Out The Door (OTD) Pricing questions

txallstar210 · January 2004

ok why not

blh7068 · January 2004

I'm not speaking for Terry but...

"...i start out real low just like they start out high then come down to what you may think is reasonable, but really isnt"

Reasonable for who and on what vehicle?

If you are educated...you'll know that "invoice-minus holdback-minus any other factory to dealer incentives + 200" probably isn't a reasonable starting point. I think that is what Terry is saying.

First off you likely wont even get to the holdback- it's not profit. It(helps)cover the dealers floorplan expense. Also, how much holdback is entirely dependant on how long a particular vehicle has been on the lot. It is prorated over a 90 day period starting when the dealer receives the vehicle. So beyond 90 days...there is no holdback.

What if the car you want is hot seller? Your "invoice-minus holdback-minus any other factory to dealer incentives + 200" CERTAINLY wont be a reasonable starting point for negotiations.

"Every salesman knows people dont want to pay msrp"

Hmmm....Every(good)salesman knows it does happen. The educated consumer will know why and when it will likely happen.

Put the shoe on the other foot. What would your impression of a dealer be if his first price to you, say on a Taurus was $100 off msrp? Would you take that seriously?

If you want to be taken seriously...then put your knowledge to good use by making an OTD offer that is reflectant of not just the invoice less any incentives...but very importantly also takes into account market trends of a particular vehicle.

bobst · January 2004

Don't ask the dealer to show you the invoice price of a car. I think it is rude, and it also shows that you were too lazy to look it up on the intenet before visiting the dealer.

Yeah, it is kind of hard to determine a resonable OTD offer. I have had several OTD offers refused. That is part of the fun of car buying.

txallstar210 · January 2004

asking for the invoice is not rude, plus im talking about asking for it when its time to purchase. yes you can look it up on the internet but there are some fees that aren't listed on the internet that might be listed on that invoice, depending on region, dealer, etc. i said use it to compare what is on the invoice and what is on the contract when you sign. make sure you aren't being charged twice for something or maybe an ad. fee on the dealer invoice and then another one on the contract. you can ask to say why you are being charged again for another ad fee. if you already agreed on the purhcase price and you intend on buying the car why is it rude to ask for the invoice. so what if they don't like who cares ex to the next. biggest threat is walking out...slowly of course. if you tell them you are seeking bids above or below invoice and you have an idea of what the dealer invoice is. there is nothing wrong with asking to see it later on.

txallstar210 · January 2004

i see what you guys are saying and i do understand about the holdbacks, the usual 90 days, floorplans, etc. the holdback could be used for the flooplan or may not be used. but either way its the cost of doing business. the dealships has to have the car to show the customers, might as well pay for the dealers phone bill or whatever else. you really shouldnt have to pay for the floorplan. most dealerships arent in business to lose money, if so dealership owners wouldnt be millionaires. look just try this: the dealer invoice minus the holdback and like i said i start my offers around the answer plus $200-300 over. but have the price you are willing to pay or not go over. which of course is much higher. anyhow thats the starting figure then add %4.5-6% over the true dealer cost(invoice-holdback) it will come pretty close to tmv or be in the range of 1000-3000 of msrp or even 300-400 over invoice. and yes i know you have to add the tt&l. but if you can come up with your otd figure you wont go over that would be even better.

txallstar210 · January 2004

>>>>"First off you likely wont even get to the holdback- it's not profit. It(helps)cover the dealers floorplan expense. Also, how much holdback is entirely dependant on how long a particular vehicle has been on the lot. It is prorated over a 90 day period starting when the dealer receives the vehicle. So beyond 90 days...there is no holdback"<<<<

1st off the holdback is more likely to be profit. even if it does pay for the floorplan expense the dealership is not losing money because it is being reembursed in the form of a holdback, unless the car has overstayed its welcome (over 90 days, but most sell before the 90 days). so why should you have to pay for that. thus taking it into account when figuring the true dealer cost.

