Except, the one manufacturer who does only sell at MSRP is having trouble growing its market share. And that car maker has the highest gross profit in the business.
And Snurple, I'm curious, what line of business are you in?
Normally I agree with you in principle, but not here. Advertising fees, when incorporated into the invoice, are legitimate. I do believe the manufacturers are doing the consumer and the dealer a disservice by separating these fees and listing them as part of dealer cost.
All manufacturers advertise, so all dealers, and all consumers, pay for that advertising. One way or another, listed on the invoice or not.
WHY are they separating them out? I consider it a way to raise the price and to increase profit without "raising the price." It is a sneaky approach to getting more money. Have you bought new tires recently? By the time they add in the "balancing" and the "stems" and the "stem balancing" and the "wheel lubing" and the "excise tax" and the "rubber disposal fee" you have doubled the price of the ad that you saw that got you to walk in in the first place. It is deceptive--and they initiated this practice because they wanted to make more money, without appearing to jack up the prices exponentially. [btw, when I bought my last set, I didn't pay any of these fees because I brought in a competing add which they matched--so there is a way to stop the madness...]
It's the manufacturer, not the dealer. There's no profit in it for the dealer. I have seen guys try to tack on extra charges, that's when I object, but if it's on the invoice it's a cost from the manufacturer, not the dealer.
WHY are they separating them out? I consider it a way to raise the price and to increase profit without "raising the price."
Let's try simplyfying this.
First, and foremost, charges to the dealer, by the manufacturer are not profit to the dealer. Whether or not the manufacturer considers this profit or revenue is another thing.
This money goes to the manufacturer.
Now, why do they separate it? Simple. You may notice that different parts of the country have different costs of living and doing business for certain goods and services.
A pack of chewing gum, interest rates and the retail prices of cars are generally pretty constant nationwide (More on that in a bit). However, variable costs like rent, real estate, advertising, utilities, and payroll will vary.
So, advertising expenses would include radio and television airtime, billboards, print space and the like. Now, let's look at a place like Florida. Let's compare the South Florida Market (Broward, Miami-Dade and Palm Beach Counties which incorporate the Cities of Miami, Ft Lauderdale, Boca Raton, West Palm Beach, Pompano Beach, Hollywood, etc) to, say, Panama City. The Bay County market (Panama City) has roughly 100,000 people in it. South Florida has over 6,000,000 people. It's going to be obvious that, everything else being equal (which it never is, regional tastes vary) you'll sell 60 Accords in South Florida for every Accord you sell in Panama City, right? Right.
So Honda may advertise in Panama City 1/60th as much as they do in South Florida. However, it's not the same ad dollar cost per car. Airtime on the radio is far more expensive per spot. I know, I'm involved in buying airtime in South Florida, and it's much more expensive than Orlando which is 1/3 the size of South Florida. And I know the panhandle dealers are amazed at what Orlando dealers have to pay for advertising. And it's a lot more epensive to advertise in the Sun-Sentinel or Miami Herald than it is to advertise in Panama CIty's paper. Same with Billboards. A Billboard visible from I-95 in Miami is going to be a lot more than a billboard off US 231 on the way to the beach.
And there are other costs, such as having to promote Auto Shows, more district employees, and the like. Granted your sales are much greater but it costs a lot more to generate each sale down in South Florida versus Bay County.
So the manufacturer is going to have higher costs of doing business per car sold in Miami than they will in Panama City.
However, if they charge a higher retail price for the cars in Miami than they do in North Florida, well... then the FTC has a problem with that. So what do they do? They charge a higher wholesale price, which is legal, instead of a higher retail price. The dealers in South Florida pick up part of the tab for the higher costs of doing business in their market.
Which, when you look at it objectively like that, it's a fair system. Now, this is going to be transparent to the customer (And, by the way, this has been going on for years! Remember how I'm into collector cars? I have seen actual invoices from the 1960s and 1970s, they have had advertising fees listed, one that springs to mind is one from a 1970 or thereabouts Mustang Mach 1, I think it was $30 or so).
Manufacturers aren't going to rearrange the way that they bill their dealers for cars simply to make it easier for the end consumer. When you look at it objectively, wholesale invoices on any product are supposed to be for the dealer to see and not for the consumer to see. Now, it so happens that wholesale pricing on cars is publicly available, which is fine. But you cannot expect manufacturers to rework their pricing and distriution system to accomodate that.
So, shop around, find a good deal, and use the pricing here as a guide. As I mentioned in my first post, if you really know what you are looking at and how advertising fees are calculated, you can often tell whether the dealer is padding things or whether or not it is a legit charge. I don't like paying it, but it's not like I can tell GM or Volkswagen "Hey, this isnt on the net, I'm not paying it". The point is, you pay for advertising on most products you buy, but when you buy a car you are now often able to get to the very nitty gritty of wholesale pricing.
My "they" is referring to the manufacturer. And yet two people have missed this?!
And, advertising as billed by the manufacturer to the dealer should be paid by the dealer (regardless of where it appears). It does not make sense for the dealer to "pass along to the consumer" a business expense which he directly benefits from.
From the manufacturer's perspective, advertising budgets are not designated in relation to individual vehicle MSRP. Certain models in their line may be getting heavy support and others virtually none.
Quite simply, MSRP is being used as a hook to hang the fees on. The dealer is assessed them according to MSRP, and the customer is expected to pick up the tab. Even though they may be buying a car in its second model year that is selling well--and may be getting little ad support--they are still expected to "pay their share" of the entire corporate campaign!
The fact that these fees are broken out and "legitimized", instead of being invisibly incorporated into the cost of the car (on an "average" basis), IS the stumbling block. Many people are hit with "fee shock" at the end of the negotiations, when yards of calulator paper are added to the already hefty total. In other cases, the dealer may magnanimously "eat" those fees as a one of their key "concessions," making it more difficult for the consumer to get closer to their fair offer.
