MSRP, INVOICE and PROFIT

MSRP, or Manufacturers Suggested Retail Price, is the price manufacturers post on their RV,s. It is the "suggested" price and gives dealers a common number to start from. Remember, dealers usually pay the same for the products, barring any special promo's. The Invoice number is what the dealer paid for the RV. Remember, the true cost of the RV to the dealer is not the invoice, the true cost is the invoice plus the other costs of doing business, such as lights, heating, taxes, payroll, building maintenance, rent, flooring (their cost of having product on the lot), etc. Profit is the amount of money the RV sells for above the true cost. It is best to remember all RV Dealers need to make a profit! Profit is not a bad thing, after all, you would like them to stay in business to service your RV. You also want to pay as little for the RV as possible! To get a good deal, both the RV Dealer and you have to perceive VALUE. Every deal can be a good deal when both parties understand the facts. No one has to get hurt or taken! Good deals come from good communication, understanding of the issues and values, a keen sense of fairness on both sides, buyer and seller.

Step 1 Up Front Discussion

Once you have selected a type of RV, possibly even the make and model, select a dealer. When you first get to the dealership sit down with your salesperson, get to know that person and when you are comfortable in your mind that you are dealing someone you can work with then move the discussion to the RV. Discuss every aspect of what you are looking for. Some, but not all items are listed to give you an idea of the discussion.

• What type of RVing do you do (local campouts, long trips, etc.)
• How many will you be sleeping
• What will you be towing it with (5 wheel or Travel Trailer)
• What will you be towing (Motorhome)
• Type of terrain you will usually be in
• How many miles a year
• What seasons will it be used
• Where do you normally camp
• What type of hookups where you camp
• Your experience level: Brand New, Experienced in Type of RV you want, Experienced in Different type of RV and want to change
• What options do you need (power awnings, hitch, big refrigerator, etc)
• What is your trade (I know you have been told never to reveal this but you need to get everything on the table to work together - you both know what it is worth)
• What do you owe on your trade (your debt does not go away - trade value over your debt helps lower payments and trade value less than debt adds to payments of new RV - everyone needs to know this up front!)
• How will you be paying?
  • Cash - is this "out the door" meaning purchase price, tax, license, etc. totaled? or purchase price only?
  • Payments - to stay under your target payment you need to share all your trade information, plus where you will license, amount of down in addition to trade and most importantly what you are willing to spend per month - this sets your limits. A good saleperson will honor this limit and not look to maximize it or move you over it.
• When do you want your new RV
• Who will be the owners

Something else to keep in mind and to communicate to a salesperson is your buying style. I won't bore you with the types, but you know how you want information given to you, so share that information. If you are a bottom line person who only wants relevant facts in point by point format let the person you are dealing with know that you want specific items and the bottom line facts. If you will only do business with someone after you get to know them, tell the person this and ask to spend some time getting to know them as a person. If the person you are working with is not willing to adjust to your style your experience will be less than satisfactory. Believe me, the person you are working with should appreciate this information and will be less likely to waste your time.

This list is not the complete listing of everything to discuss, but it should give you a good idea of what to talk about and the importance of good communication so there will be little to no chance of a misunderstanding later. If your salesperson does not want to discuss these items or seems disinterested in them then they are not interested in you and you should move along before you waste any more of your time. RV values can be found on line at www.nadaguides.com. Be sure to use wholesale for extimating trade value and retail for estimating what you can sell it for yourself.

Step 2 RV Selection and Walkaround Presentation If your salesperson listened to you the next step is very exciting and fun. First, you should be shown RV's that fit your needs, if this is not happening, then your salesperson did not listen. The salesperson should take you to RV's that fit the requirements that you outlined. At each RV you should get a throrough walk around presentation. Your salesperson should tell you about the RV from top to bottom, inside and out. You should be encouraged to get involved with the presentation, to ask questions, and to get your hands on things. Ask to see how they work, don't assume or settle for just being told. If a salesperson doesn't want to demonstrate how an item works, there may be a good reason! If your saleperson doesn't talk about what is important to you, then ask for the manager. Remember, it is your money you are spending. The advantage of sitting down first is that you are shown only RV's that meet your needs and your presentation is geared to how you will be using your RV, not a canned demo that covers everything, including those things that are of no interest.

