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Comments
Benjaminh: rule #1; the dealer never plans to lose money. Look for the angle.... Dealer has overhead, insurance, utilities, salesmen's commissions, back office people, etc., who want to be paid...
2014 Malibu 2LT, 2015 Cruze 2LT,
The shopper also wants a "good deal". Somehow the numbers have to please both parties.
imidazo...
Must not have been a Corvette you were shopping for or you WOULD have paid MSRP or more!
The prevailing market always sets the pricing.
But trying to negotiate holdback is a quick and easy way to get shown the door, not a way to purchase a vehicle .. especially since it's not a profit center - but you knew that .. right ..?
Terry.
that said, I would take it into account when factoring my offer, I just wouldn't jaw about it. when it comes right down to it, the dealer is not going to take a loss, and will sell the car at what the market will bear, regardless of where you start your negotiations (invoice-holdback-incentives-$5,000 of double secret money the factory gives the dealer in a brown paper sack, no questions asked fugedaboutit)
Its not the customer's place to demand the holdback from a dealer but that doesn't mean a dealer won't give it up willingly. Calculate a price and make an offer. If that offer means the dealer has to go into holdback, then fine, but let them make that call. That way there are no hard feelings and everyone leaves happy. As Terry said, negotiating from holdback will prolly get you the boot - a total waste of time for all involved. But do this right and you'll get the deal you want (for the most part).
Good times to bring up holdback:
1.) "We are losing money to make this deal" (Note: sometimes the dealer DOES, for one reason or another, lose on one particular deal to meet a bonus, move an old unit, etc. even after accounting for holdback. Usually this is not the case, but I did want to point out that contrary to popular opinion, this statement is not necessarily a lie)
2.) "If I accept your offer I'm only making $x."
3.) " I need that profit to cover my floorplan expenses"
When and if you DO bring up holdback, get ready for a bit of a sililoquy on the nature of holdback, how a dealerships finances work, why holdback belongs to the dealer, and the price of tea in China.
Ben: That $1000 loss is seen as an "advertising expense". If by losing $1000 on that one, they can bring in 10 other customers who pay a profit, they hope to come out ahead.
Tk865 gave three things the salesman might say that would entice him to mention holdback. Well, these three things were statements, not questions, and there is no need for the customer to say anything in response.
After the customer has made his offer, all he needs to do is sit there for a couple minutes to see if the offer was accepted. No discussion is necessary.
That was tried in the UK about 10 years back. It worked too, for a couple of months.
I see a lot of anger here from the salespeople and I do understand a good bit of it. I understand that being a car salesman is a hard job and few make good money. But does that mean that I should pay an extra $1000 so they make $200. I'm sorry, but I'm not that nice. If you don't make any money off my offer then don't accept it.
It's always the market that determines pricing. Some customers can't stand the thought that a dealer may be making "too much" profit on the sale of a hot mover in short supply.
When this happens, they either have to pony up the required dollars or settle for something else.
The old supply and demand theory still applies.
Also, I understand that the dealer should make a fair profit off me. That of course is where the disagreement starts I understand. I think a fair profit is 5% over wholesale and the dealer might think that it's 5% over that invoice they show me which I could produce on my computer. And I don't want to get into ad fees/holdback. They could call their profit Oreo tax for all I care. I just want my "fair deal" without hidden fees.
as for a "fair deal", what is a fair deal?
the dealer would love for you to pay a trillion dollars. you would love to pay 0. now, you just have to meet somewhere in the middle.
i don't think there is such a thing as a fair deal in a market economy.
peter
that's why i liked the priceline model. too bad that didn't work out for them. i was pretty excited when that came out.
you were able to bid X dollars and have that bid go out to all the dealers in your area. if you didn't get hit, you could keep raising your bid incrementally without driving to ten different dealers. if your bid continued to not get hit, then you obviously had an incorrect read on the market for that particular car.
how did the dealers here feel about pricline?
peter
Now that the Sienna is here, I went back to the Ody "What did you pay" topic and $2000 off MSRP is the norm. What a difference a year makes.
The last 4Runner, when it was new, commanded premiums in the DC area. By the end of its run, it had rebates and invoice pricing.
When competitors see a good thing, they rush to copy it, and that improves things on the supply side. In other words, you see more choices.
