Dealership Case Study: MSRP and below VS. MSRP and above

Discussion in 'SRT Hellcat Purchasing' started by rayzazoo, Dec 13, 2014.

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Which dealership would you buy from now and buy from/recommend in the future?

  1. Dealership A - Above MSRP

    11.1%
  2. Dealership B - Below MSRP

    55.6%
  3. Dealership C - MSRP

    33.3%
  1. rayzazoo

    rayzazoo DRIVESRT.COM Gold Supporting Member

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    Background: A comparative discussion on the mindset of dealerships to sell Hellcats at MSRP and above vs. MSRP or lower:

    Baseline: A base Hellcat that with MSRP $59995 and Invoice $57606:

    -Holdback for this Hellcat is $1800 (3%) of MSRP - End of month or quarter return dealership makes for selling at Invoice or higher on a particular Dodge vehicle (excludes destination charge when calculating the value of Holdback from vehicle MSRP).
    -Destination Charge is $995 - This is factored out of the profit earning as it is a cost passed along to the customer.

    Variables:
    Dealership A
    $78,000 (MSRP and above):
    - $18005 additional profit over MSRP
    - $2389 difference between MSRP and Invoice
    - $1800 holdback (3% of MSRP)
    $22194 total profit

    Dealership B
    $58,606 (MSRP and below):
    - $0 additional profit over MSRP
    - $1000 additional profit over Invoice
    - $1800 holdback (3% of MSRP)
    $2800 total profit

    Dealership C
    $59,995 (MSRP)
    - $0 additional profit over MSRP
    - $2389 difference between MSRP and Invoice
    - $1800 holdback (3% of MSRP)
    $4189 total profit

    Risks:
    - Loss of future/current customers
    - Social media / media bad publicity
    - Not earning maximum potential profit based on current market

    Factors:
    Dealership A is a large city dealership. They focuses on earning as much money as possible while demand is high and supply is low. They have an advantage over Dealership B because of receiving 1st allocation due to previous sales volume (larger market of people to sell to). They receive 2 cars in 1st allocation. Both cars have been sold by the end of the 1st allocation period (December) for $74,000 each - total profit of $36388 - 2 happy customers. Their waiting list and potential of future customers is low due to the bad publicity received for charging an adjustment as well as poor communication between dealership and customers. By selling the 2 cars, they receive 2 additional cars in 2nd allocation.

    Dealership B is a small rural dealership. They focus on selling below MSRP, providing a hassle free customer service experience. Since they did not receive 1st allocation due to previous volume of sales (smaller market of people to sell to), supply and demand has no real impact on their sales. There are 5 people on the waiting list which has a potential to bring profit to the dealership once all 5 Hellcats are built and sold - total profit of $5,000 due to deposits. The potential of future customers is high due to good publicity received for charging below MSRP, however, the potential to lose the current 5 customers is moderate due to the extended wait time; offset by relatively good communication between dealership and customer. The potential to gain future customers is high because of the better than MSRP being offered so long as their publicity grows. Because of last 90-day sales volume, they do not receive 2nd allocation.

    Dealership C is a moderate city dealership and focuses on providing a hassle free customer service experience and earning money. They receive 2 cars in the 1st allocation. Both cars have been sold by the end of 1st allocation period (December) for $59,995 each - total profit of $8378 - 2 happy customers. The potential for future customers is moderate to high due to decent publicity received for charging MSRP and the waiting list for the dealership is approximately 50 people, however, the potential to lose customers is high due to the extended wait time. Potential profit earnings by the end of the 2015 and beyond of $209450 if all 50 people receive their cars. By selling 2 cars, they receive 2 additional cars in 2nd allocation.

    Discussion:
    I'm curious to hear your thoughts and perspectives on each dealership, and a sliding scale to help get your thoughts rolling:

    [mad] ------------ Customer ----------- [happy]
    [low] -------------- Publicity -------------- [high]
    [low] ------------ Dealer Profit ----------- [high]
    [low] --------- Future Customers ---------- [high]
    [low] --------- Future Dealer Profit --------- [high]

    Currently by December profits -
    Dealership A - $36,338 (2 sold cars)
    Dealership C - $8,378 (2 sold cars)
    Dealership B -
    $5,000 (0 sold cars, earnings from deposits)

    Questions:
    Which dealership do you buy from? In the short-term and long-term, which dealership is most profitable and successful? Short-term, in which scenario is Corporate, Dealership, and Customer winning/happy? Long-term, in which scenario is Corporate, Dealership, and Customer winning/happy?

    Another reference to help get the thoughts going:
    Strategy and Society The Link Between Competitive Advantage and Corporate Social Responsibility
     
    Last edited: Dec 13, 2014
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  2. 70Cuda

    70Cuda Yep, its got a HEMI

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    that is good work, but greed trumps the theory
     
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  3. Tspoon

    Tspoon VIP Hellcat Member

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    I paid over MSRP because I dropped two other dealers and felt
    I had no chance at a Hellcat on low end of the waiting list. Most folks will walk away
    if the car is over MSRP, which opens up an opportunity to snag one.
    Draw back is paying a little more and lucking out at timing when
    the car is coming in at a dealer.

    If you can be patient and wait, I'm sure most will score, on the other
    hand, there is a boat load on folks waiting and hoping their
    order will go thru. Good luck to everyone for their order and/or
    Finding one.
     
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  4. 70Cuda

    70Cuda Yep, its got a HEMI

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    Will tell you my details after I pick up my car but its a sweetheart deal.
     

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