Before I move to PA I will wait and see what Chapman does when the EVs start shipping.
5% below MSRP begs the question of just much they make at MSRP. Must be a good bit. 5% of $70k is $3,500.00. For those getting the late Summer 2023 RST that is a $5,250.00 discount on a $105k MSRP.
We will see how things shake out in 2-3 yrs.
Assuming EVs are similar to non-EVs, a Silverado RST @ $100,000 (I like round numbers) is going to make the dealer about $15,000. So yeah, giving up $5,000 to get a marginal $10,000 is cool. But I think the key for Chapman may actually getting the cachet of being a high volume EV seller, and maybe getting more future Chevy EV allocation.
But we all know EVs are not your normal car. My problem is I only worked with autos pre-COVID. In this current situation with constrained supply, parts shortages, and massive seller strength, things are all jumbly wumbly. I couldn't dream of paying MSRP (let alone over MSRP) for anything just 3 years ago lol. Assuming another recession hits AND the major automakers go back to their old sales practices, maybe we will return to how things used to work lol.
First thing to get out of the way... if you have a preconceived notion of "dealer invoice", just table that for now. I know sites like TrueCar and Edmunds purport to give you some inside scoop or some BS. Hell, a sales person may even show you a "authentic dealer invoice" for a car during a price negotiation. This "invoice" concept is total trash. TrueCar and Edmunds are just lead-gen to send prospective into a buying funnel at a dealership. And there are a ton of fake dealer invoices out there. So do me a favor and just "forget" the concept of dealer invoice when you read the following explanation.
Also, every car is going to be different; the goal isn't to know exactly how much a single car margin is; it's more of a general trend. Sooooooo the easiest way to answer your question on "how much does the dealer probably make on a car" is with an analogy of a hypothetical car. Since my dumb-azz only knows pre-COVID, let's take a 2018 Chevy Malibu LT with a BEFORE destination MSRP of $21,680
. With $875 destination it'd be $22,555 full MSRP. Destination varies by geography in the USA, but MSRP before destination does not vary by state. So I like starting with this MSRP before destination, because you will see the same value in Idaho as I would have seen here in California, or someone in Texas, etc. This lets us all talk about the same car and come away with something meaningful.
There's always some one-off-example of "I know so and so and they came away with a car for like blah blah blah." I don't want to talk about the one offs. I am speaking about the average volume transaction (pre COVID). With all those disclaimers out of the way... let's start talking numbers.
[A] Normally, a dealer will pay a "wholesale" (notice how I didn't call it dealer invoice) price that is about 87% of MSRP before destination. So, some accountant somewhere likely recorded an approximate accrual of $18,861.60 somewhere in some accounting ledger for this Malibu. But this is by no means the dealer's actual cash marginal cost of that car. You know somewhere out there some Malibu buyer was shown a fake "dealer invoice" of 93% of the MSRP (around $20,000) and thought that's what the dealer paid. Total bull.
(B) Ok so now it's time for the factory to consumer incentives. These are the ones you used to see published on Chevrolet.com before COVID or advertised on some nationwide 4th of July Promo. These could be say $1,000 cash. Easy enough.
[C] Next consider factory to dealer incentives. These vary based on a ton of factors. Sometimes it's geography (like the West incentive is usually less than the Plains). Or, the incentive will be tied to how much stock the dealer is carrying. Bottom line, these incentives change all the time and are a huge wild-card. But, for the sake of this example, let's say Chevy was offering the variable dealer incentive of $1,500 because the 2018 MY Malibu I'm talking about had been aged past 100 days on the floor but the 2019's hadn't dropped yet.
[D] Now, let's consider variable allowances. These are additional spiffs if your dealer can hit marginal sales goals. Like If a dealer can sell 10 Malibus this month, maybe they get an extra $400 per Malibu on some regional spiff to help dump inventory before the 2019s drop.
[E] And last, there's "holdback". This is about 2% of wholesale that the manufacturer sends to the dealer for selling a car. So in this case the Malibu is a cheap car so the holdback is small at like $375.
So let's do some hypothetical math...
$18,861.60 [A] dealer wholesale
minus $1,000 (B) factory to consumer cash
minus $1,500 [C] factory to dealer cash
minus $400 [D] sales planning allowance
minus $375 [E] holdback
add-back $875 destination
add-in say $500 floorplanning costs (interest/carrying-costs)
If you take a trade-in, financing, or other malarkey off the table, then someone could offer to buy this car for $16,961.60 (before taxes, title, doc fees, etc). This is ~75% of the MSRP (with destination). At this price, the dealer likely wouldn't do a deal.
So, to actually get a deal done, I have a general rule of thumb when buying "normal" cars off a showroom lot that had been sitting around (it's easy to spot a car that has aged and isn't some Shelby GT500). If you don't want much stress and you were ok-ish knowing there was still a chance you were over-paying... the rule of thumb is to offer paying a pre-tax and fees subtotal equal to 82% of the MSRP. So in my example $22,555 * 0.82 = $18,495. Do not bring a car to trade, and do not get financing from the dealership.
The sales person at first would tell you how crazy you were being, but if you just sat there and kept saying "I'll buy the car right now if you can make the numbers work" you'd probably get a deal done in a few hours. It wouldn't be fun ... because they'd put you in the sweatbox and keep pinching you (making you wait or having all these stress events to make you want to get out of there by increasing your price). But after 4 hours of pain, nine times out of ten you'd get a car at that price because I think this dealer is still making ~$1,500 and it's "fair."
Back in the day you could probably offer 78% of MSRP on a middling full sized truck and still get a deal done because margins on trucks used to be greater.
Of course a rule of thumb is always just that... a broad rule. You can always tweak your offer and try to play hardball to your heart's content. TBH I think this is an overpay on a Malibu, but I'm just using generic assumptions haha. I've done a new car purchase at 43% of MSRP. It wasn't fun, but at that time the factory to dealer incentives were huge lol.