How much over dealer cost should I offer for a 2001 NSX?

[Nsxotic]

Ken, You are continuing to nail it !!!! Want a job?

Steveny, you are also right in your reason for 5-10k addendums... Remember, demand determines price.

sjs, Floor plan is literally over $4000 per MONTH paid to GMAC, Primus, whoever.... to floorplan an NSX! Every month, pay the bill! It is 10k-20k/month for a Modena depending on the size of the dealership and how many cars they have floor planned. (in case you cared) Now, for everyday cars, we try to keep the stock at a 45 day inventory. Any new car over 30 is starting to be old age. Normally a well managed store will turn it's cars within 30 days to avoid high floor plan costs. Thus, you may actually get a great deal just because a certain Isuzu Rodeo has been in stock for 100 days. Another trick, ask the dealer for his oldest unit in stock and use it as a negotiating tool if your a real hard-baller. So, sjs, how do you propose that we avoid this cost and "use it for more profitable things".... Pay cash for the cars?? Yeah right!

quote: surely it is not thousands to floor plan it" YES it is....... welcome to my world.

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Todd Arnold

http://www.geocities.com/nsxcessive/index.html

 

[nsxtasy]

Okay, now we're talking about something I'm not familiar with. What is "floor plan"? I realize it's the cost of having a car in inventory, but... like the others, I don't understand why it costs $4K a month to floor plan an NSX. Wouldn't it be the direct cost associated with having a single car in the showroom - specifically, the cost of financing? The financing (interest) cost for a ~$70K car would be maybe $500 a month or so at 8 percent interest, no? So what's the difference between the floor plan cost and the cost of the money tied up in the car?

[This message has been edited by nsxtasy (edited 12 June 2001).]

 

[steveny]

E mails between Todd and myself:
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Hello Todd,
I did mean to offend you at all. I was just stating a different set of facts from my persective. I would never call anyone a liar. You may operate differently than others. I do appreciate the information that you posted. What I was trying to get at is although you were kind enough to post the info here it might not be something you would do at work. You have stated the reasons why you would not offer this at work and that is a persepctive I had not thought of. Therefore it is my own ignorance for not seeing the situation from that light. BTW I buy 90% of the pleasure items in my life using plan B.

sorry I offended you,

steve
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No problem Steve, Thanks. I was just trying to help you guys
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I guess the reason this is such a hot topic for me is that my girlfriend paid 17,000 for a new caviler back in 97. At the time she was not my girlfrind but as luck would have it I was at the dealership at the time. After she left the sales people were in their breakroom doing high 5's about all the money they made. This is when I started to do a little D&D of my own to see what really goes on behind closed doors. I talked to both of my friends who own dealerships and I was just floored at what goes on. I have made it one of my life goals that no one I know family or friend will EVER buy a car without myself present. I just purchased a new 2000 ford taurus for my mother in 2000 for 13,500. As you stated earlier tonight I know that there is NO WAY that the dealer made a nickel on this car he probally lost money just to get me out of there. BUT im sure someone like my girlfriend walked in 10 minutes later and he made it all up and then some!!!!
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Exactly!!!!!!! That's what happens. In fact, the next deal after the loser Hyundai was a $6068 deal that also made another $2200 on the backend. Average, average, average. High fives galore. Years ago, when I used to sell and had a customer act stubborn like you did for your Mother, I'd always just say... "Did you have a bad experience somewhere else?" That usually got to the root of their attitude. You should post this e-mail on Prime and It would make a lot of sense to everyone.

 

[sjs]

Originally posted by Nsxotic:
sjs, Floor plan is literally over $4000 per MONTH paid to GMAC, Primus, whoever.... to floorplan an NSX! Every month, pay the bill!

Sorry, if you're saying that the non-recoverable loss is $4k/month then I'm not buying it. But that's not what your saying, is it? So I'm NOT calling you a liar. You just own more of the car every month you keep it, and you lose a portion of that in interest and the lost revenue compared to if the same money were used more profitably. If you sit on it and others too long you may find yourself insolvent. But it doesn't "cost" you 4k/month. If it does, I'd be glad to finance a few NSXs for you. But that would make me a loan shark and I'd go to jail. Once again, the word "cost" can be used most any way you want to drive your point home.

 

[Nsxotic]

AW Ken, you let me down a bit

You were perfect til then....

Quick, without getting ridiculously detailed. I can't show you the math as that would be going a 'bit' too far. Floor plan is a variable per dealership and per car. How many cars, what typical turn is, etc.. It is not typical ammortization as in finacing a car over a certain term. Roughly, floor plans are based on turning the car within 90 days so the math is based on that.(NSXs don't turn nearly that quickly usually and nor do Modenas,etc,..) Vaguely, finance 20% of the cost over 3 months....Expensive.... is the bottom line. Don't forget about advertising that the factory charges the dealer on the invoice also..... ooh,,, more costs.

