Where does the money go!

good afternoon all! thanks for all your help, will lease a car this week.

OK- fact:
in 2009, a bad economy, my friend helped my sister in law buy a new 4 cylinder Accord. no trade in. the price was about $26000. dealer said that was their no negotiation, great price.
in 2 hours, my friend got about $22,000 and we bought the car. this is a fact.

OK; a local Mercedes dealer has a new S550 for $124,000.

dumb question:

if someone paid that exact price,

  1. how much would the salesman make?
  2. how much would the dealer make?
  3. how much would mercedes make?

very curious to know!

bob and thanks

Bob, In the next 7 days or so my GLC300 RWD will arrive at the dealership from the port. I too wondered about this. I don’t think they really know. There are so many variables. If the dealers meet certain goals they get factory rebates. The dealer I’m buying my MB is a AutoNation dealer and they give incentives too. The salesmen get extras if they meet or beat their sales goals. If I turn in a lease, the dealer can get another crack at profit on the deal if they choose to buy back the leased vehicle and resell. If you trade they resell or wholesale it for more money in their pockets. When they finance lease/loan their is more profit. Dealer sales of parts and service are fixed costs and it is very easy to figure profit at any point but a car is a different animal with so many changing factors going into the sale. The profit on the exact car at the end of month X can be and I would guess not the same (more or less) at the end of month XX.

I think the very basic theoretical answer for #2 is that the price someone purchase the car for minus the cost the dealer purchases the car from Mercedes. From my understanding this used to be be “sales price” - “invoice price”. Though it seems mercedes now sets an arbitrary invoice price and ends up charging the dealer different prices that could be significantly less than “invoice price”. As far as #3, Mercedes probably just makes money based on what they can sell to the dealer:

Dealership purchase price - (R&D cost + production/material costs) = Mercedes profit!

Not sure at all about #1, but I assume they make a percentage of profit that the dealership makes?

thanks! this is a tough one! they try quite hard to hide where the money goes!
my same friend easily got $10,000 off his dad’s new truck, just by calling dealers. he only went to the dealer to pay and pick it up!!! took very little time,. so-if a dummy, like me, paid full price, SOMEONE makes an extra ten grand! ha!

i may say, that, this week , i hope to lease a new infiniti Q 50. they have LOTS of them at a local dealer, and i will bring my friend, and i hope to get a decent lease deal.



Why not as a challenge, go thru the discussions here on the same car and try to talk to the dealer by yourself and see how you do and then send in your friend independently. Gives you an good idea of how good your negotiation skills are compared to your friend. Also, Armed with the facts and idea of how much others lease deals are, you might surprisingly do better than your friend.


Please do your research! There’s so much great info on this forum! Don’t go into negotiations blind! $10k off could be nothing if they just arbitrarily marked up the car 10k. Learn all the details about leasing… figure out your MF and Residuals… get a target sale price (that should be considerably under MSRP). Please use this forum and don’t get ripped off! The dealers aren’t your friends and they’re not there to do you a favor. Your buddy could be the best negotiator in the world and if he doesn’t go in with the right numbers, then they could tell you anything.

We re-sell software where I work. Gross margins on software are 100%.

50% to the software vendor
10% to the sales person (20% of profit)
40% towards gross profit that covers keeping the lights on, sales person base salaries, GM bonuses, etc. etc.

If we give a customer 30% off, we usually negotiate with the software vendor to take a cut as well. The new split might be:
60% to the software vendor
8% to the sales person
32% towards gross profit

Why? What if, for a example, a customer asks the same questions about you and the company you work for? How much Old Bob makes on each [XXXX] the company sells? etc. Your bottom line on a deal is all that should matter.

Also should add - if everyone was a good leasehackr, dealerships and car manufacturers might all go out business. The customers that pay full price cover the overhead, while the super good deal seekers allow the system to maintain scale.

thanks guys! i may say that i trust my friend very much! he helped me buy my 2008 caddy DTS, sister in law’s accord, my wife’s accord, a friend at work, 2 trucks for his dad, and his own cars, the last 2 of which are Q 50 leases. i am giving him all the numbers i got here, and i think we will do very well.

thank you all for your help here, and i will let you know how we make out. we ARE willing to walk out of the dealers. my car is running fine, i am NOT desperate!

thanks! bob

Maybe try to get a job at the dealer?