Vehicle invoices and pricing

Question 1

2.1.1 What is the advertising cost on a vehicle invoice?

Answer 1

A percent of MSRP (typically 1%) or a
flat dollar amount set by the factory

Question 2

2.1.2 Define the term bid assistance

Answer 2

Additional negotiated rebates that may replace or be in addition to the national fleet rebates

Question 2

2.1.3 What is the dealer invoice price and how is it calculated?

Answer 2

The invoice amount the dealer pays the manufacturer for a specific vehicle. This is calculated by deducting the manufacturer-provided holdback allowances, incentives, rebates, bonuses and other discounts from the dealer invoice

Question 2

2.1.4 What are factory and dealer incentives?

Answer 2

This is money paid to the dealer by the
manufacturer to sell specific models.
These incentives can come and go,
according to market conditions. (e.g., a
hot selling model most likely would have
no incentives; a slow selling model may
have a large incentive)

Question 3

2.1.5 What is meant by the term financing on a dealer invoice?

Answer 3

Flat dollar amount that is included in the factory invoice

Question 4

2.1.6 What are fleet incentives and who funds them?

Answer 4

This is money given by a vehicle manufacturer to a fleet as an added incentive for buying their product. Usually funded 100% by the factory

Question 5

2.1.7 What is factory holdback?

Answer 5

The amount paid by the factory to the dealer after a vehicle has been sold. Most manufacturers will pay dealers an amount equal to between 2% and 3% of either the invoice cost of the MSRP. Holdback is one of the reasons that “invoice cost” is not the net cost to the dealer. Other reason is “factory to dealer cost”

Question 6

2.1.8 define the term MSRP

Answer 6

The retail selling price of the vehicle as determined by the manufacturer, printed on the label(the Monroney Label) on the window

Question 7

2.1.9 What is the triple net invoice?

Answer 7

Manufacturer-to-dealer invoice price less holdback less advertising and financing

Question 8

2.2.1 What is the most important document in a vehicle purchase?

Answer 8

The factory invoice

Question 9

2.2.2 What information do you need to know in order to get the lowest possible price for a vehicle?

Answer 9

what the dealer has actually paid for the vehicle or “dealer cost.”

Question 10

2.2.3 What is a good starting price to use when negotiating with a vehicle supplier?

Answer 10

invoice price

Question 11

2.2.4 What type of information is contained on a standard factory invoice?

Answer 11

*price
*features
*details regarding the purchase and delivery of the vehicle
*two columns used to compare the suggested retail price and the factory invoice price
*invoice total, holdback, incentive programs and cost categories
*order dealership and ship to fields
*VIN

Question 12

2.2.5 What is the most important strategy to use when considering multiple vehicles?

Answer 12

The most important
strategy when considering multiple vehicles is to be consistent in how
you evaluate each invoice, and to use the same starting point for each negotiation

Question 13

2.2.6 What is the Formula for triple net?

Answer 13

Invoice – Holdback – Advertising – Financing = Triple Net Cost

Question 14

2.3.1 How can fleet sales benefit the car dealer?

Answer 14

It’s often in the dealer’s best interest to sell vehicles to a fleet for a much lower price than to sell the vehicles
individually. Typically, it takes dealers months to sell the same number of
vehicles that it would sell to an organization at one time through a fleet purchase. The potential exists that the dealer will be able to sell the organization a contract to service the fleet; which brings in more income for the dealer

Question 15

2.3.2 What are some of the vehicle manufacturer’s requirements for fleet pricing?

Answer 15

Possible minimum purchase requirements. It is possible that the requirement is specified on a term basis such as leasing 15 vehicles one year as well as purchasing/leasing 5 new vehicles a year

Question 16

2.3.3 What are some of the advantages of purchasing vehicles in bulk?

Answer 16

they are able
to save significant amounts compared to what they might pay for the
retail price of the vehicle. Additionally, organizations can generally negotiate good deals through the dealership on servicing their new fleet of
vehicles, as well as getting top price on a trade-in when the organization
decides to replace the old fleet with a new fleet

Question 17

2.3.4 Why would an organization want standard vehicle specifications?

Answer 17

to achieve cost-saving benefits

Question 18

2.3.5 What are the best practices for lowering cost using standard vehicle specifications?

Answer 18

*Centralize fleet management
*Distinguish “needs” from “wants”
* Conduct annual specification reviews
* Develop standards based on vehicle role and location

Question 19

2.3.6 Why is it important to centralize fleet management?

Answer 19

to allow only the
leader of the organization to be the decision maker when purchasing
vehicles, instead of allowing each division of an organization to order vehicles for their own purposes

Question 20

2.3.7 What are the potential areas to save costs when identifying needs and wants?

Answer 20

• Cloth or vinyl seats instead of leather
• Bench seats instead of buckets
• Two-wheel instead of four-wheel drive
• Gasoline instead of diesel
• Four-cylinder engine instead of six or eight cylinders
• Standard length pickup box instead of extended

Question 21

2.3.8 Describe the two categories of pricing incentives

Answer 21

national fleet incentives and competitive pricing assistance

Question 22

2.3.9 What is a good indicator of the true vehicle cost?

Answer 22

While initial vehicle pricing is important, the Total Cost of Ownership
(TCO) is a better indicator of the true vehicle cost

Question 23

2.3.10 What warranty considerations does the fleet manager have to keep in mind during the purchasing process?

Answer 23

it’s important to
have a prediction of that vehicle’s expected life and how it adds up to the
warranty you will be paying for

Question 24

2.4.1 Who can a fleet manager contact at the dealership for information on the manufacturers fleet programs?

Answer 24

The commercial or government sales person at the dealership

Question 25

2.4.2 What does the fleet manager need in order to receive fleet discounts?

Answer 25

A fleet identification number

Question 26

2.4.3 What is a volume rebate and how can the fleet manager obtain it?

Answer 26

A discount for purchasing multiple units at once. The order must include special equipment or an extra component that needs to be added

Question 27

2.5.1 List some of the advantages or ordering vehicles from the factory

Answer 27

*Personalized customization
*Can specify the vehicle to fit specific needs
*Better pricing offered by the dealer
*opportunities to add or delete options that are not available in a retail sale

Question 28

2.5.2 What are some of the disadvantages or ordering a vehicle from the factory?

Answer 28

*Longer wait time
*Incentives may be lost during the waiting period
*Production windows may close unexpectedly and the factory may reject the order
*Some of the options or popular models may not be available for fleet orders

Question 29

2.5.3 Why might ordering from the factory be cheaper than ordering from stock?

Answer 29

When a dealer places a fleet order to the factory, the dealer does
not have to worry about the vehicle sitting on the lot or trying to find a
buyer. Instead the buyer is already setup and ready to go as soon as the
vehicle is delivered. This helps the dealer cash flow and limits exposure
to finance charges

Question 30

2.5.4 What might make ordering from the dealer cheaper?

Answer 30

Dealer incentives such as limited time warranties may also expire while
your vehicle is being built in the factory

Question 31

2.6.1 What is the basic rule for negotiating vehicle price?

Answer 31

The basic rule for negotiating vehicle price is ensuring you use the same
terms and the same starting point as the dealer

Question 32

2.6.2 What should the fleet manager do in order to get the best price?

Answer 32

consolidate volume whenever possible.– prices are often tiered based on order volume – and order early

Question 33

2.6.3 What are the two approaches to negotiating?

Answer 33

a. Start at Dealer Invoice and work down
b. Start at Triple Net Invoice and work up

Question 34

2.6.4 What is an alternative to negotiating vehicle prices?

Answer 34

Bidding