Alternative Car Shopping: Boardwalk Volkswagen Richardson

Cars are merchandise.

They are also, according to one’s individual tastes and opinions, unbelievably fun, a necessary evil, cool looking, a cause of global warming, status symbols, problematic, fast and powerful, overcrowding our cities and highways, exhilarating, dangerous, the objects of a seemingly unending American love affair and an indelible part of our culture.

They are still merchandise.

As is true with all merchandise, there is no one way of merchandising it. (Is the "Tuesday Morning" approach to retailing the same as "Bed Bath and Beyond"? Not at all - yet they both sell the same type of goods). Likewise, our approach to selling cars is not like that of the traditional car dealership. Here's a brief explanation of how we do it.

USED CARS

Our approach to moving used cars is much like that of some popular discount clothing stores you know. To start, we make certain to stock plenty of fresh, quality merchandise. (Indeed, we have so many recent year used Volkswagens in stock at all time that we are the #1 seller of Certified Pre-Owned Volkswagen cars in the nation). Secondly, our cars are sold using a prescribed, time sensitive procedure.

- Each car is placed into inventory clearly tagged with a fair market price. No price negotiations are necessary in order for you to get a good deal - each car as priced is already a good deal.

- If, after 30 days, a car remains in our inventory unsold it gets a mark down tag (assuming we have some room to discount). The already good deal just got better.

- If, after another 15 days, the car is still unsold it is marked down a second time (again, assuming we have room to discount). The already good deal just became unbelievable.

- If, after another 15 days, the car is yet unsold it is quickly removed from our lot and sold at auction. Fresh merchandise is brought in and the whole process begins again.

This prescribed pricing and time sensitive sales method means that you, the buyer, will always get a good deal on a quality Boardwalk used car (no agonizing hardball negotiating necessary), and, on occasion, you even might stumble upon an absolutely great deal because you walked in at the right time (like, day 46). What’s not to like?

All of our used Volkswagen vehicles are Volkswagen Certified Pre-Owned cars. Each has been thoroughly mechanically checked out and brought up to like-new condition. Plus the original manufacturer’s warranty has been extended 2 years/24K miles beyond its original mileage/date. So a car with, say, 15K miles on it that originally sold in June 2006 and therefore had a warranty end of 50K miles/June 2010 (whichever comes first) instead now has a warranty end date of 74K miles/June 2012! What a deal!

NEW CARS

The process here is very different. Dealers buy new cars direct from the factory at a fixed wholesale price and then are free to resell them at any price they deem profitable. Of course, the competitive marketplace pretty much determines what a dealer can and cannot expect to charge for his new cars.

All VW dealers pay the same price for new vehicles. There are slight regional differences (VW adds a regional advertising and port prep fee into each dealer invoice and the advertising fee varies slightly from region to region*), but otherwise all dealers in the US buy new cars from the factory at the same price.

Any astute shopper can go to Edmunds.com or ConsumerReports.com and see that margins on new cars are very slim; typically 3% - 5%... or less. So will we discount a new Volkswagen for you? Of course. But will you get $5,000 off MSRP? Heck no - the gap between MSRP and invoice on a Jetta SE (for example) might be $1,100 at best. So how do you get a "good deal" on a new Volkswagen?

The first way we can assure you of a good deal is by not making you work for it. I mean, do you really, really, really want to engage in the old "What's it gonna take to earn your business today?" negotiations dance? I thought not. So how about this?

1). Actual vehicle invoice, +

2). $1.00 (it's symbolic, yeah, I know), -

3). Any factory incentives that may be in place (usually there are no cash incentives from VW, but from time to time that changes) =

4). Your Sale Price.

Invoice + $1.00.** Simple as that.

Now, can you get a new VW for cheaper? Yeah, honestly, you can. If you want to spend days going from dealership to dealership, spend hours fielding phone calls from one salesperson after another, spend additional hours pitting one dealership against another going back and forth, back and forth, all in the quest of getting "a better deal" you will eventually find a dealer who caves and knocks off an additional few hundred dollars. Really. But that's it. There's no big margins in these cars so VW dealers really have no ability to deep discount them. Anything below invoice comes directly out of the dealer’s pocket, so if you grind him down (or he craters and takes himself down) to a below invoice price it's a loser sale that barely makes enough to cover the salesman's commission. We have to ask ourselves, what's the point?

