Martin S.

I am eating some crow on the Consumer Reports report post of a few days ago(Bring on the Feathers!) . It has come to me as I have just been through the final negotiations of buying a new Toyota, the value of the CU Report is not on the Dealer Cost and MSRP, you can get that from Kelley Blue Book, Edmunds and other sources. The real value is in informing the subscriber of the Dealer Hold Back amount...as an example on the 2006 Tundra, Hold Back it is close to $700. If you negotiate to "dealers cost" you rascal you, they will still make money from the Hold Back. My Toyota dealer will sell you a car at "Dealer Cost", and then add a mutually agreed to (negotiated) amount to each car for Gross Profit. Their is no mention of Dealer Hold Back unless you bring it up. As am example, if you agree to $1,000 over Dealer Cost, they really make $1,700 to move the car through their dealership. However let's note, out of the $1,700 they must pay their overhead, such as warranties and sales expenses, + keeping the lights on.

WE all know that MSRP is just so many words. The dealer can sell the car for over or under this amount. Dealer Cost bis another buzz word we hear. From what I have observed and my very recent car buying experience, "dealer cost" is a misnomer. There are few dealers that would want to put up the capital to finance the huge inventory required for a dealership....think of the cost of 300 cars at $30,000 a car...not pretty. Every day the car doesn't move, eats into their overall monthly profit.

The dealer doesn't buy the cars. Their inventory is financed by the manufacturer on some sort of short term lease. I am certain the dealers horse the manufacturers around on the financing rates and special lease terms to reduce their overhead, why wouldn't they?

Hmmm, that brings up a point, we see Ford and GM in deep trouble, yet their dealerships seem to thrive! When was the last time you saw a dealership go under? Apparently it pays to be the closest to the money!!!!

Figuring out how dealerships "Really" they make their money is over my head...I want my Toyota and Porsche Dealers to make money and stay in business...to service my cars and to do warranty repairs, if needed.

I now have my Tundra...the internet buying experience was pleasant. My guy is Mr Hong Jiang from San Diego Toyota...their Fleet/Internet guy. No compensation, direct or indirect, for this mention.

SCMomentum

FYI, Dealers make even more off of the purchase than "Hold Back". Hold Back is just another rarely discussed portion off the top of the "profit margin".

Bull

Exactly, otherwise you wouldn't see all of those "selling below dealer cost" advertisements. They don't even allow their sales people to know what the real "cost" is. I was involved in fleet buying years ago, where we did our dealing with the factory, then took delivery through a local dealer. The dealer got volume credit and $50-$100 to "prep" the cars, so we ended up doing the real prep. They would deliver cars to us with obvious problems (hood hinges not connected on one side, seats not bolted down, etc), then when we would ask how that could happen, the answer was "once we deliver the car, the fix is under warranty and not out of our "prep" budget.

It was a real education to see all of the variables that go into the pricing of domestic cars and trucks to their dealers. Many of the "foreign" manufacturers have become similar in their ways, particularly as they have vertically integrated their US operations.

jnx

I was not aware that the Mfgrs financed, or leased the vehicles to the dealers. I always thought the dealers bought the cars and worked this out with their own financial institutions, as in "Floor Plan"

Bill (NC)

Martin, nice to hear you got a great deal. Bottom line though is you got a great truck. I bought mine the month they came out in Jul99 as a 2000 model. It now has 75k miles and has been to the shop exactly twice, once for front brakes and once for an o2 sensor under warranty. Enjoy.

Phil

I love car dealer discussions!!

Bull

Big business for Ford Credit, GMAC, etc. In many cases, the large regional dealers are holding stock for the factory, with the small local dealers feeding from that inventory.

Joe S.

When Edmunds.com first started they use to list the dealer hold back amount, usually around 2-3% of MSRP depending on manufacturer. Once the site became popular and started to have a lot of advertising dollars from the car companies this was removed. Of course the dealer should make a profit, but it’s just good to know what that profit is when you are negotiating a deal.

Martin S.

Fill was a dealer at one time...perhaps he still is. Regardless, I love the truck and am looking for excuses to drive it...today I am headed to Paso Robles, CA from San Diego...on the way, off of I 5 at Lebec, is a dirt road that takes you into a huge reserve...I am so on that road about 2:00 PM this afternoon. No more for this guy until late this evening!

Hold Back...yes it is good to know what it is, and Consumer Reports special report for $15.00 tells you. If you negotiate a better deal because you know more facts than most buyers, (You'll never know them all), the $15.00 is well worth it!

Now where are those truck keys because I am OUT!

brucec59

"Hold back" - that's what I was talking about in my response in your other thread. I didn't remember the name for it.