In either case, it doesn't make sense, and they should not be swallowed readily. As I have said, this practice of passing along a manufacturer expense that benefits the dealer, appears to be a strategic move on the part of both to keep the "apparent price" low, while increasing their profits in the end. Consumers should respond with a strategy of their own. If we choose to avoid this battle, you can be sure we will be faced with another, and another.
It shouldn't be this difficult to negotiate a good deal, but with many automakers and dealerships seeing shrinking profits, you can be sure that someone, somewhere is dreaming up further questionable tactics even as we speak.
It depends on the manufacturer. Toyota and Lexus charge 1.5% I think to spread it out. This way lower priced cars pay less than their fair share but it's made up for on the bigger cars.
Say Honda charged its' dealers, say, 1.5% a car, but it averaged out to, say, $500 a car. $500 will slaughter the margins in a Civic, but not affect an Odyssey's very much.
But with some manufacturers, like Volvo and VW, they charge their dealers $X per car. With VW it's no more than $150 per car, whether it be a EuroVan camper for well over $30K, or a base Golf GL 5-speed.
I just (yesterday) bought a Grand Caravan Sport. I think I handled the negotiations pretty well, although the salesperson might not agree. When I see something that I don't fully understand, I'll walk out, go home and find out the story, and come back later. I did just that in regards to the advertising fee. I offered $100 over invoice for a new Grand Caravan and the salesman and his manager agreed. I showed them my copy of what their invoice was, and theirs was pretty close. Then he told me that there would be an additional $470 in advertising fees. I told him "No Way", and he explained to me that this was not negotiable. I asked him if I factory-ordered a new van if the advertising charge would still apply and he said "yes. we apply that to every car that we sell off this lot". I told him I'd split it down the middle and he said "no". So I walked. Came home did some research, and found out that the charge was legitimate. The funny thing is.... I ended up buying a different "used" van from him than the new one I was originally going to buy. They sold it as used but it only had 390 miles on it. When all was said and done, I paid for the van, tax, license, and a few other piddly charges, but the advertising fee never came up!
You and the salesman first agreed to $100 over invoice. If he added a $470 fee after that was agreed, there is no reason you cannot ask for a $470 additional discount for "being a considerate buyer" or whatever.
My point is that EVERYTHING is negotiable, if that fee is "legit" and "fixed" then you will have to bargain harder on what you pay over/under the invoice/msrp.
I think the source of many buyer's frustrations is that they think they have arrived at a price on the car, and then they get the "ad fee", "undercoat", "dealer prep", "hot wax treatment", "extended warranty" surprises at the end. In my book, the only "legit" charge is the big number I write on the check to get the keys to that car. That is the number I want to know and want to negotiate. B.
I believe advertising fees to be questionable. Of course Edmund's here says they are legit. If you go to another site they will tell you they are not. (carbuyingtips.com)
My experience is this. My family owns a furniture store. If you come in and want to buy a leather couch I cannot charge you for the radio ad that brought you into my store. Of course I could try but I think you would tell me to shove it! At least I think you should! Advertising is a COST OF DOING BUSINESS. THEIR COST OF BUSINESS. PERIOD. Do they also want you to pay for their water bill, electricity, employees health benefits?????? When will it stop If this is the game they want to play then why do they not reimburse us for the fuel we used to get into the dealerships??? Fuel is not cheap you know so this is a LEGIT expense incurred by consumers?
With that said I was able to get out of the $450 adv. fee. I told them this story and they shut up. I was dealing with the owner by the way. I used info from Edmunds here and got my new car for WELL below MSRP(which is a whole other story, its also a rip off.) So it seems like the auto industry as a whole is trying to Up charge us consumers for every little thing. I only wish I could do the same with a leather couch!
Brentwood et al: I have a Saturn SC2 (lease) and it's coming off in about 90 days. I have already begun to get the "fishing" letters from Chase wanting to know what I plan to do and hinting that they may be willing to "deal" on the residual (way too high by the way) but more interesting is the fact that Saturn has been tempting me to buy another one by advertising price reductions on 2001 closeout cars. I think saturn is slowly and very low key, swinging towards the conventional way of pushing iron.They have so much inventory on hand, especially those dud "L" cars that they will just have to bite the bullet and jump into bed with the rest of the bad boys @ GM . I'm just going to sit tight and see what happens. If they would let me use my GM points toward a Saturn I most likely would bite.
Bill: Why does Saturn not want to honor the GM card? That really is no actual money out of their pocket is it. Who actually antes up the money for those cards, Master Card or GM itself?
Basically, what I think we're talking about is a charge, for the manufacturer's advertising costs levied to the dealer by the manufacturer.
Sort of like if, say, Thomasville Furniture Industries charged you an extra 1.5% of your cost for their national advertising campaigns and it was stated on the invoice that you got from them on your furniture shipment.
However, you don't have independent, 3rd party websites listing your product costs and you also dont negotiate your markup.
You negotiate furniture down from the retail price, so if there was a charge for it, it would be invisible to the customer.
I thought I read that advertizing fees are when a dealer becomes a member of some local 'association' that handles the local advertizing. Does not come from the manufactor and the national ads they place.
Dependson the manufacturer. Also, if you're part of a "regional dealership group"I.E. "Cadillac Tri-Statesmen" "Chicagoland Toyota Dealers" "South Florida Toyota Dealers" thenthe manufacturer or distributor determines whether or not we pay.
A lot of time manufacturers have specific marketing and advertising programs depending onthe market. In the NYC Market, leasing is very popular. So Volvo, as a great example of a mfr who does very regionalized programs, will, say, do a $399 "sign and drive" lease on an S60 in that market, but might not offer any special lease in, say, Kansas City but will do, say, 3.9% financing there.
It nice that there are those in the buying public that think that advertising fees are justified add-on expenses to a car. What if I have never seen an ad for a car I buy? Fair enough, count me out.
