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Old 01-11-2009, 11:57 AM   #1
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Technical question about discounts

Hey,

Just wondering, who actually eats the cost of the discount? If the dealership decides to accpept a discount, does the dealer that sold the car still get his/her full commision? When it comes to the bottem line, who pays for the discount?

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Old 01-11-2009, 12:07 PM   #2
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Corporate GM reimburses the dealer I'm sure
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Old 01-11-2009, 12:30 PM   #3
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Corporate GM reimburses the dealer I'm sure
Yep. GM reimburses the dealer the cost of the discount if it is a GM discount.
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Old 01-11-2009, 12:39 PM   #4
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So the dealer doesn't lose out on anything. So why would a dealer feel like they couldn't accept the discount.
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Old 01-11-2009, 01:11 PM   #5
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Yep. GM reimburses the dealer the cost of the discount if it is a GM discount.
That my friend is incorrect. The dealer does NOT get rebated.
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Old 01-11-2009, 01:56 PM   #6
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i asked this same question and found out that the dealerships to get a refund but not as much as the discount they give. kinda bs for GM to do it that way IMO.
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Old 01-11-2009, 02:01 PM   #7
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the dealer does not get the money of the discount back from gm. The dealer is just out the profit. Yes they do give some money back for the sale but it is not much at all during employee price sale we where making an average of $400 profit on Trucks and about $200 on cars so after commission to sales people floor plan gas for delivery paying the detail guy and the office girls we have a negative profit.
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Old 01-11-2009, 02:04 PM   #8
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So the dealer doesn't lose out on anything. So why would a dealer feel like they couldn't accept the discount.
Those dealers want to markup the car above MSRP which gives them even more money for the sale. In other words the dealer already makes a profit selling MSRP however any markup above that is even more profit. Red Tag events and other discounts get them money back from GM along with any other discount. With any discount, they only make up to the same amount if they sell it MSRP...
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Old 01-11-2009, 07:04 PM   #9
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Those dealers want to markup the car above MSRP which gives them even more money for the sale. In other words the dealer already makes a profit selling MSRP however any markup above that is even more profit. Red Tag events and other discounts get them money back from GM along with any other discount. With any discount, they only make up to the same amount if they sell it MSRP...

Not so my friend. The reimbursement takes it up to invoice.
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Old 01-11-2009, 07:26 PM   #10
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i say pm camaroscotty if you want the most accurate answer.
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Old 01-11-2009, 07:28 PM   #11
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Originally Posted by gss9909 View Post
the dealer does not get the money of the discount back from gm. The dealer is just out the profit. Yes they do give some money back for the sale but it is not much at all during employee price sale we where making an average of $400 profit on Trucks and about $200 on cars so after commission to sales people floor plan gas for delivery paying the detail guy and the office girls we have a negative profit.
I won't pretend to know the in's and outs of selling a car, but I have a lot of problems with this post. You said 400 profit on a truck and 200 on a car.... profit is whats left after all expenses, therefore negative profit is a totally incorrect statement, there is no such thing, it would be classified as a loss. If your dealership is sending cars off the lot with a loss it won't be in business for long. I doubt very seriously that GM endorses a dealer to lose money.
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Old 01-11-2009, 11:18 PM   #12
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I work in the finance end, not the front sales part. I don't know the exact percentage, but on the invoice is a line called memo. The $$ beside the memo plus part of the advertising cost is the amount GM will reimburse the dealer. It is enough to make a profit; but it doesn't come close to MSRP.

Some dealers will honor GMS on "in stock or ordered cars," but will charge extra for a "dealer trade." Others will honor GMS on ordered cars only.

On a "hot car" dealers may not want to honor GMS; that is their perogative. Certain cars may not carry GMS discounts; that is up to GM.
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Old 01-11-2009, 11:36 PM   #13
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Most dealers will not honor discounts on the Camaro. When I was talking to the various local dealers a few months ago, they mostly laughed at the idea that GM would honor the supplier discount. Now, they may just say "no, we're doing MSRP only" or you may be able to find a couple that will agree to it.
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Old 01-12-2009, 06:31 AM   #14
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Quote:
Originally Posted by gss9909 View Post
the dealer does not get the money of the discount back from gm. The dealer is just out the profit. Yes they do give some money back for the sale but it is not much at all during employee price sale we where making an average of $400 profit on Trucks and about $200 on cars so after commission to sales people floor plan gas for delivery paying the detail guy and the office girls we have a negative profit.
This is fairly accurate.
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Old 01-12-2009, 07:38 AM   #15
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Originally Posted by gss9909 View Post
the dealer does not get the money of the discount back from gm. The dealer is just out the profit. Yes they do give some money back for the sale but it is not much at all during employee price sale we where making an average of $400 profit on Trucks and about $200 on cars so after commission to sales people floor plan gas for delivery paying the detail guy and the office girls we have a negative profit.

This is fairly accurate.


