If you can't trust a car salesman, who can you trust?
May 30, 2008 8:27 AM Subscribe
A local Dodge dealership has been running ads for $15,000 cash back on new trucks. They make it a point to point out that it does not get added on to the price of the vehicle (i.e. you don't buy a $30k truck and finance $45k to get the cash, I'm assuming). So what's the catch? How is it possible to get a $30k truck for $15k? I'd love for someone to explain the slight-of-hand that my cynicism dictates must be taking place here...
They may be charging an exorbitant interest rate that more than makes up for the cash back. Banks do the same thing with "cash back" mortgages.
posted by acoutu at 8:37 AM on May 30, 2008
posted by acoutu at 8:37 AM on May 30, 2008
I'm not in the auto financing biz, but this comes to mind: a truck on the lot is a liability, especially in light of gas at $4-5-6-? a gallon. A truck out the door is no longer a liability. I can't remember what the profit margin is for dealers, but between the dealers and Chrysler corporate, they are likely just looking at getting rid of trucks while people still want them. They also probably tie you in to some less-than-stellar financing deal through Chrysler Finance so they can get a revenue stream through interest. (Shrug)
posted by Sweetie Darling at 8:37 AM on May 30, 2008
posted by Sweetie Darling at 8:37 AM on May 30, 2008
It's probably off the MSRP of a massive heavy, super-duty Ram, or something like that. You get to buy a $55k MSRP truck that gets 8 mpg and would normally sell for about $45k for about $40k, or something like that.
posted by iknowizbirfmark at 8:39 AM on May 30, 2008
posted by iknowizbirfmark at 8:39 AM on May 30, 2008
I've seen ads where they include the value of your trade in. E.G. Retail 29,995. cash 2000. discount 2000. trade 5000. your final cost 20,995. Read the fine print.
posted by Gungho at 8:40 AM on May 30, 2008
posted by Gungho at 8:40 AM on May 30, 2008
Are they 2008 models? Dealerships will do a lot to make way for next year's models.
posted by hitopshelf at 8:58 AM on May 30, 2008
posted by hitopshelf at 8:58 AM on May 30, 2008
A lot of times they make it up on the financing. Chrysler has also gotten themselves in trouble with overproduction of some models. There will be "new" models on a dealer lot that are 2-3 years old! They probably want to get rid of the trucks to make room for the smaller, more fuel-efficient vehicles that are more demand.
posted by Ostara at 9:03 AM on May 30, 2008
posted by Ostara at 9:03 AM on May 30, 2008
I suspect the cash-back is based on the absolute extreme MSRP that they can gerrymander for the vehicle...which is never the actual price in the first place. I also suspect that the fine print requires that the "cash-back" be applied to the price of the truck. You will never actually lay your fingers on that 15k.
It's just smoke-and-mirrors on the part of a desperate auto company.
posted by Thorzdad at 9:22 AM on May 30, 2008
It's just smoke-and-mirrors on the part of a desperate auto company.
posted by Thorzdad at 9:22 AM on May 30, 2008
I think other people have given good answers; based on my experience buying cars, "cash back" is a way of lowering the price without permanently lowering the price, and it's usually also conditional on you accepting certain financing.
I.e., if they just lowered the price on the truck down to $15k, then they'd have several problems: they may be obligated to sell it at that price to someone who's not financing, or is financing through another bank; it pisses off customers who bought the truck at its old price; and it devalues the product -- it makes people think it's only "worth" $15k, thus making it difficult to sell next year's model when they come in for $30k. So rather than do that, they create these "cash back" offers, where they keep the "price" at $30k, but then give you what's effectively a discount under certain conditions. In some cases you have to finance the price, less trade-in and cashback, with their preferred lender (in the case of GM, GMAC; in the case of Volkswagen, VW Credit, etc.). Sometimes you have to pass up other special offers (0% interest) in order to get it. I don't know the relative profitability of vehicle financing versus actual vehicle sales, but they do make a lot of money from financing; that may dull their loss on the discount somewhat.
But anyway, bottom line is that it's a 50% off sale, but with a big asterisk next to it.