Its really crazy to think that it is acceptable that dealerships can tack on such fees. If we all were to accept this philosophy then why not simply advertise 24/7 and tack on $5000! Send me a brochure upon request in the form of a 300-page leather-bound book and pass that expense on to everyone!
Ok, so I'm going a little over and beyond the point, but am I really? When did these advertising fees start becoming so costly? Did I really get $800 in advertising? I don't think so. Should I pay for the sales mechanism typically used on the unfortunate and gullable? No.
Tell the dealership to stick and move onto another means of acquiring a vehicle. If you have only one dealership for the make/model you are looking to buy, then consider online buying. Its difficult for them to justify advertising when they aren't.
It's not a fee that the dealer is charging separately.
Its' a fee charged to the dealer by the manufacturer. And, for example, most Toyota dealers in the US are asessed charges for regional advertising by either the distributor (In the Southeastern states) or by Toyota Motor Sales USA.
Basically, its' charged to the dealer by the manufacturer and the invoice reflects that. The invoice info on the net is not provided by the manufacturers, and while generally very accurate, it generally does not show regional pricing variations. Like the invoice for a "Southern Special" Volvo S70 was never available on the net. It was a package offered to buyers in GA, NC, SC and I think Eastern TN.
Remember, the info on the internet is theird party, and any info, wherether from a dealer or a third party ought to be taken with a grain of salt and not treated as gospel. So these fees pay for the manufacturer's advertising, which the dealers pay.
For example, I know for a fact that Lexus SC430s have 1.5% of MSRP as advertising asessed to the dealers by Lexus of America in Florida. That's about $900. Pointless really as these cars sell at MSRP, and for thousands over MSRP on the secondary market.
You pay for advertising in every product that you buy. However cars are perhaps the one consumer product that I can think of where you're looking at the actual wholesale invoices. The manufacturer isn't about to change the way they do business because a 3rd party website such as carsdirect.com or something says that the wholesale price on a car is different.
That being said, where do you think that carsdirect.com buys their cars from?
I did not order, did not receive, and will not pay for Item 14 on your invoice, "Tax"
I mean really, between sales and fuel taxes, who's doing the real damage?
I do wonder, though... On those SC430s at MSRP, does the ad fee get tacked on over the MSRP? If it does then advantage snurple, else game-set-match for Bill.
Of course, even if they don't you could simply redefine them as, what's the term, "Additional Dealer Profit"?... Sounds ugly, though.
Shifty's right, definitely out-the-door numbers. Then again, just buy used, privately if need be. No muss, no fuss, no nasty invoice to get marked-up. Just a high ask.
Every SC430 that I have bought and resold (9 at last count) I have gotten a copy of the invoice to.
Every single one has had "LDA" Listed on that invoice. Between 1 and 1.5% of total MSRP. As always, its' listed on the actual invoice, and invisible on the Monroney. Technically, it's supposed to be invisible to the consumer and something the dealer is supposed to deal with. Effectively, It shrinks our margins on the car.
On a $61,911 car that's another $600-900 they're hitting the dealer up for.
Buick will survive to take on Mercury and to an extent, Chrysler. Pontiac/GMC's product line amounts to Chevrolets with 5 yards of plastic body cladding - the only distinct model is the Bonneville (which could easily become the next Caprice).
That being said,
let's get this ship back on course. Any further comments on high ad fees?
I just cannot type that word and not think about OJ...
Bill...You are a very smart man, and very young...As an old man, let me tell you one really important thing that I want you to carry with for the rest of your life!!!
There is only ONE THING that we can can NEVER, EVER, recoup...and that ONE THING is TIME...We can always make more money if we happen to lose some... if we break a really good Tiffany wine glass, we can always buy another...but TIME... Can't get that back...NO WAY, NO HOW...
To spend any more of your valuable, irreplaceable time debating ANY point with Mr. SNURPLE is a pure waste of a PRICELESS COMMODITY...your TIME
Sorry, but I couldn't resist putting my two cents in before putting this debate to rest. I have been saying for a while now that General Motors should have axed Buick instead of Oldsmobile. Olds had a lot of different and new products. I think that Buick has by far the least brand equity out of all of the GM divisions. At least their other divisions have a little variation in their models. Other than the Rendezvous, which just came out, all of their products look very similar to each other to the average person on the street. And I highly doubt that the Rendezvous will be the brand's savior, given the fact that it is based upon the the highly unsuccessful Pontiac Aztek.
This debate might be pretty good over in the News and Views Board. There are a couple of GM discussions there, but this sounds like it xould easily be "Buick, Olds, Pontiac - which should stay?"
Bill, thanks for the personal replies on wholesale pricing for my Eclipse. Back to the Ad Fees.
I have to say that I would have to blame the automotive industry for putting them self in the position that they must debate, argue, and defend all individual items that appear as add-on fees.
When was the last time one saw an advertisement fee on a pair of Lei jeans? And I personally cannot remember seeing and invoice price meant for the local convenient store fore a case of Coke.
Thus, if a defense against people replying in the manner I did bothers the automotive industry then they can and should do so. Unfortunately, that means a lot of control placed upon the individual dealer, which is not about to happen.
Dare I say that the individual dealer has more power than the manufacturer, but at a cost of placing itself in stressful sales situations. Then, sales people find it necessary to take advantage because the shopper, each year, becomes more armed with knowledge--blame that on the dealers.
Finally, a hate-hate relationship is developed and other avenues are sought for escaping the seemingly all-corrupt neighborhood dealerships. Where do they go? On-line. Why? Because they don't need to be slapped in the face with destination and advertising fees, documentation fees, etc.
Sure, buying an automobile is suppose to be the second largest investment behind buying a house, but what was the advertising fee in the house you bought? No, I am not saying doc fees don't exist--far from it. But, keep in mind that my education cost more than my car. Frankly, I enjoy the experience, but I doubt that could be said about buying a car.
If the auto industry continues down the path of breaking down all the costs that go into buying an automobile then the public will see' these elements and fight against them. Ignorance is blissful in these types of sales arenas.
