How do Incentives work?

[arizBuckeye]

The terms "rebate", "incentives", "cash back", etc. confuse me as to how the work into the deal. For example, if MSRP is 35k and invoice is 32k and there is a $2000 rebate or cash back does this mean I get 2k off the agreed to price? If I negotiate to $500 over invoice ($32,500) does the cash back now make the amount $30,500? Or is it straight off the MSRP price and the negotiating goes from there...

[Austin Aggie]

Originally Posted by arizBuckeye

The terms "rebate", "incentives", "cash back", etc. confuse me as to how the work into the deal. For example, if MSRP is 35k and invoice is 32k and there is a $2000 rebate or cash back does this mean I get 2k off the agreed to price? If I negotiate to $500 over invoice ($32,500) does the cash back now make the amount $30,500? Or is it straight off the MSRP price and the negotiating goes from there...

Yes, that's how it's always worked for me.

Also, there are incentives that are manuf. to buyer (you), and manuf. to dealer (dealership). Either way, they work the same. You may find that some dealership tries to BS you and tell you that this discount only comes off of the MSRP, and not the negotiated price, but that's wrong. These incentives don't take ANY money away from the dealership, only from Toyota.

Even if you bought it at invoice, the dealership will make 3% of the actual MSRP from Toyota in the sale of the vehicle. Anything they get in money above invoice is just icing on the cake.

[mxsjw]

Toyotas only get 2% holdback.

[Austin Aggie]

Originally Posted by mxsjw

Toyotas only get 2% holdback.

I think you're right. I forgot that some of the Japanese manufacturers only get 2% holdback on vehicles where all domestic get 3%. Still, it just goes to show a person where the dealership is making money. I always say that if you're getting within $500 of the invoice, you're getting a good deal. Any other incentives after that are just gravy for the buyer!

[SFTundraMan]

Originally Posted by Austin Aggie

I think you're right. I forgot that some of the Japanese manufacturers only get 2% holdback on vehicles where all domestic get 3%. Still, it just goes to show a person where the dealership is making money. I always say that if you're getting within $500 of the invoice, you're getting a good deal. Any other incentives after that are just gravy for the buyer!

just fyi, if every car was sold at invoice , that 2% couldnt keep any dealership open.

[nferra2]

Dealer also gets 1% financial reserve, makes money of your loan, makes money off your trade, and if you use the service department, they make money there too. They also have high margins on waranty, GAP, etc. The dealer can also qualify for bonuses based of CSR and volume. I not saying ever dealer is making all there bonuses but if it was not profitable for the dealer to sell a vehicle to you at Invoice, then they would not do it.

[truckman261]

Cash Rebates are just that, cash. You can use them for a down or you could have the money mailed to your house if you so felt inclined.

[SFTundraMan]

Originally Posted by nferra2

Dealer also gets 1% financial reserve, makes money of your loan, makes money off your trade, and if you use the service department, they make money there too. They also have high margins on waranty, GAP, etc. The dealer can also qualify for bonuses based of CSR and volume. I not saying ever dealer is making all there bonuses but if it was not profitable for the dealer to sell a vehicle to you at Invoice, then they would not do it.

of course that is sorta true, the 1% financial reserve is totally ate up if the car sits for 30+ days and plenty of them do. If a customer comes in with cash , doesnt have a trade and doesnt buy anything extra and is from out of town and will not use your service dept, then you didnt make squat. Of course there is always a chance to make more money. But it aint like it comes automatically. I am allowed to discount the hell out of a car on the hopes and dreams that we might make some money off you another day. It works fine for me. But I aint paying the light bill either.

[SFTundraMan]

Originally Posted by truckman261

Cash Rebates are just that, cash. You can use them for a down or you could have the money mailed to your house if you so felt inclined.

just wondering, in 11 years, no one has ever actually wanted the cash mailed to their house, Have you ever run into that?