My blog is dedicated to the inside scoop on what auto dealers do, and information about our business that most wouldn’t know.
Here are some of the advertising schemes and themes you should be aware of:
There’s a dealer who continuously advertises that no dealer in America pays less for (his new brand). That’s a half truth. Back in the 50’s dealers were so flagrantly playing with what was supposed to be the list price on new vehicles laws were passed that require the familiar window sticker you see on all new vehicles. The window sticker is only the suggested list price, what a dealer sells, or offers for sale, their vehicles for either above or below that list price is up to them. The law says that the sticker has to stay in place until the vehicle is sold. Part of those rules include that all dealers pay the same for their new vehicles. There are no special discounts, kickbacks, or other incentives for big dealers, or any dealer for that matter. Simply put, if it were not for those rules, there wouldn’t be any smaller dealers left, you’d have no choice but to go to metro dealers and pay their price. It’s kind of like the TV business. Years ago there was a TV dealer in almost every town. There are none now, and appliances are much the same. The big box retailers have taken over almost all of that business because they buy TV’s and appliances by the train load so they get a better price.
There are other dealers who have “push pull drag” sales. They routinely raise their price before the sale to compensate for their “special” trade allowance. We’ve done such a sale twice. In both instances we used the regular retail price to start with, not a discounted price. We have an added advantage, we have a salvage yard that needs those vehicles whether they run or not so they really are worth more to us than other dealers.
Some dealers advertise that they’ll pay off all of your credit card debt with the purchase of a car. Essentially they want you to think that they can add the balance to your car loan. However, since that’s a banking function dealers aren’t allowed by law to do so. So what they do is lower your trade value to cover the difference. Bottom line is you usually come out on the short end of the stick. Your monthly payments might be less, but you’ll end up paying a lot longer. Plus you have to have perfect credit to get good enough financing terms to make it work.
Dealers often send out coupons good for $500 or more off on any deal. It always says that you have to present the coupon upon arrival. Well, guess what, they adjust the trade in value if you have a trade or the normal discount you’d get, to compensate for that coupon. Our way of doing this is that we charge the value of the coupon as advertising expense. That means our coupon is really worth what it says it’s worth.
Dealers often advertise that they’re selling vehicles for X amount of dollars under invoice. Invoice is what we paid the factory for the vehicle. But, on almost every vehicle there is a rebate, and often there is also what is called “dealer cash” which is essentially a secret rebate direct to the dealer. Again, it’s the same for all dealers so any dealer still has the same bottom line cost. So if a dealer is advertising a below invoice sale, even if they state that you get all rebates, there’s still other incentives involved that would be available at any dealer. Remember also that most dealers, especially the large ones, count on making money on the finance package to compensate for low profit on the actual sale. (see my 9/14/2010 post)