Need help consoling my dealer

[MX5Racer]

So I ordered my ride a few weeks back at a dealer who needed me to walk them thru the process (the usual "can't order 2016's yet", "we don't have an order guide", blah blah). Then I told them I'm using x-plan to pay, and he got all depressed. Now when ever I call (I've made a few changes to my order, mostly upgrades) and mention x-plan, I get the old "We're not making any money on this sale. It's x-plan. Boo hoo!"

So I'm asking anybody in the know, how much is he making on a $42,000 x-plan price so I can shut him up?

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[StangMan04]

So I ordered my ride a few weeks back at a dealer who needed me to walk them thru the process (the usual "can't order 2016's yet", "we don't have an order guide", blah blah). Then I told them I'm using x-plan to pay, and he got all depressed. Now when ever I call (I've made a few changes to my order, mostly upgrades) and mention x-plan, I get the old "We're not making any money on this sale. It's x-plan. Boo hoo!"

So I'm asking anybody in the know, how much is he making on a $42,000 x-plan price so I can shut him up?

Need more details in terms of which model,options,etc.

Edit: it looks from your signature that you have already ordered?

 

[CJ4life]

He shouldn't be complaining about X Plan. My understanding is that Ford sends them a kickback for every X Plan pin used in a sale. There's also usually a bit of wiggle room below X Plan pricing so this sounds like terrible dealer salesman to me.

 

[syntheticgt]

He shouldn't be complaining about X Plan. My understanding is that Ford sends them a kickback for every X Plan pin used in a sale. There's also usually a bit of wiggle room below X Plan pricing so this sounds like terrible dealer salesman to me.

This.

My salesman has been pretty awesome so far. He doesn't answer emails as fast as I would like, but, he got the job done and made it painless. They will make about $1000 (give or take) off my deal since I am using outside financing.

Tell him to buck up and help you out. A sale is a sale and Ford gives them money for using x-plan. Then there are holdbacks and volume bonuses. They are going to make plenty of money.

 

[StangMan04]

Yeah don't believe their line of not making money. I got my car ordered and will be paying less than invoice price AFTER tax/title/fees. But, this was through Koons.

I had a local dealership come close to Koons pricing, so money is still being made for below x-plan prices.

 

[RobbieFrazier]

It should be noted that there is a big difference in the dealer making money and the salesperson making money.

The dealer makes money in several ways:

1. Gross margin (sale price - invoice) OR A/Z/D/X program commission (about $250 IIRC)
2. Dealer holdback (3% of MSRP for Ford/Lincoln vehicles)
3. Volume bonus (this is an additional percentage of each vehicle MSRP based on sales volume in a given month/quarter; the percentage varies by dealer, make, and model)
4. Financing markup (generally about 1% of your APR goes to the dealer if you finance through them; the amount varies by dealer and lender)

The salesperson makes money in several ways:

1. Commission on gross margin ([sale price - invoice]*commission rate; the commission rate is generally 25-30%; this rate varies by dealer and make; A/Z/D/X plan pays flat $250)
2. Spiffs from upsells on the back end (e.g. convincing you to buy an extended warranty or service contract; note that the salesperson does NOT get paid if the finance manager sells you these things, and not all dealers offer this type of spiff)
3. Spiffs from perfect manufacturer surveys (this is why they usually tell you, "if you believe any aspect is not worthy of a 10, please let me know and I'll take care of the issue"; again not all dealers offer this type of spiff; the amount typically varies from $20 - $50)
4. The "mini" (this is a "mini"mum commission the dealer will pay in cases where the commission on gross margin falls below a threshold, usually $150 - $250 per vehicle)

Assuming the following, let's look at your deal:

• $45,000 MSRP / $41,865 invoice / $42,000 X-Plan
• Average-volume dealer
• Cash deal
• No upsells
• Perfect survey

Dealer [$1,600]:

