Does Employee Purchase Pricing come from FCA or Dealer?

[njt07]

As the title asks, trying to find out if the dealer is “losing money” due to the employee pricing and rebate(s).

 

[PorBoy]

I have never known a dealer to “ lose “ money in any transaction that I’ve seen.

 

[cj7]

Employee pricing is a marketing program from FCA to consumer.
FCA sets the vehicle’s cost to the dealer, and has several ways to amend that cost over time. FCA can also offer the dealer discounts or incentives that change during the year, or based on dealer performance, etc.

While a dealer can sell a vehicle at a loss, it’s rarely done, and not because of a marketing program like Employee Pricing.

 

[jsteinm1]

I have never known a dealer to “ lose “ money in any transaction that I’ve seen.

Maybe my understanding of the system is off- I always thought the dealer was potentially losing money on specific sales where the buyer gets a fantastic deal, but makes money back in the bigger picture from holdbacks from FCA which increase with volume.

 

[GoMango16]

Dealer gets back 5% over the EP price for doing the leg work plus dealer hold back.

 

[Jus Cruisin]

I have never known a dealer to “ lose “ money in any transaction that I’ve seen.

I can guarantee that dealers have lost money to move a car. Now, on the December "Employee Pricing" incentives that I've seen on TV, those are not dealership "losers".

The reason I know dealers will occasionally lose money to sell a car is because I was in the car business for 20 years and about 8 of them I was a GSM. There are cars/trucks dealers get, not because they want them, in order to be able to get the "hot" vehicles that sell immediately. We had to take an EXP to some Eddie Bauers. That thing sat and sat. I ended up sticking it in the showroom with the orders that the only way it was moving out of the showroom was it being sold. I was put a $500 bonus on it for the salesman that sold it. I approved a deal that was below net/net and paid $500 to the salesman to boot. A write off. Every dealer has them.... Cost of business

 

[cj7]

There are several elements to current pricing structures. Those already mentioned, as well as regional programs, Customer Satisfaction Index rating related incentives, floor plan-related, seasonal programs, direct-to-dealer incentives, and others. Dealers often set price floors based on then-current cost assumptions, which could go down after some threshold is reached. So, a dealer could choose to sell below the then-current dealer-set price floor on a particular vehicle, but subsequent changes could reduce the net cost of that vehicle.

Last time I sold new cars, the dealer set price floors that basically targeted CSI money, volume incentives, and programs as the minimum profit - ie the dealer made money selling at invoice, invoice-holdback or even below. Occasionally, the dealer would sell a car or two below the floor, to meet monthly or other targets, that in effect, reduced the vehicle cost or increased the holdback or incentive value.

In summary, never feel bad for the dealer, they know what they are doing.

 

[Granite2WD]

I can guarantee that dealers have lost money to move a car. Now, on the December "Employee Pricing" incentives that I've seen on TV, those are not dealership "losers".

The reason I know dealers will occasionally lose money to sell a car is because I was in the car business for 20 years and about 8 of them I was a GSM. There are cars/trucks dealers get, not because they want them, in order to be able to get the "hot" vehicles that sell immediately. We had to take an EXP to some Eddie Bauers. That thing sat and sat. I ended up sticking it in the showroom with the orders that the only way it was moving out of the showroom was it being sold. I was put a $500 bonus on it for the salesman that sold it. I approved a deal that was below net/net and paid $500 to the salesman to boot. A write off. Every dealer has them.... Cost of business

This is a fun and interesting story and no doubt true. However, the 99% of other times a salesman is saying the dealership is losing money on a deal is not believable to me.

 

[HAL9001]

I can guarantee that dealers have lost money to move a car. Now, on the December "Employee Pricing" incentives that I've seen on TV, those are not dealership "losers".

The reason I know dealers will occasionally lose money to sell a car is because I was in the car business for 20 years and about 8 of them I was a GSM. There are cars/trucks dealers get, not because they want them, in order to be able to get the "hot" vehicles that sell immediately. We had to take an EXP to some Eddie Bauers. That thing sat and sat. I ended up sticking it in the showroom with the orders that the only way it was moving out of the showroom was it being sold. I was put a $500 bonus on it for the salesman that sold it. I approved a deal that was below net/net and paid $500 to the salesman to boot. A write off. Every dealer has them.... Cost of business

So, how do dealers such as Koons, Criswell, and some others sell so far below invoice? My local RAM dealers outright refuse to go below invoice and tell me that's what every dealer pays for the truck. I know that dealers get holdbacks from the mfgr, so they can still make a good profit selling at invoice, but the holdbacks appear to be around $1400 on a typical RAM 1500 and yet the high-volume dealers such as Koons sell even below the holdbacks. My local dealers tell me no one can sell that low and appear baffled when I show them such prices.

 

[Jus Cruisin]

So, how do dealers such as Koons, Criswell, and some others sell so far below invoice? My local RAM dealers outright refuse to go below invoice and tell me that's what every dealer pays for the truck. I know that dealers get holdbacks from the mfgr, so they can still make a good profit selling at invoice, but the holdbacks appear to be around $1400 on a typical RAM 1500 and yet the high-volume dealers such as Koons sell even below the holdbacks. My local dealers tell me no one can sell that low and appear baffled when I show them such prices.

