Do dealers lie about the MSRP?

[Neal]

Dealers know most of us know what we're looking for in our discount percentage off of MSRP. The question is can we trust the MSRP number they list? We may be able to get close based on the stock item but when things are specialed then we're in uncharted territory.

 

[sheridany]

I don’t believe MSRP relative to their cost. They (newmar and dealers) are making a nice profit. You can never get a dealer to tell you their invoice. I have asked multiple times having bought three coaches and was told no. But I hear from a trusted source in the industry that the margin is significant. Take Girard awnings. They really are expensive but to make them at cost what would you guess, 25 to 50% of the MSRP? Honestly, I don’t know. Don’t get me wrong they are beautiful awnings. There has to be a hefty margin in them so that manufacturer and coach builder and dealer can profit. American capitalism at its best. I too would love to see how they price specials.

 

[TJ&LadyDi]

MSRP is simply what the manufacturer says it is! "Manufacturer's Suggested Retail Price (MSRP)" is basically a myth. It is an artificial number tossed out to establish some kind of starting point. The bottom line is that a fair price is actually what a willing buyer and a willing seller agree upon. Trying to turn MSRP into an absolute number is a fool's errand.

Sheridany's observation that there is a "hefty margin" in products like Girard awnings is spot on. My son is a licensed customs broker in the import-export business. He sees the actual cost of items when doing the paperwork for import/export and is frequently flabbergasted. One example is those fancy cell phones we can't seem to do without. You know...the ones we pay several hundred bucks for. In many cases, the actual cost is less than you'd expect to pay for a hamburger in a fast-food joint.

The retail price of any item is based primarily on what the market will support.

TJ

 

[Akdare]

Most people that have not worked in a product manufacturing environment don’t understand is that there is a lot more to the cost of a product than just the actual materials used to produce it. It has to be researched, designed, developed and tested. And, depending on the product, those costs are extraordinary...and have to be recouped in the retail price of the product. It’s a balance between what the consumer is willing to pay, how fast the company wants/needs to recoup those R&D costs, the product life cycle, etc.

 

[sheridany]

Excellent points above. What’s interesting is this may be the only industry or I am not aware of another industry where negotiations to buy an RV start as a discount off MSRP on new inventory. I am curious how that came to be the standard basis of price negotiations. I assume this is true across RV types. No doubt 20-25% off MSRP as it seems to be the numbers I read or hear people quote (on class A) is significant and still leaves the dealer a healthy profit on the sale I would presume. It also gives a sense how inflated MSRP is if they can discount in a double digit range makes you wonder.

 

[BGMAC]

I got a chance to buy a Cadillac DTS back in 2002 new from a friend who owned a dealership (He sold it). I bought it at $500 above his invoice. Let me just say at 20-25% off MSRP, they are still making a lot of money.

 

[TJ&LadyDi]

Be careful with "invoice" prices. We are in the process of buying a new car and the "invoice" I was shown was certainly NOT what the dealer paid for the car! There are "invoices" and then there are "invoices."

TJ

 

[BGMAC]

Be careful with "invoice" prices. We are in the process of buying a new car and the "invoice" I was shown was certainly NOT what the dealer paid for the car! There are "invoices" and then there are "invoices."

TJ

I do understand that. And dealers get incentives off the Invoices/Invoices. LOL. I got to see the bottom dollar invoice/invoice/after incentives invoice. LOL

 

[Joe Hogan]

For automobile dealers there is also "Hold Back" which is paid to dealers on units sold when certain metrics are met. The invoice is a base number but dealers still make money even selling at invoice due to various incentives they are paid by the MFG like Hold Back. What Is Dealer Holdback? on Edmunds.com

 

[Jabber Jaw]

A couple of comments about this!

I spent 40 years in the automobile industry, most in management positions, but was a Dealer Principal for 2 years. So some of what I say is based on actual "been there, done that" experience.

RV MSRP.....When building my new Canyon Star from the "Order Sheet", the MSRP was shown at the top of the sheet. For each optional item, there was a code, description, & MSRP. This form is a NEWMAR form, printed off by the Dealer from the Newmar Dealer Portal. Was it truly MSRP? I don't know 100%, but think it was the actual MSRP, as priced by Newmar. The "Specials" were done on a different sheet, and I saw nothing that suggested "MSRP". All I saw was an individual price on each special item. I assume it was the Dealers cost for that special from Newmar.
I negotiated my price, then negotiated the "CPU" price I paid. When paying for the coach just prior to going to Napanee; I was trying to get the "CPU" fee deducted from the total price, to save paying tax on it. I was told by the Manager doing the paperwork, that the CPU charge was included as part of the "cost of the coach" from Newmar. He went on to show me that line on the invoice. While looking at it, I did see the "Total Amount Due" line, and the difference between that & what I paid was $5600. So, I felt as if I got a pretty good deal. And that the Sales person with which I dealt, had been honest with me. He had said that it was between a $5,000-$6,000 deal, so I'd say he was accurate. Dealer made about 3.7% profit for its' efforts in securing & placing order, and doing paperwork. They had no delivery expense, which it is my understanding in the RV Industry, that the dealer pays for separately. A good deal for me, an easy deal for them!

