
The truth about auto dealer invoice prices (2017) - nkurz
https://clark.com/cars/eye-opening-truth-about-dealer-invoice-price/
======
brandonmenc
> Then 1995 happened, and any doofus with five thumbs and a keyboard could get
> invoice prices for free all over the Internet.

My uncle was a top car salesman in his area at that time. He said guys would
come swaggering in with a printout from the internet, and he'd be like "so
what - go somewhere else, then" because it didn't matter - no one was going to
sell you the car at zero profit.

If they "secretly" raised the "invoice" price it was almost certainly so they
wouldn't have to deal with boneheads constantly coming in and demanding to buy
the car at cost.

Anyways, his advice today? Lease. And if you're trading in, wait until the day
you're supposed to pick up the new car, then call in and say, "you know, I
think my trade-in is worth more than that" \- they will always negotiate at
that point.

~~~
jdblair
I hear people say leasing is the way to go, but I don't understand the math.
Cars easily last 10 years now, and I drove my last car for 18 years. Please
explain! Is it about always having a newish car at an optimal price?

~~~
NeedMoreTea
Leasing wins against having a new car every few years. It fails badly if you
keep your cars longer or buy when they're a few years into the depreciation
curve.

Personally I decided buying cars a few years old made far more sense.

~~~
taeric
So leasing wins if you've already decided to pour money out the window? I see
that you said buying used and older makes far more sense; which means we are
probably on the same page. However, is that really the only selling point for
leasing? If so, how in the world do so many folks get suckered into doing it?

~~~
crysin
Lots of people like new cars and being able to have the latest year's model
every 3 or so years is a big bonus for people. Same a majority of people like
having the latest iPhone or Android flagship phone.

Not everyone places value purely in the monetary realm. Some people view cars
as a status symbol. There is also less hassle with leasing.

~~~
taeric
Saying people don't place the value in the monetary realm is amusing, since
money is supposed to be fungible for all value. :)

That said, I get it. Some people place a ridiculously high value on having the
latest. I think I used to be in that population, to an extent. Nowadays, I
confess this mentality leaves me ridiculously confused.

------
Xcelerate
I bought a new car last year, and the way I did it was to locate the car I
wanted at all dealerships within 300 miles. I then emailed each dealership and
asked for the lowest price that they could sell the car for. Then I passed the
lowest number to the other dealerships, who counter offered. I iterated this
process until no dealership would go any lower, and then I drove to the one
with the best deal and picked up the car.

It brought the price a few thousand lower than the supposed "invoice minus
holdback minus whatever", but I suppose they wouldn't have sold the car unless
they made _some_ profit on it.

~~~
alanfalcon
Sometimes you can take a loss on the car, but make a profit on the sale:
[https://www.thisamericanlife.org/513/129-cars](https://www.thisamericanlife.org/513/129-cars)

~~~
ethbro
If you're interested in how dealerships actually work (and how perverse and
stressful the incentive structure can be), I _highly_ recommend listening to
the above podcast. It was fascinating.

One example: sometimes dealerships are selling you a vehicle at a loss, in
hopes they'll hit the next volume tier, earning enough manufacturer rebates to
make a net profit on the deal. And they _have_ to cut their prices that low if
they're in a competitive market.

Which turns the entire endeavor into a monthly game of musical chairs. "And
3rd place? Third place is you're fired."

------
faster
My sister bought a new car in 2014. She used one of the services that shops
your requirements to dealers within your area. The night before her scheduled
test drive with the dealer who had the best price and didn't seem sleazy, a
friend of hers told her to check with a fleet broker. Within a few hours, the
fleet broker sent her a price that was about $100 less than the dealer's.

I went to the dealership with her, we both drove the car and made sure it
would fit in her driveway (steep with sharp angles, a recipe for ripping off
front trim). On the way back to the dealership I asked how long the paperwork
would take. The salesman (actually the sales manager) said it takes a couple
hours because of 'state requirements'.

She asked him to match the fleet broker's price, he said it had to be a scam
and refused so we drove away. On the way to lunch, she called the fleet broker
and had her insurance agent send him proof of insurance (she already had
financing arranged). As we sat down to eat, the fleet broker called back and
asked when she wanted the car delivered. She got it delivered 2 days later and
spent less than 5 minutes doing the paperwork.

I have always fantasized that the next time I buy a new car, I'll figure out a
reasonable price and take a cashier's check for that amount to the dealer. I
imagine telling them that I want to be on my way out the door with the keys in
my hand in 15 minutes or I will leave. But really, why waste time on that when
I can just call a fleet broker?

~~~
gautamdivgi
If you have a Costco membership and buy cars through them they always send you
to the fleet or wholesale section of the dealership. There isn't any
negotiation with fleet sales but their price is almost always at invoice or a
few hundred less. In fact for one of the cars I bought through Costco the
fleet sales guy threw in a manufacturers discount of $2k in addition to giving
me a base price of about $500 below invoice.