1. Gross margin (42,000 - 41,865 = 135) but A/Z/D/X = [250]
2. Dealer holdback (45,000 * .03) = [1,350]
3. Volume bonus = [0]
4. Financing markup = [0]

Salesperson [$270 - $300]:

1. Commission on gross margin (135 * .30 = 40.50) but A/Z/D/X = [250]
2. Spiff from upsell = [0]
3. Spiff from survey = [20 - 50]
4. "Mini" = [0]

The salesperson will spend around four hours total working your deal. This includes the time spent building rapport, determining your vehicle needs, facilitating the test drive, selling you the vehicle, facilitating the negotiation, completing paperwork, fueling up the car, coordinating make-ready, performing delivery, after-sale follow up, etc.

Sounds like a great hourly rate, right? Think again.

The typical salesperson works about 50 hours per week, but sells only about four cars during those 50 hours (remember, most people that visit a dealership do NOT buy a car). This equates to a lot of work for a relatively modest income.

On the other hand, the typical dealer will sell around 125 vehicles per week.

You do the rest of the math.


*Note that I last sold Ford/Lincoln vehicles over ten years ago, so the program commissions may have changed.

 

[Five Oh Brian]

RobbieFrazier nailed it pretty darn close to reality, despite being out of the car biz for awhile.

I'd gladly sell at X-plan all day long to anyone and everyone who qualifies. We make reasonable money selling at X-plan.

 

[MX5Racer]

Thanks! Exactly what I'm looking for. As far the salesmans hourly rate, he made out on this deal because I literally walked in and ordered. He had no idea what options were available, so I did all the work. So I'm going to tell him to stop whining!

 

[syntheticgt]

Regardless of what the salesman actually makes versus the time spent with the customer, there is still a level of customer service required. Surveys need to be good and the customer needs to feel like they chose the right dealership to buy from. The customer can head down the street, pay the same price at another dealership, and get faaaar better service from said dealership. So it's up to the salesman, as the first stop for that customer, to make that dealership look like gold.

Just for some e-cred for myself...I spend 10 hours a day/5 days a week watching sales and service from my parts counter at a dealership. I watch these situations play out during the day and some people have the touch...some don't. Those that don't just find a way to "accidentally collect the wrong email address" from customers that will definitely leave a bad survey. LOL!

 

[angermgmt14]

It should be noted that there is a big difference in the dealer making money and the salesperson making money.

The dealer makes money in several ways:

1. Gross margin (sale price - invoice) OR A/Z/D/X program commission (about $250 IIRC)
2. Dealer holdback (3% of MSRP for Ford/Lincoln vehicles)
3. Volume bonus (this is an additional percentage of each vehicle MSRP based on sales volume in a given month/quarter; the percentage varies by dealer, make, and model)
4. Financing markup (generally about 1% of your APR goes to the dealer if you finance through them; the amount varies by dealer and lender)

The salesperson makes money in several ways:

1. Commission on gross margin ([sale price - invoice]*commission rate; the commission rate is generally 25-30%; this rate varies by dealer and make; A/Z/D/X plan pays flat $250)
2. Spiffs from upsells on the back end (e.g. convincing you to buy an extended warranty or service contract; note that the salesperson does NOT get paid if the finance manager sells you these things, and not all dealers offer this type of spiff)
3. Spiffs from perfect manufacturer surveys (this is why they usually tell you, "if you believe any aspect is not worthy of a 10, please let me know and I'll take care of the issue"; again not all dealers offer this type of spiff; the amount typically varies from $20 - $50)
4. The "mini" (this is a "mini"mum commission the dealer will pay in cases where the commission on gross margin falls below a threshold, usually $150 - $250 per vehicle)

Assuming the following, let's look at your deal:

• $45,000 MSRP / $41,865 invoice / $42,000 X-Plan
• Average-volume dealer
• Cash deal
• No upsells
• Perfect survey

Dealer [$1,600]:

