The truth about auto dealer invoice prices (2017)
clark.com
clark.com
My uncle was a top car salesman in his area at that time. He said guys would come swaggering in with a printout from the internet, and he'd be like "so what - go somewhere else, then" because it didn't matter - no one was going to sell you the car at zero profit.
If they "secretly" raised the "invoice" price it was almost certainly so they wouldn't have to deal with boneheads constantly coming in and demanding to buy the car at cost.
Anyways, his advice today? Lease. And if you're trading in, wait until the day you're supposed to pick up the new car, then call in and say, "you know, I think my trade-in is worth more than that" - they will always negotiate at that point.
Personally I decided buying cars a few years old made far more sense.
I think it absolutely does. I actually go for older than that, Typically 6-8 years or even more. Right now my newest car is a 2006 which I bought last year.
I can understand the appeal of new if you are buying to keep for a long term, or something exotic. Outside of those I don't know why anyone would buy new a thing that loses half its value in the first two or three years. Still it provides plenty of choice in the secondhand market. :)
Not everyone places value purely in the monetary realm. Some people view cars as a status symbol. There is also less hassle with leasing.
That said, I get it. Some people place a ridiculously high value on having the latest. I think I used to be in that population, to an extent. Nowadays, I confess this mentality leaves me ridiculously confused.
The dealers will sell the car for next to nothing because they owe money on the car, and get stuck with inventory they don’t want. Your Toyota dealer doesn’t get his high margin 4Runner unless he takes a view Yarii (or whatever the tiny Toyota is). This is the same reason bars sell well liquor at a loss.
Even if a Rum & Coke is 5 dollars (I'm used to it being more around 8-10$ on average, but being conservative), the unit economics still seem extremely profitable to me. I would think the coke from the fountain costs pennies, and the shot of (well) rum would be max one dollar.
For comparison, with beer you're looking at about $2 per beer retail ($50/24 bottles) and likely to pay $8 or more at a pub. This suggests a similar markup on beer to spirits, at least here.
Note however that a proper martini (or manhattan, old fashioned, etc) is likely to get you the best bang for buck as a consumer - all the 'fancy' drinks marketed toward women like frozen margaritas etc usually contain less alcohol but retain the same price tag.
I know one guy who had his own vehicle. But right before breaking up with his girlfriend she took out a car lease with his name on it. After they broke up he not only never needed the second vehicle, but also couldn't get out of the payment, so he had to get a second job just to cover the payment on a car he didn't need or want.
So yeah, there are people who want to negotiate a fair price, and then there are inconsiderate boneheads.
If the alternative is buying a used car, then leasing is definitely different, but that's orthogonal to the mileage issue.
It brought the price a few thousand lower than the supposed "invoice minus holdback minus whatever", but I suppose they wouldn't have sold the car unless they made some profit on it.
Reason? Those agents are comp'd based on volume over minimum, not on margin (or how the lot salespeople are measured).
End result? If he or she can sell you a car in 5 minutes for over the minimum, they'll happily do so and then chase the next sale.
One example: sometimes dealerships are selling you a vehicle at a loss, in hopes they'll hit the next volume tier, earning enough manufacturer rebates to make a net profit on the deal. And they have to cut their prices that low if they're in a competitive market.
Which turns the entire endeavor into a monthly game of musical chairs. "And 3rd place? Third place is you're fired."
I went to the dealership with her, we both drove the car and made sure it would fit in her driveway (steep with sharp angles, a recipe for ripping off front trim). On the way back to the dealership I asked how long the paperwork would take. The salesman (actually the sales manager) said it takes a couple hours because of 'state requirements'.
She asked him to match the fleet broker's price, he said it had to be a scam and refused so we drove away. On the way to lunch, she called the fleet broker and had her insurance agent send him proof of insurance (she already had financing arranged). As we sat down to eat, the fleet broker called back and asked when she wanted the car delivered. She got it delivered 2 days later and spent less than 5 minutes doing the paperwork.
I have always fantasized that the next time I buy a new car, I'll figure out a reasonable price and take a cashier's check for that amount to the dealer. I imagine telling them that I want to be on my way out the door with the keys in my hand in 15 minutes or I will leave. But really, why waste time on that when I can just call a fleet broker?