The second way you get a "good deal" is by buying a Volkswagen. No kidding. I realize they are not perfect; VWs are machines and so occasionally they develop problems. And every now and then a less-than-stellar copy gets out of the factory, but, really, that is not the norm. From annual appearances on the IIHS "Top Safety Picks" list (in every vehicle category, too) and Kelly Blue Book's "Best Resale Value" awards, to Edmunds.com owner reviews of 9+ on a scale of ten, the list of awards and recognitions given to Volkswagen in just the past 3 years alone is staggering. If you have not yet driven a Volkswagen, check it out.

*In the DFW region the total advertising, port and prep fees is $407. This is added into every invoice. If you go to Edmunds.com to look up the MSRP and invoice prices of new Volkswagens simply add $407 to the invoice amount shown and you will have the true amount dealers in this region pay for that car.

** We make an exception to the “Invoice plus a buck” pricing formula on the diesel TDI models. We sell the Jetta and Golf TDI models at MSRP. Believe it or not, this is also a “good deal” since dealers in other parts of the country (and in Texas) sell these cars for MSRP plus a premium of anywhere from $2,000 - $4,000.

"I Might Be A Little 'Upside Down' In My Car...."

The news has reached everyone by now; full sized trucks and SUVs and other thirsty vehicles are taking a bloody beating in the resale markets. If you have recently taken your Navigator, Tahoe, Hummer, F-250 or pretty much anything with an engine bigger than 3.5 liters to a dealer and inquired about its trade-in value you have undoubtedly been disappointed.

Many people now face a tough dilemma: they can’t afford to drive their guzzler any longer, and no dealer or individual will buy it from them at a price needed in order to pay off the vehicle's loan.

However, before the current market upheaval it was already estimated that as many as 60% of Americans were driving cars on which they owed more money than the car was worth - wholesale, or even retail. How high do you think that number is now?

Why do people get “upside down” in their cars so easily today? Well, as cars have gotten better (and they really are much better today than were their predecessors 20, or even 10 years ago) they have gotten more expensive. As cars get more expensive the only way to keep payments affordable is to extend the term of the loans. In the last twenty five years the average car loan term has jumped from 3.5 years to 6. And while stretching out loans keeps payments down, it also means that it takes a long, long time before a five or six year loan is paid down to the point where the owner has enough equity that the car can be taken to a dealer and traded in for a new one.

If you determine that you want or (absolutely, positively) need to trade in your car before you reach the equity stage, you face a dilemma. Dealers are offering you $ X for your car as a trade-in, but the loan payoff on it is $ X+Y. You owe more than the car is worth. Not only do you have no cash value (equity) in the car, you have negative equity. Your only options are to write the lender a big check for $ Y, or, ask the selling dealer to add $ Y into the purchase price of your new car. (Called “rolling in” or “burying” your negative equity).

A lot of people still assume that they can bury their negative equity into a new car loan easily and without consequence. It can still be done, although the lenders are now more particular about the negative equity absorbing loans they will approve.

To illustrate, let’s say you have -$6,000 negative equity in your trade-in, and you want to buy a new car worth $21,000. The new car, after tax, title and license might be $22,500. When you add in $6,000 you get a financed total of approx. $28,500. You've just increased the price of your new car by 29%!

There are two big problems here:
1) You are asking the lender to finance $28,000 on a product that is worth $21,000. If, god forbid, you should ever default on this loan the lender is stuck with a bad car loan amount far greater than the value of the car used as the loan collateral.
2) Because the contract amount is now huge the only way you can afford the payments is to stretch out the loan to 6 years. Which means you can never, ever trade in this car before it’s paid off or you will encounter a negative equity situation all over again – only worse.

If your credit score is medium to high you can usually bury a couple thousand dollars worth of negative equity into a new car purchase without too much difficulty. But if you are $6,000 - $8,000 upside down and need to bury it all you might be out of luck. Lenders are fleeing big negative equity loans like Galveston residents fleeing an impending Hurricane Ike.