the 90 days....well you have to look at the date of manufacture on the door jam or invoice to kind of get an estimate of how long the car has been sitting there. beyond 90 days yes you are more likely to get charged for the floorplan but you can tell them hey ill take the car right now, relieving you of the flooplan expense, if you drop the floorplan expense in the deal. might work, might not.

mirth · January 2004

The dealer not going to give you the holdback on a car because they know it'll be needed to cover other cars that have sat on the lot too long. I don't know where you got your stats that most cars sell within 90 days, but I'm betting for a lot of the bread and butter brands (Ford, etc) that's just not true.

Plus, if a salesperson gives you the holdback then they are looking at no commission or maybe $50. Do you really think that many cars sell for below invoice? I'm a pretty savvy shopper, and the best I ever did was invoice on a car that was a slow seller. Dealers know they can sell even Cavaliers and Taurus' for over invoice, so why would they dip into holdback for you?

I'm not trying to be hard on you, but I fail to see why you think a dealer would be willing to lose money for you. Dealerships make millions on parts and service, not new cars.

bobst · January 2004

On second thought, go ahead and try to buy a car any way that you want to. If the sales people don't like your way of doing business, they can certainly boot you out of their store.

Car buying should be an enjoyable experience. If you enjoy doing it your way, then it is right for you. Let us know how it goes.

On the other hand, if you don't enjoy the experience, you have only yourself to blame.

audia8q · January 2004

I don't mind people asking to see the invoice as long as the person asking is willing to show me their credit report/financial info to prove they have the ability to actually buy it....I'm not going to play the invoice game unless the buyer is a real buyer who is capable of buying, NOW.

if you dont ask for the invoice, I dont ask for the credit report until you actually buy the car.

rroyce10 · January 2004

........ >>1st off the holdback is more likely to be profit. even if it does pay for the floorplan expense the dealership is not losing money because it is being reimbursed in the form of a holdback, unless the car has overstayed its welcome (over 90 days, but most sell before the 90<< ..

             Really ...? .. all you need now, is Dorothy and Toto and you would be on your way to see the Wizard of Oz ... Where do you come up with stuff ..?

                Holdback is nothing more than a reserve that is used to "help offset" the cost of the inventory, it certainly doesn't pay for it .l.o.l.. do yourself a favor, you need to look up this discussion in the Archives, there is about 200+ posts about this topic, we discussed it and everyone seems to understand it, except you ...

                      Terry.

isellhondas · January 2004

I suppose we differ in our thoughts on rude behavior. Your approach may or may not buy you a car. Cars always sell for whatever the current market dictates. The invoice really doesn't have much to do with it.

A lot of people get frustrated when all of their research and determination fails to buy them a car.

blh7068 · January 2004

"1st off the holdback is more likely to be profit."

No. Read what's been posted.

"Even if it does pay for the floorplan expense the dealership is not losing money because it is being reembursed in the form of a holdback"

OK- it's a reimbursement. As Terry said its money being kicked back to the dealers to help offset inventory costs. Explain how that money translates into profit.

"'...well you have to look at the date of manufacture on the door jam or invoice to kind of get an estimate of how long the car has been sitting there"

That may not be good estimate since there can be variation in how long cars take to get from the factory to dealer.

Question for car guys(a little OT) do cars go directly from the factory to the dealer or is it factory-distribution center-dealership?

landru2 · January 2004

Explaining away everything you don't like as "a cost of doing business" brands you as ignorant of what a business is.

Customers pay ALL the costs of doing business PLUS more for profit.

Also, you seem to be under the mistaken impression that what is on the dealer's invoice has some bearing on what you should pay. The dealer's invoice details what he has paid the manufacturer. It has nothing to do with what you may have to pay the dealer.

brianw220 · January 2004

Hey Texas Allstar,

I can't speak for the rest of the dealers here, but asking to see my invoice is kinda like asking to look up my wife's dress. I think you would be a great potential dealer though. Get the capital and open a dealership, and I will certainly buy one from you during that year that you manage to stay open. There's an old saying, "If you want to make a small fortune, start with a large one, then open a car dealership."

