Any auto dealers or anyone in the know?

[don911]

I've been looking at new Audi A4s and A5s. My knowledge of the dealers cost for the car is limited to whatever Edmunds.com has to say. I've been researching invoice, MSRP and hold backs. From what info I can find on hold backs, Audi does not have any.

From my research, there's roughly $3K between invoice and MSRP. This doesn't seem like enough margin for the dealer to survive. The dealer I'm working with has a really nice building along with a huge car wash facility that all customers can get free car washes. With facility, inventory and employees costs, how can they pay for all of this on $3K/car? and this assumes they get MSRP on every sale.

Is invoice the real price or is the dealer paying far less for the car? Audi sales seem to be doing ok but the monthly cost must be huge and it doesn't seem like they can sell enough cars/month to cover cost. What am I missing?

[stomachmonkey]

Service.

My brothers dealership just opened up a new service facility last year.

Cost them 7 figures to build and outfit.

Spif's on the financing, upselling.

[gizmofixer]

back-end money, often called 'incentives' or 'programs' is part of the dealers profit.
financing, add-ons, accessories, extended warrantees all help.
but service is the big money-maker.

[intakexhaust]

Not sure as of the later years but it used to be 3 to 4% holdbacks with Audi. That actually adds up nicely when considering volume dealers with average $45,000 cars.

Also agree with the prior mentioned F&I, etc. but one thing not mentioned is mighty profits made in leasing and then for retail sales, trade-ins and selling used cars are major profit centers.

Also, forget about all those Kelly, NADA, Ed's guides. Banks will use them if your securing a loan with them. Dealers use the Black Book. Your minty car at best ACV (actual cash value) is Avg to Good condition catagory. The numbers you see during negotiation are flipped around to make you feel good but dealers work hard to get that trade-in. When they wholesale or retail the trade-in, nobody but them really knows what they have in it, so they have the edge. Scott

[McLovin]

Audis have notoriously low margins for new cars.

But, pretty much every manufacturer pays a "Business Builder" type of rebate for new cars sold.

This is basically a "holdback." It's a payment the dealer gets for every qualifying new car sale.

It's a way for the manufacturer to control the sales. To get the money, the sales has to meet qualifications. For example, generally it has to be a sale to an end user consumer. It can't be a sale to someone who exports the car. It needs to be a sale in a defined territory, etc. etc.

These payments are a huge part of a dealership's profitability. It probably varies from brand to brand, but the dealership financials I have seen generally show that these payments can pretty much be the entire profit of the dealership. In other words, they operate at a break even, except for those payments.

Of course, those payments can be $1, $2, $3 million or more per year, depending on the size of the dealership.

So, the bottom line is, yes, a dealership can sell a car for exactly what it actually paid for it, or even less, and still make a profit on the car.

[McLovin]

Service used to be a bigger part of a dealership's profits than it is today.

All cars are more reliable, the service intervals are 2-3x as long, and the service requirements are much less.

Plus, once a car is out of warranty, most people don't bring them to the dealership anymore, they go to independents. This % increases as the car gets older.

If you think about the average service requirements for the first 4 years of a car's life, it really isn't much. Just ballparking it, that's 4 oil and filter changes, 1 or 2 brake fluid flushes, maybe an air filter or something, but that's about it.