So, if you owe way more today on your car than it is worth you likely have the same choices that the gulf coast people did with the storm: either ride it out to the end or pay to get out now.

"How Much Is The Dawn Payment On That Car?"

I get credit applications all the time from people who, it turns out, have only a vague understanding of how automobile financing works. For example, they want to buy a $35,000 R32 with no money down, but then are disappointed when I tell them the payment can't be $350 per month. Or they want to buy a 10 year old /100,000 miles-on-the-odometer used car on our lot but don't understand why it can't be financed. These are just two examples. So allow me to elucidate a little bit in the hopes that this random information will be helpful.

DOWN PAYMENT AND PAYMENTS. Every week I get at least one email inquiry that reads like this, "How much will the payments be on that car and how much down payment is required?" The correct answer is that there is no one fixed amount of down payment required of all people. The amount of down payment required is directly affected by your income and your credit score. For example, if you have a crappy credit score you are seen as a great risk by the lending company. They are therefore going to require a large down payment in order to minimize their risk. Likewise, if you have a super high credit score you can pay a minimum amount down if you want 'cause the lender knows you are going to pay the loan on time.

These factors affect interest rate also. If you are high risk they are going to raise the interest rate in order to try to get as much of their money back upfront as possible. If you are low risk you will get the lowest rates.

Therefore it is very difficult for me to tell you what kind of down payment and payment are required without first seeing a credit report and loan application.

USED CARS. The major automobile lenders want to finance cars that are 5 model years old or less and have 75,000 miles or less. They also want to make loans that are $7,500 and greater. Therefore (for example) a 1999 Beetle with 130,000 miles and selling for $5,995 does not qualify for financing. Now, this is not to say that you cannot under any circumstances finance this car; your local bank or credit union, one with whom you have a strong personal relationship, might be very happy to lend on this car. But not Volkswagen Motor Credit, Capital One, USAA or any of the other major lenders.

NEW CARS. That 0% for 72 months offer you just saw on television? It's not actually 0%. It just looks that way. I'll explain. If you have ever gotten a mortgage to purchase a house you are already familiar with the concept of "buy downs." You know, the actual mortgage interest rate is X% but if you want to give the lender a couple of percentage points worth of cash up front they will reduce the mortgage interest rate to X% - 2% (or something like that). Same thing here. When Ford or Chevy or Chrysler or Toyota or whoever tells you that you can have 0% for 60 or 72 months it is highly unlikely that they are actually giving you 0% money. Money isn't free, right? Instead, the buy down cost has been buried in the price you are paying for the car. Next time you are negotiating on the price of one of these cars ask the dealer if the price will change if you agree to take a normal interest rate loan. If you stick to your guns it will. And if you then do the math both ways (current selling price financed at 0% versus new reduced selling price financed at current market %) you might discover that your monthly payments are actually lower at the current market rate!

A lot of times people come to us with a 2 -3 year old trade-in that they financed at 0% assuming that, because they are paying no interest, there is no way they can be upside down in the car. Not true. They may have gotten 0% financing but they paid too much for the car in the process, so, they are no better off than the guy who got regular financing.

Remember what your grandfather said; "There is no free lunch."

HOW MUCH IS MY PAYMENT? Let's do some simple math. Let's say the car you want is $25,000 after TT&L. And you want a payment of $299 per month. With zero down. Can it be done?

If $25,000 is the loan amount, and you finance it for 6 years (usually the maximum term) and the interest rate is, say, 6.9% (could be higher, could be lower, it all depends upon your income-to-debt ratio and your FICO score) you end up with a monthly payment of $425. It's simple math.

Obviously then, to get a $299 monthly payment you are going to need some down payment money. How much? That's easy to figure too - we'll just find the gap and then work the formula backwards.

Take $425 (the actual payment in this example) minus $299 (your target payment) = $126 gap. Doing the loan formula again but doing it backwards this time we enter $126 as the payment, financed for 6 years again, at 6.9% interest again, and we end up with an amount of $7,411. So there is your required down payment: $7,411. That will get you the $299 monthly payment you want.

