I think I bought a new car, maybe not

[dmcummins]

Originally Posted by rick-l

This isn't Paul Scerewme is it?

No, it's the " if it's not right, I'll make it right, you have my word on it". Of coarse that was the dad, who passed away recently.

[McLovin]

Originally Posted by kaisen

I have to snicker when someone read Consumer Reports, or who washed cars at a dealership, so they claim to know the secrets ways dealers screw the public. No specific offense to MJHanna or biosurfer1, just examples.

The invoice price is just that. The price the dealer paid to buy the car from the manufacturer. That amount is due when the vehicle ships from the factory. There is a certain amount held back for the factory to use, that's 'hold back'. Dealers get their hold back, er, back when they sell the car. Not right away, some pay monthly, or quarterly, every mfr is different.

Play whatever games you want when buying a car, but understand that 'cost' isn't just the car, but the entire cost of the product the dealership is offering. For example, that $29K (invoice) car we're talking about costs the dealer every day it sits there. But they have to have product for you to look at, learn about, test drive, and consider buying. The average new-car dealership has $2 million in new-car inventory. Do the math. So when you figure the dealer 'made' $1000 on the car you buy, he likely also spent $200 in interest having it there, $250 paid to the salesperson, $250 paid to his managers, and the remaining $300 doesn't even come close to paying for the building, latte machine, lot lights, taxes, porters, car wash, and hundreds of other expenses that make up the entire product. Do dealers 'make' money when they sell a car for $1000 gross profit? Not likely.

For most mfrs/brands, there are lots of incentives dealers get for moving new cars, i.e., "Business Builder" payments, etc. These are usually paid quarterly and are significant (high 6 figures, to 7 figures per Q).

That's where franchise dealers currently make most of their new car money. They are essentially being subsidized by the mfrs. So, yes, when a dealer sells X number of cars at $1000 each in a quarter, they can make a ton of money, a lot more than X x $1000.

(That's the way it is for many brands that I personally know, but of course may not be for all).

But, yes, franchise dealership expenses are very high. $500,000 to $1 million per month, all in, isn't uncommon in major metro areas.

[Zeke]

Originally Posted by kaisen

Could they lose a couple grand? Or SHOULD they lose a couple grand?
The sense of entitlement here is amazing

The law is very clear here. All the dealership needs to do is allow Mr. Cummins out of his contract, as it was a mistake. The governing agencies won't be interested beyond that. Period.

Mr. Cummins, my advice (if it wasn't clear):
Take their offer, swallow your pride (as the dealership is too), and enjoy the great deal on your new car

Sorry kaisen, I just saw this as an opportunity. My education is in marketing and advertising, PR if you will. I just happened to go in another direction early in life.

[dmcummins]

Originally Posted by kaisen

Could they lose a couple grand? Or SHOULD they lose a couple grand?
The sense of entitlement here is amazing

The law is very clear here. All the dealership needs to do is allow Mr. Cummins out of his contract, as it was a mistake. The governing agencies won't be interested beyond that. Period.

Mr. Cummins, my advice (if it wasn't clear):
Take their offer, swallow your pride (as the dealership is too), and enjoy the great deal on your new car

While I appreciate your advice, Its not all about the money at this point.

If they want the car back, I will take it back and buy from someone else. There are plenty of car's out there.

Ive talked with several of my friends, and they understand. If they go back on the deal, I would rather pay more somewhere else than to deal with them.

[Rot 911]

Really strange that the dealer is not pushing to get the car back.

[dmcummins]

Originally Posted by Rot 911

Really strange that the dealer is not pushing to get the car back.

We are only talking about $1000. I would like to think that he is wondering how this will affect his reputation. Or he could be wondering how many people we know and will this cost him future sales. Or maybe he's just busy.

[Dueller]

Originally Posted by dmcummins

We are only talking about $1000. I would like to think that he is wondering how this will affect his reputation. Or he could be wondering how many people we know and will this cost him future sales. Or maybe he's just busy.

Probably not all THAT concerned...just figuring out how to remove your name from the title of the other car and be able to sell it as a new car if you don;t agree to take it. Or atleast his minions are doing that for him.

