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Ram pricing - Dealer Cost Assessment

threebabies

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Hello Ram maniacs.

This is my first post. I plan on buying a RAM Rebel soon and have done a metric s**t ton of research on the cost. The dealer is there to turn a profit and make money. That's why they're in business. I had an absolutely horrendous experience in 2006 trying to purchase a used car in Denver which made me apprehensive of dealerships. Now that I'm about to buy a shiny new 2020 Rebel, it lead me to do the research of pricing that I'll share with yall. Let me know if any of this is madness or if, through your experience, it's factual.

1. Total Dealer Cost
The cost of the dealer pays to purchase the vehicle from the manufacturer (Invoice Price) minus manufacturer-to-dealer incentives (Dealer Discounts/Rebates), 3% MSRP holdback (FCA), and other sales quota incentives. The Holdback, Dealer Discounts/Rebates, or sales quota incentives are only paid to the Dealership After the proof of sale has been submitted to the manufacturer. The dealer will typically never want to let you know how much their slice of the pie is for the Dealer Discounts/Rebates or other sales quota incentives because that opens up negotiation for a lower price. I've seen, depending on model, month, and brand anywhere from $500 to $2,000. Regionally, these phantom dealer incentives change and are not universal. Knowing they exist is good enough tool to put in your bag for negotiating vehicle price.

Total Dealer Cost = Invoice Price - 3% MSRP - Dealer Discounts - Dealer Rebates - Sales Quota Incentives (Group Incentives)​

2. Dealer price:
Here's the meat and potatoes of the information. Again, let me know if I'm wrong and need to adjust or research more.​
You can infer the profit the dealership is making based off the Invoice Price. Since we have the formula above for True Dealer Cost and it's unlikely the dealer discounts/rebates are going to be shared, we can likely infer that they are receiving a flat fee or percentage based off the MSRP of the vehicle they are selling as a kickback in addition to the Holdback. FCA is known to have a 3% dealer Holdback; this is a very easy number to find. So, at minimum, 3% of the MSRP of the vehicle, regardless of the negotiated price is going to be given to the dealer for the sale of the vehicle.​
Example: Ram 1500​
$50,000 MSRP​
$45,000 Invoice Price​
3% Dealer Holdback​
With an invoice of $45,000 and a MSRP of $50,000, the dealership is going to make a minimum of ($50,000 x .03) $1500 for the sale of that vehicle.​
I said we could likely infer a minimum of what FCA is giving to the dealers as discounts/rebates/incentives for them to sell. We can do this by looking at the FCA employee discount. Depending on the vehicle, this employee pricing is advertised as "up to" 5% below factory invoice. A reasonable assumption can be made that dealers will still make a profit off these vehicles, although much lower, than buying at invoice price.​
**I do not know the RAM FCA employee discount rate but will assume it's 5% under invoice**
If my assumption of the FCA employee discount is correct, we can reasonably assume that the dealer is only making a small percentage of these low-volume sales. For simplicity sake, I'm going to, again, assume this is 1%. That means the employee pricing (5%) is eliminating Holdback (3%) and reducing profit margin to 1% of total cost. This totals of 6% of Baked-in profit at a negotiated Invoice Price. If Holdback is included in all sales (Not sure if it is) then the figure would be 9% total Baked-in Profits.​
If those assumptions hold true, the true dealer cost is closer to:​
(a.) True Dealer Cost = Invoice Price - 6% Manufacturer baked-in profit - Dealer Rebates - Sales Quota Incentives​
(Unknown) = $45,000 - $3,000 - Dealer Rebates - Sales Quota Incentives.​

(b.) True Dealer Cost = Invoice Price - 9% Manufacturer baked-in profit - Dealer Rebates - Sales Quota Incentives​
(Unknown) = $45,000 - $4,500 - Dealer Rebates - Sales Quota Incentives​
From this example, a $45,000 dealer price has a profit margin of around 6% or 9% of MSRP resulting in (a.) $42,000 or (b.) $41,500 not including Dealer Rebates and Sales quota incentives.​
 

Patsy1099

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Sounds like you have done your number crunching. Depending on the time of year, dealer and where the model is in their cycle, all will add to the numbers and deals available. With vehicles that cost this much, you get as close as you can to a solid deal, at that point in time, then close your eyes. Love my Rebel. Maybe I could have saved a grand or two or three if I waited longer, etc but I’m happy. I’m sure when you pull the trigger you will also. You might want to reach out to these guys and see how they price out. They seem to have some low pricing.

