Monday, January 30, 2023

Don’t Let Dealers Steal Your Discount on a New Car

All auto manufacturers offer price discounts and very low interest rates. As we begin the recovery from the microchip and other supply line shortages, car dealers and manufacturers inventories are growing rapidly. This will trigger more and steeper discounts to move inventory in the form of cash incentives and interest rate reductions.
Cash incentives take two forms, dealer, and customer. Dealer incentives, as the name suggests, are paid directly to the dealer, and are kept secret from the public. These discounts range from a few hundred to a few thousand dollars. Depending on how large an inventory of a particular model is, dealer and customer incentives can range from several hundred to several thousand dollars. Discounts of $10,000 and higher are not uncommon.
Customer cash incentives are advertised by the manufacturer to the public. For all intents and purposes, these customer incentives may as well be secret. Car shoppers and buyers rarely buy cars because they know of advertised manufacturer’s discounts. A big reason for this is that dealers’ advertised prices already includes the manufacturer’s advertised incentives. In effect, the dealer is taking your discount for himself and then “discounting” the car in his advertised price. When you buy the car, one of the many papers you will blindly sign in the “business office” is assigning your manufacturers discount to the dealer. By making your discount part of his advertised price, the dealer has secretly converted your discount to his profit.
Manufacturer discounts are paid directly to the dealer and are kicked back to the dealer after he sells you the car. These “kick-backs” are in addition to the routine kick-backs such as advertising money, 2% or 3% holdback, interest rebates, quota rebates, etc. The “invoice” that the manufacturer sends dealers for every car they buy are loaded with thousands of dollars in hidden profit for the dealer. You’re supposed to believe the invoice is the “true cost” of the car. In normal times the average car’s “invoice” includes thousands of dollars in hidden profit to the dealer.
Interest rates are rising rapidly, and manufacturers are offering subsidized, lower interest rates to attract buyers. Sadly, the average buyer is unaware of these available low interest rates because the dealer won’t tell the customer. The reason is that manufacturers offer a cash discount OR the low interest rate, leaving the choice to the customer. The dealer makes the choice of cash without informing the customer so that he can convert the discount into his profit.
You can avoid being taken advantage of by going to the manufacturer’s website after you choose the specific year-make-model car you will buy. This will tell you what customer discounts are available from the manufacturer and what low interest rates.

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