Dealer cost - are you getting a deal ?

(I'm sorry in advance this got so long... can't help myself sometimes.)
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The one true thing about people walking onto a lot and looking at buying a car is that eveyone wonders "am I getting a deal"?

I sold cars for Chevy/Olds way back in the day and was surprised that dealer cost wasn't more available online when I started looking for a new Prius in the past couple of weeks. I mean seriously it's 2015 - wikileaks has millions of government documents posted and yet I couldn't find dealer cost on new cars ???

And while I sold cars over 20 years ago - I don't think too much has changed...

Dealer cost - the price a dealer pays for a new car is the rock bottom price at which a dealer will sell a new car, and yet even at dealer cost there was 2-3% holdback for me at the GM dealer which is built in profit for the dealer. I don't know what holdback % Toyota dealers have for holdback, but I'm sure there is some holdback.

If a dealer ever tells you he's selling to you at dealer cost - that would be good for you, but there is still holdback that he's getting, so don't worry that they'll starve. Keep in mind for me that pricing was very competitive and sometimes I would just break out the dealer sheet and tell a customer, "I can probably talk my sales manager into selling you this car for dealer cost + 100$ ... would you buy the car for that price ?" And that usually got me a sale.

Another thing of note here is that a new car sale usually meant a minimum commission (50$) for me at the time, so whether it was dealer cost + 100 or 400 - I got the same commission.

Why would a salesman put forth effort into selling a car for a minimum commission ? Because that would get them another "number" towards their monthly bonuses, and the salemen with the higher numbers would get all kinda of bonuses at the end of the month. Remember that "holdback" that dealers were keeping in profit? well there ya go! Bonuses !

In theory each salesmen would take turns with people walking on the lot, so that's why they should always ask if you've been there before, so they don't take a customer from another salesmen, and end up splitting the commission... and also start lots of arguing and in-fighting.

Anyway a salesman who can't pull in numbers will eventually quit or get canned. Dealers spend tons of money trying to get you to walk on their lot, and if they got a salesman who can't keep up is either a bad salesman or just isn't trying hard enough.

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Oh and if you're shopping for a used car - that is where salesmen can make big commission. At my dealer we would mark a car up 3000 and they'd take 1000 in profit for it. The advertised sale price would be around that 1000 of profit mark. If I was buying a used car - I'd look at kbb kelly blue book values, and offer 1000 less than the "good" condition. I'd be lowballing them and the price might be way off from what they're asking, but used cars have tons more wiggle room in them. I'd do the same if at dealer or private. If someone says they still owe 10k and your offer is only 6k - that's their problem for over paying in the first place. Always ask how long they've been trying to sell it - the longer means they'll take less. And if say the craigslist ad says the ad has been active for 30 days or more... you know you got someone willing to take less. You can also check to see when the last time they got an oil change was and the mileage... almost everyone changes the oil before they try to sell a car privately.

And ALWAYS take a used car to a mechanic for an inspection if you're going to buy it privately. If you're not a heart doctor you wouldn't diagnose your heart if it was beating erratically ... if you're not a car mechanic...

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Maybe it's just easier to sell cars now than it was for me back in the day, but one thing I'd note is that the salesmen that we've talked to have been terrible - very poorly trained if they've even been trained at all. I kick tires now and then (window shop), while the wifey is shopping at Target, so I've talked to maybe 30 salesmen in the past few years at different dealers, and not a one of them asked me "why I was shopping for a car?". Which is about the most basic qualifying question you can ask someone who walks on a lot.

We were in a Toyota dealer two weeks ago, and they didn't have any Prius visible on the lot, so we asked a guy standing outside if they had any on the lot and he said to look at the one inside... ok... so we spent almost half an hour crawling all over a Prius 2 inside and nobody even bothered to talk to us AT ALL ?!?!?!?!?!??!!!!!

(The only thing I can think of is that everyone thought we were there for a specific salesman and nobody wanted to step on the toes??? Well I was happy to boogie out of there without talking to a salesman or sales manager. Thanks for the Keurig and letting us shop ???)

