I never said that it would be a good thing. This is actually the third comment where I've clarified that I wasn't saying it's a good thing. I think you quote the other two comments where I clarified that as well.
In 50 years from now, what will people be nostalgic for from around today's time period?
- Thread starter Chrisinmd
- Start date
Will this happen in 50 years?
A guy has 39 wives and 86 children.
A guy has 39 wives and 86 children.
As for shoplifting, it's pretty much legal in California now.
To me, the idea of having that many wives is like wishing, "Gee, if only I could have a few dozen more toothaches every year, that would be swell."
Steve
Mostly Harmless
couple of hours? I don't think so. The price of the car is going to be withing a few hundred of whatever the fair market value is, which is easy to find online. You might get free carwashes or a few hundred off, but that's about it. I stay away from dealerships that expect you to haggle. Frankly, if you're really interested in saving some dough, don't finance for more than 60 months, don't finance at all for more than 1 or 2%, and pay the car off early if you can. Folks brag about saving a few hundred on the asking price while they finance at 5% for 84 it even 96 months. Lol.
Steve
Mostly Harmless
if you know how much you're going to pay, I think you have choices. You can go to the dealer that marks it up and makes you dicker to get to that price, or you can go to a dealer or service that offers you that price out the gate. I choose the latter.
who says Americans don't appreciate irony?
granfire
Sr. Grandmaster
Don't call him Shirley
granfire
Sr. Grandmaster
that's why we lead the country in new COVID cases and past capacity hospitals.
YMMV
I was going off your statement about saving 5%
If that's to me, I don't get what your point is. I am repeating myself.
Steve
Mostly Harmless
Sure. But even if we take the 5% comment at value, if you know a truck is worth $80k and you pay $81k at a fixed price or "save" 5% at a dealer who marks it up to $90k, what's the difference? The dealer is still running up against a margin and honestly, there are about a dozen other ways they could get their money. Whether it's the dealer add ons, the maintenance packages, the trade in value etc. And the banks get a lot of folks, too, as I mentioned.
To be clear, the idea that people not haggling at a dealership as some kind of social conditioning is pretty stupid. That's what I was commenting on. But hopefully the above clarifies what I meant by 5%.
dvcochran
Grandmaster
Hilarious. You really believe buying a large ticket item works that way don't you?
dvcochran
Grandmaster
W
Well, you have the financing part right at least. But why would you ever think you know what a dealer has in a vehicle? That is what is going to set the price, not some made up 'fair market value' that is dictated by the automakers and dealers in the first place. Fair market value is just a sales tool to lure tools into thinking they got a good deal.
Steve
Mostly Harmless
It can and does, but you've been socially conditioned.
Look at it like this. I put myself through college by working in sales and know a little bit about how sales work. The margin varies from industry to industry, but businesses rely on income. I sold everything from furniture to jewelry to computers.
Do you know what the standard markup for jewelry is? About 400%, as a rule of thumb, though on some items it could be much higher. But they don't sell on volume, and each sale basically keeps the lights on. So, if you go into a jewelry store, even if you get 25% off the retail price, you're probably still paying at least 300% over the wholesale cost to the vendor. This all translates to a typical operating margin overall for a jewelry store of 50% or more.
What's the average retail markup for furniture? When I sold furniture, it was between 200 and 300%. The store I worked at was a small business boutique, and we did a lot of custom furniture. Just me, one other guy, and the owner, so every one of us had to be able to design a piece of furniture and calculate an accurate wholesale cost plus shipping in order to apply our standard markup (225%) to give the customer a retail cost. Did they haggle? Well, they tried, but outside of a 10% designer discount (if you could show us your business card as an interior designer) you were out of luck. Even if we sold items at 30% off, we were making a profit on that piece. So, all of that translates to an average operating margin of about 40 to 50%.
Standard markup for clothing is 200%. So, it works very much the same as furniture, though at a lower price point, they rely more on volume, so depending on the retailer, you'll see a LOT of sales where they are operating closer to the margin. This can be very profitable, but makes it hard to weather a bad economy.
There are many industries that run a lot closer to the margin. It's harder to quantify the markup for a restaurant. I mean, I guess you could look at what they pay for the fish of the day vs what they charge. But we can still see their typical operating margin is much lower, around 5%. That's been widely publicized as an effect of the pandemic on restaurants, local ones in particular which often run on a tighter margin to compete with chains.
So, where to car dealers fit in? "The average pretax profit margins for car dealerships was just 2.2% last year, down from 2.3% a year prior, according to the National Automobile Dealers Association 2013 report -- and this year, that pretax profit margin is expected to remain at just 2.2%." "Last year and this year" refer to 2013 and 2014, when the article was written. So, I'll share with you what I heard from a neighbor who is a sales manager for a large car dealership, and has worked in auto sales for about 20 years. To sum up what he said. According to him, the markup (not margin) on a new car at MSRP is about 10% (give or take). If you pay whatever the market value of the car is for your area, you are probably paying somewhere between 1 and 5% above the dealer cost, and are likely in the middle of that somewhere. The dealers make their money in different ways. Some focus on the used cars (which is a completely different kettle of fish), on parts and service, on repeat customers, volume sales (i.e., fleet sales and service), trade in values, and incentive from the auto maker.
