I have a honest question about invoice pricing that maybe someone could help me understand. I know that some dealers claim that they sell a vehicle for 100 to 500 dollars over invoice. Does invoice mean that is what the dealer paid the factory for a vehicle? If so, how can a dealer make any money. Please enlighten me. Thanks

 

No, the "invoice" price is not what the dealer actually pays for the car. In the world of Ford, there is another price labled "Memo" that is what the dealership actually pays for the vehicle. The difference between the "Invoice" and "Memo" is the holdback amount that Ford lets the dealers "keep" for advertising, inventory costs, interest, etc. If a vehicle has been sitting on the lot for a while, a dealership may be willing to sell below the stated invoice price just to keep from losing money on the vehicle as the aforementioned costs erode away the holdback money.

When Ford announces one of these "invoice pricing" deals from a corporate level, rest assured that the dealers are getting additional incentives from Ford. When a Ford employee or vendor buys a car on A, X or Z plan, Ford pays the dealer a percentage above invoice (I think, its been a while!) as a profit on the vehicle. I am not certain if that is the way things still work today, but that is more or less how it was when I worked as a salesman about 5-6 years ago.

 

Read the "Things You Should Know" thread near the top of this forum (it's marked "Read First")

 

My question is:

Do Dealerships actually fork over Cash to Ford when they order vehicles? Do they outright BUY the vehicle from Ford.

Or is there a line of Ford Dealership credit that is extended to Dealerships so they can stock their lots? In simple terms a loan from Ford to stock and then paid off when vehicle sells, all the while the Dealership has an incentive to sell the vehicle to forego the monthly, weekly, whatever, payments they make to Ford.

I have heard it both ways from people and Dealerships tell you and act as though they actually outright bought the vehicle your interested in etc. I don't know if this is true.

I'm not in the market to buy but it's just something I've wondered about for some time now.

 

Floor Plan vehicles are usually on consignment. Anything beyond that usually a dealer has to finance on their own. Usually higher volume dealers can make you a better deal because they're not paying a bank interest on most of the vehicles sitting on their lot since they have a higher allotment of vehicles. It is just in their best interest to sell it as quickly as possible because they make more money that way. But this also why many dealers require deposits on special orders. Since it isn't a floor plan vehicle they usually have to buy the vehicle directly from Ford. If the car/truck is something that the dealership thinks they'll be able to move if you back out, they might not charge a deposit. But if you're wanting some oddball option package (like something with no A/C here in the South) then a dealer is generally going to require some money down just to make sure you'll take delivery when it arrives so they're not left with an unsellable turd on the lot.

Again, this is the way I remember things being a while ago. Corrections and additions are always welcome.

 

Some dealerships are private owned and usually run on the "line of credit" for lot inventory. With GM some dealerships are actually owned by GM and operated by them. GM will buy dealerships that are in financial trouble to avoid a hole in sales coverage in high population areas. The GM owned places tended to pay salesmen flat wages which resulted in lower prices on vehicles.


----begin mini-rant
When I was selling we avoided the "x dollars over invoice" scheme with customers for 2 reasons: 1 it usually resulted in poor wages for the sales people, who in turn offered very poor after-the-sale customer service and no drive to generate repeat customers; and 2 the margin of profit on most of the vehicles was less than 10% so knocking off 500$ from a vehicle with 1000$ profit does not sound very convincing to most buyers so in the end they never believed us when we said "we paid this much for the car/truck". The sad truth was the guy I made 2000$ off of ended up with a lot better customer service after the sale than the guy I made a 100$ off of. I can afford to do favors for the 2000$ guy, like throw him a rental car when he is in for service and things are backed up or fix some dings or scratches at no charge durning his next oil change. Or even offer to pick his car up and drop it off for service or warranty work while he is at work... ask your next salesman if you will be getting what you pay for after you drive away with a new car or truck.
I tend to think most of the time you get what you pay for and the dealer must profit or they wont exist or they will only exist in a very poor state of customer satisfaction. In the end many buyers argue about what is a fair profit on somthing that costs 20 or 30 grand. I pose the question is it fair to make 2000$ profit on somthing that costs 20 grand? I think so, ask a diamond ring dealer what his percentage of profit is on a 5000$ ring and how much over invoice he will sell it for. Talk about a depreciating asset diamonds are often marked up over 300% above cost and are worth virtually nothing after the sale, yet people pay without question the asking price. Choose your saleman carefully and dont be afraid if he makes a living when you buy his product, if you choose well you will see that money repaid many times over in saved time and frustraition especially if you have to have any warranty repairs performed. There are plenty of shark suited, slick haired salesmen and the most importaint thing you can do as a buyer is make sure your salesman cares about your satisfaction, dont hesitate to dismiss the sharks and ask for someone else to help you.

 

...Welcome mamasford, to Ford Truck Enthusiasts!

…..See you on the boards.

 

Dealer's got a "floor line" for his new car inventory- and often, some of the used car inventory as well. The "invoice amount" is what the dealer actually paid Ford for the vehicle- but it doesn't reflect credits that come back at a later date- so don't confuse "invoice" and "cost," they're different numbers.