------
tomcam
Our strategy is to let local dealers compete, then go in and offer cash at the
last minute. But also we have a different agenda, which is: how much is the
car worth to me? I've always assumed exactly what Clark says, which is that
the dealer invoice is bogus. By paying cash we save a huge amount over the
lifetime of the car, and the wiggle room isn't terribly important.

~~~
post_break
Cash is usually the last thing the dealers want because they double dip by
getting kick backs by selling loans to people. By financing through a credit
union you can usually get a great rate, invest that large sum else where, and
pay the loan off early if you want. Some scummy dealers will also only give
you a price based on you financing with them, cash is more expensive since
they were expecting that kickback.

~~~
everdev
Yeah, whenever I say I'm paying cash they get disappointed and stop
negotiating as much. I've learned to save it until the very end when the real
salesman, the "paperwork" guy.

------
exabrial
Dealerships are a state protected scam. They collude on prices and with Kelly
Blue Book, as well as wholesale auctioneers to keep prices high.

~~~
koboll
If states allowed direct sales, an entire industry would vanish overnight.
Auto dealerships employ two million people in the US. No politician wants that
on their hands.

~~~
mysterypie
Interesting, I didn't realize there were laws against direct sales[1]. The
phenomenon of bullshit jobs--i.e., jobs that serve no real purpose--has been
discussed here on HN multiple times[2]. It's funny how entire industries (like
the 2-3 million people who do health care paperwork in the U.S.) could
disappear overnight if the systems and regulations were different, and we
wouldn't notice, except possibly for the unemployment it would create.

[1] "U.S. car dealerships [are] protected by state laws. Most state laws
expressly prohibit manufacturers and distributors from operating retail
outlets. They must by law sell their vehicles through independent franchise
retail distribution network." [https://www.theglobeandmail.com/globe-
drive/culture/commutin...](https://www.theglobeandmail.com/globe-
drive/culture/commuting/why-cant-we-buy-cars-directly-from-car-
companies/article16935030/)

[2] Most recently:
[https://news.ycombinator.com/item?id=17260911](https://news.ycombinator.com/item?id=17260911)

~~~
blattimwind
> I didn't realize there were laws against direct sales

Interesting. Not even Germany has such a law, I wonder whether that makes the
US a car _maker_ or rather a car _seller_ country?

~~~
TeMPOraL
I recall reading that laws against direct sales were created because car
_makers_ in the US were very abusive/anticompetitive. So the laws might have
had some sense at that time.

------
vvanders
One new trick I discovered last time around doing the new dealer quote
matching game is to find a set of dealers in a different state.

In our case all the dealers for one brand were owned by a single
conglomerate(under different names) however as soon as we mentioned we had a
lower quote from a OR dealer(this was in WA) they suddenly dropped their
prices significantly.

------
closeparen
The quoted price for the last used car I bought was a hair under what any
third-party pricing resource said it should be, so I accepted. I then learned
where the dealer profit margin lives - in a very aggressive upsell to a $2500
maintenance package.

------
bingchenasian
Why are people still buying cars?

Google's Waymo is going to be available to the public in less than a year...

People buy cars and expect them to last between 7-10 years.

With Waymo soon to be available to the general public, why would anyone want
to buy a car and make a purchase that you pay for over 10 years?

~~~
tomcam
In our case, because we live in the Seattle suburbs and we don't have a
solution to the problems of street people shitting in the buses, threatening
our children and causing fights; of banana republic hours and whimsical every
two-hour-or-so schedules; of no room in the Park and Ride lots; or of miles-
long walks to the bus stops. You sound pretty smart and probably have the
solution to these problems. Please share it.

~~~
hprotagonist
Not to be glib, but a bicycle solves a lot of the medium range issues. I have
a car but use it sparingly.

Anything inside of 15 miles or so is fair game and I’m almost always faster
than a car and guaranteed faster than public transportation. Kid and grocery
hauling is well within reason. And my weather is about as weird as yours.

~~~
jimmaswell
I drive my car less than half a mile to a Wendy's on a regular basis. On a
bike I wouldn't be able to bring my dog, it would be weird using the drive-
thru, it would be uncomfortable on all but the few days of the year that are a
perfect temperature, and I'd be much less safe in the case of an accident
(people don't look at all coming out of this one place they're supposed to
yield sometimes).

And taking home the amount of groceries that I do on a bike would be
impractical, and if put in a backpack, probably hurt my back.

I cherish having the choice to take a car to these kinds of places. No way a
bike would be faster because whenever there's someone on a bike in front of me
on these routes, I have to slow down, and these routes are never badly
congested. Admittedly riding a bicycle in a bike lane can be a lot faster in
some of the most congested parts of the country like Manhattan, but there
often aren't bike lanes and using sidewalks is a point of contention.