Note: you can try this yourself with any online payment calculator. Here's a link to the one on the Edmunds.com website.

So... What DO You Think It's Worth?

Here is a paraphrased recounting of an actual price negotiations exchange a couple of months ago between me and a customer who was attempting to buy a used Volkswagen Jetta that we had for sale.

Customer: “Is $ZZ,ZZZ your best price?”
Me: “Yes, it is. The car has already been marked down twice. This is as low as we can go.”
Customer: “Hmmm, well, I don’t think it’s worth quite that.”
Me : “Oh-kay…, well, I'm sorry you feel that way. We put the car on the market for $XX,XXX, which was at market value. After 30 days we marked it down. And then just last week we marked it down again. So now it is priced well below market and is a heck of a good deal. Um, just curious, then, what do you think it’s worth?”
Customer: “How should I know? You’re the dealer!”

He bought the car for $ZZ,ZZZ.

What? No $5,000 Rebate?

Sometimes people ask me, "Why doesn't Volkswagen advertise big cash rebates plus '0% financing for 72 Months' plus other deep discount promotions like many rival brands do?"

That's a good question and one I am happy to answer. Let's start with a story:

Recently a customer came to me to trade-in a luxury brand American car that he had purchased only two years before. When we did the appraisal we discovered that the car's trade-in value was only 1/3 the original MSRP of $36,000. He was disappointed to say the least, but when you consider that when he purchased this car new he received
1). a $4,000 "Employee Pricing" discount, plus
2). a $3,000 dealer discount, plus
3). a $2,000 factory rebate, plus
4). low rate financing, it becomes obvious that his $36,000 car was really a $26,000 car with $10,000 worth of "fluff" added into its MSRP by the manufacturer.

By contrast, a quality European or Japanese car (including VW) with a similar $36,000 MSRP will sell retail for $34,000-$35,000. There is no "fluff" added into the MSRP - the car is really worth the asking price. The quality of the engineering, the quality of the materials used, and the quality of the customer service attached to the brand combine to assure buyers that, not only does the car have a high value in the marketplace today, it will also have a high resale value in the future.

Think about it; if you knew you could buy a new $36,000 Mercedes (or Lexus or whatever) today for $26,000 after all discounts were applied, would you still view Mercedes as a high quality high value luxury brand car? Or would you feel that Mercedes' brand image had been cheapened?

The practice of motiviating buyers with exhorbitant discounts/rebates/low rate financing incentives is one of the major reasons big American carmakers are in the trouble they are in today. High quality, high value cars like VW begin with a reasonable MSRP, sell at a fair market price, then strive to continually deliver high value after the sale. That seems to be all the "incentive" most customers are looking for when buying a new Volkswagen. :-D

What's Your Best Price On That Car?

The above line can make a car salesperson laugh, cringe and sigh at the same time. We hear it almost every day, and it’s not always spoken politely. It’s sometimes uttered as a modest threat, as in “Give me your cheapest price on that car and don’t try any tricks, you hear?” More often it is delivered with a little bit of a sneer, as if to say “I’ve already talked to your competitors/spent hours reading Consumer Reports/talked to my brother-in-law who sells cars in Memphis (or whatever) so I’m holding all the cards here. Give it up!”

My friend Ronnie has a great comeback for “What’s your best price on that car?” He says “I’m happy to give you my best price,” and then proceeds to quote the MSRP. After sputtering and stammering in disbelief the customer cries out “That’s not the best price!” To which Ronnie replies, “Well, it sure is. It’s the best price to me. Do you have something else in mind? If so, I’m interested in hearing it. Let’s talk.”

It’s comical when you think about it; as the sellers of the vehicle, and as sellers with clearly posted prices, it is not our job to make an offer to sell. We already have! If the buyer doesn’t want to pay that price, it is his job to make a counter offer to buy. Those are the simple rules of the bazaar.

And yet it is not that simple because the retail automobile industry has for many years now dazed and confused the public with come-on rebates, sales, discounts, incentives, bonuses, prizes, giveaways and who-knows-what-else, all with the intention of exciting people into buying a car today. So people walk into our store expecting us to make an offer to them. It’s bass-akwards.

