What is "net cost" to a dealer?

A friend forwarded the e-mail below that he received from his local P-car dealer: Dear xxx As you've probably heard, Porsche sales are off about 45% nationwide. While analysts are predicting that 20-30% of our peers could be closing their doors in the next 12 months, we are doing everything that we can to not be included on that list. We feel that we are well positioned to get through this difficult time, yet we are taking aggressive action to ensure our success. Right now the most important thing we can do is to control our expenses. Inventory carrying cost makes up the largest single line item expense we incur, and to the extent that I can reduce that number by reducing my total inventory, I am offering my loyal customers an offer which we have never entertained before: Between now and the end of December, I am willing to sell you a new Porsche for what is our net cost. This offer applies to all of my inventory that is currently in-stock. What is the catch? 1. Again, I need you to buy something that is currently in stock. 2. You have to contact me directly as our managers are not authorized to make these kinds of deals. 3. We can only offer this until December 31. Is this a good deal or a clever marketing ploy?

honestly, sounds like a scam to me but hey..if its not, a good deal could be had..

My local dealer did the same thing two years ago.Employee pricing they called it.I didn't drive the two hours to see what it was about. If I was anyway interested in a Porsche I would go see.The prices will tell you if it's a scam or not.

At my last job, I did some consulting for a company that writes automotive dealer CRM software. One of the applications in the "suite" was a tool to data mine high potential customers and send them an email or letter in the mail, which pretty much says: "blah blah blah... your car in high demand, our inventory low, now is a great time to trade in your car... blah blah blah" This sounds like a different spin using the current economic situation as a compelling reason to get you to the dealership. The name of this application is certainly interesting and reflects its success. ///Michael

We should all be skeptical about a car dealer's pitch, but there could be a reasonable deal here. It is quite true that interest costs on inventory (floorplan) are a big big part of a dealer's operating cost. I'm don't know how Porsche does things, but on domestic dealers the dealer pays invoice, but then gets a holdback, floorplan and advertising assistance fees, a dealer preparation fee, and other cash incentives on its inventory purchases. A net cost could be invoice less those items.

Look at the MSRP (say for a C2 coupe), if they are knocking off around $10K plus or minus $1K, you've got a good deal. Anything less than $ 7K off MSRP is a ripoff.

That is basically also known as a "Get them in the dealership" mailer. You can't sell cars unless someone is in the dealership. Even internet or phone ups need to come in to be sold. So, curiosity brings you in, they move in on the kill. Most people buy on emotion, when you are in the presence of a beautiful vehicle, right in front of you...attainable...all you gotta do is say yes...... you most probably will agree to forgive whatever "catches" that popped up. If you know the invoice, plus any dealer cash incentives available, then you'd know if it's a good deal or not. I know Edmund's shows invoices, but sometimes dealer cash is not listed, even when there actually is.

Not off 45%, more like ~25%. Net cost would be invoice. Yea it's a good time to buy, but this isn't news to anyone.

A deal is a deal. If you are smart, you can get a good deal even if this one is a scam. Porsche dealers buy the cars on their lot from Porsche. This is money spent that they hope will bring in income, i.e., sale of the car at profit. If they don't sell the car, not only is that money not making more money, say in an interest bearing account, the dealership usually gets the money on loan and now has to pay interest on it. So, a true deal, or, a "steal" is when you get the car for LESS than the actual dealer cost because you save them losses on the money already spent. That's when you know the dealer is desperate. A true "fire sale". The letter, promising not cost but net cost, is a pretend fire sale. Anyhoo, check them out. A good source for dealer cost is Edmunds .com. As an example, a base 2009 997S has an MSRP of $86,200, and an invoice cost (what the dealer paid) of $73,200. When he said "net cost", he may mean he will add some items to the invoice, such as salesman salary, advertising, etc. That's BS. If he trully wants to sell, it should be invoice or less.

i worked for 13 years selling to dealerships... there is an "invoice price"..."net cost"..and then a "holdback".. so to buy at the "true" price that a dealer pays you must buy at net ...minus the holdback.. in the biz this is called "net/net" but dont forget they are paying floor plan interest for every month a car sits there... hope this helps..

Edmunds isn't entirely accurate - they almost always have invoice too low. They also don't include the destination charge, port prep, and regional advertising. Mark up is ~10.25% for a MY09 911.

From what I know, Edmunds is pretty accurate on what I was dealing with, down to the penny. Most people miss the destination, which should be added onto the invoice. The others like "port prep" or "advertising" has nothing to do with invoice or msrp, those might be add ons by the dealership, and different dealers have "fancy' names for those fees. Basically, like what others have said, to negotiate effectively....you need to know the invoice, whatever available dealer cash/incentives, and holdback. The longer the vehicle is in stock, the more desperate the dealer is to sell.

The basic truth for the dealers, or any business, is clearing their existing inventory is going to be the only way to survive over the coming months. There was also a story yesterday about how city tax revenue is also way down where they have big auto malls. Personally I'm looking for an early 911, although I don't know where I'd put it.

