his monthly financial statement. If involved in some sort of "contest", he would book that additional profit when it is known. That number we are talking about is not going to be a substantial amount per unit but can be a substantial amount based on volume.

The disclaimer comes from the fact there are rebates to the consumer and rebates to the dealer (dealer cash). A consumer sued stating he purchased based on a stated dealer invoice amount and a dealer rebate was not disclosed to him. The disclaimer has been there for many years.
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Old 07-31-2017, 10:49 AM
  #93  
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Originally Posted by p4snow View Post
As a buyer, a $200 commission seems fair, but that's up to the powers that be at the dealership, because I have absolutely no control regarding what your boss wants to pay you.

* The only time I paid MSRP was when I was 23 and stupid.

* I bought my C6 from Tommy Jr. at Macmulkin (NCM delivery) and all it took was a two minute phone call to agree on price, and then an email to him confirming the RPO codes. I spent more time in line at my local tax office registering the car in Texas.
I agree that the customer has no real reason to care or be concerned how much the salesman makes on a commission. I will though point out that on a national basis, the average salesman sells ten cars a month. That would mean making $2,000 month or $24,000 a year. Hardly a living wage.
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Old 07-31-2017, 10:58 AM
  #94  
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My local salesman seems to have a philosophy that he sells to his customers at deep discounts while probably making small commissions. He has a crap ton of regular customers, and it is often difficult to catch him with free time if you just walk in although he will eventually get to you. About 4 or 5 new car salesmen at this dealer and this guy probably sells as many as the rest put together.

I don't know what he makes on each deal, but I would assume it's mostly minimums, so when I ordered my '14 in January of 2014, his manager reluctantly matched the discounts the large forum dealers were giving at the time on Z51 orders which was $2k-$3k off msrp (I got $2500 off). I don't think there was much commission to be made on my past deals, and I hope he made a good commission on my '14 which I had in 6 weeks. I wasn't going to get it any cheaper or quicker anywhere else.
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Old 07-31-2017, 12:30 PM
  #95  
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Originally Posted by JALLEN4 View Post
Although I can understand why one might feel that way, it is simply incorrect. There is an MSRP that every car has, an invoice that every dealer pays which is the same for every dealer, and the
"holdback" (which is 3% of MSRP minus freight) that is paid to the dealer periodically.

In addition, there are incentives or rebates that are available for the sale of a vehicle that change on a regular basis. Even the dealer does not necessarily know what these incentives will be until they are announced. They can take the form of customer rebates, dealer incentives, contests, or any number of other programs. This is the manufacturer's way to stimulate sales and maintain production as the market for particular vehicles increases or decreases and as inventory levels change.
http://clark.com/cars/eye-opening-tr...invoice-price/

‘In response to this threat, the auto industry launched a secret program to transfer beaucoup bucks from the sticker price to the invoice price, a process that has continued for almost two decades. They’ve done this by steadily raising the invoice price by more than they raised the MSRP, thereby disguising a big cache of available dealer-incentive dollars as dealer-cost dollars. They chose this approach because car shoppers have been conditioned for decades to believe the invoice price is a real cost number. And they did it slowly and deliberately, year after year, so that we wouldn’t notice a sudden substantial change.’

Last edited by PDCjonny; 07-31-2017 at 12:31 PM.
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Old 07-31-2017, 01:08 PM
  #96  
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^^^^^
Exactly. It's always tickled me that folks actually believe they were getting a new car for what the dealer paid for it....One doesn't stay in business long doing that.
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Old 07-31-2017, 02:28 PM
  #97  
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Originally Posted by PDCjonny View Post
http://clark.com/cars/eye-opening-tr...invoice-price/

‘In response to this threat, the auto industry launched a secret program to transfer beaucoup bucks from the sticker price to the invoice price, a process that has continued for almost two decades. They’ve done this by steadily raising the invoice price by more than they raised the MSRP, thereby disguising a big cache of available dealer-incentive dollars as dealer-cost dollars. They chose this approach because car shoppers have been conditioned for decades to believe the invoice price is a real cost number. And they did it slowly and deliberately, year after year, so that we wouldn’t notice a sudden substantial change.’
Another failed ex-car guy who wants to convince everyone he is the buyer's friend. It is pretty simple to look at his theory and see how far afield he is.

The gross percentage of mark-up reduction started long before 1995 and long before the internet popularity. Going back to the sixties and seventies, mark-up on an Impala for a common comparison was 23% and 2% holdback. That left a $1,000 profit margin. Today, that same Impala would be $30,000 plus and the dollar mark-up would be almost four times the previous dollar amount. As car prices increased by leaps and bounds mark-up percentages were lowered to help control the rise of the MSRP but still gave dealers adequate dollars of mark-up for operations. Remember, you spend dollars not percentages.

It is true that manufacturers have far more incentive programs for dealers today and they are more lucrative. But, there are far more manufacturers competing for dealer's investment today and the cost of operation is much higher for the dealer. Every manufacturer wants the dealer to build a "Palace" for them and the author of your article fails entirely to understand that many of the dollars he quotes are based on facility up-grades and CSI scores.

Had your boy had a clue about the business to begin with, he would have been trying to collect the "big bucks" he writes about rather than his two bit con game trying to sell people on how to buy a car!
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Old 07-31-2017, 03:27 PM
  #98  
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There's nothing overtly wrong with leasing but I prefer ownership... and not to perpetually be in a payment. Some say leasing costs less and avoids the responsibilities of ownership but you still have to have Insurance and buy gas.

How long does making payment continually hold an advantage over paying the car off and not making any more payments ? I owned my last car for 10 years. It was paid off in 3 years so I had 7 years of no payments. Maintenance ? Yeah, but that's rolled into a lease payment, isn't it ?

Originally Posted by GR Jay View Post
I've often wondered how car dealers make money when you see the multi-million dollar facilities they have. The millions in inventory on the lot etc. and their constant claims "I'm losing money on this deal". I assumed they make a killing off of leasing since that is the vast majority of what people do. Every time I buy a car the salesman is shocked when I tell him I am buying not leasing. One guy told me that less than 1 in 10 people buy.
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Old 07-31-2017, 03:33 PM
  #99  
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I find it funny that people are concerned with how much a dealer should make when the dealer is not asking the reciprocal question about how good of a deal a buyer should get.

Let me know if there is such a dealer. I've never met a unicorn.
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Old 07-31-2017, 03:51 PM
  #100  
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Originally Posted by mpuzach View Post
Most dealerships have very similar commission structures. The salesperson is paid a % (typically 20% - 30%) of the difference between M.S.R.P. and invoice. Thx.
Do salespeople (and/or dealerships) make money on other services? Financing for example. Just curious.
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