If you bother to read the financial statements of public companies which manufacture cars....
WTF is “invoice” ….. really?
- Thread starter philsey
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If you bother to read the financial statements of public companies which manufacture cars....
jrandom
New member
Thanks for that, I consider that a somewhat bold statement, although I do have an open mind to your proposition. I in fact did go through their FY2014 Q2 financial reports.
The thing is you do not get an accurate cost analysis of individual components reading spreadsheets with rounded numbers talking in the 100's of millions of dollars/yen (with at time exchange rates) and rounded ten of thousands of units with all models and trim levels lump summed into a single factor.
Maybe I just don't see it, maybe you can show me where I can find a calculable value or values in which I could figure a per model/trim/unit cost that wouldn't take me the better part of the day to figure out, if even at all.
:shrug:
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The Waco Kid
New member
That would be total gross costs for R&D. You will not find a single thing in a company's 10K stating how much a individual line of cars cost to R&D. Nor will you see a breakdown of costs per model or segment, which is what he was alluding to.
LOL. You think what you are seeing on the DMS is what the dealer has in the car or that you can calculate what they pay for a car based off it? That is not what they really have in the car. Really, everything you wrote is what people think and what they are taught as salespeople, etc., but it is not the case. Yes, they make a lot on used car and all the products that you mentioned, but what they pay for a car has nothing to do with invoice and their margins are not thin on new cars. They make plenty of money on new cars (not just a few hundred dollars as everyone says) and the difference between what they actually pay for a car and what they sell if for it thousands--not hundreds. They may tell you they are losing money on a car, but what they are really saying is that they did not make as much profit (and thus lost money) as they would have liked to make. Hey, believe what you want.
When you buy from a manufacturer program, you are paying based off "invoice", but that has nothing to do with what they pay for a car. Again, invoice is just a word that has no bearing whatsoever to cost. None. If you read the fine print for your employee purchasing plan it states that invoice is not cost. We are back to the fact that invoice means nothing. Too many of you folks are getting fooled by a word that should mean cost, but it does not.
By the way, those public financial statement confirm what I already know (56% of profits from new car sales) from working with the actual owners of dealerships while doing their estate planning. They are making most of their money on new cars, which is exactly opposite what everyone thinks. The margins are not thin, but they are fair for the dealership because they have a lot of expenses and overhead and they have to make a return on their investment. Like I said above, nobody at the dealership has access to what the real numbers are other than the owners and the select folks who write the checks. Sales people and managers think they know, but they don't (the system they have access to shows the meaningless "invoice" and just parts of the cost equation). It's not voodoo--it's just nobody's business other than the owners.
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philsey
New member
YES!!! And there you have it folks, the real facts. Succinctly put.... take it to the bank.
The auto biz coined this term to imply cost. It's a smoke screen to ALL but the dealer owners, and top-most dealer brass. This includes salespeople, finance people, and mid-managers - and of course buyers. Anyone who believes that ANY business owner reveals real costs is naive.
Thanks [MENTION=101120]HwyChile[/MENTION]
Donkey
New member
I agree with you, the invoice price is essentially useless except for arguing on the internet. It is just simple business. One contention: the back of the house is far more profitable than the front, that was 56% of revenue...not profit.
Yes, of course, by reading financial statements you don't get specific numbers e.g. how much did it cost Toyota to develop, etc. a 4Runner even if we were to agree on how to calculate such a number (and it depends on a lot of assumptions, conventions, and semi-arbitrary allocations). You can get an estimate for how much would it cost to "develop, build, and distribute a vehicle" in general, but obviously you don't get the invoices between Toyota and its suppliers...
jrandom
New member
Okay, full circle, and I am still no closer than when I originally posted my question. The point I am getting at is someone knows this number, yet you do not seem to think so, that's fine, someone does I guarantee it. Not to be a dick, if you are going to tell someone to go do something, maybe consider that you may be wasting someones time by giving an answer that really gives no forward leading information. I at first take trust in what you say, until proven otherwise. You lead me nowhere, and retort with gibberish. It is okay to make somewhat snide simple one lined statement like that, just be able to back them up with solid information.
Just in case it wasn't clear "accurate cost analysis of individual components" speaks of components of the pipeline as a whole itself not individual vehicle parts.