But Kelly Blue Book Says My Car's Worth Wa-ay MoreThan That!

Here’s a question whose answer dampens the spirits on many a car shopping excursion: “What is my trade-in worth?”

This has become especially troublesome since $3.50+ gallon fuel is causing legions of truck and SUV owners to want out of their big iron in exchange for 30 mpg subcompacts.

Most of these folks come to me having already been to Kelly Blue Book or NADA online to find the trade-in value of their car. Since I applaud the open-information approach to buying and selling cars you might assume that I am enthusiastic about prospective customers using these services. And I am… but I’m not… sort of. Here’s why.

The first problem is freshness of the data being used. In the wholesale market trade-in values of big thirsty trucks, SUVs and cars are changing daily - and they aren't going up! It is commonly believed that KBB changes its data only every 90 days. Well, at the time of this writing, fuel has gone up .60+ in the past 120 days and in the same period trade-in values of low MPG vehicles have plummeted. Therefore, published values of these vehicles on KBB (and other sources), unless they have been updated in the last few days, are going to be inaccurate.

The second problem is consistency: none of the online trade-in value estimators agree with each other!

Try this yourself sometime: go to http://www.kbb.com/, http://www.nada.com/ and Black Book Online (available on various dealerships’ websites, including ours). Enter the year/make/model of your personal car then compare the three results. Are they the same? Rarely.

But when a customer comes to me with a trade-in the exchange usually goes like this:
- Me: “It looks like your trade-in is worth $ X.”
- Customer: “What? No way! Kelly Blue Book says my car is worth wa-ay more than that. You’re trying to rip me off!”

The fact that KBB, NADA and Black Book (and Edmunds plus others) don’t often agree on the value of a particular car tells you something, doesn't it? I mean, I’ve seen spreads of $2,000 or more on some models. If these services can’t agree on a car’s value then why am I being asked to believe that the one you like best is right?

The other problem is this: the nice people at Kelly Blue Book (or NADA or Black Book or whatever) are not buying your car. We are! The people at KBB are not responsible for fixing up and detailing your car and then reselling it at a profit. But these are the things that we have to keep in mind.

Vehicle popularity (or lack of it) exacerbates the problem. If your trade-in is a Camry, or F-150, or Town & Country minivan or some other commonly seen there’s-one-in-every-driveway car your chances of getting a viable trade-in value from the online sources are much better than if you drive a car nobody has ever heard of. There simply aren’t enough wholesale transactions with an off-brand vehicle to provided adequate data.

Examples of cars that are difficult to put a number on are:
- Saabs
- Land Rovers
- Isuzus
- Audis
- Volvos
- and numerous other niche or exotic vehicles.
(Note that this issue is somewhat regional. For instance, while Saabs are popular in some parts of the country, they are a cold brand here in Texas - no pun intended).

Here's an example: you go to KBB and they say your beloved Audi A4 (which is really not beloved or you wouldn't want to get rid of it as much as you do) is worth, say $20K, and I tell it's worth $16K. I now have a huge credibility gap to overcome. But the problem comes from the fact that when KBB's computers searched the wholesale markets for transactions of A4s comparable to yours they didn't find many. Not in our/your area. So they looked for more data by broadening the geographic range of their search. And if that didn't work they expanded their range even more. By the time they got enough comparables to arrive at a fair market wholesale value of the car they were pulling data from 500+ miles from here! That is not this market.

By contrast we got our data by looking for actual wholesale transactions and, after maybe not finding enough data to support a dollar figure, calling local Audi dealers and asking them what they would give for it if it were being offered to them, and then relying on past experience to tell us if we think the car is going to sell quickly at that price or if is going to sit on our lot for 180 days? Then we go with our gut. Can you see now why we can't offer you $20K? We've got to err conservatively.

Yet another problem is when a make of car is slated to be discontinued. For example, a few months ago the word got out that Ford was thinking of dropping the Mercury line. The next day trade-in values of Mercury cars fell through the floor.

