Disturbing.

[Restorer32]

You can learn the invoice price online but not how much kickback goes to the dealership's owner. That info is guarded better than the gold at Fort Knox, so you still cannot learn the dealer's true cost. Dealerships hire salesmen on their ability to sell, not on their knowledge of cars. Dealerships and salesmen are far more interested in keeping the haggling system in place than are the customers. Buy your cars at the end of the month, salesmen are far more willing to cut a deal to meet their quota. Son-in-Law sells for the biggest Ford dealership in the area. He will cut his commish steeply at the end of the month to win that sales contest that gives him free gas for the next month. If you are going to actually trade in a car you might as well just open your wallet and tell the salesman to help himself. Ever notice how they will not tell you the final price without filling out the paperwork first? Have you ever walked into a dealership when there weren't special incentives, deals, or sales going on? Neither have I. In confusion lies profit.

[Guest windjamer]

Dont forget the finance scam. The salesman gets you approved at a low intrest rate first then he will tell you the bank said no,but he thinks he can get you approved at a differant bank but the rate is just a little higher. If you say yes he gets a kick back from the higher rate. If you say no then its let me try one more time to get the first rate. He all ready has approval

[Steve Moskowitz]

Kevin, thanks for adding to this thread.

Jeff, I can only tell you that I would walk out of any dealership that dealt the way you described. I worked for GM and regularly visited many dealerships for several years and also was at my dealership for almost 30 years. I knew the business practices of many of my fellow dealers very well and had access to comparative financial data.

The fact is there are absolute scoundrels in the car business along with man other businesses. However, there ARE many reputable dealers who deal straightforward and do not play games. I won't belabor the point but I believe I have the background to separate fact from the myths.

Kickbacks? There is a dealer holdback which means exactly that...the factory holds on to money that is due you the dealer and you do not get it back until quarterly or annually. Sometimes there are additional incentives but those are easily available online and in magazines as well. Closely guarded secret...hardly! Unless it has changed, most manufacturers were sitting at 3% hold back when I was a dealer. Take a $30,000 car and sell it to a consumer for $100.00 over cost and you have a total profit margin of $1,000! Then pay a salesman (how do any of them make a living), managers, office help, courtesy cars, floor plan, etc. out of this sum! At one time it took me $300,000 just to open my doors each month and I was not a real big dealer.

Now guys, there are situations with hot cars that a dealer can make $3-5,000 per car but that is the exception. In 2003 the AVERAGE national dealer total profit per new vehicle sold averaged around $1,600 I believe. At that figure, due to expenses, it is difficult to make a return on your investment.

Not only did we (an many other dealers I personally knew) make sure our customers had complete knowledge of the pricing before hand, we were absolutely LEGALLY bound to make full disclosure of all our pricing. Financing is an area where the consumer can be armed ahead of time as well. A couple of phone calls can get you rates from local banks or credit unions but the fact is that many dealers end up selling their cars at rates pre-set by national campaigns from the manufacturers such as the 0.0% financing. There are a lot of cases that a good finance manager can also help a customer get a better rate by shopping for the best rate amongst his many sources.

I realize that each of us sees thing based upon personal experiences and that is the way of life. As a former dealer, I have my own set of experiences that I know to be true as well. Comes down to it, whether it is retail furniture, clothing, electronics, real estate or whatever there are great, good, fair, poor and downright dishonest people in all forms of business.

By the way in my last 10 years of business we were more than happy to show the customer the factory invoice which included the holdback if they would offer us a fair profit for the vehicle we were selling. How many other businesses do you know that will show you their cost!

OK, time for lunch....

[K8096]

I know when those cute little Pontiac convertibles came out 2 years ago dealers were holding on to them & wanted $5000 -$10000 over MSRP. They were supposed to sell for around $20,000. A guy I work with went to a Pontiac dealer & he was told by the dealer "they thought it was worth more than MSRP" & wanted 30K for it. My coworker walked out of the dealership & bought a Saturn Sky a year later. Correct me if I'm wrong, but didn't the dealers kill the new Ford T Bird a few years ago as well? They all held onto them & marked the price up so much to try to make a killing on each one that no one bought them & they were discontinued. I think that new T Bird was beautiful, but not for what they wanted for them.