 

threebabies

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Thanks for the compliment. You're right on the timing of models, that's pretty key. The highest consumer rebates come in around June/July and November/December. In further preparation of the negotiation/bargaining process, I watched countless car salesmen training videos from Steve Richards and others. Steve mentions that the truck market in the NorthEast is very cutthroat with margins supremely low due to larger volume of sales. Koons was specifically mentioned. I'm in the middle east right now and planning on getting my truck when I get back.

Koons does have low initial pricing at 12,000 - 14,000 below MSRP but i'm not concerned with that number. Ideally, I want the car salesman (no matter how much they protest) to provide the invoice price so I can gague the profit margin.

TL:DR - I don't just want to "Feel" like I have a good deal. I want to "Know" I got a good deal.
 

Mac15

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Sounds like you’re well down the right path. Reading up here (and on other truck forums) it seems that the best dealer discounts are about $1000 under invoice depending on trim. Others might have haggled more but I think that’s a fair gauge for most. Last year’s 25% off MSRP June deals were the best I noticed when looking at Ram Limiteds. That included dealer discount to $1K under invoice and another $10K in Ram incentives. Ultimately I did not buy, but wish I had because the deals have not been that strong since. Dealer cost is one area where we can save but the deals can really be incredible when the manufacturers crank up rebates and give up some of their profit margin as well. The $17-18K off deals last year were stout! Good luck in your search!
 

Willwork4truck

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About all I can say is wow, what a lor of work and self-made stress. Once youve got a fair and reasonable price in mind, then just buy from whomever answers your emailed request for bid.
Sounds we are quite different people and thats fine. I overpaid (ignorance of the upcoming June deals) and really dont give much of a sheet cause its the truck she wanted and I had a bad taste over the cheapo K dealer games
If price is ultimate then by all means haggle away. Sounds like you are ready to.

(Edit-I don't want you to think that being a firm and informed negotiator is anything bad, just don't sweat every last dollar.
IMHO its not worth fighting over every last buck. )

I’m glad that so many buyers benefited from the June 2019 deals and now the (done) employee pricing. I’m especially glad to have let my son know about the June deals (thanks to this forum) and he saved big time $.

Ultimately as long as you are happy about your truck and price, its all good no matter what the pricing is/was.

One thing that some people seem to forget is that the remaining stock 2019’s are a full model year old and need to be heavily discounted, while it is not right to think that 2020’s should come as cheap.
Do the best you can then let it go and enjoy the best truck out there today.
 
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jimk hunt

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I ordered my truck from Koons and it was a painless transaction. I did it that way so I got exactly what I wanted on the truck, nothing more, nothing less. So I didn't pay extra for 22 inch wheels or ventilated rear seats, and I didn't have to settle on a color that wasn't my first choice. If you have the time, ordering your truck is the way to go.
 

derp

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I had a lot of success in negotiating a better trade in price and vehicle price.

The next time I go to buy a truck I will be changing the match instead of price to be about research into TSBs in the model year and whether or not they risk leaving me stranded, and has the dealership proven that these issues are checked and corrected before handing me the keys.
 

ldoh

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I try to always take the path of least resistance by online negotiations with high volume dealers that have great vehicle selection while selling at invoice, give holdback and all qualifying rebates, discounts, and incentives. That and timing will get you the best deal. All said and done, you can get 30% off MSRP on a current model year vehicle with no add-on dealer profit generating garbage.
 
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V8Spock

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The only way to really know if you’ve got a good deal is to competitively bid similar vehicles in your market that are on the lot. Some dealerships will have met their monthly/quarterly/yearly sales goals and some will not. One will be within a few vehicles of a massive sales incentive. That’s the one you’re looking for.

The invoice price of a vehicle is just as fake as the MSRP. It cannot be used to figure the manufacturer to dealership cost of a vehicle. Auto manufacturers started making them up around the time that pricing became visible on the internet. When MSRP and invoice became common knowledge, manufactures hid vehicle costs in behind-the-scene incentives. The actual cost is a highly guarded secret that is never shared (especially with customers).

So MSRP and the invoice aren’t real... what do you do?

Find as many similar vehicles as you can that meet your specs in your market.
Contact each dealership and request the final out-the-door price including EVERYTHING (price, destination, fees, tax, tag, tile and kitchen sink).
Shop the price with the dealerships that will play the game.
Only step foot in a dealership to inspect, sign and drive it off the lot (or have them deliver it to you).

As for Koons, I beat their fixed price by $3,500 and $3,750 at 2 dealerships in the DC area. Picked up my truck exactly one year ago today (Dec 29, 2018)!

Nothing beats the competitive bidding process when buying a vehicle.
 
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