If you have a non-popular car and don't like our trade-in offer don't pass up the opportunity to take it to CarMax. They are nationwide and therefore can sometimes offer you more for your car than it is worth in this market. Once they have purchased it from you they will put it on a truck and ship it to a part of the country where that make/model vehicle is more popular. Then they can resell it at a profit.

If you want to do the work yourself you can get a pretty good idea of what your trade-in is actually worth before you ever contact a dealership. Here's two methods I use to get real market comparables when none are readily available.
1). Go to www.cars.com or www.autotrader.com and do a search for cars with your car's make/model/year/mileage for sale within a 50 mile radius of your home zip code. If you only find one or two (or zero) expand your radius to, say, 200 miles. Look at what the sellers are asking for the car. Note this is not the same as what they are actually getting for the car. That part you don't know.
2). Go to www.motors.ebay.com and do the same preliminary search. Then click "Advanced Search" and in the middle of the page check "Completed Listings Only." Now you can see completed auctions and Buy It Now sales for your car. These cars either sold or the auction ended with no sale. If it sold look at the price. Then subtract $1,000. Now you've got a rough idea of what your car can reasonably expect to bring you on the wholesale (trade-in) market.

If we separate your trade-in from the new car purchase that is about to take place and look at it purely as a buy/sell proposition some clarity is achieved. Because, when you get right down to it, when you bring us a trade-in you are presenting us with a simple offer to buy. We have to ponder this for a moment, look at the data, and decide if we want to roll the dice with your car, because when we agree to buy it we are committing to acquiring an asset that we hope we can resell. At a profit. Sometimes it works out that way, sometimes it doesn’t. But rolling the dice is what we do every day.

Cash Sale! Serious Buyer!

Our eBay guy received an offer today with the above exclamatory phrases in it. It reminded me that it might be informative if I pause for a moment to explain what “Cash Buyer” means to a car dealer.

People seem to naturally assume that a cash sale is a better sale - that the dealer can/will sell for a lower price when it’s a cash sale than he will for a financed sale. Actually, it’s just the opposite.

Understand that a car dealership has three main profit centers: (1). Sales - New & Used, (2). Parts & Service, and (3). Finance.

Parts & Service becomes a source of profit after the sale, but Finance, like Sales, is a source of profit during the sale.

Just as mortgage companies receive origination fees (i.e. commissions) from lenders for creating new loans, dealerships’ Finance Offices receive commissions from lenders for creating new car loans. Dealerships’ Finance Offices also receive commissions from the sale of Extended Warranties, Maintenance Policies, Gap Insurance and other products and services. So naturally a dealer wants you to finance your new purchase and to finance it with him.

Let’s say you have come to your dealer with an offer in writing from a rival store. “Beat this deal,” you say, “and you can have my business.” The offer you hold in your hands might be a real loser for your dealer, but, if you are willing to finance the sale through his Finance Office, at least he has the chance to pick up a couple of points on the finance side. Depending upon the terms, conditions and situation surrounding your loan, it might even make sense for the dealer to lose a little bit of money on the car sale so that he can pick up some profit from the financing.

But if you say “This is a cash sale” you’ve possibly taken away all incentive for the dealer to accept your skinny offer.

So, as a general rule, dealerships are more likely to drop the price on a car in a financed sale than they are in a cash sale. Make sense?

What SHOULD You Pay For A New Volkswagen?

OK, so the subject today is THE BIG ONE, namely, “What can you/should you realistically expect to pay for a new VW?”

To do that I’ve got to explain how the Volkswagen factory-to-dealer sales and pricing process works.

Everything starts with the MSRP (Manufacturer’s Suggested Retail Price). We all know what that is. It's that number on the window sticker, the number that none of us will ever agree to pay.

Then you have the wholesale invoice - the invoice being the document from the manufacturer that shows the dealer what he has been charged for the car. Years ago the invoice amount was top secret - no dealer ever revealed it to the public - and those were the good old days, too; the retail markup (invoice to MSRP) was as much as 21%!

Today the base invoice for any make car can be found on www.edmunds.com, www.ConsumerReports.org and numerous other sources, so the secret is out. Which is why, if he/she does a little homework, any prospective car buyer can get educated beforehand and see what kind of profit margin the dealer is actually working with. Our average markup today (invoice to MSRP) is 4% or less. No joke.

