Wish we had a dealer salesman here that could give the down n dirty on vehicle pricing.
This is how I understand it, but even that's necessarily true:
*MSRP
*INVOICE - what dealers tell customers their cost is
*HOLDBACK - 3% of MSRP to cover dealer overhead costs
*Actually vehicle dealer cost
Now when last year vehicles are discounted $10K, I've heard dealers say their actually losing money, but I've also heard them them say they're still making a small profit. Which one is it?
MSRP is the price on the Monroney label (window sticker required by law) on the vehicle window. It does not include any "additional dealer markup" or any other sticker also attached by the dealer to the window near the factory sticker.
Invoice is the factory invoice price of the vehicle. Every FCA dealer pays the same for every vehicle, i.e. the invoice price. The invoice also includes the holdback and any advertising monies collected by the advertising association the dealer belongs to. I have been out of it for a while, but the ad association fees can run into the several hundreds of dollars per vehicle. These funds are collected automatically by the association and are not negotiable. They pay for local advertising not paid for by the manufacturer. FCA does not share invoice pricing with anyone but the dealer, but most dealers share the invoice price with just about anyone. When you use an employee purchase the dealer is required to show you the invoice prior to sale. There is approximately 11% markup from invoice to retail and that also varies widely depending on the product. A Fiat 500 has a much smaller margin built into it than a full size Ram does.
I'm not saying anyone never got 35% off of retail, but unless there are some very large retail incentives (I got $5,500 on my 14 1500) you will never approach that type of discount. My discount using employee purchase (net invoice less holdback) and $5,500 in incentives were right at 25% off the $42,335 MSRP.
Holdback is 3% of the net invoice (less ad association) and I believe is paid quarterly to the dealer based on sales reported during the period.
What they are working on when they get into invoice and holdback is the wholesale monies paid to the dealer for hitting sales targets or other special incentives. Besides retail incentives there are sometimes wholesale incentives paid to the dealer to move a particular product, or for moving more than their sales objectives for the month. The payments vary widely from dealer to dealer, some dealers hardly ever get them, and others get fairly significant numbers. Dave Smith type dealers are always into wholesale incentives and they bank on them to make a profit and stay in business. That is why at the end of the month and especially the last week of December there are great deals made.
According to NADA the average dealer makes around 1-3% net profit on sales. I could never understand why so many people think they can grind auto dealers for every last penny but yet pay retail for every Apple device so Apple can net $40 Billion on $200 billion in sales for a 20% net profit on sales. New car dealers have millions invested in buildings and equipment for a couple percent return, Apple has a storefront and internet sales that do not cost Apple much of anything.
Attention: TDR Forum Junkies 