Something to keep in mind when you're considering car prices is that most dealerships don't have the cash around to buy vehicles outright. They're typically very heavily leveraged enterprises: they borrow money, which they then use to buy cars, and then they try to turn around and sell those cars as quickly as possible at a profit. But every day that the car spends sitting on their lot is a loss for them, because they're paying interest on it. In some cases (which the dealerships try to avoid), it's better to sell a car at a loss or at cost rather than let it sit on their lot and continue to lose money; this is especially true of last year's models when the new ones are about to come in -- once the next year's models arrive, the old ones won't sell. Hence, 50% off isn't totally unbelievable.
posted by Kadin2048 at 9:37 AM on May 30, 2008 [1 favorite]
I.e., if they just lowered the price on the truck down to $15k, then they'd have several problems: they may be obligated to sell it at that price to someone who's not financing, or is financing through another bank; it pisses off customers who bought the truck at its old price; and it devalues the product -- it makes people think it's only "worth" $15k, thus making it difficult to sell next year's model when they come in for $30k. So rather than do that, they create these "cash back" offers, where they keep the "price" at $30k, but then give you what's effectively a discount under certain conditions. In some cases you have to finance the price, less trade-in and cashback, with their preferred lender (in the case of GM, GMAC; in the case of Volkswagen, VW Credit, etc.). Sometimes you have to pass up other special offers (0% interest) in order to get it. I don't know the relative profitability of vehicle financing versus actual vehicle sales, but they do make a lot of money from financing; that may dull their loss on the discount somewhat.
But anyway, bottom line is that it's a 50% off sale, but with a big asterisk next to it.
Something to keep in mind when you're considering car prices is that most dealerships don't have the cash around to buy vehicles outright. They're typically very heavily leveraged enterprises: they borrow money, which they then use to buy cars, and then they try to turn around and sell those cars as quickly as possible at a profit. But every day that the car spends sitting on their lot is a loss for them, because they're paying interest on it. In some cases (which the dealerships try to avoid), it's better to sell a car at a loss or at cost rather than let it sit on their lot and continue to lose money; this is especially true of last year's models when the new ones are about to come in -- once the next year's models arrive, the old ones won't sell. Hence, 50% off isn't totally unbelievable.
posted by Kadin2048 at 9:37 AM on May 30, 2008 [1 favorite]
Are you sure it's not a misprint? $1500 cash back sounds much more realistic.
posted by rhizome at 9:37 AM on May 30, 2008
posted by rhizome at 9:37 AM on May 30, 2008
$15,000 cash back on new trucks
I wonder if this offer is depending on you accepting their financing offer or anything like that. how about scanning an ad or letting us know about the fine print?
if the MSRP for the vehicle in question is $30k and they want just half of that right now, an option might be to walk in with $15k cash (okay, plus taxes) so they can't lock you into anything else. you'll find out rather quickly if the offer is genuine.
(this is almost an offer one might consider taking to make a buck via a quick resell but I don't know if this would work. do people still buy trucks with fuel prices and the construction industry being this depressed?)
posted by krautland at 9:44 AM on May 30, 2008
I wonder if this offer is depending on you accepting their financing offer or anything like that. how about scanning an ad or letting us know about the fine print?
if the MSRP for the vehicle in question is $30k and they want just half of that right now, an option might be to walk in with $15k cash (okay, plus taxes) so they can't lock you into anything else. you'll find out rather quickly if the offer is genuine.
(this is almost an offer one might consider taking to make a buck via a quick resell but I don't know if this would work. do people still buy trucks with fuel prices and the construction industry being this depressed?)
posted by krautland at 9:44 AM on May 30, 2008
The "as advertised" with these crazy deals generally apply to just a few cars on the lot. If it is a TV ad, they usually show the stock number down in tiny type while the voiceover is read. On the radio, they are often read really fast at the end of the spot. So the dealer may have had one truck that with the rebates from Dodge and the dealer's contribution might be $15K off the MSRP. It might be a butt ugly color, or have options like the cold weather package in Miami or something that makes it unappealing. But when you walk in the door, they can try an sell you something else. It isn't bait and switch since they had that car with that stock number on sale, but it is used more to get you in the door and get you to like another similar car that also has an insane deal.
When Dodge announced the silly $2.99/gas promotion, I saw on reddit how some person did the math to find the value of the promotion and it was actually less than the cash incentives on the same truck.
It is a great time to buy a gas guzzling truck since the dealers are stuck with them. So the dealers are going to make some crazy claims including having loss leaders like the ad you saw. But don't expect every truck on the lot be $15K off.
posted by birdherder at 10:29 AM on May 30, 2008
When Dodge announced the silly $2.99/gas promotion, I saw on reddit how some person did the math to find the value of the promotion and it was actually less than the cash incentives on the same truck.