Net cost could mean cost of car plus operating costs such as G&A, rent, payroll, etc. It adds up if that's what they're doing.

Quotes source post: 6058416

Invoice would be gross cost at best. Net cost would or could include: holdbacks, incentives, co-op, profit from financing, extended warranty, etc. I bought a lot of cars at or near invoice and still had salespeople calling me wanting to make deals. If invoice is net cost, selling at or near invoice would put a dealer out of business pretty quickly. I doubt they're offering net cost.

Quotes source post: 6058447

100% accurate and is is doubtful that Porsche would be selling a car at Net or net/net

The ad said "invoice" and I think it is legit. Porsche may have dumped extra cars on dealers, they are allowed to do so. Dealers do not want to be stuck with excess inventory these days when too many customers cannot finance the purchase (don't get me started on financing a luxury item). The holdback is probably not in play otherwise the sale is a net loss. Still, selling at invoice is a pretty good deal for popular items in stock. I also agree the markup on a Porsche is around 10 percent. new cars is a LOW margin business. Used cars are more profitable.

I would say it's legit, and I believe that all Porsche Dealers have similar offers. They are probably getting some help from Porsche. I received an e-mail from my Dealer and he was offering $15K off the price of an '08 997 C2. There were similar discounts on all in stock Porsches. I didn't pay much attention to the offer because I knew that whatever savings I received on the 997 would more than be offset by what they gave me for my current Porsche.

Quotes source post: 6059542

Oh you'd be very surprised. At least, I was. ///Michael

Quotes source post: 6059783

If they're getting help from Porsche, it's not really net cost. "Help" would be a factor of net.

Quotes source post: 6057425

The part in bold is what makes it sound like a ploy. As a salesman, I know all about making sure that something is purchased through me, but pretending that the managers aren't authorized to make this deal comes across as cheesy; I'm not that stupid.

Quotes source post: 6063320

I would argue that points 1, 2, and 3 are equal in their insincerity. All dealers want to sell from their inventory. everyone in the dealership can make a deal even if they have to get approval from someone else. Why December 31st? Hasn't anyone seen Fargo?

Told you guys...the goal is first to get them in...... There's no need to analyse it like Gregory House would.

I go down if they said buy one and get the second for FREE!

Quotes source post: 6063550

You do WHAT???

Quotes source post: 6063550

Maybe time to go down if you live in Belgium... Buy one car, get a second one free Friday, 5 December 2008 17:05 Buy one, get one free: it is a familiar sales pitch for happy-hour cocktails or last season's fashions, but now a Belgian car dealer is luring customers with just that line. Antwerp-based Cardoen, which sells about 10,000 new and nearly new cars per year, started the promotion at the end of last month and said it would run until 15 December. During that period, customers can choose from a range of new, full-price cars, the cheapest being a �22,800 Hyundai van, and then pick a second free vehicle from a selection that goes up to �14,000. Advertisement'People have been coming in from all over Belgium and abroad, Cardoen's Commercial Director Ivo Willems said, adding that Cardoen's eight showrooms had seen more than ten times their usual number of visitors since the promotion began. 'People will still buy cars, you just have to give them as much advantage as possible, to sell in an innovative way.' Mr Willems said Cardoen was able to run the promotion without losing money because distributors in southern Europe had been so desperate to get cars off their lots that they were selling them to Cardoen at large discounts. The move underscores how difficult the situation has become for an auto industry buckling under a global economic downturn. Belgian new car registrations fell 16.4% year-on-year in November, according to data released on Monday. In Spain, sales nearly halved. Mr Willems said Cardoen had yet to see an impact on its sales from the downturn. Story from RT� News: http://www.rte.ie/news/2008/1205/belgium.html

I'm for getting a good deal just like the next guy. But I've been in towns where the local dealership, who did a good job, wasn't able to stay in business--leaving locals with no parts or support closer than 50 miles away. For dealers, playing with the Porsche factory is an expensive game--between the equipment, training, required dealership size & styling, etc. Because I want the dealership to actually be there with technical help, parts, etc. -- I'm for them making a reasonable profit on high quality items/services. Some of the talk on this board that amounts to, "Screw all dealers" is short sighted at best. On the other hand, if a sales guy is sending out misleading letters...that's another thing. Yet, as someone else said, a deal's a deal no matter what you call it. I'm ok with negotiating the lowest deal possible (as the dealer can always say, "no"). If they sell it for that, it just means I won't get mashed so hard by depreciation.

Quotes source post: 6063897

Here in phoenix some dealers at GM are offering buy one car get one free to unload inventories. One can only hope with Pcar dealers.

That sales chart shows more Turbo cabs sold than any other 911. Wow.

Quotes source post: 6063295

My comment was directed at the fact that Porsche Dealers are offering very significant discounts on '08s, and not at the OP's net cost reference.