As we all know, the automaker industry is struggling quite a bit. Sales are down and inventory is piling up. Yet, I wonder if anybody has seen any correlating drop in price. If you have, I would be curious to hear from you. I am referring to new cars, since used cars have already been bought from the manufacturers, though if you have any relating insight into used cars, I would be interested to hear that, too.
How much does supply and demand work on the auto industry? I know that there is a lot of cost that goes into the price tag of a car, and it seems like new car prices seem to always go up, regardless of the economy. So, will automakers just hold onto their inventory until they can sell it at retail value, or will auto consumers be able to expect a correlating drop in auto prices this year? My wife and I have been thinking about buying another vehicle for a couple years now, and though we can wait a little longer, we are wondering if there is any advantage to buying within the next few months.
Posted by Tatiana (Member # 6776) on :
The prices as marked may be the same, but it's possible you can get a lower price by bargaining, I would think. Car dealers don't really expect to sell at the price marked, and the paucity of sales would have to have an effect on their willingness to cut their price.
Posted by Nick (Member # 4311) on :
I work in the automotive industry, so lets see if I can answer your question. Granted, I'm only a auto technician, but everybody in the industry learns things just by being around.
There is a lot of factors to consider when determining price. The first thing to consider is the fact that manufacturer invoice price(what the dealer pays for the car) is not negotiable. It can change, but it's not as if the dealer is bargaining with the factory.
Most dealerships don't even own their new car inventory, they do what's called "floor plan". They finance the new cars from the factory using funds from a large bank(i.e. Bank of America) and make payments to the bank until the car is sold. This allows them to bolster their inventory without a substantial amount of capital. The down side is that nobody is buying new cars right now, so those payments are now more of a burden due to a larger inventory. Also, the longer the car sits in inventory, the less profit can be made on the car due to greater interest being paid to the bank.
Dealers have to pay salespeople who aren't selling since most sales departments are ghost towns these days. Granted, they don't make much commission sales, but they still get paid.
In troubled times, people more often fix their cars in service departments instead of buying a new car so they save money. While this hurts sales, this makes service and parts more profitable(and the dealer as a whole), allowing sales to be more competitive. Often times, parts and service carry dealerships when sales is only breaking even.
Sometimes the factory provides rebates, but I'm not knowledgeable in finance, so I can't really go into detail.
All of these factors, which can vary by manufacturer, have a direct effect on the negotiated price between the consumer and the dealer. Every dealership is different, few dealers own their inventory, so it's always best to shop around.
I would saying buying a car now would be a good time, new car sales are low, inventory is high and most salesman will be willing to negotiate a really good deal considering their sales are far and few between.
It's best to realize that the dealer and manufacturer are two different entities. Vehicle price is more affected by the dealer.
[ March 03, 2009, 01:41 AM: Message edited by: Nick ]
Posted by scifibum (Member # 7625) on :
My impression has been that the manufacturer offers rebates to keep inventory moving off lots, because they have no other way to move their inventory to dealers. So while it is a separate entity, the mfr. still has a significant role in discounting vehicles at retail.
I've seen some seemingly steep discounts advertised. However, sometimes it's hard to tell whether it's one of those "only one at this price" deals they use to draw traffic, or a discount available to all buyers.
Posted by Nick (Member # 4311) on :
quote:Originally posted by scifibum: My impression has been that the manufacturer offers rebates to keep inventory moving off lots, because they have no other way to move their inventory to dealers. So while it is a separate entity, the mfr. still has a significant role in discounting vehicles at retail.
Agreed.
Posted by Lyrhawn (Member # 7039) on :
I was talking to a friend of a friend the other day who said that even in a halfway decent market, if you have great credit and you walk in the door with a loan all ready to go then you have a much, much stronger hand when it comes to bargaining. If you already have the money, you can go anywhere and in some cases, if you researched enough, tell them exactly what you want and what you want to pay, and they'll have to come pretty close to giving it to you.
Moral of the story: get your own financing before you set foot in the door. Especially given the current credit situation, it'll increase your bargaining power.
