From: saaf@panix.com (Len Saaf)
Newsgroups: rec.autos
Subject: Holdback & advertising fee for Probe (SUMMARY)
Keywords: probe
Date: 9 Jan 93 02:16:21 GMT
Organization: PANIX Public Access Unix, NYC

A few weeks ago I posted the following:

LS> I am very close to buying a '93 Probe. 
LS> 
LS> In the price negotiation I have based my offers on the "base"
LS> invoice, in which I include the invoice price for the car itself, the
LS> invoice price for  all the options, plus the destination charge.
LS> These are the prices I have information about. (I have ConsumerGuide
LS> Auto '93--I assume that Edmund's has the same info). 
LS> 
LS> What I would call the "true" invoice is the "base" invoice PLUS the 
                          ^^^^^^^^^^^^^^
                          I think "dealer cost" is a better term
LS> advertising fee that is charged to the dealer by the manufacturer
LS> MINUS the rebate or "holdback" that the dealer gets back from the 
LS> manufacturer. Independent verification of the "true" invoice price
LS> seems to be more difficult that shelling out five bucks for a
LS> magazine. I want to base my offer on the true invoice because this
LS> reflects more accurately the cost of the car to the dealer.
LS> 
LS> The Ford dealer showed me an computer printout of the invoice that
LS> included a $250 advertising fee. I plan to call some other dealers
LS> tomorrow to see if I can substantiate this figure. Does this figure
LS> jibe with you recent Ford purchasers?
LS> 
LS> During the negotiations I mentioned that I was aware of the holdback,
LS> which amounts to about 3% of the invoice cost, according to what I
LS> have read. The sales manager claimed that  there is no holdback for
LS> the Probe, the Blazer, and another model that escapes me at the
LS> moment. Can anyone verify this or discount it?
LS> 
LS> The discussions in rec.autos have been very helpful in my little
LS> consumer adventure. I plan to report on it more fully when I get the
LS> ribbons tied on.

Below I summurize replies I received via e-mail and Usenet.

Robert J. Wade asserts:

RW> they are lying to you.  who cares what they pay to advertise...or for
RW> their electric bill or pay the plumber to come and fix their
RW> toilet...those are  their costs of running a business.  and there is
RW> holdback for probe.  just offer then a few 100 over true invoice(call
RW> consumer reports for a printout of their real cost).

William R. Nau strikes a similar chord:

WN> As I posted in rec.autos, I purchased a Probe about 8 months ago.
WN> They didn't charge me an advertising fee.  If they did, I wouldn't
WN> have paid it.  I don't pay it when I buy pizza, why should I pay
WN> it when I buy a car.  Advertising should come out of profit.

William also sent me an posting by a Michael R. Dow who was an auto 
salesman for a short time. He also made the following point:

WN> Also, I'm sure you realize the high demand for the 93 Probe
WN> does not put you in a good bargining position.

Alan Denney countered RW & WN's postings with:

AD> Look, guys.  There is a difference that you are overlooking.  The
AD> advertising fee is a direct cost of goods to the dealer -- remember,
AD> auto dealers are owned and operated independently of the auto
AD> manufacturers.  That advertising-fee cost is a separate line item
AD> that the dealer passes on to the customer directly (and the dealer
AD> makes no profit on it, BTW).  If it really makes you feel better,
AD> they could fold it into the base price of the vehicle, if you really
AD> insist on kidding yourselves that you aren't paying for it...
AD> 
AD> It similar to, say, the fees a local independently-owned McDonalds
AD> would pay to McDonald's corp (directly or as a component of food-item
AD> costs) to pay for  national media advertising.  The alternative (each
AD> local McD putting its own  TV or radio ads as its exclusive form of
AD> advertising) is just plain silly.

Steve Tobias sallied AD's missive with the following:

ST>     Likewise, the plumber's charge to the dealer for unclogging the
ST> toilet in the restroom is a separate charge, as is the dealership's
ST> electric bill, office supplies bill, etc. It is still all part of the
ST> dealer's cost of doing business. If they're going to list the
ST> advertising fee charged by the car's manufacturer, they should also
ST> list the holdback which the same manufacturer gives the dealer a
ST> month or two after the car is sold, a pro-rated share of any sales
ST> volume bonuses the dealer winds up getting, etc. But that would be to
ST> the customer's benefit, so you know those credits will never be
ST> listed.

