Monday, March 29, 2010

THE NEW CAR “INVOICE” IS NOT THE INVOICE

I was very pleased to see a news article in this week’s Automotive News entitled “Dealer is a lone voice on invoice prices in ads”. At first, I thought “Oh Boy! We have another dealer - Jack Fitzgerald, a Maryland car dealer - who is willing to stand up and be counted when it comes to unfair and deceptive advertising by car dealers.

But, after I read the Automotive News article, I realized that the only thing Jack Fitzgerald was concerned about was losing his right to advertise cars at invoice. Fitzgerald is sponsoring a bill in the Maryland legislature to prevent manufacturers from withholding benefits such as advertising co-op funds if a dealer advertises invoice prices.

For those of you who read my blog, my column in the Hometown News, or my Saturday morning radio show on Seaview you know that I consider advertising a car at or below dealer invoice unfair and deceptive advertising. This is because many consumers think of the invoice of a product as being what the store pays the manufacturer or distributor. They think its true cost, but the invoice of a new car actually includes a relative large profit to the dealer with thousands of dollars of holdbacks, advertising costs, floor plan costs, and rebates included.

Some manufacturers do discourage dealers from advertising at or below invoice prices by financially penalizing them. Most manufacturers do not. Honda does and Toyota has restrictions on language used that refers to the cost of the vehicle. Honda’s motivation is clearly to support the retail selling price of Hondas. I quote from the article, Chris Martin a spokesman for American Honda Motor Co., “Encouraging shoppers to focus on the cheapest price could undermine a vehicle’s resale value and hurt the brand image.” I believe that the manufacturer has no business meddling with what their dealers can sell their cars for. In fact, I question the legality of this. However, I do believe that the manufacturers should “meddle” with unfair and deceptive advertising by its dealers and this is what Jack Fitzgerald and lots of dealers who like to advertise at or below invoice are guilty of.

In this Automotive News article, Jack says “The Federal Trade Commission tells consumers to determine the factory invoice price when they are shopping for a car to protect themselves against overpaying.” He says “That’s why I put the factory invoice price on my Web site.” I would love to see that document from the FTC that tells potential car buyers that a dealer invoice is an accurate representation of the true cost of the vehicle to the dealer. I don’t believe that such a document exists but, if it does it should be immediately rescinded. The real reason that Jack likes to show his customers the invoice on his cars is because he knows that the customer thinks it is his true cost. His customers don’t know that the typical car invoice includes thousands of dollars in profit to the dealer.

I’m writing this column on Monday, March 29, and I’m looking at an ad in today’s Palm Beach Post by Arrigo-Dodge-Chrysler-Jeep. The headline is “BELOW INVOICE PRICING”. Unfortunately there are still lots of people who will read this ad and believe that they are getting the “buy of lifetime”. Sadly they may be almost right. It will be the “sale of a lifetime” for the salesman and the dealer if you pay their asking “below invoice” price.

2 comments:

  1. Earl -
    You missed the point entirely, and you don't know Jack Fitzgerald. The bill is pro-consumer, and so is Mr. Fitzgerald. Take a look at his website www.FitzMall.com and the way that he shares FTC best practices, Consumer Reports etc. It's all about making sure a customer gets a fair deal, so that they want to build a relationsip, not a one time car sale.

    The transaction price is controlled by the manufacturer. In the 1950's, dealers got a 25% discount, today, it's between 1-5%. The rest gets doled out in various ways, but the manufacturer controls incentives and rebates like a faucet, turning them on and off. Edmunds notes that the transaction price is between 80-75% of sticker.

    So the dealer gets a floor plan line from a bank for 95-99% of sticker, on a car that will sell for between 80-85%. That's a toxic asset. That's another story.

    The invoice is a tool, just like MSRP, to make sure that a buyer is comparing APPLES TO APPLES.

    Jack Fitzgerald is a posted price dealer, and all the information is provided up front.

    In almost all cases, the selling price offered is less than invoice. Take a look, do some more research.

    ReplyDelete
    Replies
    1. The real story is the the number they put on you trade in's. Being in the business for years, they are in truth stealing your trade in's and resaling them for big profits. or taking them to the auction. Trust me I was in the business for years, one bit of advice, they want to sell you there car more than you want it. Hold you ground on you trade, and don't worry about walking away, they will call you!!!!.
      P.S BUY AT THE END OF THE MONTH, managers will bendover for the deal.

      Delete

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