OK, so the subject today is THE BIG ONE, namely, “What can you/should you realistically expect to pay for a new VW?”
To do that I’ve got to explain how the Volkswagen factory-to-dealer sales and pricing process works.
Everything starts with the MSRP (Manufacturer’s Suggested Retail Price). We all know what that is. It's that number on the window sticker, the number that none of us will ever agree to pay.
Then you have the wholesale invoice - the invoice being the document from the manufacturer that shows the dealer what he has been charged for the car. Years ago the invoice amount was top secret - no dealer ever revealed it to the public - and those were the good old days, too; the retail markup (invoice to MSRP) was as much as 21%!
Today the base invoice for any make car can be found on www.edmunds.com, www.ConsumerReports.org and numerous other sources, so the secret is out. Which is why, if he/she does a little homework, any prospective car buyer can get educated beforehand and see what kind of profit margin the dealer is actually working with. Our average markup today (invoice to MSRP) is 4% or less. No joke.
So on that 2009 Jetta SE you’ve been admiring, the one with the MSRP of $21,670 - and the one you want to buy for $19,999 - our cost is $20,961*, or 3.27% lower than the MSRP. You can see now why your offer of $19,999 isn’t very attractive.
“But,” you say, “you have overlooked the incentives.” You are correct. So let’s now address that.
There are two kinds of incentives; factory-to-consumer, and factory-to-dealer. The factory-to-consumer incentives (discount/rebate, low rate installment or lease financing, or all of the above) are yours to use as the program dictates. We the dealer cannot touch “your” incentive money - if there is some to be touched. Since Volkswagen does not offer factory-to-consumer rebates a discussion of them is irrelevant.
Factory-to-dealer incentives are between us and Volkswagen of America. Usually it’s “funny money” earned by selling a particular model or quantity of that model in a given month. These incentives appear in earnest around end-of-model-year or end of calendar year. Sometimes the dealer has the option of keeping this little reward to himself or passing it along to the customer. Sometimes not. Either way, these programs are between VW and its franchise retailers only.
So back to our Jetta example with the MSRP of $21,670 and invoice of $20,961. The current factory-to-consumer incentive for this model is $0 cash discount/rebate; low rate installment /lease financing is usually available instead. The current factory-to-dealer incentive is also zero. That’s right, nada. We sell every Jetta we get almost as soon as it rolls off the truck. So why does VW need dealer incentives?
"Hold on," you say. "You aren't being entirely honest with us. You are hiding the hold-back money you get from VW!" You are right. Edmunds, Consumer Reports and others don’t shy from reporting the fact that manufacturers “hold back” a certain amount of money from each invoice and return that money to the dealer so he can use it to pay for his advertising, inventory % charges (which can be massive), general overhead and whatnot. This is standard operating procedure in almost all manufacturing businesses, be it cars, boats, furniture, appliances, electronics, mobile homes or whatever. It’s a necessary device for leveling the playing field for retailers. But, in the past decade or two many American car manufacturers have abused this practice, often stacking multiple layers of hold-back into their invoices, enabling frantic dealers of these brands to have so many creative pricing formulas (you’ve got cars selling for invoice, under invoice, under-under invoice, and even under-under-under invoice) that their offers become outrageous. ("We’ll give you $10,000 for your trade-in, even if it doesn’t run!") Of course, you know the old saying; “If it sounds too good to be true….”
Can you ever buy a VW for below invoice? On occasion, yes. Generally no. Unlike the American manufacturers referenced above, Volkswagen does not pack its invoices with layers of fluff. The typical Jetta invoice hold-back is less than half as large as the average person's monthly mortgage payment. I'm serious.
If the dealer is overstocked with this year’s model and next year’s model is about to come out, you might find some special deals because the dealer, the manufacturer, or both are providing the discount. Otherwise, VWs are pretty much sold for some amount over invoice. Which, as a dealer trying to make a profit, is where we need things to be.
So - what’s my best price? You are going to hate this answer, but - it depends. At the very least it depends on the car you’ve selected, the time of year (are new models coming out soon?), whether we are overstocked or understocked, the incentives being offered, etc. etc. etc. On the 2009 Jetta SE in the examples above, at the time of this writing it would be $21,557 (Edmunds' TMV price) less $250 Boardwalk dealer adjustment = $21,307 + TT&L.
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* Astute readers will notice that Edmunds shows $20,554 as the actual invoice price of a base 2009 Jetta SE. In the DFW area the actual number is $407 higher than that,or $20,961. Volkswagen uses a regionally adjusted invoice system, meaning that a dealer in Chicago, for instance, might pay a slightly different price for his cars than does a dealer in Los Angeles, or Miami, or Dallas or whatever. The difference is usually attributable to that region's shared advertising costs. In each region VW adds $ X into dealer invoices to help cover regional TV, radio, print and Internet advertising and possibly other unavoidable hard costs in that area like prep charges or additional transportation or storage fees. Edmunds posts a disclaimer at the beginning of their pricing examples and you can see it here.