Anyway, having an idea of per unit costs, lets you develop a base to figure out how the rest of the pyramid is built. Leading to the tippy-top and the magical "invoice" and "dealer cost"
thebwlife
Senior Member
My father-in-law works for Subaru and is the guy selling the cars to dealerships. He said pending the car the dealer is making 7-10% when they sell at "invoice". But on a 40k 4runner that's 4K. Also said that number can start getting cut into cause of having the car on the lot to long.
First, invoice is a real number and it does have a relation to actual dealer cost of the vehicle.
Second, dealers do not know how much they made (or lost) on a vehicle until much later than the actual sale of the vehicle because of manufac incentives and several other factors.
Third, the percentage of people who end up negotiating with invoice as a starting point is in the single digits. That's why many dealers make a decent profit on new cars.
To make a blanket statement that 'all' dealers make a majority of net on new car sales is not having knowledge of the larger auto biz picture. Some dealers make a healthy profit and others do so at a significantly smaller rate. It depends on competition and philosophy of the store's ownership/management.
I've worked closely with the in-the-trenches-management, owners of individual dealer stores and execs of management groups. You learn a lot about the biz when you have dinner and drinks with them.
Second, dealers do not know how much they made (or lost) on a vehicle until much later than the actual sale of the vehicle because of manufac incentives and several other factors.
Third, the percentage of people who end up negotiating with invoice as a starting point is in the single digits. That's why many dealers make a decent profit on new cars.
To make a blanket statement that 'all' dealers make a majority of net on new car sales is not having knowledge of the larger auto biz picture. Some dealers make a healthy profit and others do so at a significantly smaller rate. It depends on competition and philosophy of the store's ownership/management.
I've worked closely with the in-the-trenches-management, owners of individual dealer stores and execs of management groups. You learn a lot about the biz when you have dinner and drinks with them.
I think everyone is missing the point here. The "invoice price" and how that relates to Toyota's profits, or the dealer's profits, is not the relevant point. We all want Toyota to make money (and the dealers), so that they can keep building and selling 4Runners, and making a reasonable living.
What we all really want is to pay less than the other guy (the squares who are not in the know) for a similar vehicle. HwyChile is a good example of this theory, as he claims to be the only true insider - obviously the rest of us are being duped.
I would assert that true market value, however you choose to measure that, is the really important number. If you're not willing to pay something at least pretty close to what others are willing to pay, then why would a dealer sell you the vehicle? It doesn't matter whether Toyota (or the dealer) is making $100 or $100,000 per vehicle, your offer will always be rejected if the sales contact can confidently expect to be able to sell the vehicle for a higher profit in the immediate future.
Research the market, and neither the invoice or the MSRP matter, except as starting points for discussion. The only reason we all want to start with invoice instead of MSRP is that it's a lower number.
:shrug:
What we all really want is to pay less than the other guy (the squares who are not in the know) for a similar vehicle. HwyChile is a good example of this theory, as he claims to be the only true insider - obviously the rest of us are being duped.
I would assert that true market value, however you choose to measure that, is the really important number. If you're not willing to pay something at least pretty close to what others are willing to pay, then why would a dealer sell you the vehicle? It doesn't matter whether Toyota (or the dealer) is making $100 or $100,000 per vehicle, your offer will always be rejected if the sales contact can confidently expect to be able to sell the vehicle for a higher profit in the immediate future.
Research the market, and neither the invoice or the MSRP matter, except as starting points for discussion. The only reason we all want to start with invoice instead of MSRP is that it's a lower number.
:shrug:
I get what you're saying and I think many will agree. However, I bolded the part that could use a deeper view. The reality is that different stores have different goals. For some it is volume, for some it is profit per vehicle, etc. While they all have these goals, they are not always weighted the same.
Some dealers only expect a certain allotment of metal so they back out their forecasts differently than other higher volume dealers.
Most stores will sell a car for significantly less to one person even if they can realistically sell it for more to another. I see it all of the time and I've experienced it personally. The stores have to keep salespeople happy and management have egos associated with sales numbers that are bandied about at functions, conferences and internally. Plus they are heavily incentivized to put up sales numbers that aren't always tied to profits. They are as human as the rest of the world and not every sale has to make sense. No business is run perfectly. If stores are highly profitable at the end of the day by whatever means everyone can sleep at night.