Posted by scifibum (Member # 7625) on :
I suppose I can see how if the dealership has a hard time financing buyers, having your own financing in hand might make them excited to see you. However, I'm not sure I see it as a price bargaining chip. Dealers usually get kickbacks from lenders, which builds a little more flex into their pricing. (Or if they finance directly, they profit from the financing as well as the sale which has a similar effect.)
I think the knowledge is the real key. If you know what the mfr. invoice price is, what rebates are in play, you know what to ask for. If you don't know any of that you might work them down from 1.2x a fair price to 1.1x, and feel like you got a good deal.
Posted by dkw (Member # 3264) on :
quote:Originally posted by Nick: Dealers have to pay salespeople whore . . .
Now that seems like an area where they could cut expenses.
Posted by Mocke (Member # 11963) on :
That slips seems very....Freudian
Posted by Nick (Member # 4311) on :
quote:Originally posted by Mocke: That slips seems very....Freudian
Fixed it to say "who are". myself
Posted by Lyrhawn (Member # 7039) on :
quote:Originally posted by scifibum: I suppose I can see how if the dealership has a hard time financing buyers, having your own financing in hand might make them excited to see you. However, I'm not sure I see it as a price bargaining chip. Dealers usually get kickbacks from lenders, which builds a little more flex into their pricing. (Or if they finance directly, they profit from the financing as well as the sale which has a similar effect.)
I think the knowledge is the real key. If you know what the mfr. invoice price is, what rebates are in play, you know what to ask for. If you don't know any of that you might work them down from 1.2x a fair price to 1.1x, and feel like you got a good deal.
I've never actually done it myself. I've only bought one car and got my financing through the Ford dealership.
But that's what the guy I was talking to said. I figured he at least sort of knew what he was talking about since he worked with car salesmen at a dealership for awhile.
Posted by aspectre (Member # 2222) on :
"Industrywide, the average incentive per vehicle last month rose 8 percent from January to $2,914 per vehicle sold, Edmunds said. Incentives climbed to an average of 20 percent of the sticker price of a new car, and they topped more than $10,000 on some vehicles."
In other words, if ya can't get 20% off the Manufacturer'sSuggestedRetailPrice -- and less than 1% interest if you have a good credit record -- walk out the door. There are plenty of other sellers willing to make the deal.
Do not let the closer or manager slip in extra charges under the guise of "standard fees" such as for transportation -- which they will try to do -- cuz that's already been figured into the MSRP. Do not allow the salesman to tell you one price, then be convinced by the manager/asst.manager to sign a contract for a higher price. Remember always that a car lot manager would much rather "make a chump" outta one customer than to make honest profit margins on multiple sales.
Don't blame the salesman for the underhandedness of her/his bosses, s/he just wants to make a sale. But do not let feeling sorry for "wasting her/his time" prevent you from walking away. The size of the commissions also covers those hours of "wasted time".
[ March 04, 2009, 05:24 AM: Message edited by: aspectre ]
Posted by Occasional (Member # 5860) on :
One of the reasons I don't buy a new car; I don't support Unions. All the perks and higher than acceptable wages bring up the prices making automobiles far more expensive than they should. I see Unions (particularly the leadership) as glorified organized criminals. The methods of intimidation are very similar.
Besides, the amount it costs to buy a car make my "boycott" very easy. Snubbing the auto-makers is an added bonus.
Posted by katharina (Member # 827) on :
I have never owned and don't plan on every owning a union-made car.
Not all cars are made by union members.
Posted by scifibum (Member # 7625) on :
quote:Originally posted by Occasional: Besides, the amount it costs to buy a car make my "boycott" very easy. Snubbing the auto-makers is an added bonus.
This made me wonder, how much am I missing out on rationalizing my economic decisions in moral terms?
Let's see...
- I don't buy beluga caviar - I don't buy diamonds (well I bought one, but that was years ago) - I don't fly around in a private jet - I don't buy and sell women as toys
I could have been justifying all these decisions on grounds of environmental impact, human rights, etc. I have been missing out.
