OK there have been tons of posts about EP. And I have gotten countless PMs about it.
So here is my best attempt to explain it clearly.

Using the attached invoice as an example.
Note the Employee Price ($1,470 below invoice). On this vehicle the dealer will get paid $1802 from the factory.
Plus the dealer gets reimbursed the $3,500 rebate, plus any other rebates applicable to the customer.

Then look at the "holdback" number. That is a 'discount' given to the dealer off of invoice... This is how dealers normally sell below invoice. It is 3% less of invoice less a few things like transportation and advertising fees. ALL dealers get this reguardless of volume.

So, if you were to walk in and buy this pickup at EP the dealer would make $1,477.

For you math minors..
$31,766 + 1,802 - 33,236 + 1085 = 1,477

Now, keep in mind.. a vehicle of this price scale the dealer is paying close to $6 day interest. So he is not necessarily going to JUMP at the chance to give away all of that $1,477. And odds are - this late in the year - he has had it a while. Plus he has made newspaper and radio ads etc. (the usual overhead).

So bottom line is - yes there is room to haggle.
MOST stores are not going to though - unless you start playing "hardball".
Its possible the salesman doesnt know this info too - typically the salesman don't do the price strategy. They just do as the sales manager tells them.















One other think I need to point out here is that I have read of a lot of people that think they are being really tricky...
dressing in rags, acting like they don't comprehend simple math, whatever...to try to squeeze that extra penny out of the salesman.
We aren't stupid. Do you really think we charge more for a car to a guy wearing a suit than the guy wearing coveralls?
Treat your salesman with respect and he will treat you the same way. It's the same no matter what business your in.

If I have some guy come in and "demand to deal off of invoice" because he "knows how the game is played" or just plain acts like a jackass - I automatically lose interest in this guy and want nothing more from him than his money.
Now if a guy comes in and is friendly and sociable - I just made a new friend. And I will be nice, courteous, and respectful to him. And that can be worth a LOT down the road when he needs service or wants to come back to make a trade.


Sorry, I started to ramble towards the end here....
There are just a few guys here that irritate me because they think they got it all figured out.
People need to stop being so cynical.

 

Sheesh!!!

All the questions I got before, and now nothing???

 

How is the $1802 calculated?
Is the customer ever allowed to know/see this number?
I used to know how HB was calculated, but forgot. Never cared anyway because it's on the invoice.
So things have changed and there are no longer incentives to the dealer for hitting targets?
Funny, I like to keep my money. I don't go to a dealer looking for a friend.[&:]
Nope, I like being wrong. I have found I get a more honest answer from someone who does know when you put B.S. out there. People do like to correct others.
Things certainly have changed. The only honest people I ever met in sales of any kind were unemployed. But you are starting to make me believe DCX is changing it's dealership relations for the better. Never had any dealership employee outright explain where they make money on a sale.I hope you aren't too irritated.
I asked you about deals on Vipers a week or so ago. A dealer here has '06 Vipers, only one at a time, that advertises them at $20,000 below MSRP plus destination. How are they doing this? And yes, the car is on the lot. This is the third one he's advertised this summer this way.

 

I have been told how the EP was calculated - I didnt pay attention because, like you say, its right on the invoice.

Holdback used to be figured invoice, less destination, less DAA, less PPA, less Loyalty Mailings, times 3%.
That is not the case on this vehicle??? Not sure how its done anymore - doesn't really matter to me for the same reason as above.

Yes, there are volume discounts if your selling 300-400 units a month it can add up to over $200k/month - but I left that out of the equasion for simplicity sake - VERY few dealers give that away anyway.
There used to be 'stairstep' volume programs that were terrible for pitting one dealer against another - but they quit doing that. I think they were getting in trouble for 'two-tiered pricing' which is illegal in most states with franchise laws.

EDIT: Pt. 2

I would hardly say dealer/factory relations have improved! Far from it if you ask me.

And as far as your cynisism towards honesty in sales, and "I don't look to make friends" then you will continue to be the guy on here with posts like "my dealer wont help me".

