The amount an automobile dealer pays the manufacturer, or dealer invoice, has been the subject of confusion and misinformation for both consumers and automobile salespeople.
Do dealers pay differing amounts for new vehicles ? The simple answer is NO.
When an automobile dealer is granted a franchise from a manufacturer he signs what is known as a Dealer Agreement. This agreement spells out the terms and conditions of the relationship between the dealership and the factory. As a part of the dealer agreement there is language to prohibit an unfair pricing advantage between dealerships.
New car dealer invoice information can be readily found via the internet. A customer using that information to determine new car prices is an informed and intelligent buyer. Using the language and reasoning found below it will be easier to convert this person to a delivery. The beauty of the truth is you never have to apologize for it.
Every vehicle that has identical equipment is priced to each dealer at the same dealer invoice amount.
The reason this is part of every agreement is to protect the customer and the goodwill of the manufacturer.
It stands to reason that a dealership located in a metropolitan area would do more volume than a dealer located in a rural area. If the metropolitan dealer were allowed a price advantage over his smaller competitor the laws of marketing dictate that the smaller dealer would eventually be forced to go out of business. He just could not be competitive as to pricing without the protection of the dealer agreement.
Consider the customers of the rural dealer who rely on him to service their vehicles under the terms of the manufacturer's warranty. If he were to cease doing business the owner of the vehicle would have no alternative other than drive some distance to a metropolitan dealership to have the work performed. This is not a good scenario for the customer nor is it a positive for the manufacturer.
In today's world access to dealer invoice via the internet is commonplace. Most of the sites who offer this information attempt to be accurate as to dollar amounts. Where the confusion starts with the customer is when they do not read the disclaimers on these sites that say...
- These figures are deemed reliable at the time of publication but no guarantee as to accuracy exists.
The reason, other than for liability purposes, this language is there is because manufacturers often announce price increases during the model year and the site may not have been updated when a customer views the site.
- These figures do not include freight/destination charges.
Going back to the dealer agreement and the prohibition of unfair pricing advantages. A dealership that is three blocks from the manufacturing plant pays the same freight/destination charge as a dealer that is a thousand miles from the plant. Unfair? Perhaps, but necessary in order to maintain like pricing.
- These figures do not include dealer advertising charges.
This is one are where there can be a slight variation in the dealer invoice amount. Dealer advertising associations contribute funds to a pool to purchase advertising seen in their market. This amount is part of the invoice and listed there. It is a charge to the dealer that is not part of the MSRP of the vehicle. Dealer ad groups assess their members a fee, generally from 1-2% of the price of the vehicle as their contribution to the advertising pool. So, a dealer who is a member of an ad group that collects 1% would have a very small advantage over a dealer who is in a group that collects 2%
What about the customer who says dealers have 2 invoices?
That statement simply is not true but is such a common myth people tend to think it's fact. Almost like the urban legend of the lady who dried her poodle in the microwave. There is only one dealer invoice generated per vehicle.
So, what do you say to a customer about the invoice? I would tell them all dealers pay the same to protect the consumer. How? By using the information above about large dealer vs. smaller dealer price protection. As I said earlier...The beauty of truth is you never have to apologize for it.
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