If he's wondering at all it may be how you think you will be able to register a car you don't have title to.

I suspect he'll make good on the deal you struck....a $1000 while not chump change probably ain't gonna make him lose any sleep...salesman yes; owner nope.

[Gogar]

I'm still searching for your 'endgame' motivation, I'm sorry.

I understand that you want the right car at the right price, the first time. Unfortunately, there was a snafu in your transaction,

for which the automobile dealer has agreed to basically give you $1000 off the purchase of that right car, for the two days of confusion.

You have admitted that you will not likely be able to purchase that right car at any of your local dealers for this new, snafu price.


Is your smug sense of self satisfaction worth more than $1000 and at least one more day of your time? And if so, can you explain to me why?

Take the car back tomorrow, and get the car you paid for. OR, if you wish, get the nicer car you've been driving around for 2 days cheaper than anywhere in town.

[McLovin]

Road Trip!!

[biosurfer1]

Originally Posted by kaisen

I have to snicker when someone read Consumer Reports, or who washed cars at a dealership, so they claim to know the secrets ways dealers screw the public. No specific offense to MJHanna or biosurfer1, just examples.

And I like to snicker when people think the dealerships are not out screw people. Believe they don't if it helps you feel better, but most sales managers and sales people I know feel the public wil do everything they can to get the car at the lowest price, be it lying, bringing invoices off the internet, etc so they feel its fair game to do whatever they can to get the most money out of the buyer.

[dmcummins]

Originally Posted by Gogar

I'm still searching for your 'endgame' motivation, I'm sorry.

I understand that you want the right car at the right price, the first time. Unfortunately, there was a snafu in your transaction,

for which the automobile dealer has agreed to basically give you $1000 off the purchase of that right car, for the two days of confusion.

You have admitted that you will not likely be able to purchase that right car at any of your local dealers for this new, snafu price.


Is your smug sense of self satisfaction worth more than $1000 and at least one more day of your time? And if so, can you explain to me why?

Take the car back tomorrow, and get the car you paid for. OR, if you wish, get the nicer car you've been driving around for 2 days cheaper than anywhere in town.

As far as I'm conserned I bought the right car. I was told that this was the only car they had, the only one I was shown. We made a deal, they say they made a mistake, and want to change the deal. I feel I got the car I paid for. It was the only one there.

The $1000 doesn't mean that much to me. I just don't back out of a deal. If I had paid $1000 over invoice I wouldn't call them back and say I paid to much and expect a refund.

[gprsh924]

Originally Posted by biosurfer1

And I like to snicker when people think the dealerships are not out screw people. Believe they don't if it helps you feel better, but most sales managers and sales people I know feel the public wil do everything they can to get the car at the lowest price, be it lying, bringing invoices off the internet, etc so they feel its fair game to do whatever they can to get the most money out of the buyer.

Isn't that the crux of every single thing that has ever been sold since the beginning of time? Trying to get the highest price possible?

[Tobra]

If they would make a mistake so basic as to not check that the VIN on the paper matches the one on the dash, what else is done in a slipshod manner? I would find a new stealership to deal with.

[Zeke]

Originally Posted by biosurfer1

And I like to snicker when people think the dealerships are not out screw people. Believe they don't if it helps you feel better, but most sales managers and sales people I know feel the public wil do everything they can to get the car at the lowest price, be it lying, bringing invoices off the internet, etc so they feel its fair game to do whatever they can to get the most money out of the buyer.

It's a game, that's for sure. I sold new and used cars at a dealership and lasted 2 months. I was leading the sales board when I quit. If you have any idea how nasty the public can be then you can understand why a salesperson can be a dick.

Anyway, there's far more money in used cars. The dealer doesn't expect to make a killing on every new car, but they will take what they can get. Most of the profit does not come from the difference between actual cost and selling price. If you go in with cash and ask to see the invoice and buy a car for 500 over, hold back or not, the dealer makes no profit. Maybe a little gross profit, but not net.

Bring the car back for service and warranty and they start to get their money. Over on the used car lot it's all about gross and they do make gross over there. I'd venture to say the worst used car deal they make betters any 500 over invoice deal in the showroom. I made the dealer 3000 profit on a Blazer. Try to make 3K on a new Malibu.