Despite what you say, the entire world is not out to get you. And a dishonest salesman is the one who is going to be unemployed - you can screw a guy once.... but I doubt he will come back. And in an industry that REQUIRES repeat business - Iyou would be a fool to risk it. I believe in taking care of my customers so they come back. We have one family here that has been doing business with us for 3 generations - one of them comes in almost every day - even if for nothing more than to say 'hi' and buy a pop from the Pepsi machine. Sure we could have screwed the grandfather over 50 years ago and made a lot of money on the sale, but I doubt his son and grandson would have come in here to continue to do business.

I guess thats my 'small town mentality'.

Like I said, as long as you go in and try to "trick" the sales staff... expect the same in return.
That is true whether your selling cars, t-shirts, or cocaine.
Thats the problem with the world today - everybody wants to be treated like royalty while they crap on everyone else.

 

Thank you for the refreshing and HONEST discussion. As a dealer myself (and an honest one at that) I believe you have hit the nail squarely on the head. Honesty in this business is rewarding for several reasons. It creates repeat customers, it creates loyalty among familys and it insures survivability in a harsh business climate. I can't stress enough that you need to treat customers like family! I just wish that the customer would begin to understand that not all salespeople are out to screw them.

Getting back to the profit calculation you presested above. The dealer is drawing a total of $1477 on the deal but may dealerships also offer free oil changes or washes (my dealership offers both) to their customers so the profit margins dive below the $1000 mark. Subtract out the per unit commission paid to the salesperson and there may not be much left for the dealer to keep the lights on with. As a matter of fact, programs like this usally leave the dealer with less profit on a $35,000 vehicle then an electronics store makes on the sale of a single $800 video camera!

Think about this the next time you head to the grocery store..... Of the $200 you spent on food stuffs more then half of it is profit to the store! If you shop for Jewelry, you pay $100 for an item that cost the store $20. If auto dealers made the same profit margins as the typical Starbucks made on a single cup of coffee, that $35,000 vehicle would have an invoice price of just over $2700 dollars. (yes that is twenty seven hundred)

You wonder why we don't sleep at night!!!!

 

Well, thats only ONE reason why we cant sleep at night.
Now lets add the parts, service, finance, and inventory to the problem..

Are those parts going to show up tomorrow? Did I accidently order the wrong part? What kind of promotions is the factory running this month, can I afford to order enough to qualify?

Why can't we get that $4,400 warranty claim to get paid? Why cant we figure out why that Caravan has a miss?
Do we need to raise our shop rate? I know we are already high, but we just recieved $12,000 worth of essential tools from the factory.

Is that contract ok? Is the bank going to send it back and make me drive 60 miles to my customer to get him to initial the changes?
Where is that title at?

Do we have enough vehicles to get us through until next model year production starts? or
How am I going to get rid of all these vehicles, we have wayyy to many?
My insurance only lets me have $2.9mil...???

It never ends.

 

I am the GM at a small town 5 Star Chrysler Dodge Jeep dealership. In November, I will be there 13 years.

Tomorrow morning I am delivering a new Ram 1500 pickup to the daughter of a customer that has been purchasing from me since 1996. They live almost 60 miles away and will drive past two other Dodge dealerships to get here. Repeat business is important to our success. Sure there are horror stories out there. We have all heard them. But I believe most Dealers are interested in a strong business relationship with their customers. After all.... its good for business. Of course, alot has to do with the customer, too. Let's see, how many times have I heard these:
My credits good.
This $2000 check will clear, no problem.
There's nothing wrong with my trade-in.
Sure, I have insurance.
I always change my oil on time. I don't know whats wrong.
Yes, I have a drivers license, I just forgot it.
You people fixed my tire, now my window doesn't work.

I'm off topic, sorry. EP pricing is another way to sell cars. I am not a big fan, but oh well. Maybe it will make things easier for the guy looking for a deal on a car. And if done correctly by both parties, it should make things easier the next time they sit down together at the desk. And the importance of this? So it can help pay for all the inventory, insurance, mortgage, floorplan, workmans comp, taxes, advertising, benefits, uniforms, special tools, payroll, accounting, computers, utilities, security, parts, shop equipment, MDS and DRBs, suppliers, and anything Mother Nature might throw at you.
Now if I could just get some sleep, too. lol

 

Sales people usually hate Minis, but even in employee pricing some customers still pay much more then they think. Glad I left the car business. EP is a gimick, and they dealerships often sell the cars for as low if not lower before and after the last EP.