Posted by Nick (Member # 4311) on :
Occasional, I think the only union-made cars are American. I think the UAW is the blight of the nation and should be abolished. Why should a job that you can learn in a month pay twice as much as what I make. This is especially true when you consider my technical knowledge far surpasses theirs.
But that's a whole other topic.
Posted by TomDavidson (Member # 124) on :
quote:Why should a job that you can learn in a month pay twice as much as what I make.
Here's a better question: why don't you have that job, if you could learn it in a month and make twice as much?
Posted by Nick (Member # 4311) on :
Here's a even better answer. I wouldn't be able to live with myself if I had to pay a dime in union dues, and I don't want to live in Detroit. The repetitive day-in day-out grind would drive me nuts.
Besides, I'm only a 24 year old journeyman technician, I'll earn more in the long run. I still don't think they should make more than me and get better health benefits.
Posted by Mucus (Member # 9735) on :
quote:Originally posted by Nick: Occasional, I think the only union-made cars are American. I think the UAW is the blight of the nation and should be abolished ...
Unfortunately, there is a CAW (Canadian AutoWorkers) as well, not much of a fan ...
Posted by TomDavidson (Member # 124) on :
quote:I still don't think they should make more than me and get better health benefits.
Why not? They're doing a grind that would drive you nuts, won't make as much as you'll make in the long run, and are having to live with paying union dues (which is something you can't do).
Posted by Mucus (Member # 9735) on :
Because there are people who want to do that grind, who are eager to make even less, and don't have to pay union dues either. Heck, at this stage, even in the US there are people and states in the south that would jump (and have been) at the chance.
Of course, we don't need to explicitly abolish the UAW, market forces are neatly doing that anyways. In a way, the system works.
Posted by Nick (Member # 4311) on :
quote:Originally posted by TomDavidson: Why not? They're doing a grind that would drive you nuts, won't make as much as you'll make in the long run, and are having to live with paying union dues (which is something you can't do).
First off, you can't really quantify my inability to handle the repetitive nature of their job, so it doesn't help the argument you seem to be making. I can, since it's my emotion. In my opinion, I don't think the repetitive nature of the job justifies the pay.
Here's a thought, why shouldn't they make less and not pay their unions?
I think automakers that have pay exorbitant wages, benefits and retirements to their workers have a tendency transfer that cost to the consumer or produce a sub-standard product, or both.
[ March 05, 2009, 11:33 PM: Message edited by: Nick ]
Posted by scholarette (Member # 11540) on :
I thought that the idea that union car makers made more then non union ended up being an urban legend- like on average Toyota paid their workers more then the US companies.
Posted by Mucus (Member # 9735) on :
That not what they themselves say at least:
quote: Union workers earn more
Wages and benefits for the average union worker in the private sector totaled $36.65 per hour in September 2008, compared to $25.92 an hour for the typical non-union worker.
Wages and salaries higher for union workers In September 2008, the average union worker in the private sector earned $22.77 per hour in wage and salary income, while the average non-union worker earned $18.70 per hour. That's a union advantage of $4.07 per hour, or $8,466 per year for a full-time, full-year worker. ... But benefits are the biggest union advantage
Benefits, though, are where the biggest union advantage lies. The average union worker in the private sector receive $13.88 per hour toward their benefits package while their non-union counterpart receives only $7.21 per hour.
Retirement benefits more widespread for union workers After years of service, workers deserve a secure retirement. Unfortunately, only 51 percent of non-union workers receive retirement benefits through their employer, through either a traditional pension or a 401(k) account. In stark contrast, 86 percent of union workers have employer-provided retirement benefits.
Only about half (52 percent) of non-union workers receive health care benefits through their employer. That compares with 79 percent of union workers.
I can't find a link now, but it was comparing a specific company that was not unionized to the average union wage. I thought it was Toyota, but my google skills are pathetic. Or I am misremembering the company name and so my search for Toyota is destined to failure.
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