The dealer's actual cost is below invoice. Dealers make money on:
- Holdback (always)
- Financing (unless a customer pays cash or brings their own financing)
- Volume bonus (usually)
- "Doc fee" (almost always)
- Dealer-added accessories such as tint, nitrogen, interior/paint protection, etc. or manufacturer accessories (often)
- Your trade (if there is one)
- "Floor plan assistance" (money from the automaker that overs part, all, or more than the interest the dealer pays while a vehicle sits in inventory - sometimes)
- "Paperwork errors" (charging more for certain taxes and fees than they actually cost - sometimes)
- "Extended warranties", prepaid maintenance plans, GAP, and other forms of insurance (sometimes)
- Factory-to-dealer rebates or advertised rebates that you didn't know about (sometimes)
- Warranty repairs, maintenance, and out-of-warranty repairs (often)
- Applying one off their allotted "friends and family" discounts to the sales (occasionally)
Most transactions yield the dealer thousands of dollars in profit even when they sell the vehicle at or below invoice. Occasionally, they'll let some go below their actual cost if it means qualifying for tens of thousands in volume bonuses for that month. Most of their profit is made in the finance office and after the sale or trade has been made.
I'm not saying you did
bad (you didn't), but be aware that invoice is meaningless because that's not the dealer's actual cost. Most buyers (not saying you) don't know how to properly research vehicle pricing and up falling for at least some of the dealer's selling and profit-generating techniques and end up leaving
thousands of dollars on the table. However, if
every buyer paid as little as what most people in this thread have reported, the dealer wouldn't be able to afford remodels every several years with all the marble floors and multi-story showrooms and "free" Wi-Fi and popcorn and daycare, etc.
There are two essential facts frequently left out of these deal reports: (1) where the vehicle was purchased and (2) the trade deal. You can't pass judgement without knowing these things.
I've commented on these factors before but I'll give it another shot.
Leaving out the issues of expensive add-ons or accessories, price gouging on such, financing, yada, yada, which can be handled with a series of "no thanks", and focusing on actual dealer cost and manufactuer incentives, that can vary widely by region and dealer. I see recent deals posted here that include manufacturer cash backs, $1,500 I think I saw, that do not now and have never existed at least since late spring, maybe never, within 200 miles of where I live, maybe not within 450 miles reaching into NYC metro or maybe 90 miles to Toronto which would present a whole other set of difficulties for a US buyer including not being allowed to cross the border at this time.
Why might this be? Each of the dealers within 200 miles of where I live peaked out around
60 CX-5s in stock during showroom closings and they started dropping pretty quickly after reopening. When closed back in March they were advertising 8% of MSRP across the board. After reopening that disappeared, evidently a manufacturer-to-dealer incentive for a very difficult sales period. Right now the two dealers within 90 miles have a grand total of 70 2020 CX-5s in stock with no 2021s yet. Want a Signature? There is a grand total of one in stock. GT Reserve? There's two of those. Good luck with those. Want a FWD Sport on a budget? None. Right now they're pushing lease deals on AWD Sports. These Mazda shops are a minor sidelight at a superstore with a 1/2 dozen makes and other shops around the region. The other dealer has several shops with several makes.
How come? This market of around 2 million folks is predominated by domestic makes. There's a Ford stamping plant, a Chevy engine plant and a national top 3 Chevy dealer in town. The roads are filthy with GMC SUVs and those little subcompact Buick crossovers. The Chevy Traverse seems to be the favored mommy wagon.
I noticed a while back somebody posting a good deal in the LA area who claimed to have canvased every dealer within 100 miles. Just for yucks I just checked what inventories look like in LA county, a market one might say favors imports. I stopped at the second of a dozen dealers I looked at and it had 150 CX-5s in stock. There you have a very large market, competition among dealers, a market that likes imports, and evidently some high volume dealers.
The long and short is you cannot pass judgement on somebody's deal without knowing where it was signed among other factors. Dealer holdbacks and volume bonuses can vary widely as can manufacturer incentives.
That takes us to the trade among other sources of dealer profit. They might not make money on any aspect of the deal other than trade if you get out of the F&I office with a 0% from the manufacturer and a successful series of "no thanks" while dodging expensive add-ons like rust proofing or ceramic coatings or price gouged doc fees. They might deal on the MSRP down to cost and but find success in hard sells in the F&I office. Barring that, all of their profit may be in the trade. You simply cannot evaluate a deal without knowing the trade terms.