And yes, I would happily buy my next vehicle for $300 over invoice if the ad fees were tucked away. But mention to me by your own stupid practices that they are $800 and I'll raise some can over it!
I don't see it being that difficult really. And glad to help with the mitsu.
To me, its' summed up pretty simply:
(What I need to do is to scan an invoice to show this properly)
Manufacturer invoices me for, say, a New Beetle GLX. They charge me a fee for regional advertising. Why? Costs of doing business in my market are kinda expensiveI guess, or maybe they feel like it. Why I have no idea, but they can and they do. Can I negotiate with VWoA? Nope.
Now, customer comes in with info off the net, which differs from what VWoA charges me for the car. So, say, we're $400 off. I whip out the invoice, show it to a customer and there are these charges that the customer did not see on the 'net. I don't like these fees any more than customers do. They cause me aggravation at times, and cut my margins on other cars.
So what happens is, a 3rd party website puts information out there. And they buy it from another 3rd party. And it makes my life difficult at times. Not "my stupid practices". And the manufacturers are not about to realign their wholesale pricing to make it easier for customers to view internal documents which, technically, we aren't supposed to be showing them if you get down to the nitty gritty (per a franchise agreement).
As far as $800... that's got to be a serious exception. And I've had invoices where it was a tad higher. Look at Lexus. 1.5% of total MSRP is LDA advertising in most of Florida. On an ES300 that's $400-500 or something like that. But I've seen invoices on LS430s where the charges (Say on an Ultra Lux with Black interior and chromes) were over $1,000. Again, its' a percentage. For $800 on a Toyota it would have to be a Land Cruiser or something. Also, on Toyotas and Lexuses I have yet to see one that's an even dollar amount.
to explain? The Retail Automobile Dealer is dealing in an environment that is totally different than the Retail Grocery Chain or the the Retail Department Store.
Wholesale prices for Levis & Coke or Pepsi, are not available on the net for a consumer to use when purchasing those products to negotiate a price... McDonald's spends more money on Advertising it than they do on raw materials for a BigMac...
Ask the Developer/Builder for their expense sheets on the home that you want to buy from them...Good Luck...And, as Bill has mentioned many times, it costs more to live in Short Hills, NJ than it does to live in Jersey City, NJ...not to mention Burlington, Iowa Vs. Burlington, Mass.
If car buyers want to buy a car based on Invoice up, as opposed to MSRP down, well then so be it...this is what we pay, and if there is a problem with Ad Fees that are Regionally imposed, then go buy a car where there are none...What is spent getting there will most probably exceed what is saved...
Do you really think that the invoice cost of Pepsi doesn't include a advertising fee.Oh,that's right these superstars love it so much that they do this for free.You are paying retail for these products,so you don't know what this really costs the company.
I used several research sites to get my base invoice plus options.
However, when I got to the dealer and went over these and what I was willing to pay above invoice, they added advertising costs (around $424 for a Toyota 4runner).
I haven't made any deals, but is this legitimate? In the FAQ, it says never pay above 1% of MSRP for advertising. Is this negotiable? Thanks, Dave.
Advertising costs never seem to be covered by these websites.
However, on many cars, they are legitimate charges that the manufacturer passes on to the retailer. Basically, you'll generally see them in larger markets where the manufacturer has higher costs of doing business.
Since it would not be legal (or good for PR for that matter) to charge people in, say, Los Angeles higher prices than people in, say, Barstow... the manufacturers charge fees to the dealers to cover their costs.
You mentioned Toyotas (They seem to come up the most). Toyota Advertising charges Vary from regionto region, but they are generally 1.0-1.5% of the car's total MSRP.
Its' also easy to tell if its being made up or legit.
1) I've never seen TDA in an exact, round number. Also, if a dealer charges a dealer fee, dealer prep, doc fee, processing fee, etc it has to be, by law, the exact same amount per car and, legally, cannot be waived (If its' waived for one customer, and the DMV audits you, they can require the dealer to refund that fee to everyone you charged it to).
2) It will be preprinted on the factory invoice. On a Toyota Invoice, if I remember right, there's a box right above the box for the destination charge (I think they now call it the delivery, handling and processing fee) marked "TDA".
I'd guess that this 4runner has an MSRP of $28,265 or so?
I didn't know Priceline lists it. Did find out that Carsdirect has both the dest. charge and adv fee in their listed invoice price. Edmunds, Msncarpoint and Lycos autos don't have it included and that means you have to add it to their invoice if you can find out what it is! You have to spend a lot of time with these auto sites to get all the CORRECT info as all of them seem to have mistakes in pricing details etc. Art
Dtabaka, rather that wondering about the legitimacy of certain charges that dealers try to pass on to you I personally think that you should concentrate on the big picture, that is the total amount of money that you will have to pay to drive off in the 4Runner that you want. I suggest that you shop around at several different Toyota dealerships in your area for out-the-door prices. Once you have several quotes for the total amount of money that it will cost you to drive off in the truck that you want, it will be easy for you to see which dealership is offering you the best deal.
I used Priceline for myself and I have a couple of friends shopping now. One is looking for an Acura MDX and the other a Camry. Priceline doesn't list the ad fee on the Acura but it does on the Toyota, so I'm not sure how accurate they really are.
They also seem to be late in posting 2002 prices. The new MDX prices are not on their website yet.
has a good point. It's the drive away price that is the bottom line. Advertising is one piece of the pie that all adds up to what the dealer can sell the car for and still make a fair profit. Edmunds used to have (don't know if they still do) a formula which took 3% of MSRP and took that off of Invoice and that was the dealer cost after holdback. Then add advertising fee + dest.+ dealer profit and that was your target price. Set yourself a window of $200, $300 or whatever and when you get a deal in the window buy and be done with it unless you like to play games with dealers and your times worth nothing. Art
Yesterday, I went the a local Chevy dealer, equipped with Edmunds printouts on the car that I planned to buy, a Chevy Prism LSi
I agreed to pay what Edmunds listed as the TMV, and which was $287 over the Invoice price that I had calculated on the Edmunds site. They have to locate a vehicle from another dealer, since they did not have any 5 speeds in stock. I was surprised when I was told that they would not do this unless the price was at least $250 over the invoice price.
