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Discussion Starter #1
I have always wondered about this and it will be interesting if anyone can give me a good answer...

How does GM charge dealerships for vehicle inventory? Obviously, there is a cost to keep vehicles on the lot and a benefit for dealerships to sell vehicles quickly.

I look at the local Chevy dealership near my house and they have 50 Corvettes in stock. That can't be cheap. Am I correct at saying that the longer the dealership leaves a car on the lot the less profit they make on that car (assuming they sell it at MSRP or invoice)?

Is the inventory cost a function of MSRP or invoice price? Does it go up as the car sits there?

Does GM even charge something like this?

I just look at Rick and Carl and the others selling 2007 Vettes for $7,000+ off of MSRP late in the year and wonder how much you guys are still making on these cars!

Thanks in advance for any input on this.
 

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As far as I know, once a dealership purchases a car from the manufacturer it is theirs to do as they please. GM no longer has any tie to the vehicle in terms of ownership. So if the dealer chooses to sell for under MSRP it is at their discretion and if they decide to go below cost it is their loss.
Someone correct me if I am wrong.;)
 

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Ok, here's the real scoop. If the dealer "floorplans" the car, which most do, after "x" amount of days, they incur interest on the car. That's how their cost can technically "go up". I've been in the car business for 15+ years, so I know all about this stuff.
 

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Discussion Starter #4
Ok, here's the real scoop. If the dealer "floorplans" the car, which most do, after "x" amount of days, they incur interest on the car. That's how their cost can technically "go up". I've been in the car business for 15+ years, so I know all about this stuff.
Thanks for the response. Can you better define "floorplanning" for me?

What are a typical car dealer's options?

I would assume a dealership can buy cars outright from GM for invoice and then they "own" them until they are sold to a customer. Who does the dealership work with to "buy" the cars from GM and what do they have to pay said lender for having 50 or so Corvettes collecting dust on their lot?
 

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Floor planning is the dealers way of having someone else pay for the car to the manufacturer before it is sold, keeping their in cash flow. Basically, if a dealer gets 20 cars from the manufacturer, they can have the cars for 45 days or so without incurring any interest. Most new car dealers floorplan with either their manufacturer or their main bank that they utilize. What they have to pay is up to the charges that their floorplan company charges them. Typically it is at a very low %. If they are telling you they have inventory charges, it's one of two things. 1) they do have some inventory charges from their floorplan company, 2) they just want to make extra profit. They puchase the vehicle from the manufacturer.
 

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GM, as does most everyone else in the auto industry, pays what is called "hold back" to the dealership to help offset the expense of the floorplan, and to help with advertising. But...this still requires the dealer to move the vehicle in order to get paid. Other than this, the dealer is on his own with the bank.

There is very little overhead built into a new vehicle. That's why most are willing to sell you a vehicle at "invoice". The dealership makes "most" of it's profit from service, finance (this is why you should always arrange your own financing if possible), warranties, and the biggie...the used car lot.
 

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Hold back is not for that. They get compensation for floor assistance and for advertising. Don't let them fool you.
 

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GM, as does most everyone else in the auto industry, pays what is called "hold back" to the dealership to help offset the expense of the floorplan, and to help with advertising. But...this still requires the dealer to move the vehicle in order to get paid. Other than this, the dealer is on his own with the bank.

There is very little overhead built into a new vehicle. That's why most are willing to sell you a vehicle at "invoice". The dealership makes "most" of it's profit from service, finance (this is why you should always arrange your own financing if possible), warranties, and the biggie...the used car lot.
You are partially correct. Warranties yes, service yes, but as far as little overhead don't fool yourself. When everyone was offering by it for what an employee could, there was still big money going back to the dealers. I bought a GMC Denali and the manufacturer kickback was $2200. Yes it's true, the quicker they move their inventory, the better off they are, and yes the used car lot is definitely the place to sell and make money.
 

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Floorplanning

Dealers do not get 45 days free floorplanning. The interest begins as soon as the vehicle is placed into the dealers inventory, usually a few days before the vehicle arrives at the dealership. The manufacturer gives a floorplan allowance that is equal to the cost of about 15 days interest charges to cover the period between when the vehicle is placed in the dealers inventory and when it actually arrives at the dealership.

The statement that you should avoid purchasing products or financing from the dealer is not true and was obviously made by someone who does not have a thorough understanding of how a dealership operates. It is often better to arrange financing through the dealership when purchasing a vehicle. Dealers often deal with many banks and shop the banks to find you the lowest rate. A dealers profit for arranging the loan is quite often very little, many times only about $100.

