jrock65

Why make so few GS430s? Are they running out of V8 engines?

flipside909

I guarantee you whoever you spoke to will tell you anything. Especially when you mention Longo. You have to remember, JM Lexus is under South East Toyota/JM Family Enterprises' control, not TMS/Lexus USA directly. Longo sells cars directly through Toyota Motor Sales/Lexus USA here in Torrance or if you want to be more direct, Toyota Western Region, Irvine, CA. Longo's numbers are not foiled either Toyota, Lexus or Scion. They command the lead in profitability and sales for TMS. JM Family Enterprises is the company distributes it through their whole South East Region, and then sells it to customers directly. So you have a middle man there plus whatever forced option packages they add at their ports. It works the same way for Gulf States Toyota region for Toyota and Lexus. Very rarely will you see a Toyota roll off a dealership floor from Texas with out some pinstriping package, aftermarket factory look-a-like alloy wheels, additional door moulding and painted mudguards.

BTW, did you get your GS yet?

flipside909

You got that right. Lexus USA has been generous to ClubLexus for a consecutive 3 years when they invite us to CA Speedway for big events i.e. all paid for hospitality/meals/drinks and etc.

flipside909

The general GS buyer is more apt to buying a GS300 which is why they have a large allocation of them. The GS430 is scarce intially, but will free up as the high demand phase passes.

Rockville

The internet is where we all meet and discuss whatever we like. It might be the closest thing to freedom in the world right now. The internet also can create misconceptions. I'm sure that Elizabeth will agree that most of the time we have to re-educate the consumers such as Marc after they have visited Edmunds. They come in to the dealership and say something like: I've done my homework and the car I'm interested in has an invoice of such and such. Just to mollify their concern I will often bring out a real invoice and show them that Edmund's doesn't tell the whole story. It even has little disclaimers on Edmunds but nobody bothers with that. They also give a True Market Value as if they knew what you paid last week or something. It's sometimes used by salespeople to validate their asking price. It's impossible for a source to know what the market is because it can change on a daily basis. Not to pick on Edmunds but have you ever looked up a used car value on Edmunds? That is a joke! Nobody in the business would ever refer to Edmunds as a credible source of used car values. If I was selling my car to you I would buy a round of Champagne if I good get the Edmunds price. What would make the price information realistic would be if good old Edmunds would pay you what they say your car is worth. Now that would be something. But they don't of course. It's all a guess really. BTW what other business do you know of that publishes their cost of sale on the internet? What business are you in and doesn't your company publish their profit on the internet? That's what CPA's are for. Right? Have you ever seen something in the paper like this film "grossed" 2 Billion Dollars but the Director is suiing because the studio said they only netted a few hundred Million and there were a lot of expenses. Believe me there are a lot of expenses in the car business. That is one reason that dealerships have resorted to charging Processing Fees. The Real Estate Industry does also.

Now on the subject of profit. If you were to purchase some goods for one hundred Dollars and sold them on EBay for two hundred Dollars then how much profit did you make? What is your profit percentage? Did you say 50%? Most people think when you double your money you are making 100% profit. The only way to make 100% profit is to acquire something for nothing and sell it for something and then you get 100% profit. When I worked for Mercedes there was about 20% profit in the MSRP. We could effectively give a 10% discount and still have a decent profit. The average retail profit when you go to a department store is between 40% to 50%. Yet they go out of business all of the time because of lack of volume. Does the business that you work for or own make a 10% profit? Can you sustain that business and grow at that rate of profit? I doubt it unless you are doing some terrific volume. Well Lexus dealers have about 12% gross profit at sticker price. Is that unreasonable? And dealers discount from there once a model is adequately supplied into the market. What Elizabeth was referring to is that profit has eroded on the 2nd Generation GS to a point where the Sales Consultant's make very little such as a $100-$200 minimum deal flat. A decent Sales consultant makes 10 Luxury Sales a month. If they were all 2nd Gen. GS300's it would be difficult to sustain a living. Most Sales jobs in the industry are 100% commission and if you have a bad month you have to make up for it in the next month.

Now mark up is the percentage over cost that is its asking price. If you bought some mythical goods for $100 and marked them up 50% you would have an asking price of $150. Your profit would not be 50% if you sold at the Asking price however it would be only 33%. So mark up percentage is not the same as profit percentage. These two figures are commonly confused as in some of this thread's examples.

