New GS Invoice Prices vs. MSRP - WOW!
03-04-05, 09:48 AM
#46
Lexus Champion
Originally Posted by AmethySC
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.
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.
It's pretty complex.
One interesting fact is that it costs FAR less to design and produce a body on frame vehicle of any sort than it does a unibody vehicle... yet they remain popular, so on average the profit made on true body on frame trucks/SUVs is higher than on cars.
It's also true that Toyota basically revolutionized just in time (lean) manufacturing as well as quite a few automated manufacturing processes, although a lot of the rest of the industry has emulated them in the mean time. BMW is not one of them. They've tried, but failed.
If you want to get further in detail in there... I posted this thread a few months back that gives my non-profesional perspective on it.
https://www.clublexus.com/forums/sho...d.php?t=137839
03-04-05, 09:58 AM
#47
Lexus Connoisseur
Threxx, you make very valid points and have read your write up from the past. This coming from a Business Econ background. 
03-04-05, 10:21 AM
#48
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Posts: n/a
Great info in this thread. Yeah, Jrock, I was talking about how much they make overall (due to parts sharing) so it is not directly related to what we talked about, my bad.
marcpitch, I am not directly attacking you and you do bring up a good point in your initial thread.
Bit, I'll see your **** before you leave 
marcpitch, I am not directly attacking you and you do bring up a good point in your initial thread.
Bit, I'll see your **** before you leave
Last edited by LexFather; 03-04-05 at 11:06 AM.
03-04-05, 01:31 PM
#49
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iTrader: (20)
Originally Posted by 1SICKLEX
Bit, I'll see your **** before you leave
03-04-05, 11:42 PM
#50
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If no one made money on the GS in years and everyone at the dealerships were already making money, where does all the extra money made by the larger profit go? Not only has the profit per car gone way up, but it seems like the volume will at least triple. Seems like Lexus has bestowed an on going x-mas bonus onto its dealers.
03-05-05, 01:21 AM
#51
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I don't know that Edmunds is inaccurate in their MSRP and invoice pricing. Everything I've seen so far has been pretty spot-on. The TMV always seems to be extremely inflated, though. People say carsdirect is more accurate, but their estimate is sometimes even higher than TMV, which is already grossly inflated. Basically, there's no good "market place value" site out there. Best bet is to go to the dealers with your invoice pricing calculated out and consider how much you want to pay above (or below) that, and then see what deals you can work. Also, reading forums to see how much others paid is a good source of info.
03-05-05, 06:28 AM
#52
Ok, lets point it out once again - gross profit margins for dealers are around 12%... Thats true for the whole luxury car industry for MSRP prices. Those are gross profit margins, so they dont include any dealer cost at all.
MB dealers have slightly less than 13% gross profit margins. I dont think Audi or any other luxury brand is different (for non-luxury cars, margins are lower, depending on car size/class).
So yes, Edmunds invoice prices for GS are wrong.
Dealers dont make 19% gross profit, that is simply not true, end of story there.
As to the how much of an discount you might get - it all depends on your dealer, they might need to get rid of the car and give you an large discount. If you special order the car on the other hand, it is much less likely that you will get an discount. Supply and Demand.
MB dealers have slightly less than 13% gross profit margins. I dont think Audi or any other luxury brand is different (for non-luxury cars, margins are lower, depending on car size/class).
So yes, Edmunds invoice prices for GS are wrong.
Dealers dont make 19% gross profit, that is simply not true, end of story there.
As to the how much of an discount you might get - it all depends on your dealer, they might need to get rid of the car and give you an large discount. If you special order the car on the other hand, it is much less likely that you will get an discount. Supply and Demand.
03-05-05, 08:28 AM
#53
Lexus Connoisseur
Originally Posted by spwolf
As to the how much of an discount you might get - it all depends on your dealer, they might need to get rid of the car and give you an large discount. If you special order the car on the other hand, it is much less likely that you will get an discount. Supply and Demand.
03-05-05, 08:39 AM
#54
Super Moderator
From Forbes :
Companies, People, Ideas
The Lexus Nexus
Jonathan Fahey, 06.21.04
Lexus' path to big sales : Make sure dealers get very rich.
When you drop your car off for service at Ray Catena Lexus of Monmouth, in Oakhurst, N.J., bring your golf clubs: You can practice your game at an indoor driving range and golf course simulator adjacent to the plush waiting lounge. If you happen to be at Fletcher Jones Lexus in Las Vegas, feel free to get your nails done with the on-site manicurist or browse the Neiman Marcus boutique.
