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Not true! There is a dealer invoice for every vehicle. That is the cost that the dealership pays the manufacturer for the car. From there, the dealerships mark up the cost of the car. You get a false impression that competition creates cheaper prices. It doesn't. It's just that you have some dealers that offer close to invoice while others mark up their prices. When dealers sell below invoice, it's because they are getting rebates from the manufacturer so they can still make money.
If the manufacturers were able to directly sell to the public, every vehicle would be sold at invoice since no dealerships would be involved to increase the price of the car.
The advantage is the manufacturers would sell more cars because they could offer them at a lower price. Dealerships offers prices above the cost of the vehicle in order to make money on them. If manufacturers could directly sell to consumers, they could eliminate the middle man and offer more competitive prices which would result in more vehicle sales.
With all due respect you have no idea what you're talking about.
First of all "invoice" means absolutely nothing these days - dealer cost is what matters and that is not the invoice price but that's a whole separate discussion.
Secondly, lets say a manufacturer sells a Ford Fusion to a dealer for $20K. The manufacturer is out of the equation at that point and has no further costs associated with retailing the car. (Land, building, employees, insurance, benefits, floorplan costs, etc.)
Do you honestly think that if the dealers were eliminated and Ford had to open and run a bunch of dealerships themselves the price to you would still be $20K? If so, I've got some swampland in Louisiana I'd like to sell you....The manufacturer would have to raise the price of the car to cover those costs they would now incur that they didn't have before. (The previously mentioned land, building, employees, insurance, benefits, floorplan costs, etc.)
I think each manufacturer should be able to choose whether they sell with or without dealers. I am not a dealer apologist but to say that there are some ungodly middleman costs here is just a lie. Dealer margins on new cars are razor thin as it is but most people think they make huge profits on them - they don't. They make money a little at a time through volume and then pick up more on the back end. (Parts & Service.) Even with that, an average dealer return on sales is 2-4% which is much lower than most industries.
Do you honestly think that if the dealers were eliminated and Ford had to open and run a bunch of dealerships themselves the price to you would still be $20K? If so, I've got some swampland in Louisiana I'd like to sell you....The manufacturer would have to raise the price of the car to cover those costs they would now incur that they didn't have before. (The previously mentioned land, building, employees, insurance, benefits, floorplan costs, etc.)
Not to mention that the manufacturers would likely handle that much more inefficiently than the current dealerships. Successful companies stick to what they know and do best. That's why so many companies outsource services like payroll processing, data storage, network admin, benefits programs, etc. even though they pay a premium and someone else makes a profit. The automakers know how to make cars. It's what they do.
Secondly, lets say a manufacturer sells a Ford Fusion to a dealer for $20K. The manufacturer is out of the equation at that point and has no further costs associated with retailing the car. (Land, building, employees, insurance, benefits, floorplan costs, etc.)
This is also incorrect. Manufacturers put incentives on cars, particularly those that aren't selling quickly. Let's say that particular Fusion is on the dealer lot with a $24k sticker. In any given month there will be a manufacturer incentive on that vehicle that reduces that cost significantly, and that will come out of Ford's pocket, not the dealer.
I know no one would know the answer but curious what margins we are talking about on cars. Factoring in manufacturing, labor, parts, R&D, etc wonder what the true costs are for high volume cars and trucks (Camry, F-Series, Fusion, Accord).
Is it $5K? $10K? More to build a Camry that MSRP's for $25K
I know no one would know the answer but curious what margins we are talking about on cars. Factoring in manufacturing, labor, parts, R&D, etc wonder what the true costs are for high volume cars and trucks (Camry, F-Series, Fusion, Accord).
Is it $5K? $10K? More to build a Camry that MSRP's for $25K
Are you talking about margins for the OEM? I am an analyst for an OEM and I can tell you the margins on cars are very thin, under $5. Margins on trucks, SUVs, and crossovers are all much higher. I can't get into specifics because that is considered to be pretty sensitive information.
Are you talking about margins for the OEM? I am an analyst for an OEM and I can tell you the margins on cars are very thin, under $5. Margins on trucks, SUVs, and crossovers are all much higher. I can't get into specifics because that is considered to be pretty sensitive information.
Yes, from Toyota, Ford, etc. I have a very hard time believing it's in the single dollar range.
Are you talking about margins for the OEM? I am an analyst for an OEM and I can tell you the margins on cars are very thin, under $5. Margins on trucks, SUVs, and crossovers are all much higher. I can't get into specifics because that is considered to be pretty sensitive information.
This is also incorrect. Manufacturers put incentives on cars, particularly those that aren't selling quickly. Let's say that particular Fusion is on the dealer lot with a $24k sticker. In any given month there will be a manufacturer incentive on that vehicle that reduces that cost significantly, and that will come out of Ford's pocket, not the dealer.
That would be the case whether or not they own dealerships themselves or use franchised dealers, so that's irrelevant. Getting rid of dealers would not change that.
My point was there is some misconception that dealers add cost to the manufacturer and that couldn't be further from the truth. The costs of maintaining a retail network, including brick & mortar service centers, etc has to be paid by someone, you know? And right now that cost is taken care of by the dealers...if they go then guess what, the manufacturer now has to take care of that.
I know no one would know the answer but curious what margins we are talking about on cars. Factoring in manufacturing, labor, parts, R&D, etc wonder what the true costs are for high volume cars and trucks (Camry, F-Series, Fusion, Accord).
Is it $5K? $10K? More to build a Camry that MSRP's for $25K
On the F-150 program from 2009-2014 Ford made about $5,800 per truck on average. They spent $1.8 billion in R&D on that one. That includes some company-wide fixed cost allocations, too, so the actual variable profit as we called it was actually more than that.
On those same trucks a dealer will be happy to make $1,000 profit on them. I'd say the average profit would be closer to $500 per truck for dealers and that's before counting their interest cost on the truck depending on how long they've had it.
New car & truck margins are razor thin for dealers. So much competition out there, not just with other brands but other dealers selling the same brand down the road. People like to rip on dealers for getting fat & happy when the automakers actually get most of the profit.
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