Question For AutoBrag: Good Deal or Bad Deal? (Updated)
Question From Prashanta: Bought a new RAV 4 Base 2 WD with third row seats with the following accessories (this was the only car on the lot and hardly any could be found with a third row seat anywhere in the SE U.S.) 2008, 4 cyl Base with 2 WD
Item Invoice MSRP
Car $19888 $21500
Roof rails $176 $220
Running light $32 $40
third row $760 $950
Fuel surcharge $27 $34
Toyoguard $159 $619
AM/FM 6 disc $150 $200
Mats $208 $259
Alloy wheels $448 $560
Total $21848 $24382
I estimated the dealer\\\\\\\’s cost as $21848- 2% holdback (in Florida, it is 2% of invoice)- 1% wholesale reserve (1% of MSRP)= $21096
My estimate was that Dealer\\\\\\\’s cost + delivery charge ($735 + TDA (at this dealer, was $700, which included setup of car) + 3-5% profit (of $21096)= reasonable price
for 3% profit- good price was $23163 +TTL
for 4% profit- $23371 +TTL
for 5% profit- $23586+TTL
I paid $22450 +TTL, for a vehicle very difficult to find. Do my calculations make sense? How was the price I got?
Car Finance Guru: Hi Prashanta.
By comparing MSRP, here’s what we’ve got in store….
For a 2008 Toyota RAV4 4dr SUV (2.4L 4cyl 4A),
MSRP: $24,344.00
ePrice: $22,784.00
Savings: $1,560.00
% OFF MSRP: 6.41%
Let’s take a look at the most imporant numbers here. The MSRP was $24,383 and you paid $22,450. That is a dollar discount of $1,933 or percentage discount of 7.92%. We’ll tell you right now that it is going to be nearly impossible to calculate the true cost of the vehicle for the dealerships because you have to add in many variables. Depending on how much volume the dealer pushes affects many of the incentives Toyota grants to the dealer.
However, from another perspective we are fortunate to have a family member working as an executive at Lexus/Toyota. Usually in our experience the employee discount on Toyotas are about 5%-7% under invoice. We’ve heard from dealerships that when people buy through these progams the dealer really makes zero.
Here are some more figures to chew on. If you look at the major publicly traded auto dealerships like AutoNation, Lithia, Penske, etc the average gross profit margin on new vehicles is around 8%. That is GROSS not NET, so contrary to popular belief there is not a lot of room for profit on new cars.
In your situation the price you paid $22,450 I would assume that the dealer’s gross profit is probably around the 4%-5% area. Is that a good deal? We think so and if you are satisifed with the way you were treated at that particular dealership be sure to service your car with them. Most people don’t know that service, parts, and finance make up over 60% of a dealerships gross profit.
!Congratulations on your new Rav4!
