Why are people paying mark-up for a toyota?

And the difference was.......

 

Invoice pricing ? If you get it from the dealer, you really have no idea what the dealer actually paid for the car. MSRP, dealer invoice price, shipping and handling....this is all pricing information from the dealer that seldom if ever tells you the bottom line costs. Negotiating with these items from the dealer is a lost cause. You are playing their game. If you pay cash, the only thing you should be concerned about is the " walk out the door price". If you have a trade, the only thing you should be concerned about us the "difference" you pay. If you haven't done your job ahead of time and determined what a fair price for you to pay for a truck is, then the dealer has done it for you. If you negotiate with " his"numbers, you never get all of them. You might as well just hand over your check book and invite the salesman to fill in the amount.

 

Which is why you start your negotiation at invoice as opposed to X amount over invoice or MSRP.

 

Unless you have done your own research , the invoice price they give you, is NOT WHAT THEY ACTUALLY PAID FOR THE CAR. Invoice prices are constantly affected buy factory kick backs and incentives, or "sales" as we call them in retail.

 

they're called holdbacks and they start at 2% of MSRP at Toyota (additional 1% for financing) and go up from there based on dealership sales tiers.

I value and sell car dealerships for a living which means I have to throughly exam the books. I get to see everything. I look at the internally prepared books for the last five years, tax returns, take a look at inventory, how much the owners of the dealership are taking home, and how much they are running through the business... Basically, I have to know every aspect of the business.

If you buy at invoice and pay cash, the dealership will net a 2% profit. If you finance they'll net 3%. Think about how little profit that actually is. I've never seen a dealership that makes any money on new car sales. They make a little on used cars sales and a little more on service but it's still an extremely low profit margin business. The internet killed all that years ago.

We have access to RMA. They compile financial info for companies (primarily from banks as companies submit financials for loans and lines of credit), sort them by industry, and produce reports so you can get a feeling for the average financial metrics for companies in an industry.

The average profit before tax for car dealerships with revenue $10 million to $25 million for the last eight years was 0.5%. The average for dealerships with revenue over $25 million was 1.4%. This includes service revenue. If dealerships are in the business of completely ripping people off, they are collectively terrible at it.

 

Most car dealers are bad at their business. First there are too many dealers. Second most are not good business people. But look at all the very successful dealerships that exist, that's why people keep thinking they can open a dealership. It's sort of like the restaurant industry. Collectively I'm guessing the restaurant industry is not very profitable. Restaurants open and fail all the time. Most don't make it, many others just squeak along. But a good restaurant or a good chain can make lots of money. So can car dealers. Just ask Warren Buffet. He didn't buy one to lose money. That an industry loses money collectively means squat.

 

Nice post. Having been in a dealership (years ago) and now friends with the owner of our local Toyota & Ford dealerships, it's nice to see a rational post that's actually true.

 

I personally like so many other people have gone into a dealership several times throughout out my life. Haggle, walked out been called back several times and watch them juggled the price around. Car dealerships don't do me any favors and by the time I drive the new car/truck off the lot I get the sickest feeling like I got food poisoning. I've worked hard for my money and hate having to deal with idiots that have only one interest, in getting every nickel out of me. Today's dealerships look more like an airport, tall ceilings, all glass walls, wall mounted TV sets, wifi, a cook to make sandwiches and coffee. Someone has to pay for it and it's not going to be me! If their not making much money, then why are they living in big house on a golf course laughing at us? I'm all for Tesla, they only been around for only several years. Their quality and performance are better than any other car manufacturer in the world, and the car dealerships dislike the way they sell their cars. Too bad!

 

LOL you don't actually believe that one price shit do you.

 

I think a lot of people don't appreciate that markets differ from around the country. What may sound unreasonable in some markets may be the norm in others. At the end of the day, people buy emotionally and justify logically. That said, some will satisfy their craving for something at any price and be content. Doesn't mean they're wrong, just different from how others buy

 

These always make me chuckle. Someone who is involved with a certain event once in a great while, and posts online acting like they are the king of said event. All of the sudden we become internet lawyers, doctors, construction contractors, electricians, ect ect.

Who are you to tell someone else what to do? Why would you pay "mark up" for a lexus or mercedes? Why would you offer $500 over invoice when some people pay under invoice? Your "rules" are incredibly arbitrary. Yes "dealers" lie, so do "customers". You lie too, JustaToyota.

Here's a rule for you, don't get upset over things that don't effect your life. Worry about your own business, the market place will set itself regardless of you and your minuscule transactional impact.

 

This is so true. You can't buy a 2016 Tacoma right now in Southern California at only $500 over invoice, hard to get $1,100 over invoice. Too many people here right now willing to pay closer to MSRP. I don't blame the dealers, if people are willing to pay for it the dealers should get it. I'll wait till the demand goes down some before I'll buy.

 

Exactly. When some of the limited edition muscle cars hit the market, people were (are) paying 20-30% OVER MSRP and are happy to do it

 

Yikes

 

Hi guys this is my first post. I sell Toyota's in Orange County. I am curious, we just started discounting Tacomas but where in the country are you buying them for invoice?

 

Excuse me for miss quoted terms but otherwise, I stand by everything I said. You cannot go into a negotiation and decide your self from the information given to you by the car dealer what is a good buy. This is especially true with trade ins. I an aware where much of the profit comes from and it is not in new car sales and we over state how much you really save when buying the car when it's the service and extended warranties and finance charges if you choose, which net more profit. IMHO, if you are totally honest with the dealership, you will get honesty back. You can't go into a negotiation when you don't intend to buy. IMHO, it's dishonest on the customer's part and is not good for relations the next time you are there.

The dealerships will know what I say when I make an offer that it's something that is reasonable and I expect the dealership to profit. They will also know that if accepted, I will buy the car immediacy. If not, it's up to the customer to be honest as they could miss a sale elsewhere. They appreciate that as much as a sale.

IMHO, over the years, there can be an element of trust that developes with customers who not only buy the car, but have their service done there as well. Good prices are not that difficult to get if you treat them with respect regardless of what you have for a preconceived notion of a dealership in general.

 

My cousin was a third owner of a small dealership many years ago. If I told you the dealership, some would recognize it in the North East in a couple of states where they have expanded from their roots. They did not "sell new cars" they sold service and follow up care. The cars originally were crappy, at that time, Subarus. They became one of the biggest seller of Subarus in the world, simply because, Subbies weren't that good but they still sold a ton of them. When they went to AWD exclusively, it expand their already solid market.

The car was quite poor initially, but these guys still sold enough to spread out to other makes. Their philosophy has never changed. They still cars the same way. The service prices were less or equal to any other independent in the area and the parts were very reasonably priced, so you never thought of not buying OEM. I don't know how they did it, but it work.

I remember one after noon when I had an older Subaru, my cousin stopped by with a pair of fenders. He told me, he was giving me the fenders for my Subaru because they could rust through at any time. He knew I was handy enough to repair my own. When I ask if he was doing it just for me as a cousin, his reply was, "no, you're no one special. We treat every one this way." I didn't know whether to feel good or bad.

 

paid 37.5k msrp was 38.1k, however good frikking luck at finding trdor 4x4 dc's in socal, almost impossible. I wasn't willing to "order". Oh and true car (not that true car is great) reported that's what people were paying so, good enough.

 

Didn't Saturn try that?

 

Information is power.