undecided.steve

There is one thing that has always puzzled me about buying a car.
We all know about invoice price, bargaining up from invoice, dealer holdback and so forth but
what about some of these huge rebates that are offered from time to time?

I've seen Dodge doing employee pricing (invoice) and then another $4500 off of that!

So if they can offer that kind of a deal on Monday why can't that deal be offered next Sunday for example?
IOW when the *sale* is over?
It's the same car that they want to get rid off.

To me that seems to indicate there is ALWAYS a tremendous amount of profit built into these cars and it's really just a matter
of who is getting this profit.

Comments?

Meph

Because those sales are to clear out inventory to make room for the new lineup.

We're a Capitalist nation. Welcome. As the saying goes, if the people will pay that much for it then they'll charge that much for it.

CurtX

Nobody really knows the true cost of a car, except for the manufacturer. The invoice is just a facade of numbers, just as the sticker is. I'm a programmer for a company that works with the invoicing program (although not for cars). I know firsthand that the invoices that retailers get are different than the invoices on record at the manufacturer, reseller, vender, etc. This may not even sound legal, but rest assured, every company does this and it is legal.

undecided.steve

That's kind of what I thought!
I seriously doubt that either the dealership or the manufacturer is losing money on these cars.
They may not be making as much as they would like, but they are not losing.

I suspect the dealerships work on the "I'll make it up on the next customer" method so in effect
if Susie gets a great deal below invoice, and Joe comes in an hour later and pays $500.00 off sticker (such a deal!)
as far as total profit for the day things will balance out.

I'm pretty sure that they want to move certain cars, even within the same model year, because they
have been sitting too long and a better deal can be had on those.
Although, a car that gets purchased right off the truck has cost the dealership nothing (no interest on loan etc)
so maybe a better deal can be had on that type of car?

tsaints1115

The amount of profit also varies by car, a suburban has 10k or so while a stripped down commuter car might have 1k.

bl1nk

Meph is right, alot of those sales they are taking a small profit or maybe even a small loss on, simply to get the cars off their lots. Keep in mind, once the first quarter rolls around again they have to pay taxes on everything they still have in stock, they dont want to be paying taxes on all those 06s they still have AGAIN.

AirForceGeorge

...

timothyrw

If you are getting under invoice and 0% financing...

The manufacturer is DEFINITELY losing money on the car... at least if it's Chevy, Ford, or Chrysler...

The dealership is definitely making money.

I bought my then brand new 2003 Ford Explorer for $1500 under invoice and 72 mo's no interest financing.

That was an incredible deal considering I got a free loan of $35k for 6 YEARS!!! (Actually, it's better than free, they were paying me in a way, time value of money thing, "even-steven" would be the rate of inflation...)

You can now finance a decked out '06 Ford F150 for 0% for 72mo's and save over $9k in fianancing alone...

Now, someone is paying the interest on that loan, who? Ford MoCo...

The big 3 have GOT to get away from 0% financing... but, I'm glad they are doing it, made my 06 GT affordable!!!

These deals are incredible... unbelievable really, enjoy them while they last...

05gtdriver

Not so sure about the "Big Three" losing money on the cars they actually sell. I can see that when they over forecast and produce too many cars they fail to meet quotas and stock holders take the hit(devalued stock). Everything comes to a head when they don't sell enough product to meet responsibilities to employees(and all the benefits employees should have), suppliers and shareholders. Rule of thumb is 300% built-in profit, now as to how much they actually sell the cars to the dealerships.....good question. I doubt it costs Ford(after tooling, designing and manufacturing costs are met) much more than $5-8k to produce a Mustang GT(when volume is up).
Why do you think Ferrari, Porsche and other high-end cars can afford to go racing? I think Ferrari sells less than 10,000 units per year world wide. At $250K (on average) per car(do the math). Do you really think it's costs Ferrari even a $100K to make a car? Maybe $50-60K..... Ford wouldn't offer 0% financing if it wasn't going to stay in the car making business. It would be much easier to diversify and concentrate on the money making aspects of their company. Oil filters maybe?. Cars don't cost as much as you'd think they would to build. It's when expectations aren't met that drastic measures are needed. They still make money, I think the dealerships are the ones to get hurt first, that's why some dealerships fold within a matter of years. Others flourish and it's because A) Volume B) Steady customer base or C) Not greedy. Just my take.

classj

Depends on how you look at it. You have to really add up all of the engineering hours and every other persons time that actually touched the car during development. Then add tooling which is millions. Etc Etc.

So before you sell car #1 ford has millions and millions tied up in a new car and have to divide that cost over the number you intend to make, the longer you run the body style, the less it impacts the cost of the car. Then you have to add the labor to make the new car.

But as far as what the car actually costs ford. I would be very surprised if the whole car cost any more than 8K dollars soup to nuts without any tooling or development costs.