In the past two years Lexus has persuaded its 207 U.S. dealers to spend $750 million of their own money upgrading their stores. We're not talking streamers and bright paper signs advertising low APRs. Instead they built huge, clean service bays and thousands of square feet of showroom space appointed with espresso machines and grand pianos.
Why dealers are willing to do this says a lot about why Lexus, already the nation's bestselling luxury brand, is pulling away from competitors. Sales are up 21% through April, while Cadillac's have grown 5%, BMW's are up 2% and Mercedes-Benz's have shrunk 3%. In 2003 Lexus, a division of Toyota, sold 260,000 vehicles in the U.S., 19,000 ahead of number two BMW.
Lexus has perfected a model that revolves around this simple proposition: Pamper your dealers, and they will pamper your customers.
It helps that Lexus makes high-quality vehicles in hot segments. But, says Joseph Ivers, a J.D. Power & Associates partner who tracks customer satisfaction, "The Lexus phenomenon is in a large way a retail phenomenon."
Far more than other car manufacturers, Lexus manipulates its business to accommodate dealers. For instance, Lexus keeps the number of dealerships at a minimum, so dealers sell more vehicles per store than any brand but Toyota (see table, below). Lexus has also never reduced a dealer margin on a slow-selling vehicle by lowering the listed price or raising the price dealers pay. So the difference between the $35,900 sticker price of the RX 330 SUV and the $31,841 invoice price will remain the same, even if that hot vehicle turns cold. And Lexus lays itself at the dealers' feet. "Four or five times a year they have meetings where they roll up their sleeves and ask, ‘What are we doing wrong?'" says Timothy Horn, who runs the Ray Catena Lexus dealership in New Jersey.
Luxury in Volume
Lexus dealers move more metal even than most mass-market brands, and it is precious metal indeed.
Unusually for a carmaker, Lexus even varies production to keep inventories low, which reduces the pressure on dealers to lower their prices. Every quarter Lexus and its dealers have a so-called make meeting where they talk about what is selling, in which colors and with what options, so the factory knows what to build. Ac-cording to industry watcher Edmunds.com, over a re-cent five months it has taken Lexus vehicles an average of 21 days to be sold off dealer lots. Mercedes-Benzes have sat around 44 days, BMWs 47 days and Cadillacs 58 days.
"You sort of scratch your head as a consultant when you hear the manufacturer suggest they curb production," says Mark Rikess, who runs a dealership training and consultancy in Burbank, Calif. "If I had been at a domestic manufacturer, I would have thought someone was on drugs."
Lexus' U.S. chief, Dennis Clements, says Lexus sacrifices sales in the short term by keeping inventory low. But it gains sales over the long term because dealers won't alienate consumers by using the hard sell to push slow-selling vehicles to ambivalent shoppers.
All this leads to fat profits. Last year the average Lexus dealer sold 1,280 new vehicles, at an average price of $42,503, for new car sales of $54 million. (Ray Catena's New Jersey dealership, the third-largest in the nation, had 2003 sales of $200 million, including service and parts.) Lexus dealers average a gross profit of $3,500 per vehicle--higher than that of any other mass-market luxury brand, according to Sheldon Sandler, managing partner of Bel Air Partners, a Skillman, N.J. investment firm that brokers sales of auto dealerships. That's an average of $4.5 million in gross profit from new car sales. Now add the revenue from service, parts, financing, insurance and used cars. "It's a license to mint money," Sandler says. "When you and I die, we should hope to come back as Lexus dealers."
Lexus dealerships are in fact the most valuable in autoland, according to Sandler. Lexus dealers sell for six times earnings before interest, depreciation and taxes--in a good market, $25 million to $30 million. Other brands of dealerships sell for between two and five times Ebitda.
With all this gross profit, the dealers can afford posh showrooms. They attract the best salesmen who, with the normal 25% cut of the gross profit, can pocket $800 per sale instead of the $400 they might get with a typical brand. And the dealers can offer perks like loaner cars and free car washes. Timothy Horn spends $1,500 a week on gourmet deli sandwiches and salads that sit in a refrigerator case for customers. There are carpeted gyms at the dealership and at the service station. The mechanics' bathroom is tiled with marble.
