The Basics: Understanding “Why” Article One- of series “The Truth Exposed About Car Buying”
In this article I would like to explain why a dealership would sell a vehicle $1,000’s below cost. It’s done every day, contrary to what most people believe. This is a subject that the “online car buying guru experts” seem to never address. If they do, it’s made out to be some kind of a “big secret,” and the dealership is holding back on something that the consumer is supposedly entitled to. Wrong!!! The truth is, most consumers have never been educated on how a dealership functions and profits. Think about that for a second. If you don’t understand “why” something is possible, it becomes very hard to comprehend “how” to make it achievable. Understanding “why” is imperative to negotiating the lowest price on your car deal, yet, most people don’t understand or even care about how a dealership profits. The dealerships job is not to educate the consumer on how to negotiate the lowest price. They are a business like any other business and they exist only to create profit. The selling systems they use were developed by them and for the most part, are pretty effective in accomplishing their profit objectives. But if their systems work so well, why would they lose $1,000’s on a car deal? The truth is, they’re not. There a number of incentives the manufacturer provides the dealership with to assist them in moving inventory. These incentives are not advertised to the general public. They are between the manufacturer and the dealer. There is no “big secret” or conspiracy to screw the customer. Most of the time, these non-advertised incentives are used to assist the dealer in moving “aged” or old inventory. Some incentives reward the dealer for volume sales increases on a specific model.
Most of the time, the dealer has options on how they can use this factory incentive money, also known as dealer cash. Options can include, down payment assistance to the customer, assisting in reducing the negative equity of a trade-in, lowering the selling price of a qualifying vehicle, or hell, just keep it for themselves! Here’s an example of how dealer cash could save a customer $1,000’s. Lets say there is available dealer cash of $4,500 on a new pick up truck. Let’s also say there is a consumer rebate on the truck of $2,000. If the dealership were to offer the customer a price $4,000 below invoice including the rebate would that be a good deal? It’s OK I guess. Do you see what’s happening here? $2,000 in rebate plus, an additional $2,000 in dealer cash. The dealer still profits from the remaining $2,500 in dealer cash plus other profits. The consumer just doesn’t know about it. There are a number of ways the dealership creates profit. If consumers understand those ways, they enable themselves to identify a dealerships potential motivation to sell a car $1,000’s below cost. For more information on “why,” click on the link below to a very comprehensive Ebook that explains the “why” in great detail. Click the link and read the review. http://amzn.to/xyRRXn .The book is about 130 pages and covers more than you would think you would need to know when it comes to negotiating a car deal. In the next article, I will discuss what works and what doesn’t when it comes to negotiating a car deal