There are a lot more folks who have gone broke in this business with these "low price, no hassle" business plans than there are millionaires.

elf043 · January 2004

...it might be unreasonable for txallstar to start out at below the holdback, but by the same token, is it really reasonable for dealers to start at MSRP (for a majority of models anyway)?

I would bet that Tx is just using the same negotiating strategy that's used on him.

mirth · January 2004

I guess that's fine as long as you realize that you're not going to get anywhere near that price (like a salesperson offering MSRP to a savvy customer on an average car). But tx gave the impression that he thought a below invoice offer was reasonable enough to be accepted. I think that's where everyone's incredulity is coming from.

brianw220 · January 2004

The manufacturer sets the MSRP, not the dealer. So, the first offer has been made by the manufacturer -- not the dealer.

audia8q · January 2004

The risk of a low offer from a consumer is they lose the dealers interest in the sale. Sometimes a consumer will make an offer that is so low and absurd that I won't even counter offer and say something like "well pass on that offer" and move on to a more realistic consumer....It also tells me the consumer wants to play games. These are games that most consumers will not win.

txallstar210 · January 2004

thanks for the info everyone. hey, understand im not gonna get a car for that low a price. it was just a starting to point. maybe it is too low i dont know and maybe its not. i just want to point out that no i dont expect to get a car for that price. but thanks for the opinions and insight. helps me get different ideas, other ways of possibly negotiating, or maybe check and see what i might be doing wrong. its like a saleman says make me an offer or what do you think its worth? all those little games. basically ill say ok 500 below invoice might think im crazy might throw me out or might say how bout 200 over, 500 over, or whatever and that might be the best offer i got all day from visiting 4 or 5 other dealers. never know. sorry but i still dont understand why its wrong to ask for the invoice or is it because the ones that think its wrong are salesmen/women. its not like i walk into the dealer and say can i see the invoice for this car so i can make an offer. there maybe something on there i need to question while making the deal

audia8q · January 2004

I think you missed the point....I didnt' say I never counter-offer. I just won't do it with an offer that is beyond stupid.

example... MSRP 20,000 invoice $18,000 and rebate of $1000.....customer offers $14K out the door. This is a guy who wants to play games. Now if the guy offers, lest say, $16,500 plus tax now I will counter and negotiate the deal in good faith with the consuemer. His offer is below cost but not a million miles away and 95% of the time when we get an offer like that, the consumer expects to be counter-offered.

jlawrence01 · January 2004

Why does a salesman want to spend HOURS tied up with a buyer who makes an offer that is off the wall? The last time that I checked, salesman receive compensation based upon the number of units they move, not the amount of time they spend yakking it up with prospects.

I have nothing against looking for a good price, but be realistic. If a dealer has $20k invested in a vehicle, he is not going to let it go for $16k just because you are a good negotiator. Especially if the car is one of the hot models.

On a number of occasions, I have walked from a used car purchase because the dealer overpaid for a vehicle and can't let it go for what I am willing to pay for it. But there are thousands of other cars out there.

KCRam · January 2004

Not here, you two. Argue in email if you want, but this will stop right now on these boards.

kcram
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bobst · January 2004

Audia, there is a difference between being stupid and being ignorant.

All of us buyers are ignorant of the lowest price you will accept for a particular car. All we can do is guess. Sometimes we guess too high, and we pay too much. Other times we guess way too low, and you laugh us out of the store. Ignorance is nothing for us to be ashamed of.

Yeah, I agree that most buyers want you to counter-offer, but I don't quite understand it. Why should I consider a counter-offer until I am sure my original offer has been refused? And I don't know my original offer has been refused until I walk out the door and drive home. Therefore, I only make one offer on each visit to the dealer. Seems logical to me.