Elsewhere in the auto industry, relations between dealers and manufacturers are often chilly and sometimes hostile. Thomas Elliott, who runs Honda's North American auto operations, including the semi-luxury Acura brand, acknowledges as much. "It's what all of us would like to do at the dealership level," he says of Lexus.
This strategy was planned from Lexus' be-ginning. While preparing to pit a new brand with no heritage against European brands like Mercedes-Benz, Lexus decided it would have to build a perfect car--and a perfect retail experience.
Lexus was able to handpick the best dealers and offer dealerships on the condition that they provide new or completely renovated buildings. And they were able to set up ground rules from the beginning. "The Lexus Covenant," a collection of platitudes about taking care of customers, is couched in New Age phraseology, like: "We celebrate our customers' personal goals and achievements, and share in their passion for making the most of every moment."
It is backed up by action. One Ray Catena employee does nothing but call people who have had warranty service to make sure everything went smoothly. Last year the dealership spent $2 million building a new parking lot, removing 1,100 truckloads of dirt because having a lot on a slope would be un-Lexus-like. Recent customer surveys revealed that 99.2% of people who serviced their cars at the store would recommend it. That meant there were about a dozen less-than-perfect surveys out of 1,400. Those customers got personal letters and phone calls offering apologies.
Lexus did have one rocky period, in the mid-1990s. Sales stagnated because Lexus vehicles were aging, and a trade dispute with Japan was threatening the brand's existence. James Press, who now runs all of Toyota's U.S. sales operations, visited Lexus dealers to apologize and to ask what Lexus could do to redeem itself. A manager at Ray Catena told Press that removing the factory shipping stickers damaged the tint on the side rear windows. Lexus moved the sticker to another location.
When dealers are treated like that, they are willing to listen when the factory has a suggestion. Lexus did an analysis of Ray Catena's New Jersey Lexus customers and found out they were traveling too far. They suggested Catena open a satellite store 15 miles away in Freehold. That kind of meddling would raise hackles with most dealers--after all, it's the dealer's capital that is on the line. But Ray Catena, who has been selling cars for 48 years, knows a good investment when he sees one. Construction will start this summer.
Source & chart HERE
The Lexus Nexus
Jonathan Fahey, 06.21.04
Lexus' path to big sales : Make sure dealers get very rich.
When you drop your car off for service at Ray Catena Lexus of Monmouth, in Oakhurst, N.J., bring your golf clubs: You can practice your game at an indoor driving range and golf course simulator adjacent to the plush waiting lounge. If you happen to be at Fletcher Jones Lexus in Las Vegas, feel free to get your nails done with the on-site manicurist or browse the Neiman Marcus boutique.
In the past two years Lexus has persuaded its 207 U.S. dealers to spend $750 million of their own money upgrading their stores. We're not talking streamers and bright paper signs advertising low APRs. Instead they built huge, clean service bays and thousands of square feet of showroom space appointed with espresso machines and grand pianos.
Why dealers are willing to do this says a lot about why Lexus, already the nation's bestselling luxury brand, is pulling away from competitors. Sales are up 21% through April, while Cadillac's have grown 5%, BMW's are up 2% and Mercedes-Benz's have shrunk 3%. In 2003 Lexus, a division of Toyota, sold 260,000 vehicles in the U.S., 19,000 ahead of number two BMW.
Lexus has perfected a model that revolves around this simple proposition: Pamper your dealers, and they will pamper your customers.
It helps that Lexus makes high-quality vehicles in hot segments. But, says Joseph Ivers, a J.D. Power & Associates partner who tracks customer satisfaction, "The Lexus phenomenon is in a large way a retail phenomenon."
Far more than other car manufacturers, Lexus manipulates its business to accommodate dealers. For instance, Lexus keeps the number of dealerships at a minimum, so dealers sell more vehicles per store than any brand but Toyota (see table, below). Lexus has also never reduced a dealer margin on a slow-selling vehicle by lowering the listed price or raising the price dealers pay. So the difference between the $35,900 sticker price of the RX 330 SUV and the $31,841 invoice price will remain the same, even if that hot vehicle turns cold. And Lexus lays itself at the dealers' feet. "Four or five times a year they have meetings where they roll up their sleeves and ask, ‘What are we doing wrong?'" says Timothy Horn, who runs the Ray Catena Lexus dealership in New Jersey.
Luxury in Volume
Lexus dealers move more metal even than most mass-market brands, and it is precious metal indeed.
