So how can ‘the dealer invoice price,’ which those ‘trusted’ Internet sources use as the foundation for their ‘target price’ advice, be a bona fide dealer cost number? 3. In addition, it needs to make a profit to provide a decent return on investment. Over and above the vehicle’s cost, every dealership has at least a 10% overhead expense. (It’s 7% on every Mercedes.) And that’s at the sticker price! Who pays that? (Only the guy who thinks Taco Bell is a Mexican phone company.) Today there isn’t a single new vehicle with more than a 10% difference between the invoice and retail prices. Anyone with the savvy to run a profitable lemonade stand should be able to look at the difference between the invoice and retail (sticker) prices on any new car and conclude that no business could survive if those invoice numbers were the real deal. Isn’t that naiveté on stilts? Does stupidity get anyone to $10 million? 2. Yet we’re willing to believe that people with a $10 million net worth, half or more of which is sunk into their new-car dealership, are going to let you and me know what they pay for those cars. You and I buy hundreds of products and services every year, and no one can tell us what the seller paid for any of them. But new-car shoppers are gullible, and on this subject, they’ve sent their common sense on a multi-year vacation to Dumbsville. I’ve doubted that wisdom for years, for these reasons: 1. So in return, I ask that you promise to visit me when I enter the witness protection program! Here’s why the dealer invoice price is not a real number anymoreįor decades, the conventional wisdom has been that “the dealer invoice price minus holdback” is a good estimate of a dealer’s true vehicle cost. As you might guess, that doesn’t please all of the players all of the time. Uncovering and telling car-shopping consumers the truth is what I do. But those so-called “experts” aren’t telling you what you really need to know: The truth about the sea change in the automaker-dealer financial relationship that began in 1995 and has continued ever since. Most new-car shoppers turn to those big new-car pricing websites for the information and advice they need. Editor’s note: This is Part 1 of a five-part investigative series.
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