[javadog]

I hate to hijack this thread, but there is quite a bit of bad informtion being given here about how the car business works. Sometimes I can't help myself.

First off, I used to be a new car dealer. So, you might say I know the business. I got out of it quite a few years back but my brother stayed in the business until last year, so what I am going to say is still relevant. One more thing; there are people out there that hate dealers so much that they will refuse to believe what I am going to say. Fine with me; it was those jackasses that convinced me that there had to be a less painful way to make a living. I actually quit the business because too many of the customers were dirtbags. That is a long story and for another time.

Anyway, the markup between dealer invoice price and MSRP varies by brand, with the more expensive brands having a higher markup. Sometimes, it will vary within the brand, with the more expensive models having a higher markup. It has also varied over time and is generally less today than it was in the past. As an example of this, have you noticed that Mercedes has magically dropped their prices over the last decade and a half? I bought a 1993 S-class that cost mid-nineties. Today, you can still buy an S-class for that amount, although the dollar is worth much less. Why? Because Lexus kicked their butts bad enough that they had to lower their prices. Mercedes AG paid for some of that and the rest came out of the dealers' pockets, as Mercedes dropped the markup drastically. Lastly, the markup will be quite different between national markets. Go price a car here in the US and then price that same car in the UK. After allowing for VAT and the exchange rates, the UK car will be way higher. Count your blessings that most of you live where cars are cheap.

Okay, the dealer pays the manufacturer what's on the invoice. The timing of this payment varies but you like to pay for the cars after you get them. Sometimes the manufacturer is screwed up enough to bill you before you get them, so you have the occasional argument. If the dealer has a lot of cash, he writes a check. If he has a floor plan account, some bank pays for the cars and the interest clock starts ticking.

Some manufacturers have what is generally called holdback. This was an ancient practice from the US car companies that basically means the dealer gets a small amount back from the manufacturer for every car sold. These payments weren't great, usually $500 to $700 per car, but they did exist. Many manufacturers, notably the imports, didn't have this.

The dealer pays shipping for the car, the "destination fee." Every brand I have been associated with has had this and it's non-negotiable. The dealer HAS to pay it. Period.

There may also be, from time to time, charges the dealer HAS to pay for advertising by the manufacturer, in the dealers' local market. This is also non-negotiable and a sorry deal in most dealers' minds.

The dealer gets to pay one of his mechanics for a couple hours work to make sure the car is screwed together properly and gets re-imbursed by the manufacturer for this, at a lesser hourly rate than customers pay. A few bucks are made here, maybe $50 or so, not counting overhead.

The documentation fees are essentially additional dealer profit, in a sense. The costs are real. We usually had at least two people ( in a relatively small dealership-50 to 60 units per month) whose full time job was dealing with the paperwork associated with buying the cars from the manufacturer and selling them to the public. There's a lot of paper, especially if there is a floor plan. The dealer used to absorb this cost as part of the overhead; now the public pays for it directly, or a part of it. If you are a good negotiator, some dealers will waive this fee. He still has to pay somebody to do the work.

Occasionally, there will be a rebate program, or other incentive program, like low interest rates. Rebates can either be to the buyer or to the dealer and are common knowledge amongst buyers. The manufacturers make sure the public knows about them, generally. The more upper crust brands may be a little more reserved and tell only the dealers (they don't want to associate their brand with the stigma of low cost) but word will get out and 5 minutes spent on the internet will tell a buyer all he needs to know. I personally think that the use of rebates has made the relationship between buyer and dealer much worse and has done a lot of harm to the business. That cat is out of the bag now, so.....we are stuck with it.

Some dealers will show you the factory invoice and sell a car for x dollars over. We did this for years. Some dealer will make up their own invoices and show you this instead. These dealers are usually the really large ones. Buyer beware. Trucks used to not have MSRP stickers. Figure that one out yourselves.

Occasionally, a car will be so popular that it will command prices greater than MSRP. Some dealers will sell them over sticker; we didn't. Don't ***** if they do; it's just basic economics. Don't buy the car if you don't like the price.

Dealers will usuallly try to make a little money in the F&I department. If they arrange the financing for you, they will mark up the rate if they can. If the sell you an extended warranty, they will make a few bucks here too. If they install an accessory, or pinstriping, or "clearcoat protection" they will mark up their costs and make a little bit. All these prices are negotiable but no dealer will lose money on these items either.

That's about it, really. All the rest that you hear about is generally BS from someone that has a grudge to pass on to the world.

Have fun out there,

JR