Extended service plans should always be purchased from a new car dealership. Many dealers sell plans that are backed by the manufacturer or non-OEM plans that are sure to cover problems that may arise. Many plans sold by non-licensed companies (not dealerships) are often misrepresented and carry much higher fees / co-pays than what you were told.

Used cars are a profit center for dealer since they make so little on most new cars. Dealer typically make more on used cars but not so much that it is not worthwhile to purchase one from a new car dealer. New car dealers typically have the best selection and, most importantly, must stand behind the used vehicles they sell. Would you rather save a few dollars (possibly) and purchase a used vehicle from an individual or non-licensed dealer and have no recourse if the motor blew up two days later? What if the A/C stopped working a few weeks after you bought the vehicle? A licensed dealer must prep the vehicle prior to delivery so that it will pass inspection and also repair any problems for a period of time after delivery. This time period is dependent upon the state in which the transaction took place and the year and mileage of the vehicle.

There are bad dealers out there but also many good ones. People should refrain from making general comments about all dealers until they have a much better understanding of how a dealership operates. It is unfortunate that the bad dealers make everyone look bad.

:partyon:
 

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Interesting :surprised
 

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I have always wondered about this and it will be interesting if anyone can give me a good answer...

How does GM charge dealerships for vehicle inventory? Obviously, there is a cost to keep vehicles on the lot and a benefit for dealerships to sell vehicles quickly.

I look at the local Chevy dealership near my house and they have 50 Corvettes in stock. That can't be cheap. Am I correct at saying that the longer the dealership leaves a car on the lot the less profit they make on that car (assuming they sell it at MSRP or invoice)?

Is the inventory cost a function of MSRP or invoice price? Does it go up as the car sits there?

Does GM even charge something like this?

I just look at Rick and Carl and the others selling 2007 Vettes for $7,000+ off of MSRP late in the year and wonder how much you guys are still making on these cars!

Thanks in advance for any input on this.
Hi buddy, sorry for delay to your question....it's on the bank the delaer is financed with and that is where the charge comes from. We are charged advertising fees, we have to advertise on top of that to keep things moving, pay for training, pay for tools & equipment as needed...you bet it does get costly.

As far as the $7000 off etc....we are , in most cases, NOT making on these cars, we are trying for the win, earn a customer and keep thinsg moving. You wnat to be a Corvette dealer , there is a level of commitment you have to maintain...we do enjoy it and where we can offer pricing flexibility, we do. It's truly a pleasure to be a part of this.....trust me, it's a blast dealing with the classy people. There are still dealers that rely on YOU to sell the car for them.

It is the ultimate trophy in a Chevrolet showroom and trust me, the guy walking out of service with his Impala could be your next dream come true. If you are not selling Corvettes...I feel sorry for you.
 

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Hold back helps pay for the floor plan, very few dealers make money on hold back account. and very few dealers do NOT floor plan. Advertisinging is figured before Invoice price. A dealer that has 0% advertising on there car can sell a car for less than a dealer that has 2% advertising and still make more $$$ive for them self and give you a better deal. For your best deal find a small town dealer that has NO advertising on there cars! And if a dealer says they will sell you a car below invoice and "get into hold back" they are full of **** and they will make it up with accessories such as rust evaders, High APR, or tell you in order to get this price you must take this and that and if not the price goes up.
 

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The statement that you should avoid purchasing products or financing from the dealer is not true and was obviously made by someone who does not have a thorough understanding of how a dealership operates. It is often better to arrange financing through the dealership when purchasing a vehicle. Dealers often deal with many banks and shop the banks to find you the lowest rate. A dealers profit for arranging the loan is quite often very little, many times only about $100.
Well...I do know something about dealer financing, and how a dealership operates, both from the aspect of having worked in "the business", and by the mere fact I've purchased a few vehicles in my day. I'm also not too much of a slouch in the department of finances either. By God's grace, I enjoy a rather comfortable existance. But all this is irrelevant.

By your own admission, the dealer profits from arranging the financing. Why pay extra points on a loan when you can secure your own financing very easily. I'm not out to bash the finance guy at the dealership. He/she needs to make a living too. That's what Free Enterprise is all about. At the same time, the idea of being able to save a few bucks too is quite nice.

By securing your own financing, one is also less likely, although not immune to ,having to endure the pain of the "backend" sell of aftermarket stuff. Simonize Paint Treatments, Window Etching, and LoJack for an OnStar equiped vehicle. All this after you've shook hands on a deal, and agreed to a price. It happens, and it's all part of the business. I bought a 2007 Tahoe for the wife last week, and the all of the above were touted at closing.