In fact, that is how it was on our last two car purchases. We make offer, they refuse, we get up to leave, they say they accept. Kind of like the Japanese Kabuki Theatre where everyone knows the outcome but they still have to go through the motions.

bobst · January 2004

In message 10446 under the Inconsiderate Buyers topic, you described how you would handle a nice customer named Bob who came in and offered to buy one of your cars. It was a very educational post, and taught me even more about how car sales people operate. As best I could tell from reading your post, you never even gave poor old Bob an answer.

I posted my rejoinder in message 10447.

dbgindy · January 2004

Went back and reread 10446-100448.Looked to me as if he was describing someone who was either looking for too low a price or wasn't sure what they wanted. Where he ( cliffy) comes off as inconsiderate I didn't get.
bobst your method works great for you and I'm glad. It doesn't work for over 99.5 % of the car buying public who do talk to the salesmen so I don't see cliffy in the same bad light as you do.
I guess we'll agree to disagree. :-)

Duncan

isellhondas · January 2004

I read nothing "inconsiderate" in Cliffy's post.

Cliffy just knows there is a small percentage of shoppers he is better off without.

audia8q · January 2004

your are trying to compute this from your buying perspective....but your buying methods are very unique. I'm not saying its bad or good, just different....maybe we have had people who use your offer and leave concept but I can't recall it. So it's hard for me to look at things from your side of the table....

I remember you saying you normally make an offer and if its not accepted you leave, even if they chase you out the door and agree to your price...so when you actually got up and then came back and purchased the car I was surprised.

bobst · January 2004

When we make an offer, we are serious. If they accept, we buy the car.

If they accept while we are sitting at the table (as happened in 1995), we buy the car.

If they accept over the phone (like in 1993, 1995, and 1997), we come in and buy the car.

If they accept as we are getting out of the chair and heading for the door (like in 1998), we buy the car.

If the follow us into the parking lot and say they accept our offer (like in 2003), we buy the car.

Either way is OK with us.

bobst · January 2004

In the very first sentence of Cliffy's post, he says that a buyer named Bob come in and makes an offer.

That is like, you know, an actual offer to buy one of his cars.

Don't you think he should have given Bob a 'Yes' or 'No' answer?

cliffy1 · January 2004

You're not serious are you? You've taken a post I wrote about the importance of qualifying a customer and extracted from that the idea that I wont give a straight answer to a customer? It was a hypothetical situation anyway. Didn't you wonder why I called the guy Bob?

Are you aware of what the word "qualifying" means? I'm not slamming you if you don't but keep in mind where you read this post. It was in a discussion among car salespeople. Its a word that means making sure the customer can actually follow through with what he claims.

prodigalsun · January 2004

Um, Bobst, I think what Cliffy did made perfect sense. Are you serious in saying that you wouldn't engage in any conversation to validate how serious you were? He's trying to make sure 1, that you're real, and 2, you're getting the best product for your needs.

See, 1/3 of my job is focussed on sales. I have customers come to me all the time saying "I need this for X price." Before I say yes, I need to determine if that's what they really need, and explore all options with them, and make sure that the solution really meets their needs. The only time I will take a request like that is with an existing customer who knows what we have, and is making an informed buying decision. I might have a cheaper option that meets their needs.

If I don't do this, and the requested product doesn't hit the target because they miscalculated, who do they get mad at? My company. That's why if you spend a little time up front, you ensure success for the both of you.

bobst · January 2004

I see your point. If a buyer makes an offer and you say 'Yes' and then discover the buyer doesn't have enough money to pay for the car, you have given away important information (i.e. the price you will accept) while getting nothing in return. I can see why you don't want to do that.