"But I offered $287 over the invoice price", I protested, but they pulled out a sheet of paper that showed the invoice price to be $239 higher than I had calculated using Edmunds. The discrepency was a line item that they labeled "Advertising /adjustments". They considered this additional charge as part of the invoice.
I objected and said that advertising is part of the cost of doing business, like utilities, payroll, rent and other expenses. It is a legitimate business expense, but not properly part of the invoice price on the specific car.
If this expense is properly part of the invoice price, then why did Edmunds neglect to add it into the calculations and why was there no mention of it on the Edmunds site.
We walked out, choosing to think it over and research it before we made a costly mistake. I would like to hear from others on this and especially any Edmunds experts. I will check back to this conference and can also be reached on AIM or AOL with the screen name Bob2ndWave. Bob hoey
cost that is charged to dealers by the manufacturer. I run into this all the time. I imagine what brought you into the dealership was the 0% finance, I also imagine you were alerted about this by the national ad campaign. I will locate a car for $200 over invoice but it will be the invoice that I pay, not what edmunds or anyone else state the invoice is. Ad charges vary by location of dealership. Hope this helps.
This has been discussed repeatedly. Most recently in the thread titled "Advertising costs?" and also "Inconsiderate Salespeople" both in this very same "Smart Shopper" topic
Also, Edmunds DOES acknowledge that they are a legitimate part of invoice. Go back to the Edmunds pricing page for new Prisms, and this time scroll down one screen's worth past the section giving model MSRP, Invoice, and TMV. You'll see Edmund's discussion of holdback and Advertising Costs. I assume the reason they don't include them is that unlike Destination Charge, Ad Fees vary from region to region.
Responses #2 & 3 say that this advertising is legitimately part of the "invoice". I am not convinced and would like to hear from others.
In response to "IsellPontiac", I was not induced by the 0% interest but I was aware of the rebate. That got me in the door. I am also aware that the dealer will make a bit over $500 on the holdback and even if he has to pay the $239 Advertising, we offered him $287 over the invoice, which pays for that advertising with additional profit left over.
I am also aware that the dealer has other expenses that he has to cover and these could be prorated and allocated to the price of the cars too, but the issue is just what expenses are properly included within the concept of "invoice".
CW, I will go back as you suggested and study the Edmunds comments on holdback and Advertising costs. Bob
Comments
And Snurple, I'm curious, what line of business are you in?
Wait, dont all those cars sell at MSRP? So, then what the heck does it matter what the invoice amount is on one of those cars?
Irrespective, Snurple, do you have AOL?
If so, please look up the profile for "WiseguyXJ6" and read the personal quote.
Sums this up effectively.
Bill
All manufacturers advertise, so all dealers, and all consumers, pay for that advertising. One way or another, listed on the invoice or not.
Let's try simplyfying this.
First, and foremost, charges to the dealer, by the manufacturer are not profit to the dealer. Whether or not the manufacturer considers this profit or revenue is another thing.
This money goes to the manufacturer.
Now, why do they separate it? Simple. You may notice that different parts of the country have different costs of living and doing business for certain goods and services.
A pack of chewing gum, interest rates and the retail prices of cars are generally pretty constant nationwide (More on that in a bit). However, variable costs like rent, real estate, advertising, utilities, and payroll will vary.
So, advertising expenses would include radio and television airtime, billboards, print space and the like. Now, let's look at a place like Florida. Let's compare the South Florida Market (Broward, Miami-Dade and Palm Beach Counties which incorporate the Cities of Miami, Ft Lauderdale, Boca Raton, West Palm Beach, Pompano Beach, Hollywood, etc) to, say, Panama City. The Bay County market (Panama City) has roughly 100,000 people in it. South Florida has over 6,000,000 people. It's going to be obvious that, everything else being equal (which it never is, regional tastes vary) you'll sell 60 Accords in South Florida for every Accord you sell in Panama City, right? Right.
So Honda may advertise in Panama City 1/60th as much as they do in South Florida. However, it's not the same ad dollar cost per car. Airtime on the radio is far more expensive per spot. I know, I'm involved in buying airtime in South Florida, and it's much more expensive than Orlando which is 1/3 the size of South Florida. And I know the panhandle dealers are amazed at what Orlando dealers have to pay for advertising. And it's a lot more epensive to advertise in the Sun-Sentinel or Miami Herald than it is to advertise in Panama CIty's paper. Same with Billboards. A Billboard visible from I-95 in Miami is going to be a lot more than a billboard off US 231 on the way to the beach.
And there are other costs, such as having to promote Auto Shows, more district employees, and the like. Granted your sales are much greater but it costs a lot more to generate each sale down in South Florida versus Bay County.
So the manufacturer is going to have higher costs of doing business per car sold in Miami than they will in Panama City.
However, if they charge a higher retail price for the cars in Miami than they do in North Florida, well... then the FTC has a problem with that. So what do they do? They charge a higher wholesale price, which is legal, instead of a higher retail price. The dealers in South Florida pick up part of the tab for the higher costs of doing business in their market.
Which, when you look at it objectively like that, it's a fair system. Now, this is going to be transparent to the customer (And, by the way, this has been going on for years! Remember how I'm into collector cars? I have seen actual invoices from the 1960s and 1970s, they have had advertising fees listed, one that springs to mind is one from a 1970 or thereabouts Mustang Mach 1, I think it was $30 or so).
Manufacturers aren't going to rearrange the way that they bill their dealers for cars simply to make it easier for the end consumer. When you look at it objectively, wholesale invoices on any product are supposed to be for the dealer to see and not for the consumer to see. Now, it so happens that wholesale pricing on cars is publicly available, which is fine. But you cannot expect manufacturers to rework their pricing and distriution system to accomodate that.