Finally there is mark down. If a Lexus dealer marks down their car 6% to you they have effectively cut the profit in half and your discount is equal to their profit. That seems reasonable to me but most consumers feel that the Car Dealers are not entitled to make a profit on them! Make it on the next guy everyone says......Many consumers after much trolling of the internet come in and confidently offer us a couple of grand below invoice. Sometimes we laugh and sometimes we just bear it. There was a post yesterday where the guy was accustomed to buying cars at the level of $200 over invoice. He wondered since it was a Lexus should he offer $500 over invoice. Of course if the invoice amount is very large that would be a very thin margin of profit. He is in for a rude awakening but I don't blame him because it said so on the internet. He also expects to get the Edmunds value of his trade. Double whammy! Not in this life. If in fact you are able to buy a car under these conditions the car you are buying probably has some incentive and when the time comes for you to trade or sell it then it will be worth very little. The dealership you bought it from will probably look pretty shabby and one day it will be out of business or swallowed up by a bigger chain. At least with a Lexus you get what you pay for and it holds its own when you want to trade in or resell it. Any questions?

marcpitch

First Question: Why do your posts make mine look brief?

Next, I have little doubt Edmunds numbers are not exact. Of course, if they are incorrect for the Lexus GS, they would most likely be incorrect for other cars too. I talked in terms of percentages as well as absolute dollars.

Rather than bemoan the fact that consumers have access to invoice figures (or approximations), tell me why the following differential:

Audi A8 (no slouch of a car): Base Invoice: $62,300; MSRP: $66,600......$4,300 markup or 6.9%
Lexus GS430: Base Invoice: $42,945; MSRP: $51,125.....$8,180 markup or 19.0%

Let's assume Edmunds' numbers are wrong for both. The comparative numbers are still valid....aren't they?

Rock, you know I am a morning person....maybe in the morning 51,125 minus 42,945 will not equal 8,180. Any questions? Remember, it's not in the Edmunds numbers its in the relative numbers.

Rockville

The "base" invoice on Edmunds and the real invoice in my office are two entirely different Universes. I can't vouch for Audi as that is their business but I bet they have the same discrepancy. If they can stay in business with that profit potential, God bless them. We just moved our Audi dealership so we could knock down their old building and expand our franchise operation. Audi was almost down for the count when 60 Minutes did a hatchet job on the Audi 5000. BTW an Audi A8 has about $13,000 higher base price than an LS430 and I have seen them discounted bigtime at the end of the year and the problem is when they go out of warranty and the owners want to trade them in for new ones. Oops! Just took a bath......

Marc, I surely wish I had a profit of $8,180 on a GS430 because at a 12% commission rate I'd make $981.60 a throw. Sorry, it's just not that easy my friend. Ever heard of Garbage in Garbage out? I wish you were right this time......

Sandman

I enjoyed reading your post Rockville. I am in sales also and I have seen my industry ravaged by competition. Competition is great but if competition becomes too efficient it can in effect destroy the system that drives innovation. There is a balance there that needs to be considered. Competition is good and it makes for more affordable goods. But when competitive pressures become too great and profits evaporate - so do jobs. People either take their ingenuity and leave for a better industry or close up shop all together. Look at all of the jobs going overseas. Yes products come back cheaper but if too many people lose their jobs then there is no one left to buy them anyway. In my industry, for every 4 people that were employed in sales a decade ago there are now about 1 or 2. Those who are really good (or really lucky) have not seen much income decrease but many are making 50%-70% of what they used to. On a daily basis I see my customers try to commoditize cutting edge technology. They want you to invest, innovate and develop cutting edge products and break through technologies and they expect you to sell it like it were a handful of sand. And they expect this because of the pressures they are feeling from their customers and competitiors.

Of course, I always look for a fair deal. But as far as I'm concened I'm pleased with what I got for my money in my Lexus. Lexus delivered VALUE to me. I hope in return that the salesman, the dealer, the port and Lexus made a good profit. So they can go buy an expensive house (and keep my wife who is a realtor in business ) and buy lots of other stuff that stimulates the economy and creates jobs. And if Lexus is good enough to make the GS for $10 and sell it for $46k - more power to them. Let them keep reinvesting that profit and making more great cars!

I agree that both Edmunds and NADA tend to be inacurate. Kelly Blue Book in my opinion is much more reasonable and realistic. What do you think?

To clarify what I think you were saying: People need to be careful when discussing profit figures because "Gross Profit" is very different from "Mark-up profit".