If you're a committed haggler who wants the best deal, is willing to get last year's model, etc, you might actually save a few more percent. What does this mean in real dollars? If a car has an MSRP of $60,000. The actual dealer cost is probably right about $54,000. You're probably going to pay between $54,500, if you're a very skilled and committed haggler who is willing to leave the lot a few times and negotiate over a week or two, and $57,500 if you're not at all interested in haggling. If you do some research online and aren't a complete jerk, you'll probably pay between $55k and $56,500. If you financed 100% of this at 1.99% financing for 60 months, we are talking $20 to $50 per month difference in payments, less if you're like many people now who are financing cars for 72, 84, or even 96 months.
All of that said, @dvcochran created a completely unnecessary dichotomy. The kerfuffle here is that @dvcochran made a judgmental statement that folks who don't haggle are gullible and have been "socially conditioned". That's a pretty disparaging position to take, and one that he can't really support beyond snide comments like the one I quoted above. As far as I'm concerned, if you want the best deal and are willing to do that, go for it. You might even save a few bucks, and everyone likes feeling good about a deal. My goal here isn't to disparage anyone who chooses to dicker at the dealer. It's not for me. Similarly, you'll never find me at a Black Friday sale. But I do love a good garage sale or thrift shop.
So, that's what the point isn't. The point is that there is plenty of actual information about how retail markup works. Everything is marked up when new. Retail vs wholesale prices are pretty significant. How many of you school owners sell gear to your students at a "modest" markup? If you buy a gi for $20 to $40 and sell it for $60 to 100, are your students gullible? Are you ripping them off? Also, car dealer prices aren't as jacked up as most people think, that as long as you know the average, fair market value for the new car you're looking to you shouldn't get ripped off. And lastly, that folks who choose NOT to dicker at the dealership may just have different priorities from you. People shop differently.
dvcochran
Grandmaster
Like I said, you can waste you time and money as you wish. I still call BS on your vehicle markup pricing determination.
I am currently running 12 basic white service trucks. They are all 2017's bought in 2018. The sticker for each truck was somewhere north of $36k (I do not remember the exact price). I paid 24k for each truck, and my dealer was very honest that he still made money on each of them. I suspect this trend only goes higher on current model year vehicles. So you can buy all the auto market industry fed information you wish. But it is just that, market driven information to condition buyers to feel 'good' about what they are paying.
You cannot seem to get beyond the dealer/retail barrier and understand there is the actual cost of a product. That is where the buyers position starts from.
Steve
Mostly Harmless
Couple of quick thoughts. Fleet sales are not the same as typical consumer sales. So, if you're buying 12 service trucks (which is not something a consumer will ever do), the dealer could make money through incentives with the manufacturer. If they're willing to pass those savings to you, great. But that sort of purchasing power isn't available to a consumer. When I sold furniture, the person who owned the store I worked at had a business partner in SoCal who had two stores of his own. Their partnership was, in large part, so that they had the purchasing power to import full shipping containers of goods, rather than partial containers. Because they were buying in larger quantities, they could negotiate better terms with the manufacturers, and they saved money on shipping, as well. Point is, I would be very careful drawing any conclusions about consumer retail prices from this. It's just apples to oranges.
Second, the dealer invoice is the amount paid by the dealer to the auto manufacturer. As noted above, sure they make some money through manufacturer incentives. I just don't get why you're so derisive about it or call it BS. I mentioned manufacturer incentives earlier. I mentioned buying previous year models earlier. You can get a good deal this way. But those factors can come into play with or without haggling. And neither the incentives nor buying previous year stock is intrinsic to haggling. Nor is buying in bulk. In fact, we see all of these things regularly in every day shopping. Look at the price per unit on any item at the grocery store. The larger the container, the cheaper the price per unit. When you buy 24 rolls of toilet paper, it costs less per roll than when you buy 4. No haggling required.
You know. I'm beginning to think you actually don't know as much about how car dealerships work as you're suggesting. You seem to be basing your entire position on a fleet transaction you made a few years ago, I'm the one actually explaining the process, and the best you can say is, "I still call BS." The impression I have is that you feel like you really got a really good deal, which is great. Sounds like you did. Good on you. There is absolutely nothing wrong with haggling to get a better deal with a dealership that expects you to haggle. If that's what it takes for you to feel good about your purchase, knock yourself out.
But that doesn't make folks who don't purchase cars from dealerships which expect you to negotiate a price foolish or gullible or "socially conditioned" (whatever you mean by that). That's where I think you're off base.
dvcochran
Grandmaster
Again, whatever makes you feel good. You do realize the vast majority of consumables come here via ships in containers donāt you? That is a far cry from a big ticket purchase. I pay the same price as anyone else at Walmart or such.
I am not a fleet buyer, far from it. I will only buy ever 5 or 6 years. I negotiate no different for my personal vehicles, farm equipment, home improvements/repairs, leisure craft and such. Hell, I even traded out a surgery once for electrical work.
If you donāt like the phrase socially conditioned how about just plain lazy or lambs to slaughter?
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