However, that has never happened to me. When we bought our Acura I didn't dress to impress (shorts, tee shirt, fleece, tennis shoes) and we didn't pull up in a fancy car (97 Accord), but they didn't make any attempt to 'qualify' us before telling us they would accept our offer.

By the way, just to show what a nice guy I am, I will actually answer your other three questions.

Yes, I am serious.

Yes, I read your original post and extracted the idea that you won't give a straight answer to a customer.

No, I didn't wonder why you called your hypothetical customer Bob.

Would you care to answer the question I posed in post 134?

You see, I am such a 'considerate poster' that I only ask one question in each message I write.

bobst · January 2004

No, I can't recall saying that I wouldn't engage in any conversation to validate how serious of a buyer I am.

There, I answered your question. Do you care to answer the question I asked in post 134?

As I told Cliffy, I have never been asked to validate that I am a serious buyer.

I think we have paid for our last 6 cars with personal checks, but I can't recall ever being asked to show any evidence that our checks were worth anything. I would not have been the least bit insulted if they had asked, but they never have.

Could they have gotten the license plate number off our car while we were test driving the new car and used it to check up on us somehow? If they had, it would be fine with me. I guess we mere mortals don't understand everything about the car selling business.

cliffy1 · January 2004

Its more than just qualifying. Its about psychology. To immediately answer yes or no to the offer in my hypothetical example would be the best way to ensure the sale never took place. That is because I did nothing as a salesman to firm up the customer's commitment.

If I said, "yes, I'll sell the car for that price" before probing just a bit further, most customers will think that they offered too high of a price. They will almost always back away from their offer if it is taken too quickly. I can't put into words how many times I have seen this happen. In the example, I didn't even say no. I said I just probed a bit further to make sure we were on the right car and that the customer was fully committed to the particular car in question.

You also failed to notice a key word in that post. That word is "yet." I placed it there for good reason. The word "yet" implies that there is action impending but that action is waiting just a bit to see what else transpires. A yes or no response would be forthcoming as soon as I figured out what kind of person was standing in front of me.

Understanding human nature may not be part of what you do for a living. It has everything to do with my career. Its more than being a cashier. Its about making sure the customer is pleased with their decision before, during and after the fact. By firming up a commitment, I accomplish that.

prodigalsun · January 2004

I think your indian name would be "Man who walks on no"

You said: "No, I can't recall saying that I wouldn't engage in any conversation to validate how serious of a buyer I am."

but before you said

"Since I didn't see the word 'Yes' in your third paragraph, my wife and I would assume your answer is 'No'. Before you got halfway into your fourth paragraph, we would be out the door heading to Bertuccis for our favorite pizza."

"Don't you think he should have given Bob a 'Yes' or 'No' answer? "

So,

Walks-on-no talks with forked tongue.

Are you expecting him to say yes before he qualifies you? Wouldn't it make sense for him to determine who the heck you are, how educated on the vehicle you are, and understand your needs before accepting and rejecting a price?

Once he does that, and you are still on your offer, Sure, he should give you a yes or no.

Bobst, you ain't the average car buyer, in fact, I don't know anyone who buys cars your way, but come on, man, let's give the sales person a break.

bobst · January 2004

I should not be a car salesman. I have always known that I don't understand human nature, and I really don't even care to.

I can appreciate your way of doing things. It probably makes most customers very happy.

In my mind, however, a car salesman is simply the person who carries my offer to the sales manager.

bobst · January 2004

Wow, do I ever hate the word 'expect'. I don't think I ever use it.

Since all of our offers to buy cars in the past have either been accepted or rejected without the salesman trying to qualify us, I assume it will be done that way in the future.

However, maybe it won't. I am not worried. We could find a way to deal with it.

prodigalsun · January 2004

Expect the unexpected.

Actually, based on your buying style, I'd think the internet approach would be right up your alley.

bobst · January 2004

I think a dealer is more willing to accept a low offer if the buyer is right in front of them with his checkbook in his hand.