Mark-up is figured by looking at the profit as a function of cost. If your cost is $1.00 and you sell at $1.50 - well that is $0.50 Mark-up profit - since $0.50 is 50% of $1.00 (the cost).

But Gross Profit is a function of the resale: What percentage of the resale price is profit? In the example above $0.50 profit is what percent of the resale of $1.50? $0.50 is one third or 33% of the resale of $1.50.

80% markup of $1.00 is $1.80- but 80% Gross Profit means that if the cost is $1.00 the resale is $5.00!!! So these figures can be very deceptive if you aren't sure what is being quoted.

Profit is the engine of business! Competition is like VDIM - keeping the system under control. If VDIM is too aggressive the car is no fun to drive.

biker

My question would be this: would this "we'll sell it at MSRP until demand tapers off" apply for someone who wants to custom order? Lets say the person doesn't want anything on the lot nor anything in the pipeline and is willing to wait for that custom order. Let's say someone really wants the base GS300 and is willing to wait and custom order it. Would a dealer turn down 40K from this person and the potential of 3K profit? There's no one to replace this person, he/she can walk right over to an Infiniti dealer and with the same 40K buy the base M35 that probably is on the lot.

flipside909

It's all up to market demand and it's ultimately up to the consumer. If the consumer wants the vehicle that bad they'll wait for it and pay market value for the car. Sure there are the other cars available down the street, but that doesn't necessarily say the consumer will just jump right out and buy the M35 because it's sitting on the Infiniti lot. If they weren't looking to buy a M35 despite the fact that 3 are sitting on the lot, doesn't mean they will buy it. It's all consumer preference. If the GS is worth the wait for them for that special ordered one, they will wait if they want it that bad.

marcpitch

Rock, I respect your enormous knowledge about cars; however, bringing up Audi's problems in the 1980's is somewhat ridiculous. To most car buyers, that is forgotten. Audi got up off the mat and is doing quite well thank you. Their interiors set the standard by which cars interiors are measured and they are the reason Lexus (and others) finally decided to make AWD cars.

You provide excellent information and I always appreciate your point of view, but mentioning Audi's 20 year old problems seems desperate. Don't you think?

Threxx

This does not reflect my opinion of the true topic at hand (pricing of Lexus vehicles), but I just wanted to say that Audi is still crap for the most part. They have excellent initial perceived quality, true. You get in almost any brand new Audi and it will feel tank-like in its build quality. Even better than Lexus IMO. Just about as solid as can be. But man oh man they sure don't stand up to the test of time. Rattles galore can surface within a very low number of miles... and they really love to develop rediculously impossible to diagnose electrical problems left and right... just like their parent company volkswagon!

Their drivetrains and chassis are very nice and in some respects may even be considered class leading (chassis rigidity of some of their vehicles is excellent, and the AWD/turbo aspect is very nice on some of their models) but man oh man they are not the car to buy if you want to keep it outside of warranty.

Gojirra99

If Lexus can afford to give a lower invoice price & thus higher margins to their dealers, I say more power to them, happier dealers means more will want to sell their cars which is good for further increase of their market penetration.

Does anybody really knows what's the cost of building each of these models to the respective manufacturers anyway ? The German marques are not as efficiently built as the Japanese counterparts, & especially Toyota(who is renowned for it's manufacturing efficiency), due in large part to the European labour unions etc. so they have to price it higher, but yet cannot overprice their vehicles too much compared to their competitors, especially with the strong Euro these days, so it's not a surprise that many European luxury marques have lower margins for their dealers.

dseag2

You took the words right out of my mouth. And to add to that point... I think Lexus has realized they now have a strong brand franchise and can command the premium in the market they may not have been getting in the past. The new GS may not cost them much more to produce than the last gen, but the public will pay more for it because of the new bells and whistles and the quality/reliability associated with the Lexus name.

To all you guys who paid MSRP... enjoy your GS's! The true value of the car is what it's worth to YOU!

akbergq

If i paid 48K dollars to a Toyota/Lexus....im much happier giving them my money and buying their product instead of me dishing out 48K and giving that money to a BMW or Mercedes.

My money will go a longer way with lexus than those other two simply because service, quality and satisfaction speaks for itself.

So even if the invoice that edmunds reports is true, and lexus has the highest profit margin than any other of its competitors product profit margins, im happy that i gave them more profit for their product because in turn the consequences will manifest themselves in due course, heck im experiencing them now



When you are a company that is numebr 1 in sales and service for 4 consectuive years in a row in the luxury brand automotive market, it must tell you something.