[MENTION=101401]4r2014[/MENTION]: True - every situation is different and I have no doubt that dealers occasionally sell vehicles at a "loss" to meet sales goals. I'm not sure that's of much use to the buyer though, as it's not necessarily predictable beyond the old adage that it's better to buy at the end of the month/year than at the beginning. And the invoice/retail price has even less bearing on those particular situations.
If you know how to find flexible dealers and know how negotiate with dealers then it is very useful. Timing has nothing to do with it.
This. Pay less than average when buying new and sell higher than average when you sell and you maximize the value by minimizing cost of ownership. Invoice has value in navigating and negotiating the new car buy price. If it cost toyota $100 to make my t4r, good for them, because I know I can sell it for $35k. Invoice is a real number in that it is strongly correlated to the actual cost of the vehicle to the dealer (cost minus holdback and financial reserve and rebate if applicable). So it is neither cost nor completely erroneous. I am glad I can ask my salesman for it as I find it a good tool along with truecar.
RG79
New member
Are you in the car business??? Are do you just talk to one guy who owns one dealership??? Do you know the difference between the front and back of a NEW car deal???
This gentlemen your planning for what type of dealership is it?? Depending on the manufacture they may be making a ton of gross on their new cars. I have a Chevy dealer that puts a $1500 addendum on all their new cars to bump up the sticker price. Now Toyota dealers are a whole different story, they GIVE their cars away at or below invoice to hit rebates/incentives. Now that being said Toyota may loose on the front(sell under invoice) but, they will make it up in the back(finance apr,warranty,gap,paint protection,alarm,ect....). At this particular dealer that is at 56% gross sales on new cars that is the front and back total gross combined. I hope this helps you understand
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psiems
New member
Forge Invoice....Price varies from state to state, county to county, city to city, dealer to dealer and of course, a persons patience and negotiating skills, to include the following factors.....
The consumer surplus (individual or aggregated) is the area under the (individual or aggregated) demand curve and above a horizontal line at the actual price (in the
aggregated case: the equilibrium price). If the demand curve is a straight line, the consumer surplus is the area of a triangle:
Where Pmkt is the equilibrium price (where supply equals demand), Qmkt is the total quantity purchased at the equilibrium price and Pmax is the price at which the
quantity purchased would fall to 0 (that is, where the demand curve intercepts the price axis). For more general demand and supply functions, these areas are
not triangles but can still be found using integral calculus. Consumer surplus is thus the definite integral of the demand function with respect to price, minus the
definite integral of the constant function D(P)=Qmkt (i.e. PmktQmkt), from the market price to the maximum reservation price (i.e. the price-intercept of the
demand function):
In other words...find a truck you like and pay what you think it is worth! :0)
The consumer surplus (individual or aggregated) is the area under the (individual or aggregated) demand curve and above a horizontal line at the actual price (in the
aggregated case: the equilibrium price). If the demand curve is a straight line, the consumer surplus is the area of a triangle:
Where Pmkt is the equilibrium price (where supply equals demand), Qmkt is the total quantity purchased at the equilibrium price and Pmax is the price at which the
quantity purchased would fall to 0 (that is, where the demand curve intercepts the price axis). For more general demand and supply functions, these areas are
not triangles but can still be found using integral calculus. Consumer surplus is thus the definite integral of the demand function with respect to price, minus the
definite integral of the constant function D(P)=Qmkt (i.e. PmktQmkt), from the market price to the maximum reservation price (i.e. the price-intercept of the
demand function):
In other words...find a truck you like and pay what you think it is worth! :0)
philsey
New member
Agree, but it's still a nebulous amount... and only of value if the buyer is well-enough informed to know the back end numbers.
And even if your slsmn shows you "The Invoice", he's done so as part of the sales process, created and approved by ownership, and only contains numbers ownership wants you to see.
As I've said numerous times, anyone that thinks they are seeing any business' costs are, well, just wrong.
I just bought my wife a new Accord, and after waiting two weeks after their "absolute, final, bottom line price", I offered them $800 less and they took it. You just never know.
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