Unusually for a carmaker, Lexus even varies production to keep inventories low, which reduces the pressure on dealers to lower their prices. Every quarter Lexus and its dealers have a so-called make meeting where they talk about what is selling, in which colors and with what options, so the factory knows what to build. Ac-cording to industry watcher Edmunds.com, over a re-cent five months it has taken Lexus vehicles an average of 21 days to be sold off dealer lots. Mercedes-Benzes have sat around 44 days, BMWs 47 days and Cadillacs 58 days.
"You sort of scratch your head as a consultant when you hear the manufacturer suggest they curb production," says Mark Rikess, who runs a dealership training and consultancy in Burbank, Calif. "If I had been at a domestic manufacturer, I would have thought someone was on drugs."
Lexus' U.S. chief, Dennis Clements, says Lexus sacrifices sales in the short term by keeping inventory low. But it gains sales over the long term because dealers won't alienate consumers by using the hard sell to push slow-selling vehicles to ambivalent shoppers.
All this leads to fat profits. Last year the average Lexus dealer sold 1,280 new vehicles, at an average price of $42,503, for new car sales of $54 million. (Ray Catena's New Jersey dealership, the third-largest in the nation, had 2003 sales of $200 million, including service and parts.) Lexus dealers average a gross profit of $3,500 per vehicle--higher than that of any other mass-market luxury brand, according to Sheldon Sandler, managing partner of Bel Air Partners, a Skillman, N.J. investment firm that brokers sales of auto dealerships. That's an average of $4.5 million in gross profit from new car sales. Now add the revenue from service, parts, financing, insurance and used cars. "It's a license to mint money," Sandler says. "When you and I die, we should hope to come back as Lexus dealers."
Lexus dealerships are in fact the most valuable in autoland, according to Sandler. Lexus dealers sell for six times earnings before interest, depreciation and taxes--in a good market, $25 million to $30 million. Other brands of dealerships sell for between two and five times Ebitda.
With all this gross profit, the dealers can afford posh showrooms. They attract the best salesmen who, with the normal 25% cut of the gross profit, can pocket $800 per sale instead of the $400 they might get with a typical brand. And the dealers can offer perks like loaner cars and free car washes. Timothy Horn spends $1,500 a week on gourmet deli sandwiches and salads that sit in a refrigerator case for customers. There are carpeted gyms at the dealership and at the service station. The mechanics' bathroom is tiled with marble.
Elsewhere in the auto industry, relations between dealers and manufacturers are often chilly and sometimes hostile. Thomas Elliott, who runs Honda's North American auto operations, including the semi-luxury Acura brand, acknowledges as much. "It's what all of us would like to do at the dealership level," he says of Lexus.
This strategy was planned from Lexus' be-ginning. While preparing to pit a new brand with no heritage against European brands like Mercedes-Benz, Lexus decided it would have to build a perfect car--and a perfect retail experience.
Lexus was able to handpick the best dealers and offer dealerships on the condition that they provide new or completely renovated buildings. And they were able to set up ground rules from the beginning. "The Lexus Covenant," a collection of platitudes about taking care of customers, is couched in New Age phraseology, like: "We celebrate our customers' personal goals and achievements, and share in their passion for making the most of every moment."
It is backed up by action. One Ray Catena employee does nothing but call people who have had warranty service to make sure everything went smoothly. Last year the dealership spent $2 million building a new parking lot, removing 1,100 truckloads of dirt because having a lot on a slope would be un-Lexus-like. Recent customer surveys revealed that 99.2% of people who serviced their cars at the store would recommend it. That meant there were about a dozen less-than-perfect surveys out of 1,400. Those customers got personal letters and phone calls offering apologies.
Lexus did have one rocky period, in the mid-1990s. Sales stagnated because Lexus vehicles were aging, and a trade dispute with Japan was threatening the brand's existence. James Press, who now runs all of Toyota's U.S. sales operations, visited Lexus dealers to apologize and to ask what Lexus could do to redeem itself. A manager at Ray Catena told Press that removing the factory shipping stickers damaged the tint on the side rear windows. Lexus moved the sticker to another location.
When dealers are treated like that, they are willing to listen when the factory has a suggestion. Lexus did an analysis of Ray Catena's New Jersey Lexus customers and found out they were traveling too far. They suggested Catena open a satellite store 15 miles away in Freehold. That kind of meddling would raise hackles with most dealers--after all, it's the dealer's capital that is on the line. But Ray Catena, who has been selling cars for 48 years, knows a good investment when he sees one. Construction will start this summer.