To do that I’ve got to explain how the Volkswagen factory-to-dealer sales and pricing process works.
Everything starts with the MSRP (Manufacturer’s Suggested Retail Price). We all know what that is. It's that number on the window sticker, the number that none of us will ever agree to pay.
Then you have the wholesale invoice - the invoice being the document from the manufacturer that shows the dealer what he has been charged for the car. Years ago the invoice amount was top secret - no dealer ever revealed it to the public - and those were the good old days, too; the retail markup (invoice to MSRP) was as much as 21%!
Today the base invoice for any make car can be found on www.edmunds.com, www.ConsumerReports.org and numerous other sources, so the secret is out. Which is why, if he/she does a little homework, any prospective car buyer can get educated beforehand and see what kind of profit margin the dealer is actually working with. Our average markup today (invoice to MSRP) is 4% or less. No joke.
So on that 2009 Jetta SE you’ve been admiring, the one with the MSRP of $21,670 - and the one you want to buy for $19,999 - our cost is $20,961*, or 3.27% lower than the MSRP. You can see now why your offer of $19,999 isn’t very attractive.
“But,” you say, “you have overlooked the incentives.” You are correct. So let’s now address that.
There are two kinds of incentives; factory-to-consumer, and factory-to-dealer. The factory-to-consumer incentives (discount/rebate, low rate installment or lease financing, or all of the above) are yours to use as the program dictates. We the dealer cannot touch “your” incentive money - if there is some to be touched. Since Volkswagen does not offer factory-to-consumer rebates a discussion of them is irrelevant.
Factory-to-dealer incentives are between us and Volkswagen of America. Usually it’s “funny money” earned by selling a particular model or quantity of that model in a given month. These incentives appear in earnest around end-of-model-year or end of calendar year. Sometimes the dealer has the option of keeping this little reward to himself or passing it along to the customer. Sometimes not. Either way, these programs are between VW and its franchise retailers only.
So back to our Jetta example with the MSRP of $21,670 and invoice of $20,961. The current factory-to-consumer incentive for this model is $0 cash discount/rebate; low rate installment /lease financing is usually available instead. The current factory-to-dealer incentive is also zero. That’s right, nada. We sell every Jetta we get almost as soon as it rolls off the truck. So why does VW need dealer incentives?
"Hold on," you say. "You aren't being entirely honest with us. You are hiding the hold-back money you get from VW!" You are right. Edmunds, Consumer Reports and others don’t shy from reporting the fact that manufacturers “hold back” a certain amount of money from each invoice and return that money to the dealer so he can use it to pay for his advertising, inventory % charges (which can be massive), general overhead and whatnot. This is standard operating procedure in almost all manufacturing businesses, be it cars, boats, furniture, appliances, electronics, mobile homes or whatever. It’s a necessary device for leveling the playing field for retailers. But, in the past decade or two many American car manufacturers have abused this practice, often stacking multiple layers of hold-back into their invoices, enabling frantic dealers of these brands to have so many creative pricing formulas (you’ve got cars selling for invoice, under invoice, under-under invoice, and even under-under-under invoice) that their offers become outrageous. ("We’ll give you $10,000 for your trade-in, even if it doesn’t run!") Of course, you know the old saying; “If it sounds too good to be true….”
Can you ever buy a VW for below invoice? On occasion, yes. Generally no. Unlike the American manufacturers referenced above, Volkswagen does not pack its invoices with layers of fluff. The typical Jetta invoice hold-back is less than half as large as the average person's monthly mortgage payment. I'm serious.
If the dealer is overstocked with this year’s model and next year’s model is about to come out, you might find some special deals because the dealer, the manufacturer, or both are providing the discount. Otherwise, VWs are pretty much sold for some amount over invoice. Which, as a dealer trying to make a profit, is where we need things to be.
So - what’s my best price? You are going to hate this answer, but - it depends. At the very least it depends on the car you’ve selected, the time of year (are new models coming out soon?), whether we are overstocked or understocked, the incentives being offered, etc. etc. etc. On the 2009 Jetta SE in the examples above, at the time of this writing it would be $21,557 (Edmunds' TMV price) less $250 Boardwalk dealer adjustment = $21,307 + TT&L.
***************************************************************************************
* Astute readers will notice that Edmunds shows $20,554 as the actual invoice price of a base 2009 Jetta SE. In the DFW area the actual number is $407 higher than that,or $20,961. Volkswagen uses a regionally adjusted invoice system, meaning that a dealer in Chicago, for instance, might pay a slightly different price for his cars than does a dealer in Los Angeles, or Miami, or Dallas or whatever. The difference is usually attributable to that region's shared advertising costs. In each region VW adds $ X into dealer invoices to help cover regional TV, radio, print and Internet advertising and possibly other unavoidable hard costs in that area like prep charges or additional transportation or storage fees. Edmunds posts a disclaimer at the beginning of their pricing examples and you can see it here.