Ralph Palmer agrees that the obfuscation is the dealer's best friend:

RP> I have relatives that have worked in the car business ranging from
RP> selling used cars, new cars and in the leasing scam.  All the little
RP> extras like Advertising fees, import fees (remember those), and
RP> dealer prep are all crap designed to confuse the customer when they
RP> are trying  to figure out what the damn thing costs.  Of course they
RP> don't list the kick back they get from the manufacturer a couple of
RP> months after the car gets sold, or extra discounts they getting after
RP> reaching their  alloted volume.  The bottom line is that it is very
RP> difficult to determine "dealer cost", and that creative accounting is
RP> always used. Don't feel sorry for a dealer, he won't make a deal
RP> where he loses money (no matter what they tell you)
RP> 
RP> Here are my rules to follow (with apologies to honest sales people)
RP> 
RP> Rule #1: don't trust them   
RP> Rule #2: get the bottom line price including all the little extras 
RP> Rule #3: make them write it down 
RP> Rule #4: get other quotes from other dealer, don't trust them either 
RP> Rule #5: walk away if you are being pressured, and don't return

>Rule #1: don't trust them  
>Rule #2: get the bottom line price including all the little extras
>Rule #3: make them write it down
>Rule #4: get other quotes from other dealer, don't trust them either
>Rule #5: walk away if you are being pressured, and don't return

Troy Frericks adds:

TF> My perferred method is to buy the Consumer Reports price list for
TF> $11.00. It will tell you exactally what the dealer paid for the car,
TF> options, information on rebates, etc.  Work from that total up,
TF> rather than from sticker price down.  They also include a contract
TF> for the dealer to sign (not the sales person).  This contract cuts
TF> through all the bull, to the point to give you a cost.  The dealer,
TF> than can not ask you for more money than is listed on the bottom
TF> line.  CR suggests a proffit of $200-$500 is reasonable. See Consumer
TF> Reports for more details (espically each April issue).  I did not
TF> have to deal with ADP, ADM, Advertising Fee, Administrative Fee,
TF> dealer prep, etc, etc.
TF> 
TF> I bought my honda at $300 over dealer cost when the sticker price has
TF> a 17.4% markup (92 CIVIC VX).  I walked into the showroom with
TF> contract in hand, at noon, and drove back to my office and was at my
TF> desk by 1:10.  That was the quickest $300 that they have made, I
TF> would bet!

This sounds like the best idea I've heard so far. The rebate information
was something I didn't have. But does the "dealer cost" Troy mentions
include or exclude the holdback?

Richard Steele has a hopeful story from Rochester.

RS> Hey!  Regarding your note on buying the '93 Probe with package 263A: 
RS> I just got one from a dealer here in Rochester for $100 over invoice.
RS>  This did not include any discussions about an "advertising fee," and
RS> the dealer admitted he got a holdback.
RS> 
RS> As an aside, the salesman was so up front with me (I got his offer in
RS> writing 10 minutes after walking in, and he said it was good for a
RS> week), that I ended up buying the car from him two days later.

I used to live in Rochester, and I miss it even more now. :-)

First, let me thank everyone for their input. Now I'll describe what
happened with me.

My target price was $200 above the "invoice." The dealer invoice
prices for the base car, the options, and the destination charge went
into the "invoice" price I calculated. These prices came from
ConsumerGuide '93 and are certainly identical to Edmunds, etc. The
dealer's "invoice" was identical except that he included a $250
advertising fee. Let me make it clear that the advertising fee was
part of the "invoice" price the dealer showed me. The ConsumerGuide
has some comments on advertising fees:

CG> Many manufacturers do in fact levy an advertising fee on some or all
CG> cars. Compare different dealers' advertising charges for the same
CG> car. If they are different, be suspicious. But the larger issue is
CG> whether the dealer ought to be passing along his cost of advertising
CG> to the consumer as a separate charge. However, rather than getting
CG> into an argument over individual charges such as advertising, one
CG> tactic is the "bottom line" approach. Compare your bottom line figure
CG> to what other dealers are charging. 

Indeed. One could also argue that the destination charge is a cost of
doing business, just as the shipping of pepperoni is a cost of doing
business for a pizzeria. The point is to confuse and to hide the
actual cost to the dealer. The holdback is the perfect
example. I cannot find any firm numbers on holdbacks, just "2-3% of
invoice on most cars."

I called two other dealers in the area and suggested that I was
unhappy with a $250 advertising fee and would give them my business
if they could be flexible. Both insisted that the $250 fee is a
direct charge from the  manufacturer. Unlike the first dealer, both
admitted that there is, indeed, a holdback for the Probe, though they
"couldn't discuss how much."

I also had Nationwide Auto Brokers (313-559-6661)fax me a quote for
the Probe. This included the usual dealer invoice prices as well as a
quote for which I could order the car. In addition to the standard
dealer invoice prices for the car and options, their price included:

FREIGHT CHARGES     $330
MFG ADVERTISING     $250
NATIONWIDE MARKUP    $50
OPTIONAL DELIVERY   $245 (alternative: pick it up in Michigan)


Based on this information and the discussions with three dealers, I
decided to accept the advertising fee as a justified cost to the
dealer. I made a deal with the original dealer for car invoice +
options invoice  + destinstion (freight) + $250 advertising fee +
$200. It's a factory order, and I should get in a couple of weeks.

Thanks again to everyone who responded.

LS



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| Len Saaf | Poughkeepsie, NY | Internet:saaf@panix.com | America Online:saaf |
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| Len Saaf | Poughkeepsie, NY | Internet:saaf@panix.com | America Online:saaf |
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Newsgroups: rec.autos