It is a great time to buy a gas guzzling truck since the dealers are stuck with them. So the dealers are going to make some crazy claims including having loss leaders like the ad you saw. But don't expect every truck on the lot be $15K off.
posted by birdherder at 10:29 AM on May 30, 2008
I'd go with the idea that trucks with crappy gas mileage are finally approaching worthless for anyone who doesn't use them for work.
posted by sully75 at 10:33 AM on May 30, 2008
posted by sully75 at 10:33 AM on May 30, 2008
"How is it possible to get a $30k truck for $15k?"
Besides wanting to dump inventory that's going to move ever more slowly as gas prices rise, for the last decade or so trucks have had a crazy profit margin. Last year Dodge could have been easily making 10-15K on a fully loaded dually. Selling the truck now at break even is a lot better than selling it at a loss next winter.
posted by Mitheral at 11:10 AM on May 30, 2008
Besides wanting to dump inventory that's going to move ever more slowly as gas prices rise, for the last decade or so trucks have had a crazy profit margin. Last year Dodge could have been easily making 10-15K on a fully loaded dually. Selling the truck now at break even is a lot better than selling it at a loss next winter.
posted by Mitheral at 11:10 AM on May 30, 2008
Response by poster: I looked for "fine print", believe me, but I can't find any details anywhere. I'm sure that if I called asking about it they would tell me to come in and they'd be happy to talk to me about it. I guarantee they won't give details over the phone.
Here is the website of one of the dealers doing $15k cash back (apologies for the horrible ad music). Toward the bottom of the page there is a scrolling banner that says "$15,000 Cash Back On Any New 2008 Ram In Stock!". There are no further details available that I can find. One of the things I'm trying to figure out is of you could finance $30k then refinance and use the cash to cut the loan down to $15k. The difference in the payment may actually help make up for the increasing gas costs. I'm guessing that if the catch is that you have to use Chrysler financing at a higher rate that they also probably have a massive prepayment penalty or something like that.
posted by jluce50 at 1:34 PM on May 30, 2008
Here is the website of one of the dealers doing $15k cash back (apologies for the horrible ad music). Toward the bottom of the page there is a scrolling banner that says "$15,000 Cash Back On Any New 2008 Ram In Stock!". There are no further details available that I can find. One of the things I'm trying to figure out is of you could finance $30k then refinance and use the cash to cut the loan down to $15k. The difference in the payment may actually help make up for the increasing gas costs. I'm guessing that if the catch is that you have to use Chrysler financing at a higher rate that they also probably have a massive prepayment penalty or something like that.
posted by jluce50 at 1:34 PM on May 30, 2008
jluce, see my link above. Dodge can't give these away and the new model year is fast approaching.
I wouldn't expect any extraordinary hinkiness on the finance end, other than the usual games they play.
Here's the catch:
- - - Dealer retains all rebates- - -
if you're in the market for a vehicle that gets 10MPG the world is your oyster right now.
posted by tachikaze at 2:38 PM on May 30, 2008
I wouldn't expect any extraordinary hinkiness on the finance end, other than the usual games they play.
Here's the catch:
- - - Dealer retains all rebates- - -
if you're in the market for a vehicle that gets 10MPG the world is your oyster right now.
posted by tachikaze at 2:38 PM on May 30, 2008
In addition to many of the theories posited above -- mostly correct -- there's a redesigned version of the Ram 1500 arriving this fall. Dealers and car companies would rather be rid of the old model before the new one arrives.
This is not a typo. Automotive News had a story a few weeks back about dealers offering $13k off MSRP (Autoblog summary).
posted by pmurray63 at 7:04 PM on May 30, 2008
This is not a typo. Automotive News had a story a few weeks back about dealers offering $13k off MSRP (Autoblog summary).
posted by pmurray63 at 7:04 PM on May 30, 2008
Full size trucks are selling at about 10% of the rate they sold at in the last few years. As an example the Chevy Yukon/Tahoe had projected sales of 12,000 this year - huge projected drop from prior years - and they are on track to sell only 3300 this year. So they aren't even coming close to selling even the most pessimistic projections.
People just aren't buying. It's because of gas prices. I'm sure these dealers want the trucks off their lot.
posted by ikkyu2 at 11:49 AM on May 31, 2008
People just aren't buying. It's because of gas prices. I'm sure these dealers want the trucks off their lot.
posted by ikkyu2 at 11:49 AM on May 31, 2008
This thread is closed to new comments.
posted by Dizzy at 8:31 AM on May 30, 2008