Source & chart HERE
03-05-05, 09:20 AM
#56
Guest
Posts: n/a
Originally Posted by jrock65
"semi-luxury Acura brand"
Well I'll be. But if some of us say the same thing, its bashing
AmethySC, that was a WONDERFUL article. It finishes the debate, with prooof. Thanks a million.
03-05-05, 10:35 AM
#57
Lexus Connoisseur
Originally Posted by 1SICKLEX
Thomas Elliott, who runs Honda's North American auto operations, including the semi-luxury Acura brand, acknowledges as much. "It's what all of us would like to do at the dealership level," he says of Lexus.
03-05-05, 11:29 AM
#58
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Originally Posted by spwolf
Ok, lets point it out once again - gross profit margins for dealers are around 12%... Thats true for the whole luxury car industry for MSRP prices. Those are gross profit margins, so they dont include any dealer cost at all.
MB dealers have slightly less than 13% gross profit margins. I dont think Audi or any other luxury brand is different (for non-luxury cars, margins are lower, depending on car size/class).
So yes, Edmunds invoice prices for GS are wrong.
Dealers dont make 19% gross profit, that is simply not true, end of story there.
As to the how much of an discount you might get - it all depends on your dealer, they might need to get rid of the car and give you an large discount. If you special order the car on the other hand, it is much less likely that you will get an discount. Supply and Demand.
MB dealers have slightly less than 13% gross profit margins. I dont think Audi or any other luxury brand is different (for non-luxury cars, margins are lower, depending on car size/class).
So yes, Edmunds invoice prices for GS are wrong.
Dealers dont make 19% gross profit, that is simply not true, end of story there.
As to the how much of an discount you might get - it all depends on your dealer, they might need to get rid of the car and give you an large discount. If you special order the car on the other hand, it is much less likely that you will get an discount. Supply and Demand.
03-05-05, 11:47 AM
#59
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Well, I answered my own challenge. carsdirect didn't have the info for 2006, but kbb did. Edmunds's invoice prices are lower than the ones listed on kbb.
kbb (without destination charges in first line, with in second line):
GS430: 44,478.00 to 51,125.00 = 14.94%
45,128.00 to 51,775.00
GS300 AWD: 39,467.00 to 44,850.00 = 13.64%
40,117.00 to 45,500.00
GS300: 37,752.00 to 42,900.00 = 13.64%
38,402.00 to 43,550.00
Oh well, I guess I won't open up that Lexus dealership after all...
kbb (without destination charges in first line, with in second line):
GS430: 44,478.00 to 51,125.00 = 14.94%
45,128.00 to 51,775.00
GS300 AWD: 39,467.00 to 44,850.00 = 13.64%
40,117.00 to 45,500.00
GS300: 37,752.00 to 42,900.00 = 13.64%
38,402.00 to 43,550.00
Oh well, I guess I won't open up that Lexus dealership after all...
03-05-05, 05:39 PM
#60
Originally Posted by Incendiary
So if Edmunds reports that BMW makes 9% profit on their 330i's, that means it's incorrect as well simply because it's not 12%? I'm not saying Edmunds is definitely right, or that they can never be wrong, but I'd have to see other sources dispute the GS invoice figures with numbers to back it up rather than just, "It's not 12%, so it ain't right."
Most important reason I "knew" that info is wrong is because Lexus has no reason to give this huge margin to their dealers if the contracts say 12% :-).
The way GM dealers give those huge discounts (biggest reported around 15k for large SUV's) is because those rabates are factory backed - so there is an split between dealer & factory for the discount and thats how dealers can still survive.
Of course, as per article above, Lexus gauges the demand and lowers production so they dont have to over-supply the market and so far it has worked - they dont give "large" factory backed rabates.
Just general info, when articles quote "incentives" for sellings cars, such as saying that GM gave average 5k incentive in Jan 2005 (around that), while Toyota did $1,100, it means that the factory gave those discounts, not dealers - dealers discounts were on top of that... Which is why for example you can get nice discount from dealer for RX330 since they sale such a huge amount of them, and yet Lexus's average discount way only something like $700 per sale.
I really dont know how Edmunds got their numbers, but they are not correct for neither Lexus or BMW...