Now, MSRP in the automobile industry. Each vehicle is required by law to have a "Monrony" label stating the MSRP. This is comprised of the base price, price of all optional equipment, freight (delivery expense), any manufacturer discount, then the total MSRP. Two identical vehicles will have an identical MSRP, other than California Emissions. There is an "Invoice Amount", which actually is the amount the Dealer pays the Manufacturer for that vehicle. Is that the "net cost" to the Dealer? No! There is a "holdback" amount, usually 3%, that is calculated, and shown. The Dealer, depending on the program he selects, will get that money Quarterly, Semi-Annually, or Annually! So, the net cost to the Dealer, is Invoice less Holdback! But, to give Dealers incentives to move certain Models, etc, there are available, "volume bonuses" (as specified by the Manufacturer), Quarterly, & Annual Sales Objectives that can be attained by the Dealer; but that amount is not known until the end of the Incentive program! Most people won't believe it, but "Net Profit" in a Dealership will run 1-1 1/2%. If a Dealer can run a 2%Net Profit he is doing an exceptional job!
And the ultimate price paid by the Consumer depends on the Dealer's actual selling price, coupled with whatever Manufacturer's Incentives are available on a particular model! Hope this helps!

 

[FL-JOE]

Back in our boating days I had an "awakening" when it came to MSRP on large vessels. A dock mate made a deal on a 33' Sea Ray with all the bells and whistles. The MSRP was just over $300,000. He got a large dealer to sell it to him for around $200,000 plus fees. Everyone was very impressed with his negotiating skills.

About a month after he took delivery another dock mate's son was down visiting. This young man worked for Sea Ray in the front office somewhere. Over a few beers he revealed that a $300,000 MSRP Sea Ray cruiser would be sold to a large dealer for around $150,000. He claimed that the markup from dealer price to initial MSRP would fluctuate between 80% to 100% depending on model and price.

I have no reason to believe that large DPs are any different. Some of us think we got a great deal when we finally drive a dealer down to 30% off MSRP. In reality they probably still had almost 70% on the table they got to put in their pocket.

 

[sheridany]

I have no reason to believe that large DPs are any different. Some of us think we got a great deal when we finally drive a dealer down to 30% off MSRP. In reality they probably still had almost 70% on the table they got to put in their pocket.

I believe that is the reality here. I have yet to find anyone who offers a service to broker a deal on your behalf that knows the dealer margins and can negotiate effectively with their knowledge. I would gladly pay for that knowing I was getting a better "real deal".

 

[FLSteve]

Just a question … does Newmar charge all their dealers the "exact same price" for the base coach??? In other words would a large dealer like NorthTrail RV who sells lots of Newmar's each year get a lower price from the factory vs. a small dealer that only sells a few coaches each year??

FLSteve

 

[sheridany]

Great question @FLSteve. I would venture to guess only there is some discounting or credit incentives on volume for the dealers but possibly everyone is eligible for special incentives as the year rolls on as it gets closer to the new year coming out. Keep in mind the dealers “buy out” the full production run at the Newmar dealer show so that has to be a hefty financial commitment by a dealer like North Trail.

 

[Jabber Jaw]

Similar to the automobile industry, my guess is, the Dealer receives "incentives" or "bonuses " throughout the model year, possibly paid Quarterly or Semiannually. By doing it this way, the monies go directly to the "bottom line" of the Dealers Financial statement, and doesn't have to be shared!

 

[FL-JOE]

I would guess, and this is strictly a guess, that a dealer as big as North Trail either gets bonuses during the year from Newmar and Tiffin as the new coaches sell or they get them cheaper in the first place. I doubt there is a significant difference between what a large dealer actually pays and a small dealer but I'm sure there is a difference.

Remember, a large dealer like North Trail also makes a huge profit from selling a larger number of used coaches, especially this time of year when many northern dealers are sitting in their offices playing solitaire.

 

[Hawkeye]

I do't care what industry you're in, the more you buy, the larger the discount. It's no different than the TDS fuel card, larger buying group, more discount.

 

[TJ&LadyDi]

We just bought a new car this past week. If the "invoice" we were shown was the actual price the dealer paid, it lost $1,800 in the transaction...unless, there's "more to the story."

Now, I really don't like using the word "lie" in the context of MSRP and invoices. Dealers use those numbers to their advantage, to be sure, but I don't think they actually "lie" in the accepted sense of the word. I do think that there are undisclosed factory incentives available to dealers and that likely account for why it would appear that the dealer lost $1,800 on our transaction.

TJ

 

[Jabber Jaw]

We just bought a new car this past week. If the "invoice" we were shown was the actual price the dealer paid, it lost $1,800 in the transaction...unless, there's "more to the story."

Dealers usually COMBINE the incentives and actual price the Dealer sold the car for, to arrive at a net purchase price.
Fairly easy way to arrive at what price the Dealer SOLD the vehicle is to add back the incentives to get a SALE price versus DEALER INVOICE. The difference is the gross profit on the sale, not including the Dealer HOLDBACK (usually 2-3%).

Now, I really don't like using the word "lie" in the context of MSRP and invoices. Dealers use those numbers to their advantage, to be sure, but I don't think they actually "lie" in the accepted sense of the word. I do think that there are undisclosed factory incentives available to dealers and that likely account for why it would appear that the dealer lost $1,800 on our transaction.

TJ