Please don't mislead the DC members by implying the dealership's route to finance is better than doing a little homework and securing your own. If they querry 10 lending institutions, so can you. They have speed and consolidation on their side, which might be important to some. But I'm willing to be a few thousand saved over the life of the loan might peak some interest. Bottom line, if the dealership didn't profit from it, they wouldn't do it.

Extended service plans should always be purchased from a new car dealership. Many dealers sell plans that are backed by the manufacturer or non-OEM plans that are sure to cover problems that may arise. Many plans sold by non-licensed companies (not dealerships) are often misrepresented and carry much higher fees / co-pays than what you were told.
Here again, I feel the need to disagree...just can't help myself. Any lending institution who will lend money for a vehicle will also carry the same extended warranties the dealership will, and at a cheaper rate. You are correct about the OEM warranties. These are a "Brand Specific" item sold through the dealer.

Please, for those of you reading this, and you are also comtenplating a vehicle purchase, do a little homework first. Price an extended warranty, taylored to meet the needs of your purchase (don't buy one that has convertable top coverage if you're not buying a convertable) from both the dealer,and your bank/credit union.

Used cars are a profit center for dealer since they make so little on most new cars. Dealer typically make more on used cars but not so much that it is not worthwhile to purchase one from a new car dealer. New car dealers typically have the best selection and, most importantly, must stand behind the used vehicles they sell. Would you rather save a few dollars (possibly) and purchase a used vehicle from an individual or non-licensed dealer and have no recourse if the motor blew up two days later? What if the A/C stopped working a few weeks after you bought the vehicle? A licensed dealer must prep the vehicle prior to delivery so that it will pass inspection and also repair any problems for a period of time after delivery. This time period is dependent upon the state in which the transaction took place and the year and mileage of the vehicle.
Never said not to purchase a used vehicle from a dealer. I'll go on record now by saying this...if the dealer is reputable, this is your best bet unless you are buying your grandmother's Buick. In most states the dealer must warranty the car for at least 30 days or 1000 miles. But...here again, if you are able too, secure your own financing and extended warranty (a MUST for a used vehicle)
 

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Other Goodies From Gm

DEALERS GET "HOLDBACK FOR EACH CAR THAT'S LEFT OVER. REMEMBER THEY NEvER LOSE SO THA 7000 OFF SORT OF MATCHES THE MONEY THEY GET BACK FROM GM . THEN ThEY SELL OR WHOLESALE THEM USUALLY WHEN AN '08 WILL BE READY TO GO THEY ARE MOVING THE '07S FAST.

'08guy
 

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Profit

On The '07s List Was 43.00 And Cost Was 39,000 Thjat's Standard Cost. Ther's Plenty Of Profit In That Car Believe It

'08 Guy
 

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Discussion Starter #16
Thanks for all the feedback guys. I didn't mean to spark an argument and I learned more than I had hoped. I am currently working on participating in my local dealer's "Transform Your Ride" sale. I am trying to get rid of my 2004 Silverado SS for a new Avalanche which has a little bit more room, is a little lighter on the gas, and doesn't take premium.
 

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Dealers

Rember on a sale "DEALERS DON'T LOSE"

now the manufacturer might put them out of business with crap to sell
but I've never known one to lose on a sale. Why do you think they try to wear you down. They have nothing else to do.

'08
 

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Dealers do sometimes lose on sales. It's not very often, but it definitely happens, usually when moving last year's inventory or something like that. Your statement that they have nothing better to do is very uneducated. They sell cars and try to make as much money as they can - it's the basic principal of business.

:nuts:
 

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Probing deeper into this subject:

In the case of the Corvette, is it still true, that the more you sell, the more you are allocated to order in the future?

Another way to put it: move them out quickly by taking less profit up front, get more than you would have otherwise have recieved later on, and make your money on them.

In other words, forego the fast buck and invest in the future (from the dealer's point of view).

I'm probably making this sound more complicated than it really is. :crazy: :D

__________________________________________________________

The reason I am asking this is because I live in ******* County. The customers here needing SUV's/Pickups outnumber people looking for a Vette a 1000 to 1.

So why should a dealer load up his lot with Vettes? I wouldn't. Also, if I was one of these dealers and got a super highly desireable Corvette in with my mix, it would make sense to sit on it and even throw an additional $5k markup. Looks good on the floor, draws interests, creates floor traffic. They'll be back for the loaded E$calade. That $5k pales in comparison the money the trucks are generating. People bash a dealer for insane markups. I refuse to even talk to them. But I understand the economics of it.
 

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Reply to "nothing else to do"

You misunderstood my statement when I said they have nothing else to do.I was talking about how much time it takes to make a sale at most dealerships.
Meaning: They have nothing else to do but sit there and hassle, dicker, be right back, on and on.

'08 guy
 
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