Price is a tricky topic. The domestics are building in huge padding for rebates. It's completely absurd that a brand-spanking new model carry a rebate from day one. This creates the illusion of a good deal, and erodes resale values.
-juice
Constant rebates, zero percent financing, etc...now the consumers expect and demand this or they won't buy the cars!
delguy...I understand that you consider a 5% profit to be "fair". I hope you never buy furniture or jewelery!
That thinking will work on some cars but not on many others.
And...I don't understand...what's the difference in your mind between a dealer's invoice and "wholesale"? Just curious.
Thanks for the reply in advance.
fo
I assume the sales manager knows his business, and he knows right away whether your offer is acceptable or not. Of course, they want to talk with you so you will change your mind and increase your offer, but do you think they will change theirs?
It is very easy to find out if your offer is acceptable - just head for the door. It has worked for me more than once.
Some of the shopping/driving I helped with but the rest she managed on her own. She had not owned a car in over 10 years, having driven trucks, vans, and SUVs all that time. This time she wanted a nice luxurious car that had lots of power and a great stereo system, among other goodies. I wanted her to get a luxo SUV. She shopped for several months, drove many cars, wrote off cars that were once high on her list and considered cars she initially ignored.
When she finally settled on a car (Infiniti I35) I helped her with pricing and making an offer. I found out that there was a $500 dealer cookie on the I35 so I dug up pricing online and advised her to make an "out the door" offer on the car. I also told her to let the dealer make the first offer as she might be pleasantly surprised. This tactic worked perfectly as the dealer accepted her offer right away and the deal was done. The F&I mgr tried to throw her a curve ball but she caught it before signing and got the deal straightened out.
The I35 is perfect for her and she absolutely loves it. The car wasn't on her list at all in the beginning (the G35 was #1) but she shopped carefully and persistently and ended up with a car better suited for her I think.
BTW, you do give the dealer time to answer the door and say "yes", don't you?
Understand, I'm not saying playing games is fun, or even a the best way. I'm just offering an alternative to Bobst's "offer and run" strategy. My way plays on the old school mentality that is still prevalent, at least on the "walk-in" side of the business. Remember - even new-school dealers are usually staffed by managers steeped in the old-school processes. Use this to your advantage - make them think they won. People LIKE to feel they won. My wife has been using this on me for a while now.
Isellhondas, I realize that jewelry and furniture are horribly marked up. I rarely buy jewelry and my furniture comes from more direct sources than Haverty's or what have you. As for the difference between dealer's invoice and wholesale. Dealer's invoice is that sheet of paper with add fees and whatever included and wholesale is Edmunds invoice - holdback.
In general, the pay structure in car sales is what it is. Would you prefer to sell pizza with it's insane markup and make $5/hr delivering it. Or how about a real estate agent that nurses customers for weeks or months for the chance of a paycheck. Again, different jobs with different pay structures. I understand that salesmen feel persecuted and this forum has turned into a place for them to vent, but I am not responsible for their pay structure. If I get a great deal that is below dealer's invoice and the salesman gets diddly, well I'm sorry.
Last, I understand that my idea of fair may be unreasonable. If weeks pass and nobody budges then I'll throw in some more cash and call people back.
Gotta love $4500 rebate on Durango, or 0% for 60 on every GM product. How can they make it any sweeter?
What business other than vehicle sales relies on direct, buyer-to-seller negotiating skills - where poor skills on one of the sides of the table equates to a substantial loss of money for either the buyer or the seller?
So when was the last time you auto sales people negotiated a price on a few delivered pizzas? Or case of detergent at the market? Or walk into a well-known jewelry store at the mall and open with 75% of the sticker price on that Rolex? Or how about cutting you some slack at Macy's on that advertised loss-leader sofa in green leather?
Right. Not often and, for most folks - never. And that's the reason, in survey after survey, auto sales is at the bottom with the telemarketers.
Folks hate shopping for a car because the sales structure put in place over the years by dealership owners in search of best possible returns on their investment mandates a confrontational methodology of us-versus-them.
IMO, it's the IDEA that somebody with more aggressive negotiating tactics can get a better deal that bothers people the most.