So, shop around, find a good deal, and use the pricing here as a guide. As I mentioned in my first post, if you really know what you are looking at and how advertising fees are calculated, you can often tell whether the dealer is padding things or whether or not it is a legit charge. I don't like paying it, but it's not like I can tell GM or Volkswagen "Hey, this isnt on the net, I'm not paying it". The point is, you pay for advertising on most products you buy, but when you buy a car you are now often able to get to the very nitty gritty of wholesale pricing.
Bill
And, advertising as billed by the manufacturer to the dealer should be paid by the dealer (regardless of where it appears). It does not make sense for the dealer to "pass along to the consumer" a business expense which he directly benefits from.
Ah....ya gotta love a succinct post.
Quite simply, MSRP is being used as a hook to hang the fees on. The dealer is assessed them according to MSRP, and the customer is expected to pick up the tab. Even though they may be buying a car in its second model year that is selling well--and may be getting little ad support--they are still expected to "pay their share" of the entire corporate campaign!
The fact that these fees are broken out and "legitimized", instead of being invisibly incorporated into the cost of the car (on an "average" basis), IS the stumbling block. Many people are hit with "fee shock" at the end of the negotiations, when yards of calulator paper are added to the already hefty total. In other cases, the dealer may magnanimously "eat" those fees as a one of their key "concessions," making it more difficult for the consumer to get closer to their fair offer.
In either case, it doesn't make sense, and they should not be swallowed readily. As I have said, this practice of passing along a manufacturer expense that benefits the dealer, appears to be a strategic move on the part of both to keep the "apparent price" low, while increasing their profits in the end. Consumers should respond with a strategy of their own. If we choose to avoid this battle, you can be sure we will be faced with another, and another.
It shouldn't be this difficult to negotiate a good deal, but with many automakers and dealerships seeing shrinking profits, you can be sure that someone, somewhere is dreaming up further questionable tactics even as we speak.
It depends on the manufacturer. Toyota and Lexus charge 1.5% I think to spread it out. This way lower priced cars pay less than their fair share but it's made up for on the bigger cars.
Say Honda charged its' dealers, say, 1.5% a car, but it averaged out to, say, $500 a car. $500 will slaughter the margins in a Civic, but not affect an Odyssey's very much.
But with some manufacturers, like Volvo and VW, they charge their dealers $X per car. With VW it's no more than $150 per car, whether it be a EuroVan camper for well over $30K, or a base Golf GL 5-speed.
Bill
The funny thing is.... I ended up buying a different "used" van from him than the new one I was originally going to buy. They sold it as used but it only had 390 miles on it. When all was said and done, I paid for the van, tax, license, and a few other piddly charges, but the advertising fee never came up!
You and the salesman first agreed to $100 over invoice. If he added a $470 fee after that was agreed, there is no reason you cannot ask for a $470 additional discount for "being a considerate buyer" or whatever.
My point is that EVERYTHING is negotiable, if that fee is "legit" and "fixed" then you will have to bargain harder on what you pay over/under the invoice/msrp.
I think the source of many buyer's frustrations is that they think they have arrived at a price on the car, and then they get the "ad fee", "undercoat", "dealer prep", "hot wax treatment", "extended warranty" surprises at the end. In my book, the only "legit" charge is the big number I write on the check to get the keys to that car. That is the number I want to know and want to negotiate.
B.
My experience is this. My family owns a furniture store. If you come in and want to buy a leather couch I cannot charge you for the radio ad that brought you into my store. Of course I could try but I think you would tell me to shove it! At least I think you should! Advertising is a COST OF DOING BUSINESS. THEIR COST OF BUSINESS. PERIOD. Do they also want you to pay for their water bill, electricity, employees health benefits?????? When will it stop
If this is the game they want to play then why do they not reimburse us for the fuel we used to get into the dealerships??? Fuel is not cheap you know so this is a LEGIT expense incurred by consumers?
With that said I was able to get out of the $450 adv. fee. I told them this story and they shut up. I was dealing with the owner by the way. I used info from Edmunds here and got my new car for WELL below MSRP(which is a whole other story, its also a rip off.) So it seems like the auto industry as a whole is trying to Up charge us consumers for every little thing. I only wish I could do the same with a leather couch!
Bill: Why does Saturn not want to honor the GM card? That really is no actual money out of their pocket is it. Who actually antes up the money for those cards, Master Card or GM itself?
Floridian
Floridian
Basically, what I think we're talking about is a charge, for the manufacturer's advertising costs levied to the dealer by the manufacturer.
Sort of like if, say, Thomasville Furniture Industries charged you an extra 1.5% of your cost for their national advertising campaigns and it was stated on the invoice that you got from them on your furniture shipment.
However, you don't have independent, 3rd party websites listing your product costs and you also dont negotiate your markup.
You negotiate furniture down from the retail price, so if there was a charge for it, it would be invisible to the customer.
Bill
I'll give you an idea of what it's worth, and I guess you can go fromthere....
Oh, yeah. Saturn is in big trouble...
Bill
Which is right?
Dependson the manufacturer. Also, if you're part of a "regional dealership group"I.E. "Cadillac Tri-Statesmen" "Chicagoland Toyota Dealers" "South Florida Toyota Dealers" thenthe manufacturer or distributor determines whether or not we pay.
A lot of time manufacturers have specific marketing and advertising programs depending onthe market. In the NYC Market, leasing is very popular. So Volvo, as a great example of a mfr who does very regionalized programs, will, say, do a $399 "sign and drive" lease on an S60 in that market, but might not offer any special lease in, say, Kansas City but will do, say, 3.9% financing there.
Bill
Its really crazy to think that it is acceptable that dealerships can tack on such fees. If we all were to accept this philosophy then why not simply advertise 24/7 and tack on $5000! Send me a brochure upon request in the form of a 300-page leather-bound book and pass that expense on to everyone!