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Todd Arnold

http://www.geocities.com/nsxcessive/index.html

 

[Nsxotic]

sjs, you are right in most of your last post. However, you keep saying "and you lose a portion of that in interest and the lost revenue compared to if the same money were used more profitably" as if there was a choice. How could I not pay it and use it more profitably>>>>???? Gotta pay it. Do not have a choice to spend it elsewhere.

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Todd Arnold

http://www.geocities.com/nsxcessive/index.html

 

[sjs]

Originally posted by Nsxotic:
How could I not pay it and use it more profitably>>>>???? Gotta pay it. Do not have a choice to spend it elsewhere.

Sorry, I didn't make myself clear. What I meant was that you could easily make the case that if a high $ car sold in 1 day, the amount you had floor planned could be rolled into one or more other cars, which might turn over quickly, generating a profit. On the other hand, if you budget for it to turn in 30 days and it takes 60, then you lose the potential profit on that same money IF it could be used to floor plan and turn more cars in those extra 30 days. That could be said to "cost" in terms of lost revenue and profit. Not much different than any other retail business. Some of them pay inventory tax, financing, whatever.

So yes, you must pay if you don't sell. And as long as the cash is tied up in a slow mover it can't be used elsewhere, and that could be construed as a "cost" of floor planning a slow mover, which is what I was trying to say. However, that's only fair to count if there really was the option to get more of the fast movers and attract ready buyers to snap them up. Often not true in your industry even for strong performing dealerships. There's always too few of the hot ones and too many of the dogs.

This has been interesting, but hopefully not destructive.

[This message has been edited by sjs (edited 12 June 2001).]

 

[Lud]

With regards to the amount of hostility so many people feel towards car dealers, I think the dealers have nowhere to look but at themselves. There is a REASON people are generally hostile towards car dealers but not other retail operations.

Reason #1: Dishonesty. While there are certainly straight-shooting honest people working in the business, there are MANY more who are not. Part of the problem is that there isn't much screening to be a salesman. Part of the problem is the pressure salesmen are under to make quotas (and comission so they can get paid!) The only people who have ever been straight with me were managers, GMs, owners, etc. I would never buy a car from anyone below the sales manager (usually from the GM if I know them).

Reason #2: Taking advantage of people. Too many people know a friend or relative who was naive and got taken to the cleaners when they bought a car. It is that "a sucker and his money are my best customer" attitude at most dealers which causes people to go in expecting to have to protect themselves from being ripped off.

Reason #3: Confusing the facts and obfuscating the true cost. Dealers never start negotiating from their TRUE COST. Most want to start from a little under retail. Some will start with a little over invoice and these days (since the information is available elsewhere) the rest will show you invoice price. But this is NOT their true cost on average due to holdbacks, rebates, volume and floorplan incentives, etc. Why do dealers like leasing so much? Because if their customer isn't very sophistocated they can spend all their time talking about $/month instead of the actual cost of the vehicle, interest (called money factor and calculated differently than APR again simply to confuse people). Because they can tack on extra charges like "acquisition fees," "disposition fees" and such. I've noticed some dealers in the last few years have also started charging a "processing fee" on top of everything. Right.

Reason #4: Lack of knowledge and wasting customers time. I am always amazed how many salesman do not know anything about the cars they sell. There is simply no excuse for that. I (and I suspect many others) feel that if a dealer is not going to add value, such as being able to discuss the merits of a vehicle vs. competing models, there is no reason they should get a profit on the sale. I am also amazed how inefficient the sales process is (by design). There is no legitimate reason a customer should have to come back to pick up their car and sit there for an hour or more while the dealer prepares the paperwork, etc. This is the opposite of "value added," it is "value reduced" because it is a waste of time.

As far as profit/floorplanning/etc: I know more than a couple people who own more than a couple dealerships each. Here is how it works (at least at their dealerships):

Profit: Hold back has already been discussed. It is simply profit they make after the sale. The dealer may also receive additional discounts in the form of dealer rebates, volume incentive bonuses, and floorplan allowances. Then there is the "gravy" on top of that consisting of additional insurances, rustproofing, extended warranties, etc. Optional? Sure, but that doesn't mean they don't make good money off them (hint: if they didn't, they wouldn't push them.) A typical mid-market dealer averages somewhere around $2000 gross profit per new vehicle sold.

Floorplan: "Floorplan" is simply the term for the way a dealer finances their inventory. Financing at this level is always a little involved, but basically dealers have a total floorplan amount, say x million dollars, to stock all of their inventory. They can stock whatever combined value of cars adds up to their total floorplan amount. A specific car doesn't cost anything, it just ties up that part of their x million dollars so they can't use it to floorplan other cars. For example, one NSX takes up roughly the same amount of their floorplan as say 2 RLs. That is a simplified view.

Hint: If anyone is truly interested in learning how a dealership operates financially, there are a number of publically traded companies that operate groups of dealerships and you can learn anything you want by reviewing their 10-Ks and 10-Qs...


Of course that's just my opinion.

[This message has been edited by Lud (edited 12 June 2001).]