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Ok I've digressed enough - how to find dealer cost....

So in trying to find the best deal I searched autotrader and sfgate (our newspaper in San Fran), and I got some around 20k prices which seemed pretty good...

But I was surprised that not all the Prius' were showing the 3000 cash back from Toyota, and that the dealer discounts were varying wildly. It could be laziness on the part of whoever's running the websites or it could be dealer shenanigans. Many of the dealers were showing full sticker of 25,200 - not a dealer I would call or go visit.

So I figured I'd use Yelp and locate all the dealers in the SF Bay Area, and look each one up individually, and to my surprise I found one that was down to 19,364 for Prius 2 models. (This was with 3k Toyota cashback - now down to 18,864 with 3500 Toyota cashback.) (And ya I'm assuimng the current 3.5k Toyota cashback is nationwide - don't kill me if it's not.)

That got me wondering what dealer cost really was, and thinking that dealers must be selling enough cars and with enough profit that they aren't even trying to be competive with each other???

So I googled Dealer Cost and came across Edmunds and TrueCar both of which require phone, address, and email. Edmunds (and some posters on this forum) are a total joke with dealer quotes in the 22-23k range which wasn't even below Toyota's casback of 3k. TrueCar got me 3 quotes from dealers that got me almost matched upto the 19,364 price, so I figure that's got to be very close to Dealer Cost.

(I used an accurate email address to register for Edmunds/TrueCar... that's all.)

Just an FYI the more a vehicle cost MSRP the more markup (dealer profit) is built in to the price. That's why you'll read that big trucks are the profit centers for manufacurers and dealers. I think I only had like a 500$ markup on your basic econo-box cars (Geo Prism and Chevy Cavalier ~15 k cars back in early 1990's), and getting more than 100$ over dealer cost was pretty rare...

That's why I was very surprised finding a Toyota dealer which had a 2900 discount on the Prius and that's not including the Toyota cashback of 3k and now 3.5k which is how I get from 25,200 down to 18,864.

(Will Toyota drop their pants even more come Sept 8th when current Toyota offers expire, and the 2016 Prius Gen IV gets unveiled ??? that's a good question and one I wish I had an answer to ! ha!)

It's likely that the 2900 dealer discount would have been available most of the year - all depends on how much any particular dealer wants to make a sale...

If I take the quote from one dealer Freeman Toyota and take it to my local dealer, I suspect they'll take the deal. My plan would be to say well then I'll go to the other dealer, and be prepared to get up and walk away. I wouldn't divulge that the other dealer doesn't have the color you want or anything like that... and

If you have a trade-in which most people do - I'd LIE and say we're keeping our old car and get a FIRM price on the new car. THEN bring in your trade-in at night (so they can't see the dings or test if the AC works), and it's likely the night guy isn't the most experienced at trade-in value. You should know the KBB Kelly Blue Book value and if you get close on a "good" condition then you're probably getting as much out of it as you're going to from a dealer.

If you have a newer used car with less than 12k miles/year, and it is actually in really good condition and you have all the repair receipts... then you definitely can try and sell your old car and get more from a private sale. If you got a 10+ year old car or something with 150k miles on it - you're probably better off getting what you can from a dealer because they will be more difficult to sell privately. You got your money's worth out of it... time to let it go.

Oh and NOBODY and I mean dealers or private buyers care about accessories.... nobody cares that you put in a 1500$ stereo or about those fancy rims on your vehicle.

Got a question about leasing ... I'm the wrong person to ask - I don't lease cars. If you make tons of money and are getting a new car every 3 years via leasing then you don't need to read this post.

Lastly I wrote this as a general guide to share with this fine Prius community - I learned alot about Prius that I didn't know before, and it's appreciated.

ps I probably won't read this forum in another month or two so unless we have a problem with our Prius, so there might be some who disagree with this, that, or the other especially about the used car stuff, and there are always exceptions about getting a great deal - so just keep in mind the exception is not the rule.

Of course if someone posts a picture of a dealer cost sheet - that'd be pretty credible, and frankly I can't believe nobody has done it already.

Cheers

~W~