1. Gross margin (42,000 - 41,865 = 135) but A/Z/D/X = [250]
2. Dealer holdback (45,000 * .03) = [1,350]
3. Volume bonus = [0]
4. Financing markup = [0]

Salesperson [$270 - $300]:

1. Commission on gross margin (135 * .30 = 40.50) but A/Z/D/X = [250]
2. Spiff from upsell = [0]
3. Spiff from survey = [20 - 50]
4. "Mini" = [0]

The salesperson will spend around four hours total working your deal. This includes the time spent building rapport, determining your vehicle needs, facilitating the test drive, selling you the vehicle, facilitating the negotiation, completing paperwork, fueling up the car, coordinating make-ready, performing delivery, after-sale follow up, etc.

Sounds like a great hourly rate, right? Think again.

The typical salesperson works about 50 hours per week, but sells only about four cars during those 50 hours (remember, most people that visit a dealership do NOT buy a car). This equates to a lot of work for a relatively modest income.

On the other hand, the typical dealer will sell around 125 vehicles per week.

You do the rest of the math.


*Note that I last sold Ford/Lincoln vehicles over ten years ago, so the program commissions may have changed.

RobbieFrazier nailed it pretty darn close to reality, despite being out of the car biz for awhile.

I'd gladly sell at X-plan all day long to anyone and everyone who qualifies. We make reasonable money selling at X-plan.

So with all of this being said, would you consider it "fair" to offer a dealer invoice price or a little below for a ordered vehicle? (before any rebates)
Again, I know it will depend on the dealership. I don't care how they get to that number, as long as they get there.

 

[RobbieFrazier]

So with all of this being said, would you consider it "fair" to offer a dealer invoice price or a little below for a ordered vehicle? (before any rebates)
Again, I know it will depend on the dealership. I don't care how they get to that number, as long as they get there.

As a general rule you should start your negotiations at invoice and move up. The dealer will start at MSRP and move down. You should ultimately meet in the middle somewhere that equals win-win-win for all parties (you, dealer, salesperson). However, there are times when exceptions apply.

The first exception is at or near the end of a model year. In these cases, you should end up somewhere around invoice price or a little below (before incentives).

The second exception is for aging inventory, particularly over three months on the lot. Again you should end up somewhere around invoice price or below, but the older the car the better the deal for you the buyer.

The third exception is at or near the end of a generation. These are great opportunities to buy what is arguably a dated design at an incredible discount. You should expect to pay substantially less than invoice for these vehicles. A prime example of this type of deal was the sudden rush of buyers seeking new S197's as the S550 was released (face it, some people just don't like this design, and others dislike the IRS).

 

[vr4]

So I ordered my ride a few weeks back at a dealer who needed me to walk them thru the process (the usual "can't order 2016's yet", "we don't have an order guide", blah blah). Then I told them I'm using x-plan to pay, and he got all depressed. Now when ever I call (I've made a few changes to my order, mostly upgrades) and mention x-plan, I get the old "We're not making any money on this sale. It's x-plan. Boo hoo!"

So I'm asking anybody in the know, how much is he making on a $42,000 x-plan price so I can shut him up?

The last 2 I talked to I said right up front I'll be using xplan and they both said "great. You know what you're doing, we don't have to work, simple. Let us know when you're ready. "

 

[Mustang1260]

Ummmm not to start issues...but ...read the initial post. The "buyer" keeps changing his mind about options with repeated calls to the salesman. Sounds like the salesman is providing service to a PIA buyer....more then a typical X-Plan order entails.

 

[GoBlues38]

Dealer is all about selling units. Most people service their car where they buy it. Service especially warenty work is where dealers make the money.

 

[Zemedici]

Dealer is all about selling units. Most people service their car where they buy it. Service especially warenty work is where dealers make the money.

No. Service in most dealerships lose money. Sales makes the majority of money, iirc parts gives anywhere from 25-50% of their GP to service to keep them afloat. (My dealer it's 50, I think that's the new standard since 'express lane' was invented, as it loses money like clockwork every month by definition)

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