So looks like a lot of the good deals come from Cali and because a lot of them do “loser” deals that technically going below invoice to lease the cars out. My question is why would dealerships do that? everytime i tryt to negotiate leasehackr worth deals the dealerships get offended because they think i want them to lease the car at a loss, and i understand that, but why would some dealerships be willing to do those deals? is it because they are so overloaded with cars? what happens to cars that they don’t lease out or sell by the end of the year, do they basically buy the cars themselves?
have to hit store objectives and too many dealerships.
3 Likes
They’re chasing big bonuses from the manufacturers that will help offset those loser deals. It’s also based on competition, so a Chevy dealer in Bismarck, ND isn’t going to have nearly as much competition as someone in the Bay area.
Plus, they probably get other incentives, manufacture bonuses etc… AND don’t forget the many people uninformed doing lease deals.
I’d like to think that the fantastic car deals I get are because of my charming personality !
5 Likes
Great listen if you have an hour to kill, basically near the end they talk about doing a bunch of loser deals to try and reach the number set by Chrysler in order to get an $80k month-end bonus. Losing a few hundred or thousand on a few deals in order to hit their mark is a great ROI in that retrospect.
Yes “loser” deals are never truly loser deals. MSRP vs Invoice vs Dealer Cost is all different. There is such a thing as a double negative that make a below Dealer Cost deal and thats when you question what the dealers thinking. As everyone else said, its to hit the month end bonus, which for BMW is worth hundred of thousands to a million dollars. They make up their money as needed.
Dealers will never lose money.
Ever driven by Joe’s Chevrolet and all of sudden it’s Bob’s Chevy? Franchise agreements get revoked all the time and dealerships close and change hands.
Yea but you see those coming a mile away. Like zero discounts… selling above MSRP…
Or just bad salesmanship on the showroom floor.
Have quite a bit of insight on this as worked for BI/Insights product for dealers to make profits.
MSRP- World Knows it
Invoice-World Knows it
Holdback - World Knows it
Grey Area :
Customer Rebate - Not all companies disclose all rebates in one place
Dealer Cash - Support for pushing specific cars to give an impression of car MSRPs being at par with competitors but making it cheaper for consumers
Dealer Incentives - These can be complex - step incentives, volume based incentives , incentives starting from 1st car
Inventory incentives - The cost to carry is 200$ to 300$ per month some manufactures support some dealers
Advertisement Incentives - These are for advertising - so the manufacturer pays expenses
The best part- Rewards - International vacation trips for families etc etc…
4 Likes
Is Invoice info public knowledge?
How do you know when you’ve reached a ‘loser deal’ for a dealer?
I’ve heard them say ‘we’re going to eat the cost of this…’ but that flips on my BS alarm.
We are a super competitive store and sell tons of cars below net net cost. Camrys for example. I will sell one for $1100 under dealer invoice and holdback. We take the good and the bad in fleet and our team generally breaks even but we help the store boost numbers. Give away the cars and make it on the trucks is basically how it works at Toyota
They do eat the loss most of the time … Here is an example…
Dealership had sold 45 cars in quarter , they need 5 more to be sold in next 7 days what do they do . The step program says if they sell 50 they get 400$ per car . Even if they take a loss of 1k per car they still make money good 20k.
If you research you will find out dealerships these days are at Mercy of manufacturer incentives which are not equal for all as large dealers tilt the pricing to get high on the step inventive.
That’s the reason you go to high volume dealers vs. low volume.
These softwares are pretty smart as they can tell you how much loss should you take vs. what do you end up making , so sales managers can make decisions in real time…
Their are bigger dealerships that puerly operate out of these predicted models as if you fall short by couple of sales and have already had a loss for past sales you are dead…
Average profit that a dealer makes on a car sale is 2500$ ish… Operational costs are usually somewhat compensated by manufacturers .Manufacturers even pay for facility renovation , finance to keep inventory floor plan…
To make a average profit of 2500$ they sell some with margin of 5000$ and some at loss of 5000$…
Did you hear of carwoo the aim was to be a place where dealers can crossbid for business of customer but it died guess what dealers protested and didn’t participate.
1 Like
I just used it as an example …avg profit in sum of parts from car, from finance , from add ons etc… I have heard just on the car it’s low hundreds…and really depends on what manufacturer is supporting…
They arent losing money. My buddy owned a Nissan dealership and while the front end of the deal may look like a loser, they make it back up on the back end. The finance guys make more money for the dealership than the sales guys. Finance guys are 100% commission at his store. They can make $3-6k on the back end between interest rate markups, extended warranties, gap insurance, wheel/dent protection, etc.
Also, dont forget the obligatory nonsense dealers add to every car. Window tint, pin stripe, door protectors, etc. That $250 cost and they are charging $750 for it.
They arent losing money
1 Like
Never mind…misread