Well, this happens because some salesmen/dealers actually accept the "below cost" offer. This leads buyers to believe that there is really more profit in the deal then we have been told. Even with information from Edmunds, KBB or whomever, how do we know we have all the costs. When an offer we believe is below cost is accepted (or we hear about anyone that has had one accepted), we come believe that we were misinformed about the real costs. Accepting just one below cost offer EVER because all the other ones will make up for it, actually works against you since it convinces us that we really didn't know the real dealer cost. Word does get around you know.
On the flip side, when negotiating the price for my new BMW(an everyday 325i, i.e. no special, limited edition anything), I made an offer something like 1700 over invoice and the salesman actually told me that he feels that BMW's should sell for atleast MSRP so they weren't going to negotiate. Went to the other BMW dealership and they outright offered to me 1500 over invoice. Gave the original guy a call back(big mistake) to try and match it or beat it and he said I should come back over and he'll see what his manager will let him do. Sorry - but no thanks - I'm not wasting any more time to "see what they can do". This is what irks me about the entire car buying process - let me see this and my manager won't sell for that - especially when they are extremely fair offers.
my $.02
fo
Let me politely ask why you think any customer knows where to start negotiating, much less stop? Between holdback, 'trunk money', 'held rate' and commissions on loans and leases, ad consortium costs, doc fees, dealer volume incentives, and what-ever-the-heck-else-that-I-don't-about, there's no way for a customer to know with any precision what his deal is actually worth in profit, gross or net. Where's a customer gonna get that number? There's an indeterminate cost problem here, created by the industry, in a negotiated sales process, again created by the industry.
My point is that your wish for customers to 'make a realistic offer' is more reasonable than it is realistic. Given that . . .
Does that mean I think a customer is justified in getting bent when his 'invoice - $1K' offer is rejected? Nope!
Even less justified, IMO, is a salesman getting bent upon a receiving an 'invoice - $1K' offer or even an offer that's 5% below 'dead cost'.
Your posts suggest that you think the fix for 'grinding' is with the grinders, and buyer's posts usually suggest they think the fix for 'sleazy sales' is with the salesguy. FWIW, I think everybody's wrong. Buyers being 'inconsiderate' and salesmen being 'inconsiderate' and each reacting to each reminds me of Nero, fiddling while Rome burns.
"the pump don't work
'cause the vandals
took the handles" ~ Bob Dylan
I guess what I am saying is if you know my cost (with Honda it's easier than most) take that and what you think is a fair profit ...0.00 tell me, 5% tell me, whatever it is, just say it. There is no rebates, this or that with Honda so my invoice is cost, so when you come in save yourself and me a whole lot of time and grief and offer realistic from the beginning...But I know how you feel when it comes to cars with rebates, incentives, this , that, kitchen sink.,...gets crazy
Truly, I get your point. Given our example, do you still get mine?
(FWIW and to be fair, if I made an offer at all, it would include a financing proviso. So, I think we'd end up fine.)
On an '03 Civic Si, Edmunds shows invoice of $17,822 with $500 dealer cash. Ok, the way you sketch it out, I offer $17.9K + TTL with 1.9 apr or $17.4 + TTL using my own money.
The prob, LOL: A guy posts (Town Hall - Honda Civic - Honda Civic Si / SiR, check it) tonight that he's gotten an initial net quote of $16.9K + TTL.
I'm gonna walk off from a possible $1K and offer anyone $17.9K? Not likely. Would you?
I'm gonna offer you $16.9K, knowing you think that's 'unrealistic'? Even I wouldn't do that.
That's a real life example of the prob with a customer making any offer at all. Given the way this ground really lies, what would you want a customer to do? Other than shooting the poster or the dealer who quoted him?
The debate seems to hinge on how disfunctional the process is that determines a reasonable price - hard to argue that one. Both sides of the table seem to end up out of sorts and disappointed at various times. I've heard all kinds of suggestions for how to remedy this, but nothing seems to work in every market and every situation. Real competition that results in real bottom-line advertised prices seems to be the best of all worlds, but those markets are unfortunately not everywhere - it's good when you live near one, though...
Right on!
Those of us who don't live in such a market can access 'em by the net. An example of the power of capitalism or of creeping societal decay, LOL?
As a buyer, I'd want a discount equal at least to the cost of repair ($2K, maybe, if paintless would work?).
Tough break for the dealerships, even if they were insured.