[Steve Moskowitz]

Sure there are dealers who have asked for over sticker on some cars and either you pay it or you find a dealer who will give you a better deal. I sure was not aware of anyone getting 5 to 10K over sticker on a Solstice but if someone paid that they either were foolish or the money was not of concern to them which is their right. Shelby's, the new Z06, first new Camaro's will undoutedbly all cause some of this behavior but some would say the law of supply and demand. Others would say you can't make money on your other vehicles so if you can on at least one model so be it..especially if it is low volume. Many times short term big profits are not conducive to growing your business in the long haul and some dealers have learned that lesson.

How about the CONSUMER who finds a dealer to sell him a car at less than market value and then goes on EBay with the same car to make a profit. There are dealers who have refused to sell above sticker on hot and hard to get models and then to see the purchaser make more money than they did with NO investment in facilities, etc. just by putting it on the net!

It happens

[K8096]

In regards to a consumer buying a new car at MSRP & then immediatly reselling it on the net - I would think the sales tax on the original purchase would kill the profit, but I could be wrong. You'd have to live in an area with low taxes & title fees.

[Restorer32]

I agree Steve. There are many reputable dealers who deserve to earn a decent profit. I switched from Ford trucks to Dodge primarily because of a small local dealership that can maintain the thing and give me honest billing. At 150k miles I told them to replace the drive shaft universals. They phoned and said I didn't need them. Not many service depts would do that anymore, talk me out of service I had already authorized! Sadly, they are so small they likely will not survive.

[Restorer32]

Steve, you mentioned furniture. In-laws family was in the high end furniture biz from 1906-1996. Their usual markup was 100-115%. The internet and "factory store" pricing put them out of biz. Think about it. You can buy a pretty nice new car for $30K while you can't even restore a Model A for that price. No one is getting rich these days building or selling new cars. Any dealership doing well is depending on their service dept for the majority of their profits I would think.

[K8096]

Are there any car manufactures that let you "buy from the factory" anymore? I knew a guy who ordered a brand new 1956 DeSoto Firedome convertible from the factory, and then drove up to Detroit with his wife to pick it up & drove it home. That sounds exiting doesn't it!

[Steve Moskowitz]

K8096...it has happened more than a few times! I am very aware of a bunch of them.

Jeff, you are right. In the 70's (while working for Olds) I use to try and tell dealers that they could be more profitable in their service departments and they would laugh at me. Their reason was that the new car departments were so profitable (Olds dealers) that they did not care about service. Now days without a strong service department and used car operation it is very difficult to make ends meet in most domestic "franchises".

However, it is even getting tougher on the service end with higher quality and longer maintenance intervals. Add that to the loss of sales and the formula does not work so well.

I miss my employees (I had one who was with the company 50 years and 6 or so over 30 years), my customers and my business partners but I sure do not miss the grind of trying to sell product that was very poorly marketed at the time and maybe not want my customers really wanted. I was forced out due to the termination of Olds but in the end it may have been a blessing!

[ex98thdrill]

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">I was forced out due to the termination of Olds but in the end it may have been a blessing!</div></div>To AACA, it has definately been a blessing.

My uncle had a Ford dealership for 35 years. Between the cost overruns on his new showroom, my cousins somewhat extravagant lifestyle, and with Ford making him keep more and more cars on the lot, the dealership is gone. One of the things that I know use to hurt him was based on the fact that some of his competition were "company owned stores." When other Ford dealers are company owned stores and they're doing oil changes for $20 and under how do you compete with that??

As for the sales associates, I have only bought three new vehicles. I have been in many dealers, but om every case I have made my purchases with the older salespeople. The young kids want your money, and then they want you out of the dealership so they can chase down the next poor sap that walks through the doors.

I don't want to be hustled, and don't want to be bumped, messed with, etc. Give me the price, if I can afford it, we have a sale, if I can't, then I'll come back when I can afford it. I've never told a salesperson that I'm walking out if they go talk to their manager, but after the third time, I leave. On a few occassions the salespeople have called me, and in every occassion I have told these people that the sales manager that they had to go visit with cost them a sale.

As for negotiatiing a price, an earlier post mentioned how we don't negotiate for a pair of shoes or a gallon of milk. I for one don't do that either, but then on the same token, when I buy a gallon of milk or a pair of shoes, I don't take the item back to the store with the intentions of getting money back for it. When I trade a vehicle in, I will negotiate because I don't want to get screwed on a trade-in. I will negotiate for the fair market value of my trade. On my last new vehicle purchase, I walked in knowing what I could afford and what I was looking for a trade in. I never said a word and the dealer came back with a price better than what I was looking to get, so I took it and walked. As for service departments, the only time any of my vehicles ever go back to the dealership is when it involves a warranty issue, a recall, or I'm trading it back in.