QuestionHey Mr. Misko,
We're looking at buying a 2006 chrysler Town & Country mini-van. I know Daimler/Chrysler is overstocked right now and I assume a little desperate to liquidate excess inventory. The customer incentives for the '06 models have all dried up, but I'm still seeing "cash to dealer" of $4,500. Does this represent the amount of profit to the dealer if the product is sold at MSRP, or is there additional money that chrysler is offering to get rid of these vehicles? Just wondering, because I'd like to use that $4,500 as leverage and was wondering how much of it I could reasonably hope to keep.
Thanx, Steve
AnswerGood Morning, Steve. Thanks for your question.
No doubt most of America’s auto companies are getting desperate to liquidate their inventory, but strangely enough, this doesn’t always translate into a big price reduction at the dealerships. Dealers have two main jobs: make as much money as they can; and sell as many cars as they can. The first option rules, although in all of the ads you see, especially the obnoxious TV ads, they all tell you they’re going to sell to you at their loss and your gain—not even close. Even when they advertise and sell to you at invoice, they’re not loosing money on the deal. In my book, $ave Thousand$ Buying Your Next Car: Confessions of a Former Car Salesman (www.Make-Me-Smarter.com) I identify six main ways dealers make money on a deal, which in addition to what they make on the selling price includes trade-in’s, financing, add-on’s, and of course through the dreaded negotiating. These are the areas that we, as consumers, have control over (which is one of the bases of my book.)
Another way they make money, but one that buyers typically don’t have control over, is called dealer cash. Dealer cash is essentially an incentive amount of money that the manufacturers give to dealers for every car they sell. The amount varies over time and market conditions, and is not typically a widely published figure. Strictly speaking, dealer cash of $4,500 would mean that a dealer selling you a car at their purchase price or invoice, (which normally is a rare event, unless you learn how in my book), would receive $4,500 from the manufacturer. Pretty sweet deal, right? So the next time a dealer tells you they’re loosing money on a deal, you know that’s just a bunch of BS.
In most deals it’s rare to get dealers to give up any of this, they’re very protective of it and won’t usually even discuss it with you. When you do hear about dealer cash it’s usually in ads acting as an extra incentive, such as an additional $1,000 off, to get buyers to come in. In your case, if they offered an additional $1,000 off of invoice, they’d still be making $3,500 on the deal, plus everything else they’re going to pull in.
Ok, the real question you have is can you get some of this money—and my answer is probably not, unless they decide to use it for an additional incentive. But, feel free to try. To tell you the truth, I look at it this way. If I can get a deal at or a few % over invoice, I’m happy with it. I just don’t want any dealer to take me to the proverbial cleaners for thousands more than I should have been paying. In other words, I want a fair deal—they make money, I save money. Whatever money they’re making from the factory is they’re ‘doing business’ money, and nothing that I would expect to get access to.
So that’s the scoop on dealer cash. If you’re an expert negotiator, and if sales are down, and if they need some deals at the end of the month to meet their numbers, then you have a chance at getting deeper into their pockets. When I researched a new 2006 Town & Country LX, with standard options, on www.kbb.com, I note that the MSRP is $26,350, but the going sales price for the vehicle is $24,362, which is the save as the invoice price. Normally invoice is not a bad price to pay, but that’s ultimately up to you, Steve.
I would be interested to hear how it goes and if you can end up getting some additional dealer cash money out of them. Good luck.
Regards,
Ron
