How Do Dealerships Really Work??

I am bringing this up in regards to people buying their Tacos and wondering if they got a good deal or not.

So when I bought my truck I wanted to get the best possible price on it as anyone would expect. I found a website that gave out the Actual costs the dealer puts forward to get the truck from toyota including all packages and accessories. Cost 20 Bucks but was valid. It was not INVOICE either because there is no way in hell a dealer would sell you the truck just above invoice if thats what they paid for it. They would only make 500 per truck then pay out commission to sales men etc... Doesnt make any sense.

Anyway when I got my 2008 4x4 DC Tacoma Sport my sticker was almost $32K I walked away with a final OTD price after all fees and taxes just at 31K If I remember correctly and this was because I paid INVOICE price on all accessories and the truck $28,100 before fees and taxes

Anyway the report that I bought I was hoping it would give some wiggle room on the price but it however didnt help it just made me feel like I didnt get any deal at all. They stated that the invoice price is not the dealers true cost due to kickbacks and incentives Toyota offers to them.

The report states that a 4x4 DC tacoma costs the dealer about $24,000 add around 2000-2500 for Off Road or Sport Packages and what nots. So by the report my Truck cost the dealer around 26500 and I paid 28100 so they made about 1600 after all was said and done.

If anyone has ever worked at a dealership and has insight on this I would like to hear it for future car buying.

 

The dealer does encounter more costs yes. If for example, the vehicle is damaged in any way (chipped paint, chipped windshield, etc) in transit for example, they have to contract it out and get it repaired on their dime. They also have to factor in lot fees, dealer trades sometimes has a small fee attached to it. The vehicle is also supposed to have a full cleaning inside and out before delivery so that means costs to their detail guy. So on and so forth.

What they made off of you sounds about right. They don't make as much money off the customer as I originally had thought.

 

I think the dealer cost is a bit lower than that with kickbacks and such, but I've been wrong before. Sticker on my 2008 was like $31,300 or something. I ended up walking out the door at $25,400 + tax/title. That was without any rebates - and was internet pricing for the dealer.

 

I'm not a dealer but I have done a lot of reading about dealerships and how they work and the differences between a used car lot and a new car lot.

At a local dealership, they do what's called "no-haggle" pricing. The bottom dollar selling price is just that, they wont go any lower than that price.

Every vehicle has that "Sticker" on it and it will list all the information about the vehicle and what it has on it and how much each major line item costs or is valued at.

For Example :

Base $25,000
(Is this the true base cost / price? IDK & IDK who does.)
Package X $2,500
Upgraded CD Player $500

Manufacturing / Delivering / Processing / Handeling $800

(then they'll total it up for you) $ 28,800

MSRP $ 28,800

(then they'll list an INVOICE $) $26,000 (and this would be the amount to be paid)

Makes you feel like you're getting a good deal doesn't it? $2,800 OFF is what it looks like.

Maybe you are, I myself wouldn't know if I was.

But I've read that all car dealers have whats called a "Hold-Back" - a certain percentage that they add to their cost in order to make sure that make this certain amount of profit no matter what.

So typicaly - INVOICE PRICE - (INVOICE PRICE X 3%) = DEALERS ACTUAL COST

So $ 26,000 - $780 = $ 25,220 where $25,220 is the dealer's cost

In my case, knowing this has down nothing more than upset me and made me want to try and figure out how to take that $780 off the table.

No offense to any salesmen or dealers, I know you guys have to get paid and all.

Used car sales are different, at most used car lots (that are apart of a new car dealership) build about $5,000 on average probably in to each of the used cars. This is where the dealership (as a whole) truly makes their money.

I went to a used lot (at a new lot dealership) to look at a truck. I asked the salesman to go pull the Carfax report on the truck, and while he was gone, he left a piece of paper (this was his 4-square) on the desk that had all sorts of things written on it including a price in big numbers. But I realized that the number was lower than what those orange and yellow stickers on the truck said. The number on that sheet of paper was $5,500 less than what they were asking for, and the number on that sheet was how much money the used car lot had in that truck. If I would have paid them what they were asking for, that salesman would have been a very happy man because he would have gotten 30% of the profit. But he wasn't going to make it off of me, especially after being as negligent as that.

But would you want to pay $5,500 more when there's a possibility that might not of had to?

I didn't want to.

Of course he didn't like my offer and wanted to know why it was so low.

When I called them out on building $5,000 onto the vehicle, they got pissed but didn't know what to say.

I walked away.

I didn't get the truck for other reasons - Financing on a used car is typically twice what you would pay in financing on a new car. But that's a whole other subject.

Say you're looking at two similar vehicles, one is used with 30K miles on it and the other is brand new. The only difference is the year model and the miles.
If you can't get that used vehicle for at least $10,000 less than the new, you will end up paying just as much, if not more, in finance charges.

If you are a salesman and this upsets you, I'm sorry, but sometimes I think you guys should be paid hourly or salary like most everybody else.

I don't know if any of this has been helpful, but it's what I've come to understand after all of the reading about stuff and interacting with salesmen.

 

The dealer probably pays interest on the car until it is sold. As for repairing cosmetic damage and cleaning, dealers charge a Pre-Delivery Inspection (PDI) fee that is often non-negotiable.

Toyota pays the dealer the holdback after the car has been sold. You typically will not be able to pry the holdback out of the dealer.

The holdback varies by specific model (probably adjusted depending on which one Toyota wants to move) and maybe even region. According to this link, the holdback for 2010 Tacomas ranged from $300 to $550.
http://www.car-buying-strategies.com/2010_Pricing/toyota-tacoma-prices.html

Purchase used cars from private sellers if you can. Eliminate middleman.

Leasing is slightly more advantageous than financing in high-tax states, because the tax on the buyout portion doesn't incur interest during the lease period.

 

For us the PDI fee only includes the mechanic going over the vehicle, short test drive to make sure it shifts into every gear. They also check that the Tire Pressure Sensors are functional as well as everything else.

Esthetics aren't included in there.