I was wondering how dealerships make money of cars they sell at VPP price since its less than invoice?

 

Manufacturer incentives

 

VPP is a manufactuerer incentive; the manufacturer pays the dealer to sell it under cost.

 

so basically the dealer has to request to get reimbursed? or the money has already been issued in the cost of the car at dealer purchase?

 

Once the VPP paperwork is sent in, Nissan sends the dealer a fee for selling the car under invoice. Some dealers will accept this deal and some won't. VPP is not compulsory....

 

As disclosed in the paperwork, the dealer makes a flat 2.5%.

 

cause normal people aren't supposed be purchasing under VPP...

Dealerships get a minimum bonus per sale... but realistically a lot of smaller dealers operate in the red and make the money on services... which is why I'm a heavy proponent on being fair to a dealership... if the salesperson isn't an *** and goes out of their way to make you happy, dude buy the car.. .don't be a jacka55 and negotiate for that last 200 bucks.... some sales agent spend like 15 hours with a sale to get a 200 dollar commission. that's a sad 13bucks per hour...

other dealerships work on volume... if you made say 500 bucks minimum per sale, and say you sold at the minimum 5 cars a month per sales person... sales team of like 10-12. that's still 360k in revenue/year... probably not enough to run a business on comfortable, but you get the idea.

 

Let's not forget that dealers don't pay the invoice price either, they pay less for the car. The manufacturer's invoice is not the real cost of a car. The true cost of a car is a number not available to customers. Truecar.com shows the actual price paid by the dealer, but I don't know how accurate it is. Dealers pay depending on how many cars they get and how many cars they sell. The more they move, the more the get, the cheaper they cost. So, if a dealer sells under invoice, it doesn't necessarily mean that they are losing money. Also, on top of incentives and discounts from the manufacturer, a dealer can also increase the interest rate at their discretion and get a kick back from the bank. That's why it's important to do your homework before visiting the dealer.

 

I love how outsiders try to associate typical business models to dealerships, because everyone knows everything with the interwebz.

 

Well, it's a fact that businesses don't like educated customers. It's bad for business.

 

When I was in the automotive industry, the educated customers were actually the best ones; they were the easiest to close by far. Educated customers know when there is actually nothing left to negotiate for, and will take the deal. The average uneducated customer continues to think that cars have a 33% or larger margin (this is partly due to american makers offering HUGE incentives in the past).

Then theres the type that thinks there is more when there isn't, even when they see the actual invoice for a car. They want the car, at cost, with all the incentives available (typically an impossible combination, then want the rebate AND the special rate, when the fine print clearly reads OR), and clearly state that they will never come to the dealer for service. We let those go .

 

It is good to know what you want and not be a jersey shore dip****