It's just like a line of credit, but works differently, depending on who holds it. Ford Credit or GMAC issue floor-lines on the number of vehicles, not the dollar amount. That number is based on the dealers planning potential- the number of cars/trucks they should be selling. Banks do the floorline on a fixed $$$ amount.

One thing that doesn't change is when the vehicle gets paid off. Generally, the car/truck note needs to paid within 24 hours after the vehicle has left the lot. Failure to do so puts the dealer "out of trust." It's a very bad thing.

 

Amen.
I've seen dealers sentenced to prison for it.

 

Oh, the stories polarbear and I could tell! Local Rochester-area consumers will remember Least Ford/Chrysler/Plymouth. Not only did Gary not pay off cars that he sold, he didn't pay off the vehicles he took in trade that still had a bank loan on them. Guess who receives a "failure to pay" notice from the bank on that vehicle? Yep- the person who traded it in. They're now liable for TWO car loans- their new vehicle, and the one they traded in. Ouch. This guy also would sell extended warranties, keep the cash and never send anything to the warranty company. 3 or 4 or 5 years later, when you finally use the warranty, they return a note that says, "who are you?" It was a real shame, because I know several members of the Least family, and they're all upstanding, honest people. But one relative has stained the family name for life.

 

The level of customer service should not be determined on how much OVER invoice you pay for vehicle.. That's the craziest thing I have ever heard...Service Dept.'s don't know how much you paid for the vehicle, especially if your not taking your vehicle to the same dealership from which you purchased it... Customer Service during and after the sale should be #1, irregardless of purchase amount, that's what makes customers come back... I mean think about it.... you have agreed on a price for the vehicle and your trade that both the dealership and you can live with.... the details are in HOW YOU GO ABOUT treating the buying during negotiations and HOW YOU GO ABOUT treating the customer AFTER the sale.... It how NOTHING to do with what you PAID for the vehicle... That's just a BAD business model in my book...

 

Forrest_F150 The level of customer service should not be determined on how much OVER invoice you pay for vehicle.. That's the craziest thing I have ever heard...Service Dept.'s don't know how much you paid for the vehicle, especially if your not taking your vehicle to the same dealership from which you purchased it... Customer Service during and after the sale should be #1, irregardless of purchase amount, that's what makes customers come back...
I'm going to say this as quietly and tactfully as I possibly can..... have you lost your mind?
1. Service Dept.'s don't know how much you paid for the vehicle
But the first time an un-reimbursed expense comes across the service writers desk, that'll be the 1st thing they check.
2. The first thing they check, when they write up the order and run an OASIS, is where you bought it. You're worst case scenerio is buying it from a local dealer- other than the one whose service department your standing in, and the thing you're demanding be fixed isn't going to be covered by Ford. (you'd be surprised at what they don't cover)

I mean think about it.... you have agreed on a price for the vehicle and your trade that both the dealership and you can live with.... the details are in HOW YOU GO ABOUT treating the buying during negotiations and HOW YOU GO ABOUT treating the customer AFTER the sale.... It how NOTHING to do with what you PAID for the vehicle... That's just a BAD business model in my book...

In theory, you're correct. The reality, of, course, is far different. A good dealership knows the price tag attached to good service, and won't sell a unit he'll be sorry to see later. But- if you're insistent on shopping twenty dealers to grind down the last $25 dollars, I'll almost guarantee you poor service after the sale. And that's the reality of the situation.

 

1) If they don't cover it under warranty then they don't cover it. If they do then they should fix it. If they do fix it and give you a bad customer experience log a complaint with Ford then go to another dealership, they are ALL over the place. Tell them you promise not to bring you vehicle back for service period, whether it's in or out of warranty....

2) I didn't realize Dealerships were so picky.. I mean selling a vehicle is better than not selling it.. If they are willing to go with the deal then they shouldn't be upset the customer negotiated a good deal.

I do my research B4 I buy.. I am usually not pleasant to negotiate with... If the dealership is willing to strike a deal then after it's done it's a done deal, no hard feelings... If they provide bad customer service after the sale because I lowered there margins then like I said above there are THOUSANDS of Dealerships out there, that's where my leverage is, I can go ANYWHERE for service, it's GREAT....THey have to give me a reason to pick them, not vice versa....

 

Are you saying we shouldn't buy from you or Jeff, unless we plan to get service at your dealership?

 

Only if you live in Beaverton- and plan on them doing the warranty work instead of bringing it back to us (it's cross town).

Let's use a little logic here. You buy a new car or truck out of state, and show up for warranty work. OASIS shows the selling dealer hundreds or thousands of miles away. That's not a reason to short a customer- that's a reason to work harder to get them the next time they're in the market. For all you know, they moved or bought the rig at their other residence (we have a lot of folks here with multiple residences).

Now lets use the same example, but the customer bought at another local dealership- just not yours. You cross check (or the system does it automatically), and you see the customer shopped your store immediately prior to purchase (you think we don't have this info integrated?). You'll do whatever warranty will pay for- and not a bit more. If the customer howls, you refer them back to their selling dealer.

Important point here- most of the FTE out-of-area deals I've done had some common threads in them.
1. Local dealers had a less than honorable reputation.
2. Local dealers were price gouging.
3. Customer was treated badly when local dealers were visited.
4. Local dealers were unwilling or unable to come up with the vehicle the customer wanted.

...or any combination of the above.