Well not exactly. The invoice is what every dealer pays for the vehicle, period. Yes, every dealer pays the same price for the same truck. The holdback is approximately 3% of the invoice and is rebated back to the dealer after the vehicle is sold. The invoice also includes dealer advertising (required on every invoice for the local DAA the dealer is in) and any required programs if the dealer is enrolled (the quarterly magazine you get etc.). What isn't included is the wholesale money (incentives for selling a quota for the month) because not every dealer hits the quota. That is the only way a Chrysler dealer can "pay less" for a vehicle than another dealer. They do not get paid extra for purchasing more units, only for selling more. The reason Dave Smith and any other dealer like him sells for less than other dealers is he has lower fixed costs (high volume out of a small property, less people as most sales are internet sales), and almost always gets the extra wholesale money from moving big volumes. He works on a smaller margin (gives up the holdback to the retail purchaser) and makes up for it in volume. He also does a good job of selling service contracts (same thing, he discounts them) and accessories, and has the opportunity to make a few bucks on financing.
There is a large fleet dealer in Watsonville CA that sells tens of thousands of cars a year at just a few dollars over his actual net cost. 99% of the cars he sell he has never seen. They are drop shipped to another dealer or straight to the fleet (Enterprise, Dollar, Thrifty etc.) You would think selling as many cars as he does he would easily make millions of dollars, but in reality he probably does not make any more or less than any other dealer because he calculates his lowest price he can sell for and still get the bids, and still stay in business. He is a great dealer that employs many local folks and is comfortable doing this part of the business for not a lot of profit. He has done it for years and has it dialed in. Most other dealer would not touch this business because "there isn't any money in it"
You are exactly correct, but using 3% of invoice is pretty darn close, especially when everyone wants to know the invoice price. The difference between the two calculations on a $40k truck is less than 1/2 a tank of fuel.
I was thinking about how everyone wants to buy vehicles at or near cost, and I'm just as guilty as the next guy. Many dealers are just becoming profitable after the melt down of the late 2000's. Compare that to Apple Computer who had sales of $170 billion and profit of $49 billion in 2013. When was the last time you got a discount on an apple product? That is a 25% profit margin, year after year. If anyone could afford to give the consumer a break it is Apple. According to NADA the average dealer in 2013 had a profit margin of just over 2%.
Yes vehicles cost more than I phones, but every time you purchase one you are getting a really good screwing. You should actually give your dealer (all dealers, not just Chrysler) a big hug for not being as greedy as some other industries. .
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