I've heard of dealers pulling out of an agreed deal when they learn the buyer wants to pay cash.
I knew a guy once that would go to dealerships with a graphing calculator (just for show) and tell them how much profit he was willing to let them make. If they said no then he'd tell them "Are you sure? you can make this much money off of me right now, or give it to another dealer who takes the offer"
E.g. loan at 0.9% and you can get WAY more than that by sticking that $40k in even a safe mutual fund.
Is there something I'm missing here? I'm extremely confused as to why someone buying a car, even with insanely good credit, would get a FAR better rate on borrowing money than the US Government.
I don't have any particular insight into this industry beyond my own personal experience though, so there's a non-trivial chance that I'm wrong with regards to the general case.
Exactly. Most auto makers would actually be better described as financing companies that happen to build autos on the side. Particularly when you look at their financials and realize that all of the actual profits are coming from financing and that actual vehicle sales are often a net loss if taken by themselves.
I suspect the local sales guy pockets any loan origination fees; the automaker is just paying that as commission for the actuarial likelihood that the people who finance will default at a rate that still makes it profitable when taking into account the benefits of maintaining low inventory in a given model year.
If Toyota doesn't want to offer $rate, Hyundai will - and now Toyota has to match it or they lose market share. (Of course, it's more complex than that, since obviously people get car loans from banks, but most of the big automakers have finance arms).
Loan origination fees are a thing.
[1] "U.S. car dealerships [are] protected by state laws. Most state laws expressly prohibit manufacturers and distributors from operating retail outlets. They must by law sell their vehicles through independent franchise retail distribution network." https://www.theglobeandmail.com/globe-drive/culture/commutin...
[2] Most recently: https://news.ycombinator.com/item?id=17260911
Interesting. Not even Germany has such a law, I wonder whether that makes the US a car maker or rather a car seller country?
I think the same thing may be true with tech employers and their on-site benefits. Sure, the employees aren't eating out in town as much, but they are still eating. For the line cooks and other service workers, there's still work to be had. Its the people who are in the business of owning service industry businesses that are in trouble.
How much maintenance do electric vehicles (not hybrids) need? Probably less than 25% of that of IC vehicles.
Oops. There goes 75% of the service department. Which is probably a higher margin area than sales. They mark up the parts and then bill $150 per hour for labor and probably pay mechanics less than 25% of that rate.
If I owned a new car dealership I'd sell it within the next 5 years. Because EVs are coming.
If built to be good cars, not profitable cars. The cynic in me says that manufacturers will find some ways to raise the maintenance requirements of EV to maximum level they can still get away with. Such is the way markets work.
I think you're spot on with your cynicism. But maybe the market won't let them get away with it, if there's sufficient competition?
Here's my sad story of what you allude to, regarding a washing machine (or maybe it was a dryer I forget now):
An electric motor is fundamentally an incredibly reliable part. I'd venture that there are still some 100-year-old electric motors in daily service.
The "contactor" (fancy word for a high power relay) failed. This contactor controlled the electric motor which made the drum turn. Turns out that the field replaceable unit is not the contactor, but is an assembly that combines the motor and contactor. So instead of being able to replace just the relay (which can be prone to failure after some years of use), the entire assembly must be replaced. A perfectly good motor thrown away because the contacts on the relay controlling it went bad.
The replaceable unit cost $320 (this was a while ago) instead of perhaps $20 for the relay itself!
In our case all the dealers for one brand were owned by a single conglomerate(under different names) however as soon as we mentioned we had a lower quote from a OR dealer(this was in WA) they suddenly dropped their prices significantly.
Google's Waymo is going to be available to the public in less than a year...
People buy cars and expect them to last between 7-10 years.
With Waymo soon to be available to the general public, why would anyone want to buy a car and make a purchase that you pay for over 10 years?
Because (majority of North American cities, and many others around the world, are impossible, impractical, or difficult to live with without a car), multiplied by (variety of lifestyles, people, locations, conditions, health, jobs).