I've been away from the business for a number of years now (I've been retired for 8 years) and now dealer /manufacturer relationships are different. High volume stores do get better deals from the manufacturers with volume incentives. Years ago, that wasn't the case. Now small stores are at a disadvantage.

 

[njt07]

There are several elements to current pricing structures. Those already mentioned, as well as regional programs, Customer Satisfaction Index rating related incentives, floor plan-related, seasonal programs, direct-to-dealer incentives, and others. Dealers often set price floors based on then-current cost assumptions, which could go down after some threshold is reached. So, a dealer could choose to sell below the then-current dealer-set price floor on a particular vehicle, but subsequent changes could reduce the net cost of that vehicle.

Last time I sold new cars, the dealer set price floors that basically targeted CSI money, volume incentives, and programs as the minimum profit - ie the dealer made money selling at invoice, invoice-holdback or even below. Occasionally, the dealer would sell a car or two below the floor, to meet monthly or other targets, that in effect, reduced the vehicle cost or increased the holdback or incentive value.

In summary, never feel bad for the dealer, they know what they are doing.

not feeling bad for them, just getting my arguments in place for when they say it lol.

 

[User_3336]

There are many incentives and back end programs consumers never know about.
Dealers rarely "lose money" on any transaction unless its a vehicle that's been on the lot forever. (2+ years).

 

[scottmoyer]

At the end of the month, the dealer may also get an additional kickback, per vehicle sold, if they reach a certain sales goal. So, the invoice price isn't always what the dealer pays for the vehicle. The holdback is typically 3% of the MSRP, dealer incentives and bonus cash from the manufacturer give the dealer their profits. In states like Florida, most dealers have a non negotiable dealer fee that seems to be creeping up to $800-$900 for every car sold. The dealer fees and doc fees are all profits.

A local dealer by me has an $899 dealer fee. They also had a supplemental sticker on the truck for $350 for wheel locks ($50 from Dodge), they had the rubber floor mats for $350 (the truck already comes with the mats), they had lifetime key replacement for $560, a drop in bed liner for $500, and they had a regional mark up of $2000. If people don't know any better and bought that truck for invoice plus options, the dealer would have gotten almost $6500 (dealer fee, plus 3% holdback, plus mentioned supplemental sticker). They would then get the manufacturer incentives, any profits like paint protection or gap insurance sold by the finance team and it's easy to see why some people are upside down in the car loans, while the dealers are getting new multi million dollar buildings!

 

[Runagun]

They are dealers that make money selling a car and they're others that make money selling cars. The ones that are selling cars look to hit numbers and get money back from the manufacturer.

 

[User_3336]

A local dealer by me has an $899 dealer fee. They also had a supplemental sticker on the truck for $350 for wheel locks ($50 from Dodge), they had the rubber floor mats for $350 (the truck already comes with the mats), they had lifetime key replacement for $560, a drop in bed liner for $500, and they had a regional mark up of $2000. If people don't know any better and bought that truck for invoice plus options, the dealer would have gotten almost $6500 (dealer fee, plus 3% holdback, plus mentioned supplemental sticker). They would then get the manufacturer incentives, any profits like paint protection or gap insurance sold by the finance team and it's easy to see why some people are upside down in the car loans, while the dealers are getting new multi million dollar buildings!

Dealer fees are b/s. I've seen them as low as $99 and as high as $798. And its the bigger, more modern, fancy dealerships that charge out the A** for a "dealer fee". I hate when its called a "documentation fee"....like it cost a lot of money to file paperwork. Many times, the salesman gets paid out of the doc fee (so its nothing out of a dealers pocket to pay the salesman his commission, the buyer did). "Free tank of gas"... Yeah, you paid for every ounce of that gas out of the doc fee you paid. Here is where many dealers are sneaky on doc fees. Lets say on their website, it says "$799 doc fee included in advertised price"....But if you look closely, even if you did get a vehicle at the advertised price, the DOC fee is STILL ADDED as a line item on the bill of sale. So you paid it, if not twice.

The so called "ADDENDUM" sticker, which dealers around here call it are add-ons that are so superficially inflated it blows my mind. $562 dealer cost for running boards, dealer marks them up to $1595. Just like wheel locks marked up 500% profit. Window tint that costs $80 for front windows, sellling for $399. Environmental package for $999. I just flat out tell them I'm not paying that, so we can put that extra out of the picture. I've had dealers totally write off running boards, bed liners, tint, wheel locks to make a bottom line deal. Only idiots or people who have no idea how to shop for a vehicle pay the inflated price for add-ons.

Likewise, my response to any "addons" in the finance is a big "NO". you can waste your time all day explaining the benefits, but after you finish, my answer will still be a "NO". One finance manager told my sister than would lower her interest rate 2% if she purchased the paint protection for her car. DUH, you marked the rate up 2% to begin with. they would have raped her on price if I hadn't been there.

Some dealerships are the slime of the automotive industry. That's why we have choices. Never be so fixated on a vehicle choice without the mindset of walking away and shopping elsewhere.