So on that 2009 Jetta SE you’ve been admiring, the one with the MSRP of $21,670 - and the one you want to buy for $19,999 - our cost is $20,961*, or 3.27% lower than the MSRP. You can see now why your offer of $19,999 isn’t very attractive.

“But,” you say, “you have overlooked the incentives.” You are correct. So let’s now address that.

There are two kinds of incentives; factory-to-consumer, and factory-to-dealer. The factory-to-consumer incentives (discount/rebate, low rate installment or lease financing, or all of the above) are yours to use as the program dictates. We the dealer cannot touch “your” incentive money - if there is some to be touched. Since Volkswagen does not offer factory-to-consumer rebates a discussion of them is irrelevant.

Factory-to-dealer incentives are between us and Volkswagen of America. Usually it’s “funny money” earned by selling a particular model or quantity of that model in a given month. These incentives appear in earnest around end-of-model-year or end of calendar year. Sometimes the dealer has the option of keeping this little reward to himself or passing it along to the customer. Sometimes not. Either way, these programs are between VW and its franchise retailers only.

So back to our Jetta example with the MSRP of $21,670 and invoice of $20,961. The current factory-to-consumer incentive for this model is $0 cash discount/rebate; low rate installment /lease financing is usually available instead. The current factory-to-dealer incentive is also zero. That’s right, nada. We sell every Jetta we get almost as soon as it rolls off the truck. So why does VW need dealer incentives?

"Hold on," you say. "You aren't being entirely honest with us. You are hiding the hold-back money you get from VW!" You are right. Edmunds, Consumer Reports and others don’t shy from reporting the fact that manufacturers “hold back” a certain amount of money from each invoice and return that money to the dealer so he can use it to pay for his advertising, inventory % charges (which can be massive), general overhead and whatnot. This is standard operating procedure in almost all manufacturing businesses, be it cars, boats, furniture, appliances, electronics, mobile homes or whatever. It’s a necessary device for leveling the playing field for retailers. But, in the past decade or two many American car manufacturers have abused this practice, often stacking multiple layers of hold-back into their invoices, enabling frantic dealers of these brands to have so many creative pricing formulas (you’ve got cars selling for invoice, under invoice, under-under invoice, and even under-under-under invoice) that their offers become outrageous. ("We’ll give you $10,000 for your trade-in, even if it doesn’t run!") Of course, you know the old saying; “If it sounds too good to be true….”

Can you ever buy a VW for below invoice? On occasion, yes. Generally no. Unlike the American manufacturers referenced above, Volkswagen does not pack its invoices with layers of fluff. The typical Jetta invoice hold-back is less than half as large as the average person's monthly mortgage payment. I'm serious.

If the dealer is overstocked with this year’s model and next year’s model is about to come out, you might find some special deals because the dealer, the manufacturer, or both are providing the discount. Otherwise, VWs are pretty much sold for some amount over invoice. Which, as a dealer trying to make a profit, is where we need things to be.

So - what’s my best price? You are going to hate this answer, but - it depends. At the very least it depends on the car you’ve selected, the time of year (are new models coming out soon?), whether we are overstocked or understocked, the incentives being offered, etc. etc. etc. On the 2009 Jetta SE in the examples above, at the time of this writing it would be $21,557 (Edmunds' TMV price) less $250 Boardwalk dealer adjustment = $21,307 + TT&L.

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* Astute readers will notice that Edmunds shows $20,554 as the actual invoice price of a base 2009 Jetta SE. In the DFW area the actual number is $407 higher than that,or $20,961. Volkswagen uses a regionally adjusted invoice system, meaning that a dealer in Chicago, for instance, might pay a slightly different price for his cars than does a dealer in Los Angeles, or Miami, or Dallas or whatever. The difference is usually attributable to that region's shared advertising costs. In each region VW adds $ X into dealer invoices to help cover regional TV, radio, print and Internet advertising and possibly other unavoidable hard costs in that area like prep charges or additional transportation or storage fees. Edmunds posts a disclaimer at the beginning of their pricing examples and you can see it here.