Besides, I love visiting car dealers and talking with the salesmen. Yeah, I really do.

But when I do make an actual offer, I don't like to wait long for a response. Time for talking is over. Time for a decision.

tobymichaels · January 2004

I'm close to making a purchase on one of the following: Saab 9-5 wagon, Volvo V70, or Chrysler Pacifica. By virtue of my employer I am qualified to participate in the supplier purchase plans for each of the above manufacturers.

In each case I've been given quotes from $350 to $2000 under invoice, with a further deduction of any current incentives. My understanding is that the dealer gets a very generous reward (up to $1800, on the Saab) from the manufacturer for handling these special purchase transactions.

Are these dealers likely to be willing to negotiate further and dip into the holdback or the supplier plan reward in order to close the deal? In two cases I've dealt only with the Sales Mgr, and in the other I've dealt only with the fleet manager so this transaction won't cost them a salesperson's commission.

I can't complain about any of the prices I've been quoted, but I'd hate to leave money on the table.

rroyce10 · January 2004

**My understanding is that the dealer gets a very generous reward (up to $1800, on the Saab) from the manufacturer for handling these special purchase transactions** ...

          Your in the right church, but your sitting in the wrong pew ...

          For starters, the dealer doesn't get any special "handling" or generous reward for doing this, they might make $200, and if you think you could be "dipping" into the holdback you might find yourself "dipping" in your pocket looking for your keys for a ride home ...

           Depending on the plan, X, whatever, the have a certain level of rules and they will go by that for you to "qualify" for that particular program .. I think you might be getting your figures a little confused, or someone has given you "net" figures, minus the rebates and/or the dealer cash ...

                       Terry.

tobymichaels · January 2004

The invoice the dealer showed me for the SAAB 9-5 had line items for employee price, supplier price, and below that something called "DLC" with an amount of $1159. Is this the fee the dealer receives from the manufacturer for handling a special program sale?

Also, does the dealer still get the holdback percentage even on program deals?

I'm not going to ask them to negotiate on the program price, just trying to get a feel for how much the dealer profits on a supplier program deal versus a straight sale.

Thanks.

matgarf · February 2004

what is the difference between tmv and otd? does tmv include taxes (typically)? what about on a "hot" car? i dont know what i should offer on a car...please help!

thanks!

KCRam · February 2004

Hi matgarf

Edmunds TMV is an average selling price of the car as it stands on its own. It does not include incentives (which may vary regionally) or taxes/fees. Out-the-door (OTD) is just that - the exact dollar amount it required to get that car legally off the lot: the net of selling price, trade-in value, down payment, applied rebates/monetary incentives, taxes, motor vehicle fees, etc.

Hope that helps!

kcram
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danf1 · February 2005

Refer to drift's post in Any Questions for a Car Dealer.

isellhondas · February 2005

Yes, read driftracer's accurate response. How many forums did you post this in anyway?

cadillacmike · February 2005

That's rich,

Who, pray tell, "needs" anything more than a geo metro????

I find out what I WANT, then find out how much is should reasonable SELL FOR and then go try to buy it.

Some popular or "hot selling models" are not going to go for anywhere near invoice, but as one can read, some people don't seem to understand this. Three years ago, if you walked into a honda dealer and tried to offer anything less than MSRP for an S2000, you would get laughed out the door, but you could get a Miata for considerably less than MSRP at the same time. So guess which one I bought? And, no I didn't NEED a Miata, but I WANTED one (for my dearest wife).

Kirstie_H · February 2005

OK, we're off the subject of OTD pricing. The "spam" has been removed.

patrick j · February 2005

If the factory is offering a $500.00 factory rebate can I still negociate for $500,00 over invoice from the dealer or does the rebate cancell that option?

danf1 · February 2005

The rebate is your money. No sale price can cancel that unless you choose to use promotional financing offers instead of rebates.

Out The Door (OTD) Pricing questions

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