Ok, so I'm going a little over and beyond the point, but am I really? When did these advertising fees start becoming so costly? Did I really get $800 in advertising? I don't think so. Should I pay for the sales mechanism typically used on the unfortunate and gullable? No.
Tell the dealership to stick and move onto another means of acquiring a vehicle. If you have only one dealership for the make/model you are looking to buy, then consider online buying. Its difficult for them to justify advertising when they aren't.
Cheers, and thats all folks.
Its' a fee charged to the dealer by the manufacturer. And, for example, most Toyota dealers in the US are asessed charges for regional advertising by either the distributor (In the Southeastern states) or by Toyota Motor Sales USA.
Basically, its' charged to the dealer by the manufacturer and the invoice reflects that. The invoice info on the net is not provided by the manufacturers, and while generally very accurate, it generally does not show regional pricing variations. Like the invoice for a "Southern Special" Volvo S70 was never available on the net. It was a package offered to buyers in GA, NC, SC and I think Eastern TN.
Remember, the info on the internet is theird party, and any info, wherether from a dealer or a third party ought to be taken with a grain of salt and not treated as gospel. So these fees pay for the manufacturer's advertising, which the dealers pay.
For example, I know for a fact that Lexus SC430s have 1.5% of MSRP as advertising asessed to the dealers by Lexus of America in Florida. That's about $900. Pointless really as these cars sell at MSRP, and for thousands over MSRP on the secondary market.
You pay for advertising in every product that you buy. However cars are perhaps the one consumer product that I can think of where you're looking at the actual wholesale invoices. The manufacturer isn't about to change the way they do business because a 3rd party website such as carsdirect.com or something says that the wholesale price on a car is different.
That being said, where do you think that carsdirect.com buys their cars from?
Dealers.
Bill
I did not order, did not receive, and will not pay for Item 14 on your invoice, "Tax"
I mean really, between sales and fuel taxes, who's doing the real damage?I do wonder, though... On those SC430s at MSRP, does the ad fee get tacked on over the MSRP? If it does then advantage snurple, else game-set-match for Bill.
Of course, even if they don't you could simply redefine them as, what's the term, "Additional Dealer Profit"?... Sounds ugly, though.
Shifty's right, definitely out-the-door numbers. Then again, just buy used, privately if need be. No muss, no fuss, no nasty invoice to get marked-up. Just a high ask.
-Greg
Every single one has had "LDA" Listed on that invoice. Between 1 and 1.5% of total MSRP. As always, its' listed on the actual invoice, and invisible on the Monroney. Technically, it's supposed to be invisible to the consumer and something the dealer is supposed to deal with. Effectively, It shrinks our margins on the car.
On a $61,911 car that's another $600-900 they're hitting the dealer up for.
Bill
Here in So Cal everyone is selling out of the L
Sales are on the upswing at Saturn.
Bill you are very imformed but Saturn isn't the division thats in trouble.
Its Pontiac that will get shot next IMO
How about a Saturn SUV that seats 7 powered by Hondas next generation Oddessy powerplant? Not a dud me thinks
Also, down here they're impossible for me to get rid of as used cars.
Personally I like the L-Series... Its' based on a car that's also sold as a Vauxhall so it cant be bad, right?
Bill
That being said,
let's get this ship back on course. Any further comments on high ad fees?
kcram
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Bill...You are a very smart man, and very young...As an old man, let me tell you
one really important thing that I want you to carry with for the rest of your life!!!
There is only ONE THING that we can can NEVER, EVER, recoup...and that ONE
THING is TIME...We can always make more money if we happen to lose some...
if we break a really good Tiffany wine glass, we can always buy another...but TIME...
Can't get that back...NO WAY, NO HOW...
To spend any more of your valuable, irreplaceable time debating ANY point with
Mr. SNURPLE is a pure waste of a PRICELESS COMMODITY...your TIME
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Remember how I used to comment that the Intrigue actually had decent resale for a dometic?
Look in MMR (I assume you have access to it) and see what 99-00 Buicks sell for.
Terrifying.
I agree. Buick should be axed, Oldsmobile kept.
Bill
kcram
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I have to say that I would have to blame the automotive industry for putting them self in the position that they must debate, argue, and defend all individual items that appear as add-on fees.
When was the last time one saw an advertisement fee on a pair of Lei jeans? And I personally cannot remember seeing and invoice price meant for the local convenient store fore a case of Coke.
Thus, if a defense against people replying in the manner I did bothers the automotive industry then they can and should do so. Unfortunately, that means a lot of control placed upon the individual dealer, which is not about to happen.
Dare I say that the individual dealer has more power than the manufacturer, but at a cost of placing itself in stressful sales situations. Then, sales people find it necessary to take advantage because the shopper, each year, becomes more armed with knowledge--blame that on the dealers.
Finally, a hate-hate relationship is developed and other avenues are sought for escaping the seemingly all-corrupt neighborhood dealerships. Where do they go? On-line. Why? Because they don't need to be slapped in the face with destination and advertising fees, documentation fees, etc.
Sure, buying an automobile is suppose to be the second largest investment behind buying a house, but what was the advertising fee in the house you bought? No, I am not saying doc fees don't exist--far from it. But, keep in mind that my education cost more than my car. Frankly, I enjoy the experience, but I doubt that could be said about buying a car.
If the auto industry continues down the path of breaking down all the costs that go into buying an automobile then the public will see' these elements and fight against them. Ignorance is blissful in these types of sales arenas.
And yes, I would happily buy my next vehicle for $300 over invoice if the ad fees were tucked away. But mention to me by your own stupid practices that they are $800 and I'll raise some can over it!
To me, its' summed up pretty simply:
(What I need to do is to scan an invoice to show this properly)
Manufacturer invoices me for, say, a New Beetle GLX. They charge me a fee for regional advertising. Why? Costs of doing business in my market are kinda expensiveI guess, or maybe they feel like it. Why I have no idea, but they can and they do. Can I negotiate with VWoA? Nope.