[In reality, I assume you understand the answer to this question but there _are_ people who genuinely don't - their age, health, needs, job, location, lifestyle and wealth are such that they can get away without one, and lacking empathy or bother, don't understand not everybody is in that very specific slot]
>>People buy cars and expect them to last between 7-10 years.
I bought a new car in 2004 and am still driving it. I go to dealerships for fun with my dad few times a year, but am in no rush to replace. When I do, I'll expect at least 10 years out of it (tricky with the welded entertainment systems these days, but you can still get a car without a Touchscreen, if you try hard ;).
>> With Waymo soon to be available to the general public
See #1. Some people need a car now; some people need convenience, availability, particular size, etc; some people will be outside of target markets for years if not decades; etc etc etc.
Again, I understand the question may have been meant to start a discussion, but I feel there could've been less intentionally provocative ways around it (or, if it were purely genuine, for your own sake, dear goodness, open up your eyes and empathy gland a bit and notice the world around you - talk to or make some friends who are in different positions, travel, watch some TV, etc :-)
Out in the country/rural area? You're may want a truck that's matched to what you tow/haul/etc. Pretty sure it'd be against Waymo's ToS to haul your garbage into the dump in places where trash service isn't a thing.
But perhaps you didn't mean buy. Perhaps you mean "use it like Uber now". Well, I don't want to use Uber for all my driving needs now - why would it be different once it's Waymo instead?
Also, we're a good 10 years minimum from viable self driving cars, and people I know in that industry say it's more like 15+. It's a fucking hard problem, and one where you can't screw up. You screw up and people die.
Self driving cars also will not clear up road congestion. Even if every car was self driving, they still take up a shit ton more space than a train and transport a fraction of the people. I wrote about this a while back:
https://penguindreams.org/blog/self-driving-cars-will-not-so...
A suggestion that bikes replace a car for a family of 4 strongly suggests that the author doesn't have kids.
Spoiled children we are in the western world.
Waymo will cost way more for a long time, assuming its street legal and available.
You buy a car today because it saves you time and provides utility.
Anything inside of 15 miles or so is fair game and I’m almost always faster than a car and guaranteed faster than public transportation. Kid and grocery hauling is well within reason. And my weather is about as weird as yours.
Not to be glib, but what about the old, the young, those who cannot come in sweaty to work, those who don't live in Caribbean / those who need to get out of their house more than 6-8 weeks out of the year, those of poor health or limited mobility, those in places which are not friendly to bikes, those who need to go with somebody, those who need to carry stuff, etc?
My pregnant wife, my 73 year old dad, my waist-down-paralyzed nephew, my asthmatic self (no made-up examples) cannot take 15 mile trips in Canadian Winter through a place lovingly called "Halton Hills". I have two friends who can. They did for one season, they told everybody how awesome they are, and their bikes are now in the locker.
And taking home the amount of groceries that I do on a bike would be impractical, and if put in a backpack, probably hurt my back.
I cherish having the choice to take a car to these kinds of places. No way a bike would be faster because whenever there's someone on a bike in front of me on these routes, I have to slow down, and these routes are never badly congested. Admittedly riding a bicycle in a bike lane can be a lot faster in some of the most congested parts of the country like Manhattan, but there often aren't bike lanes and using sidewalks is a point of contention.
Your dog can run leashed next to your bike, it's a very common way to walk dogs.
Or you could even walk, half a mile is super close.
>"it would be weird using the drive-thru"
Yeah probably a bit. Go inside instead and sit down to eat, maybe?
>"it would be uncomfortable on all but the few days of the year that are a perfect temperature"
You get used to it extremely quickly, trust me :-)
>"I'd be much less safe in the case of an accident"
Even in a car, I would avoid a place like that, and find an alternate route. That just sounds like an accident waiting to happen, to be honest, no matter your mode of transport.
>>"And taking home the amount of groceries that I do on a bike would be impractical“
Yeah, if you only shop once every week or even two weeks. My girlfriend and I manage grocery shopping quite well on foot and bike, and I would think we buy an average amount for two people.
I know it's easiest to stick with what you know, but there's always an alternative.
