Welcome to A Chrysler Dealer's World

Robert Farago
by Robert Farago
welcome to a chrysler dealer s world

A dealer writes:

Say I order a pickup truck from the Chrysler mothership: an ’09 Dodge Mega Cab Cummins 4×4. MSRP: $59k. Invoice: $53k. Hold back: $2,400. Chrysler bills my bank for invoice ($53k). My bank gets the title and pays for truck. [ED: this is also known as floor-planning or flooring.] I take delivery of the truck, I sell the truck. Two weeks later, my floor-planning bank transfers the funds to Chrysler. First, I have to pay off the flooring liability: the Ram’s invoice price ($53k). Then I wait for the factory rebate money. That’s why it costs so much to operate a franchise dealership: the operating capital requirment is huge. We are fronting the manufacturer’s cash flow by overpaying for the units when we (the dealer) buy them from factory.

Let’s say the factory-to-dealer and factory-to-customer incentives add up to $10k. So I sell the Ram to a customer for invoice less rebates. Purchase price: $43k. Chrysler sends me the $10k rebate about three weeks after I report the unit as sold. (That’s $10k on one truck. Average incentives today are around $7k.)

Bottom line: a Chrysler dealer is looking at the number of units in stock multiplied by the $8k payable from Chrysler to the dealer. That’s IF the dealer sells all these cars in given timeframe. If, however, Chrysler files for Chapter 7 or Chapter 11 . . .

Chrysler isn’t going to pay the dealer incentives. So now my cost basis is actual invoice—which is WAY-the-NSFW too high to get the cars sold based on market conditions. In this scenario, the dealer takes it in the derriere big-time (pardon my French) as they try to sell off the remaining stock. Even if the federal government steps in and protects Chrysler customers’ warranties (so it’s safe to buy the leftovers), the rebates aren’t there. So the s**t’s still way off the money.

Consider the amount of floorplan interest paid by the dealer on the unearned rebate ($10k) alone. In other words, the REAL MSRP is/should be $49k and REAL INVOICE is $43k. But I have to pay interest on $10k of bulls**t while I owned this unit, until I receive my rebates from Chrysler.

Why doesn’t Chrysler just cheapen up the invoice amount, instead of having the dealers pay full boat now and get their rebate money later? Guess who the dealers use—or used to use—to provide the floor-planning loans? Chrysler Financial. The interest on the $10k part of the loan is staggering.

Think about the number of Chrysler units in stock across the country. [ED: At the end of January, Chrysler had 359,980 units of inventory.]

The system has worked in Chrysler and Chrysler Financial Services’ favor for decades. Now that the company is staring death in the face, guess who Jim Press wants to carry the can? The dealers. You might not have much sympathy for us, but you should have even less for Chrysler.

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2 of 55 comments
  • Speedlaw Speedlaw on Feb 09, 2009

    bunkie: I’ve noticed that outside the automotive world. All this talk of gloom and doom, yet very few clearance sales at various retail stores. Heck, the Going Out of Business prices at our local Circuit City are higher than what you can get the same stuff all day long from Amazon.com for. Sorta. Look closer, and on a recent trip to Home Depot, Walmart, Circuit City and Best Buy, I noticed the same things...very thin shelving. The shelves are "full", but it is one product taking up a whole row (does anyone need a 100 dollar HDMI cable ?), not a variety of products. All the big box retailers (CC is an exception) are showing very, very thin stocking. They all look like different stores compared to say, November of 2008. Home Depot just sucks. Back when we had two other home retailers, prices were good and there was a variety of products. Now that they killed the other two, no selection really and high prices for a lot of items. I saw a new 4 door Hyundai sedan on the "strip", new with a 14k price. I didn't actually try to buy it, but they are stocked to the gills-front lot, lawn, and pretty much stacked up on the roof.

  • Willbodine Willbodine on Feb 09, 2009

    Boo-hoo! Since when did a car dealer give a rat's hiney about economic ethics? It's a two-way street, bub. Auto dealers come up close to dead last in any survey of the public's least trustworthy/ethical businesses that they deal with. Usually, only lawyers rank lower. There's a good reason for this. I'm glad the chickens are finally coming home to roost.

  • Scott ?Wonder what Toyota will be using when they enter the market?
  • Fred The bigger issue is what happens to the other systems as demand dwindles? Will thet convert or will they just just shut down?
  • Roger hopkins Why do they all have to be 4 door??? Why not a "cab & a half" and a bit longer box. This is just another station wagon of the 21st century. Maybe they should put fake woodgrain on the side lol...
  • Greg Add me to the list: 2017 Sorento EX AWD w/2.0 Turbo GDI 68K miles. Changed oil religiously with only synthetic. Checked oil level before a rare long road trip and Ievel was at least 2 quarts down. That was less than 6 months after the last oil change. I'm now adding a quart of oil every 1000 miles and checking every 500 miles because I read reports that the oil usage gets worse. Too bad, really like the 2023 Tuscon. But I have not seen Hyundai/Kia doing anything new in terms of engine development. Therefore, I have to suspect that I will ony become a victim of a fatally flawed engine development program if I were to a purchase another Kia/Hyundai.
  • Craiger 1970s Battlestar Galactica Cylon face.