How much flexibility do dealerships actually have with pricing?

I talked with a sales person at toyota dealership. He said they only make 2% profit on new vehicles, and he said he wouldn't be able to lower the price more than 2% or he would be loosing money.

Is this true?

 

I got mine 8% of MSRP in Sacramento, so doubt it.

 

How would they stay in business breaking even?

 

“said”

Ask to be shown. Invoice etc.

 

Total profit may be 2% at the end of the year. So if they sell $25,000,000 revenue in cars, they keep $500,000 profit. I got ~13% off and they still made money.

Not sure if this is accurate, but invoice/hold backs here --> https://www.car-buying-strategies.com/dealer-invoice/toyota-tacoma-prices.html

 

All of the flexibility. They are selling the best selling new midsize, and best selling used midsize pick up in America at a high cost to the consumer. Along with all of the other vehicles they sell.

 

Dealerships get rewarded for every unit sold and are making money off every option and accessory sold on the truck. The bed lights and black out packages come to mind, I remember them being double the price if you bought them on the truck, compared to buying them after.
It's true the non-luxury vehicle prices are not as padded as the luxury vehicles, but never believe a salesman when he/she says they're losing money on a deal. Business is business, they're looking to make the most out of every deal. As a customer, don't buy in to it and feel bad for them.

 

I spent a short time selling cars at a pretty large dealership. Very educational. They don't make money selling cars. It's almost all made on service. More cars out the door, more service.

 

Yep this. Sometimes you're lucky to make $300 profit on the sale. Sometimes, you'll make $1,500. But at the end of the day you make your money on Doc Fee's (legit, but pure profit), bullshit glass etching, window tint and pin-striping (usually 100% +markup), vehicle set-up fees (also bullshit), and on accessories and services (legit).

One of the shadiest things from back in my day, is they would have two "blue books" one that the customer saw, and the one that the rest of the world used. So they would show the customer the "fakey" book that showed their car was only worth $800. But in reality, their car was easily worth $2,500. Nonsense like that.

Part of this experience is why I refuse to deal with any dealer where I see any of these tactics being used. Including selling for over MSRP. If a dealer says they are selling over MSRP. I walk. I want nothing to do with a dealership that operates that way.

On the other hand, I realize that the money isn't in the sale. You feel like you just gave them $35,000, but they only see a fraction of that (depending on the vehicle). I also use "i'll come back here for all my service" as a negotiation tool. If they feel like they can make money back on that end, they'll likely negotiate more on the purchase price (assuming they are a dealer playing the long game).

 

Service department and used vehicles apparently.

 

The "invoice" often only shows standard dealer cost vs sticker price. It does not include volume discounts and other hold backs available to the dealer. Even if they sell to you at "invoice", they are making money on the back end.

 

Sticker price on my taco was $24xxx, the online price was $22xxx so the dealer matched the online price and with taxes and fees, ended up being $24xxx out the door.

 

Funny thing is, never trust any dealer, any salesman or manager. Lies, lies, lies is all they know how to do. EVERY single last one of my car deals I’ve done in the past, they tell me they are losing money on the deal. Lol. I know for a fact this isn’t true but they want to make you “feel bad”. They wouldn’t be in business if they lost money on deals.

 

Don't forget about financing ...

Link:
https://www.forbes.com/sites/jimhen...-make-the-most-money-off-of-you/#757775ca1e6f

"Financial results for the six publicly traded, new-car dealer groups in the United States show that to a great extent, dealerships are in the business of selling new and used cars so they can service them and finance them. Compared to the new-car department, gross profit margins for dealerships are much higher for service and parts; also for arranging financing; and for selling extras like extended-service contracts, often called “extended warranties.”

 

That is total bull crap. I bought a used Taco this year and really dived in doing some research and learning some dos and donts. I listened to a podcast that was entertaining but also insightful. I believe it was this one. Hope it’s useful!

https://www.thisamericanlife.org/at-the-car-lot/

 

The Dealerships also cash in on service and parts too. Several years ago a magazine did an article where they bought a brand new Nissan Sentra for around $14,000 then completely disassembled it and priced every single part and it totalled around $42,000.

 

This guy's You Tube site has great car buying information............

https://www.youtube.com/c/KevinHunter/videos

 

The Taco is one of the best selling Toyotas. The salesman doesn't have to negotiate.

 

Yes he would be losing money. Every dollar less they charge you they "lose" money

 

Sometimes actually cheaper as an option on the truck. Example, factory tonneau cover. $650 option but over $1100 to put on after the fact.