Scotty,
I respect what you have to say as you seem to be very knowledgeable on this subject, but that doesnt isnt logical. If for the past 2 months all the GM dealers are selling RedTag cars at a loss, how are the dealers supposed to maintain a healthy company with NO profit? There would be NO way for them to keep the lights on unless they had a very larger reserve fund. So I would say there is a profit built in somewhere whether you want to tell us or not it has to be there. Could/would you elaborate on "fairly accurate" please?
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Old 01-12-2009, 08:20 AM   #16
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Originally Posted by live2well View Post
Quote:
Originally Posted by gss9909 View Post
the dealer does not get the money of the discount back from gm. The dealer is just out the profit. Yes they do give some money back for the sale but it is not much at all during employee price sale we where making an average of $400 profit on Trucks and about $200 on cars so after commission to sales people floor plan gas for delivery paying the detail guy and the office girls we have a negative profit.

This is fairly accurate.


Scotty,
I respect what you have to say as you seem to be very knowledgeable on this subject, but that doesnt isnt logical. If for the past 2 months all the GM dealers are selling RedTag cars at a loss, how are the dealers supposed to maintain a healthy company with NO profit? There would be NO way for them to keep the lights on unless they had a very larger reserve fund. So I would say there is a profit built in somewhere whether you want to tell us or not it has to be there. Could/would you elaborate on "fairly accurate" please?
You're neglecting that any time there is a factory to dealer incentive, THAT money is given to the dealer to pass along to you (us). If you looked at any of the Red Tag pricing, most reflected an amount still above dealer invoice; where it didn't I assume FTD incentives were in effect..
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Old 01-12-2009, 08:37 AM   #17
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Scotty,
I respect what you have to say as you seem to be very knowledgeable on this subject, but that doesnt isnt logical. If for the past 2 months all the GM dealers are selling RedTag cars at a loss, how are the dealers supposed to maintain a healthy company with NO profit? There would be NO way for them to keep the lights on unless they had a very larger reserve fund. So I would say there is a profit built in somewhere whether you want to tell us or not it has to be there. Could/would you elaborate on "fairly accurate" please?
Don't forget profits from mechanical and body shop. They are the money makers.
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Old 01-12-2009, 10:11 AM   #18
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You're neglecting that any time there is a factory to dealer incentive, THAT money is given to the dealer to pass along to you (us). If you looked at any of the Red Tag pricing, most reflected an amount still above dealer invoice; where it didn't I assume FTD incentives were in effect..
Ok I follow that but he said they were losing money on the REDTAG sales and Scotty agreed , sort of. I just want some clarification on the sort of part. It doesnt make since that GM would put their source of revenue at jeopardy by making their dealerships have loss. I find that hard to believe that the dealships are losing money on deals like the REDTAG or even GMS. It just doesnt make for good business.
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Old 01-12-2009, 04:43 PM   #19
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Ok I follow that but he said they were losing money on the REDTAG sales and Scotty agreed , sort of. I just want some clarification on the sort of part. It doesnt make since that GM would put their source of revenue at jeopardy by making their dealerships have loss. I find that hard to believe that the dealships are losing money on deals like the REDTAG or even GMS. It just doesnt make for good business.
There's still dealer holdback... but even mentioning that money is taboo and likely to get you a visit from one of these...

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Old 01-12-2009, 06:35 PM   #20
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I don't want to come across as the bad guy here. Once again I find lots of misleading information. I am not going to edcuate everyone on how the automotive industry works, but I'll give you car sales 101.

When a car is built, the dealer is invoiced and pays GM, dealer net for the car. If a dealer is in a larger metro area or chooses to participate in GM sponsored advertising it gets charged to the car and the dealer pays that to GM. In our case it is 1% of MSRP less destination for the national program and local advertising for us on a Corvette is $350. I'm not sure what Camaro will be. We have no choice to but pay that. Everything else from that point is "gross profit". Holdback added to the net plus advertising gets you invoice price then the markup to MSRP. If there is a rebate or incentive, GM reimburses the dealer that money. If you buy a new Suburban and there are $9,000 in incentives, you get that off the price but the dealer doesn't get reimbursed for up to 30 days. On top of all of this, all dealers have expenses. You have to keep the lights on, pay indirect employees, pay mortgages, property tax, insurance, sales commissions, etc. All dealers have this down to a science so we know what it takes to break even. Once that is all washed out, you have "net profit". Let me tell you, it ain't much!

If you take a 2SS with no added options the MSRP is $34,180 including destination. The invoice with advertising is $33,025.65 and dealer net with advertising is $31,272.75. If the car sells for MSRP, the "gross profit" is $2,907.25. Most sales commissions are 25-30% so 30%=$872.18, now your just over $2,000 gross before any other expenses.

