Maybe bit of a rookie question, but I’m baffled how these dealers can make money on all these sales way under invoice on orders.
Using Jeep as an example where the holdback is about 3% of MSRP most of these brokered discounts go far beyond that. And if they’re not marking up the MF then all that’s left it seems is the doc fee.
Back when there were cars on the lot they paid floor plan on or when there were incentives for slow sellers I’d get it.
So why would a dealer sell this low? Are there bonuses that really make a difference or is will it help them with allocations on future hot models?
Just curiosity but it’s just pretty wild that even in this environment there are deals so far beyond what the general public is getting.
Fixed operations (service & parts) cover the overhead of any well operated dealership. In the front of the store, used car sales and F&I are the money makers. They don’t do all deals at buy rate, and they also make healthy margins on warranties, gap, paint protection, etc.
And they aren’t blowing all new cars out below cost, there are definitely some in there with gross to make up for it… plus rebates, volume bonuses, etc.
Pre-2021/22, volume dealers would take a hit on front end gross and either have a small, zero, or negative deal with the hopes of making it up elsewhere. Most likely, it would come from kickbacks for financing along with back-end products (warranties, t/w, etc.). Some manufacturers also give big bonuses for hitting certain volume targets. On a dealer owner level, they hope to get those cars back in for service and warranty work. Then you have whatever money you can make from any trade-ins and lease returns. So generally for a volume dealer, you take a small hit on the act of selling a car with the hopes of getting it back from back-end products and service.
Depends on the brand. Certain brands will say why would we give you more cars to sell at a loss and devalue the brand. Others will say thanks for selling 2000 turd boxes this year, here is a reward. But generally, the more volume you do the more of the “hot” product you get.
Not to mention some folks are begging to be bent over. I find it hard to believe that a dealer will let them be innocent and not squeeze some kind of profit
Hacker deals are prolly 5% of the deal. Most of them walk-in no research customer pay for hacker discounts
Especially when you’re talking about a product where thr manufacture is saying “6-9 month wait on inventory orders” but 2 months on customer orders. That’s a long time to go without inventory to sell acquired through normal channels.
