Car Buyer's and Leaser's Negotiating Bible by William Bragg

Author:William Bragg [Bragg, W. James]
Language: eng
Format: epub
ISBN: 978-0-307-55494-9
Publisher: Diversified Publishing
Published: 2004-03-24T16:00:00+00:00

MANUFACTURER-TO-DEALER OFFERS

As noted above, the first element determining the dealer’s “dead cost” for your vehicle is the dealer invoice price, and the second is dealer holdback. There’s a third and final piece to this puzzle, but this is where the trail gets difficult to track because we can’t see all the footprints.

Have you ever watched late-night television and wondered how so many dealers can shout about “prices below dealer invoice,” implying that they’re selling them for less than they paid? What they’re trying to do, in dealer jargon, is “create a sense of urgency” that will get you off your couch and into their showrooms. The best way to do that, apparently, is to convince you that they’re almost giving those things away.

But how can dealers sell cars and trucks for less than they cost? The answer, of course, is that they can’t. At least they can’t for long and stay in business, and who wants to buy a car from a dealer who’s about to go out of business?

So, when they spend all those ad dollars implying that that’s what they’re doing, are they telling us less than the whole truth, or even misleading us? The answer lies somewhere between yes and no. Yes, because a dealer can sell cars all day long for less than he paid for them and still make money. And no, he can’t sell cars for less than they cost him without losing money.

Yes, the dealer invoice cost is what he paid for the car. It’s the bill he got from the manufacturer, the invoice he had to pay when the auto arrived. But what he paid for the car is not what it ends up costing him, because there are several ways manufacturers put money back into his pocket through factory-to-dealer incentive programs.

There are two classes of factory-to-dealer incentives: traditional dealer cash and what we will call undisclosed incentives—undisclosed to everyone except individual dealers.

Traditional Dealer Cash—In these programs, automakers give dealers a specific cash payment for every vehicle sold within a given time period. Most of the time there will be either a customer incentive or a dealer incentive; in rare instances, a vehicle may have both. Sometimes, these incentives are advertised, but often they are not. It is usually possible to learn about these traditional dealer cash offers through published incentive reports.

As a general rule, Detroit concentrates the bulk of its incentive activity on direct customer rebates and cut-rate financing, while the Europeans favor factory-to-dealer cash. Some Japanese companies lean toward consumer offers, while others lean toward dealer incentives. But it’s not uncommon for a manufacturer to have rebates on some cars and dealer cash on others, or rebates in some regions and dealer cash in others. Sometimes, the dealers in each market get their choice of either a rebate or a dealer cash program.

Undisclosed Dealer Cash—This is where the hunt for the true dead cost of your car hits a wall. Because today virtually all automakers are rewarding dealers in ways

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