~~~
KozmoNau7
>"On a bike I wouldn't be able to bring my dog"

Your dog can run leashed next to your bike, it's a very common way to walk
dogs.

Or you could even walk, half a mile is super close.

>"it would be weird using the drive-thru"

Yeah probably a bit. Go inside instead and sit down to eat, maybe?

>"it would be uncomfortable on all but the few days of the year that are a
perfect temperature"

You get used to it extremely quickly, trust me :-)

>"I'd be much less safe in the case of an accident"

Even in a car, I would avoid a place like that, and find an alternate route.
That just sounds like an accident waiting to happen, to be honest, no matter
your mode of transport.

>>"And taking home the amount of groceries that I do on a bike would be
impractical“

Yeah, if you only shop once every week or even two weeks. My girlfriend and I
manage grocery shopping quite well on foot and bike, and I would think we buy
an average amount for two people.

I know it's easiest to stick with what you know, but there's always an
alternative.

~~~
jimmaswell
> Your dog can run leashed next to your bike, it's a very common way to walk
> dogs. Or you could even walk, half a mile is super close.

Biking across a street with her beside me? No. She freezes sometimes when
there's something like a dog or just a person she doesn't like in the
distance, and she can be stubborn about running regardless. If I was biking at
a speed she could keep up with then I might as well walk. And I wouldn't make
her stay outside that long in extremely high or low temperatures, especially
10 minutes both ways.

> Yeah probably a bit. Go inside instead and sit down to eat, maybe?

Like I said, I like to bring my dog, and you can't bring doge inside a
restaurant. Taking her with me there and giving her a bit of bacon/whatever
has been a great positive reinforcement to make her see car rides as a
positive.

> Even in a car, I would avoid a place like that, and find an alternate route.
> That just sounds like an accident waiting to happen, to be honest, no matter
> your mode of transport.

You're less visible in a bike. It's not a big deal with a car, I just go slow
and stay prepared to stop. The speed limit the entire trip is 25mph at most.

>You get used to it extremely quickly, trust me :-) > I know it's easiest to
stick with what you know, but there's always an alternative.

In college I walked across campus for food daily. At my job training when I
was in a hotel I walked to the nearby mall or Wendy's for food daily. I never
particularly got used to freezing temperatures on my face (and sometimes
texting gloves weren't enough for the hands) and very hot temperatures. Even
in nice weather I didn't like all the walking college entailed. After all this
I greatly appreciate having the option of driving, not to mention that I've
come to enjoy driving in its own right.

~~~
KozmoNau7
I know it's very easy and comfortable to stay in our chosen set ways, but
there is always an alternative.

You could train you dog to run alongside you, just like you've trained her to
go on car rides. You could sit outside with her and eat.

Setting up mental barriers is very common in order to avoid things seen as
uncomfortable or strange, but sometimes you just have to try. See the world in
a new light, rather than through a windshield. Enjoy the fresh air (while we
still can).

~~~
jimmaswell
Did you read my post? I said I used to walk to get food all the time. I have
extensive walking rather than driving to places to get food. Driving is the
new thing for me here, which I really only started doing late last year, and
it was uncomfortable at first as well. I've made an informed opinion of both
after having done both.

And I do go with the windows down when it's reasonable to do so.

------
shartshooter
What is the most valuable resource a car salesman has? Time. She/he can’t make
more of it and any time spent on something that likely won’t bring them a deal
has a huge opportunity cost.

Knowing that, the most effective way to get the lowest possible price is to
spend as much time with a salesperson as possible. Test drive every model,
have them dig up odd questions and get them convinced that you’re going to
buy. After all, a serious buyer would never take so much time if they weren’t
serious.

The sales rep will see all the other potential buyers coming into the lot
getting help from his competing reps. This isn’t a big deal if she/he is
convinced you’ll buy.

After spending all day, walk away. And do it at the absolute last minute. The
sales rep and their boss will do everything they can to get you locked in
because 1) they were already set on you buying and 2) they burned a huge
amount of time helping you and missing out on other buyers. They’re too
mentally invested in seeing you buy.

There’s no guarantee you’ll get something at cost or at a loss but you’ll put
the power in your hands and be working with someone who’s as invested in
buying as you are.

The idea that you can email your way to the lowest price is far less
effective. The amount of time it takes for a car salesperson to reastart one
to an email is trivial compared to burning an entire day test driving vehicles
with you.

~~~
jghn
_your_ time also has value. Spending a whole day to get a lower cost might not
save as much money as it seems

~~~
twothamendment
Sometimes it is worth it. I spent 2 days to buy a truck. I flew to another
state and drove it home. It mostly went according to plan except the leaky
power steering hose that I spotted the first minute I looked at it - and then
spent the next 5 hours waiting for them to fix it. I wish I could trade more
weekends for $5,000.

~~~
blattimwind
> except the leaky power steering hose

Great QA right off the bat.

