Dealer Profit Margin

A friend of mine and I each just picked up a 2008 HG (package 2) yesterday. I went to the Toyota website and sent quote requests to 12 different dealers in the area and slightly outside of the area. I've done quite a bit of reading, including this article on Edmunds: Dealer holdback at Edmunds car price guide

Most dealerships responded around invoice or as high as $300 over. One responded by asking about the "texture" of my inquiry, whether I was ready to move, if anything firm had come in yet, etc. She was very straight with her questions, unlike the other places which basically sent form letters telling me how wonderful they were (literally, "mailing it in"). She responded with the $200 under invoice which really got my attention. I calculated that the holdback in this car is about $480. I added that a friend of mine might be interested in the same car and what kind of deal we could get if we bought two at the same time. She came back and said add another $150 under or $350 under invoice. The calculator in my head said that if we both bought one their profit would be $130 for each car.

I always believe that if something sounds too good to be true then it definitely is.

We went in yesterday very skeptical, thinking about what kind of things they could do to the deal to mess it up and waste out time. To our shock, it was a straight deal, no add-ons, nothing to obviously inflate their profit (we declined the hard sell from the finance guy for all of the extras they try to peddle).

What we are speculating is that they are having a very slow February coupled with the fact that February is a short month. They must be very worried about making their quota and jeopardizing their holdback. When I asked her why they were being so aggressive with us she said privately that her boss was very interested in doing two deals at once and the profit wasn't that important in this deal. Talk about straight talk.

I asked her how many cars the store moves every month and she said between 250-300. Figure 250 is their quota and maybe $750 holdback per car calculates to $185,500 which is a big chunk of change for the store.

I'm just wondering how we got this deal. Is there something we missed in calculating the dealer profit? I couldn't find any dealer incentives or other things that would add to the net $130 on these cars. Is our timing impeccable?

Did we find a store who is being threatened with losing their holdback in February? It is a small store, given the 250 car quota.

I've been to quite a few dealers recently and they are like ghost towns with nobody shopping in the stores. I know that Internet shopping explains much of this but you just don't see young families looking at cars around here recently.

I was ready to move at $200 under, figuring the dealer deserves the $280 holdback, even in this slow market but when we packaged the 2-fer and they came back with $150 more off, how could we refuse that deal?

 

I know $350 under MSRP is meaningless. I paid $350 under invoice.

No extras, no pre-paid maintenance or warranties.

$22,059.16 with carpets (Factory Kit IDs: FE,HZ,HG,CF)
$24,145.16 out the door in California. Every state out the door price is going to be different.

 

I thought dealer advertising was a cooperative thing and came from the region and was unavoidable. In other words, it's to cover the advertising that they are mandated to do by Toyota. That's what I was led to believe by a friend of mine in the business. The dealer does advertise heavily in the local paper. Is this something different? Additionally, there is a fee that is tacked on to every car that covers regional and national advertising campaigns, too. I always figured that the advertising fee was sacred and not really a profit center for the store.


This is from Edmunds: The invoice price does not include any fees that may be charged by the manufacturer to dealers in a particular area of the country, such as local advertising fees, dealer association fees, or docking and storage fees. Edmunds.com does not track or provide such local fees.
If a local fee appears on the invoice, it is an actual cost that the dealer paid to the manufacturer when buying the vehicle. In other cases dealers may choose to write in their own ad fees on the consumer sales contract. However, in either case these local fees are a part of the dealer's cost of doing business.

 

Monroni (sticker) shows $660.00 for "Delivery Processing and Handling Fee" which is the destination charge?

I'm still curious about this mysterious advertising pack. What's that about?

Also, what are the "dealer fees" that you mention? Is that the advertising pack?

 

This is what they are all showing when I asked for quotes so can someone dissect the $22,409 here:


2008 Prius HG Package #2
Model # 1224

FE - 50 State Emissions
HZ - Base Package:
Cruise Control
Heated Outside Mirrors
15" Alloy Wheels w/Trim Ring
Tonneau Cover
Seatback Pockets
HG - Package #2:
Smart Start and Smart Entry
MP3/WMA Playback Capability
Auxiliary Audio Input Mini-Plug
CF - Carpet Floor Mats
MSRP: $23,909
Dealer Invoice: $22,409