Biking across a street with her beside me? No. She freezes sometimes when there's something like a dog or just a person she doesn't like in the distance, and she can be stubborn about running regardless. If I was biking at a speed she could keep up with then I might as well walk. And I wouldn't make her stay outside that long in extremely high or low temperatures, especially 10 minutes both ways.
> Yeah probably a bit. Go inside instead and sit down to eat, maybe?
Like I said, I like to bring my dog, and you can't bring doge inside a restaurant. Taking her with me there and giving her a bit of bacon/whatever has been a great positive reinforcement to make her see car rides as a positive.
> Even in a car, I would avoid a place like that, and find an alternate route. That just sounds like an accident waiting to happen, to be honest, no matter your mode of transport.
You're less visible in a bike. It's not a big deal with a car, I just go slow and stay prepared to stop. The speed limit the entire trip is 25mph at most.
>You get used to it extremely quickly, trust me :-) > I know it's easiest to stick with what you know, but there's always an alternative.
In college I walked across campus for food daily. At my job training when I was in a hotel I walked to the nearby mall or Wendy's for food daily. I never particularly got used to freezing temperatures on my face (and sometimes texting gloves weren't enough for the hands) and very hot temperatures. Even in nice weather I didn't like all the walking college entailed. After all this I greatly appreciate having the option of driving, not to mention that I've come to enjoy driving in its own right.
You could train you dog to run alongside you, just like you've trained her to go on car rides. You could sit outside with her and eat.
Setting up mental barriers is very common in order to avoid things seen as uncomfortable or strange, but sometimes you just have to try. See the world in a new light, rather than through a windshield. Enjoy the fresh air (while we still can).
And I do go with the windows down when it's reasonable to do so.
Other than that, I took the bus/LINK nearly every day to work when I lived there, and a ton on the weekends, and never had issue with the Seattle bus system. I knew people who took the bus from up in Linwood at the park and ride; way better than trying to drive through that shit in the morning.
ST3 is going to help a lot too. A train to Redmond and up past the University. That's going to be amazing when it goes live.
I am not OP, and I am not sure where in the Seattle area home and work are, but my suggestion is to move somewhere where you don't have to drive as much.
Fully aware that many people don't want to do this and will even get angry at the suggestion. But speaking personally this is doable. I myself lived in the walkable part of Bellevue, then I lived in SLU shortly before the tech boom hit full steam.
I since moved to SF and my kids were born down here, so I do not know the Seattle kid experience well other than to say when we go back we stay downtown and walk everywhere without problems.
There simply isn't a place in North America, let alone the world, that a) Is amenable to a non-driving lifestyle, and b) has room for all the people in the world.
It is not a universally applicable advice; it is virtually by definition only doable by select few. The rest of the population will still have to deal with reality of things.
Fully agreed - exactly the point :-)
For the foreseeable future, we'll have to live in heterogeneous environments with limited "one size fits all" , or "implementable immediately by all" solutions :-/
Even if you don't interact with them, you see them .. you see all sorts of people from all walks of life. In the 60s we were all in our books or in newspapers. Today we're all in our cellphones. We don't interact, but we see each other. That changes perceptions. That changes the way you view people.
When people go to work in their cars and yell at other faceless cars, they don't truly see people. It changes who we are.
Knowing that, the most effective way to get the lowest possible price is to spend as much time with a salesperson as possible. Test drive every model, have them dig up odd questions and get them convinced that you’re going to buy. After all, a serious buyer would never take so much time if they weren’t serious.
The sales rep will see all the other potential buyers coming into the lot getting help from his competing reps. This isn’t a big deal if she/he is convinced you’ll buy.
After spending all day, walk away. And do it at the absolute last minute. The sales rep and their boss will do everything they can to get you locked in because 1) they were already set on you buying and 2) they burned a huge amount of time helping you and missing out on other buyers. They’re too mentally invested in seeing you buy.
There’s no guarantee you’ll get something at cost or at a loss but you’ll put the power in your hands and be working with someone who’s as invested in buying as you are.
The idea that you can email your way to the lowest price is far less effective. The amount of time it takes for a car salesperson to reastart one to an email is trivial compared to burning an entire day test driving vehicles with you.
Great QA right off the bat.
some folks prioritize the former or feel like they have time to burn