[GH85Carrera]

Car salesmen have for the most part the reputation they deserve. They are trusted just less than congressmen.

One of my friends used to re-fill the vending machines all over town. He was telling me how the salesmen at one dealership would go hang out in the break room with the vending machines when they were supposed to be “talking to the manager” about the deal. The salesmen were having a contest to see how far upside down they could get a customer on a new car.

I would think there are a few honest car salesmen out there. Someone at the dealership is either a total swindler or completely incompetent. How could they ever let a car drive off without checking the VIN against the paperwork. Just be glad they are not your Dr.

[Rick Lee]

Originally Posted by GH85Carrera

The salesmen were having a contest to see how far upside down they could get a customer on a new car.

While this is a pretty sleazy thing to do, I have no sympathy for people whose math skills are so bad as to fall for this. We need to thin the heard a little anyway. And life is hard on stupid people.

[biosurfer1]

Originally Posted by Rick Lee

While this is a pretty sleazy thing to do, I have no sympathy for people whose math skills are so bad as to fall for this. We need to thin the heard a little anyway. And life is hard on stupid people.

+1...I cannot imagine buying something that costs several thousand dollars, if not 10's of thousands and not knowing the numbers inside and out from every angles. The ones who don't and rely on the people at the dealership to inform them are asking for it.

All it takes is a couple hours of research on the internet to be informed

[jyl]

In case you were curious, here is the gross margin percentage for the different aspects of a new car dealer's business. This is for one publicly-traded company, but the margins for the other ones I have looked at are quite similar.

Selling new cars: 6% gross margin
Selling used cars at retail: 10-11%
Selling used cars at wholesale: 2-3%
Parts and service work: 50-55%
Selling financing with cars: about $800-1,000 per car, which is nearly all gross profit.

This particular dealer got almost 50% of its gross profit dollars from the parts and service business in 2009, 20% from new cars, 13% from used cars, the rest was from selling financing. Of course, 2009 was a very hard year for dealers. In good years, the parts and service business are a smaller part of the gross profit, maybe 40%.

Incidentally, the average selling price per new car was $30K, implying average $1800 gross profit per new car sold, for this particular company.

Now, take off the saleperson's commission. Also take off the inventory carrying costs (averaging $350/car for this dealer). You can see that the incremental operating profit margin from selling a new car is really low.

As far as I can tell, the primary benefit of new car sales, for a typical new car dealer, is to build a customer base for its parts and service business. Secondarily to obtain a flow of trade-ins. And, of course, to do enough volume to keep the franchise. Selling new cars, by itself, is an awful business.

That is how it looks to me, from an outside investor's perspective. I'd be interested to hear how it looks from inside the business. How much does the salesman get for selling a $30K car for, let's say, $2,000 over dealer invoice?

[Steve Carlton]

Originally Posted by jyl

As far as I can tell, the primary benefit of new car sales, for a typical new car dealer, is to build a customer base for its parts and service business. Secondarily to obtain a flow of trade-ins. And, of course, to do enough volume to keep the franchise. Selling new cars, by itself, is an awful business.

That is how it looks to me, from an outside investor's perspective. I'd be interested to hear how it looks from inside the business. How much does the salesman get for selling a $30K car for, let's say, $2,000 over dealer invoice?

I'd say your assessment is pretty much right on the money. The new car portion of a dealership is a loser, but necessary to constitute a franchise and have profitable parts and service departments. In a well-run dealership, those departments make a fortune.

I'd say a typical $30K car sold for $2K over invoice probably sold for close to MSRP. Most dealers pay 25-35% of the mark-up over invoice, often minus a few hundred "pack" above invoice. On the downside, the minimum commission (or "mini") is usually $175-300. So, usually a salesman doesn't see more than a mini unless the car is sold for roughly $1,000 or so above invoice. There's usually spiffs for selling unit goals, too.

[dmcummins]

I had another talk with the owner today, then I got a call from the sales manager that I could come in and sign new paperwork for the car I feel I had bought all along. So I signed a new title application and got a new receipt. They also signed on my old receipt that it would not be processed.

Hopefully this takes care of everything.