Now, customer comes in with info off the net, which differs from what VWoA charges me for the car. So, say, we're $400 off. I whip out the invoice, show it to a customer and there are these charges that the customer did not see on the 'net. I don't like these fees any more than customers do. They cause me aggravation at times, and cut my margins on other cars.
So what happens is, a 3rd party website puts information out there. And they buy it from another 3rd party. And it makes my life difficult at times. Not "my stupid practices". And the manufacturers are not about to realign their wholesale pricing to make it easier for customers to view internal documents which, technically, we aren't supposed to be showing them if you get down to the nitty gritty (per a franchise agreement).
As far as $800... that's got to be a serious exception. And I've had invoices where it was a tad higher. Look at Lexus. 1.5% of total MSRP is LDA advertising in most of Florida. On an ES300 that's $400-500 or something like that. But I've seen invoices on LS430s where the charges (Say on an Ultra Lux with Black interior and chromes) were over $1,000. Again, its' a percentage. For $800 on a Toyota it would have to be a Land Cruiser or something. Also, on Toyotas and Lexuses I have yet to see one that's an even dollar amount.
Bill
totally different than the Retail Grocery Chain or the the Retail Department Store.
Wholesale prices for Levis & Coke or Pepsi, are not available on the net for
a consumer to use when purchasing those products to negotiate a price...
McDonald's spends more money on Advertising it than they do on raw materials
for a BigMac...
Ask the Developer/Builder for their expense sheets on the home that you want
to buy from them...Good Luck...And, as Bill has mentioned many times, it costs
more to live in Short Hills, NJ than it does to live in Jersey City, NJ...not to
mention Burlington, Iowa Vs. Burlington, Mass.
If car buyers want to buy a car based on Invoice up, as opposed to MSRP down,
well then so be it...this is what we pay, and if there is a problem with Ad Fees that
are Regionally imposed, then go buy a car where there are none...What is spent
getting there will most probably exceed what is saved...
However, when I got to the dealer and went over these and what I was willing to pay above invoice, they added advertising costs (around $424 for a Toyota 4runner).
I haven't made any deals, but is this legitimate? In the FAQ, it says never pay above 1% of MSRP for advertising. Is this negotiable? Thanks, Dave.
However, on many cars, they are legitimate charges that the manufacturer passes on to the retailer. Basically, you'll generally see them in larger markets where the manufacturer has higher costs of doing business.
Since it would not be legal (or good for PR for that matter) to charge people in, say, Los Angeles higher prices than people in, say, Barstow... the manufacturers charge fees to the dealers to cover their costs.
You mentioned Toyotas (They seem to come up the most). Toyota Advertising charges Vary from regionto region, but they are generally 1.0-1.5% of the car's total MSRP.
Its' also easy to tell if its being made up or legit.
1) I've never seen TDA in an exact, round number. Also, if a dealer charges a dealer fee, dealer prep, doc fee, processing fee, etc it has to be, by law, the exact same amount per car and, legally, cannot be waived (If its' waived for one customer, and the DMV audits you, they can require the dealer to refund that fee to everyone you charged it to).
2) It will be preprinted on the factory invoice. On a Toyota Invoice, if I remember right, there's a box right above the box for the destination charge (I think they now call it the delivery, handling and processing fee) marked "TDA".
I'd guess that this 4runner has an MSRP of $28,265 or so?
Hope this helps!
Bill
something like "hey, guys, sounds like a deal. show me the invoice and then let's wrap this thing up -- I want to go 4-wheeling this weekend."
I'd bet you would see the advertising right there in black and white.
Sites that don't list this fee just fool the customer and in the end cause hardships.
Art
Car_Man
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No haggling, No adv fee, No hokus pocus
Just a great price on a new car or truck !
They also seem to be late in posting 2002 prices. The new MDX prices are not on their website yet.
Art
I agreed to pay what Edmunds listed as the TMV, and which was $287 over the Invoice price that I had calculated on the Edmunds site. They have to locate a vehicle from another dealer, since they did not have any 5 speeds in stock. I was surprised when I was told that they would not do this unless the price was at least $250 over the invoice price.
"But I offered $287 over the invoice price", I protested, but they pulled out a sheet of paper that showed the invoice price to be $239 higher than I had calculated using Edmunds. The discrepency was a line item that they labeled "Advertising /adjustments". They considered this additional charge as part of the invoice.
I objected and said that advertising is part of the cost of doing business, like utilities, payroll, rent and other expenses. It is a legitimate business expense, but not properly part of the invoice price on the specific car.
If this expense is properly part of the invoice price, then why did Edmunds neglect to add it into the calculations and why was there no mention of it on the Edmunds site.
We walked out, choosing to think it over and research it before we made a costly mistake. I would like to hear from others on this and especially any Edmunds experts. I will check back to this conference and can also be reached on AIM or AOL with the screen name Bob2ndWave.
Bob hoey
Also, Edmunds DOES acknowledge that they are a legitimate part of invoice. Go back to the Edmunds pricing page for new Prisms, and this time scroll down one screen's worth past the section giving model MSRP, Invoice, and TMV. You'll see Edmund's discussion of holdback and Advertising Costs. I assume the reason they don't include them is that unlike Destination Charge, Ad Fees vary from region to region.
CWJ
In response to "IsellPontiac", I was not induced by the 0% interest but I was aware of the rebate. That got me in the door. I am also aware that the dealer will make a bit over $500 on the holdback and even if he has to pay the $239 Advertising, we offered him $287 over the invoice, which pays for that advertising with additional profit left over.
I am also aware that the dealer has other expenses that he has to cover and these could be prorated and allocated to the price of the cars too, but the issue is just what expenses are properly included within the concept of "invoice".
CW, I will go back as you suggested and study the Edmunds comments on holdback and Advertising costs.
Bob