When you look at car sales compared to other industries, the profit margin is nothing. What is the profit margin on an Apple i phone, a Sony PS3, Nintendo Wii, furniture, jewlery? A gallon of milk? You can't go into Wal-Mart and negotiate the price of a 42" plasma TV. With our Corvette business, it has gotten to the point where you bust out of a car to sell it if it sits around you begin to pay interest on it. There is little to no profit in new cars. Dealers make their bottom line on used cars, service, parts and body shop. Someone mentioned that earlier. If someone has true GMS (GM Employee Purchase), you get to buy at $150 over dealer net and the dealer does get reimbursed a little money. A GSU (GM Supplier Purchase) also has a formula, but these make nowhere near the profit of an MSRP deal and that is why GM allows dealers to opt out of the program.

We here at EVS are straight shooters and when you have a high demand item, you can't expect discounts. If the lots were full, it'd be a different story. Let's be thankful we live in America where we have choices and don't drive Russian Trabants or Yugos. A Capitalist Society relies on supply and demand and that is important to the future of our economy.

Thanks for your time, I hope you find this helpful.
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Old 01-12-2009, 06:40 PM   #21
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The dealers that continuously sell at at large discounts have probably gone out of business already. Dealers are reimbursed for GM Employee and Supplier, Military, College Grad, etc. programs and that gets them back to invoice. Discounting sales now on Camaros is the same as throwing thousands of dollars in the street and letting it blow away. Until the car cools off, don't expect much of any discount. The fact that you are getting the car in the first place is "the deal".
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Old 01-12-2009, 06:54 PM   #22
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Random question, forgive me if this is silly, but am I able to use my GMS (father is a GM employee) with my college grad discount? Not necessarily on the Camaro, but any car in general?
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Old 01-12-2009, 06:56 PM   #23
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Originally Posted by camarogreg@evs View Post
I don't want to come across as the bad guy here. Once again I find lots of misleading information. I am not going to edcuate everyone on how the automotive industry works, but I'll give you car sales 101.

When a car is built, the dealer is invoiced and pays GM, dealer net for the car. If a dealer is in a larger metro area or chooses to participate in GM sponsored advertising it gets charged to the car and the dealer pays that to GM. In our case it is 1% of MSRP less destination for the national program and local advertising for us on a Corvette is $350. I'm not sure what Camaro will be. We have no choice to but pay that. Everything else from that point is "gross profit". Holdback added to the net plus advertising gets you invoice price then the markup to MSRP. If there is a rebate or incentive, GM reimburses the dealer that money. If you buy a new Suburban and there are $9,000 in incentives, you get that off the price but the dealer doesn't get reimbursed for up to 30 days. On top of all of this, all dealers have expenses. You have to keep the lights on, pay indirect employees, pay mortgages, property tax, insurance, sales commissions, etc. All dealers have this down to a science so we know what it takes to break even. Once that is all washed out, you have "net profit". Let me tell you, it ain't much!

If you take a 2SS with no added options the MSRP is $34,180 including destination. The invoice with advertising is $33,025.65 and dealer net with advertising is $31,272.75. If the car sells for MSRP, the "gross profit" is $2,907.25. Most sales commissions are 25-30% so 30%=$872.18, now your just over $2,000 gross before any other expenses.

When you look at car sales compared to other industries, the profit margin is nothing. What is the profit margin on an Apple i phone, a Sony PS3, Nintendo Wii, furniture, jewlery? A gallon of milk? You can't go into Wal-Mart and negotiate the price of a 42" plasma TV. With our Corvette business, it has gotten to the point where you bust out of a car to sell it if it sits around you begin to pay interest on it. There is little to no profit in new cars. Dealers make their bottom line on used cars, service, parts and body shop. Someone mentioned that earlier. If someone has true GMS (GM Employee Purchase), you get to buy at $150 over dealer net and the dealer does get reimbursed a little money. A GSU (GM Supplier Purchase) also has a formula, but these make nowhere near the profit of an MSRP deal and that is why GM allows dealers to opt out of the program.

We here at EVS are straight shooters and when you have a high demand item, you can't expect discounts. If the lots were full, it'd be a different story. Let's be thankful we live in America where we have choices and don't drive Russian Trabants or Yugos. A Capitalist Society relies on supply and demand and that is important to the future of our economy.

Thanks for your time, I hope you find this helpful.

Bad guy? Not with me my friend. Everyone's got a job to do and we all know what happens if your company isn't making money by you doing it. Thanks for the insight.
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Old 01-12-2009, 06:59 PM   #24
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Random question, forgive me if this is silly, but am I able to use my GMS (father is a GM employee) with my college grad discount? Not necessarily on the Camaro, but any car in general?
Unfortunately no. Your Dad's discount is much better for you. College Grad gives you Supplier Price. These prices are set and printed on each individual invoice. Supplier is right at invoice and Employee is $150 over dealer net.
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Old 01-12-2009, 06:59 PM   #25
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...If someone has true GMS (GM Employee Purchase), you get to buy at $150 over dealer net and the dealer does get reimbursed a little money. A GSU (GM Supplier Purchase) also has a formula, but these make nowhere near the profit of an MSRP deal and that is why GM allows dealers to opt out of the program...
I fully understand with Supplier but are you required to accept Employee then ?
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