Step 3 RV Demonstration This may or may not be necessary. For example, there may be no need to hook up a travel trailer to your rig to see how it tows if you already tow a similar unit. Even popup tent trailers can and should be fully demonstrated. You and your salesperson should take the popup from stowed to fully set up and back again to see how the process works and how difficult or easy it may be. When buying a motorhome, you should always take a good test drive. You need to see for yourself how the unit handles in traffic, on the open road and around a campground. Will it fit where you go? Can you get it into your normal storage location? How will you feel at the end of the day when driving it? Don't let your initial apprehension bother you if you have never driven a Class A (bus style) RV before. Most people say that once you get used to how the road looks from a higher position they love it! Drive the RV you think you want enough to know how you will feel. Don't worry about the miles, remember, RV's are not hauled in, they are driven, so a new RV made in Oregon and sold in New York already has 3000 miles on it, so what difference will another 20 or 30 make?

Step 4 The Purchase

During the walkthrough and demonstration your saleperson may ask several question designed to determine whether you are on the right unit or not. Do not be bothered by these "trial closes", they are for you benefit, too. You do not want the saleperson to apply pressure to get you to buy something you do not want. You should only get to this stage when you are sure you are ready to buy. We will not get into negotiation strategies and tactics except to say most people have their own methods and unless someone (buyer or seller) is trying to take advantage of the other there should be no real issue here. What people are trying to find is the point where both can feel they got a good deal - the dealer made a fair profit and the buyer received value for price paid.

It is probably important to discuss one common misconception. Many people are told to never reveal their trade until after the purchase price is agreed upon and also to begin negotiations by first asking for 25% off the MSRP. If this is your strategy, so be it, but our experience is that the trade is best dealt with up front to eliminate surprises and disappointment for all. If a dealer has cut himself to the thinest deal and then you ask more for your trade than it is worth (remember the dealer needs to buy at a price that allows for markup to make a profit on its resale) then you are going to be disappointed and potentially lose a good deal when you perceive getting ripped off on your trade. Know your values going in! Know the Wholesale number. Also, the discount is often mis-understood.

Assume you are a business person who paid $100,000 for a new RV and you plan to mark it up 25%. This means you would be selling the unit for $125,000. If a customer then asks for you to reduce the price 25% and you do it by multiplying $125,000 by .75 (to get 25% off) you come up with $93,750 or $6,250 below actual cost. The proper way is to reverse the original problem (you multiplied $100,000 by 1.25 to get $125,000) so you will need to divide $125,000 by 1.25 to get back to $100,000. This is a common mistake and often sets people up for failure in negotiations. Understand it and you will do well.

Once you have agreed on the price you will be signing a contract for purchase. Many people think there is a 3 day rule, meaning they have 3 days to change their mind and cancel the contract. This may or may not be true! Many states allow this rule when contracts are signed in the home in the presence of the salesperson, but do not apply if you approaced the salesperson and signed at the dealership. Nothing to fear here because by now you should not be buying unless you know it is exacly what you want. Do understand that because of the truth in lending laws most dealers will not allow the salesperson to sign a contract and reserve this only for the Sales Manager or higher.

Before you sign remember that everything you talked about is replaced under law by what you signed (the parole evidence rule). Be sure you get everything in writing on the purchase agreement. Being accurate here protects you and the dealership. Many deals are soured by not getting things written on the purchase agreement. This is not to suggest everything be written down, but if you are replacing a couch in a used unit for example and all items on a special order unit should be spelled out. Also, be prepared to put some money down at the time of signing. This does not have to be the full down payment, but a sufficient amount so the dealership feels good about taking the RV out of inventory. Remember the RV continues to cost the dealership money until you take delivery, or it is paid in full.

Step 5 Delivery This step is more than signing a bunch of papers and getting the keys. You should be introduced to key people in the service department and given a very thorough walkthrough of every system on your new RV. This should take from one to three hours to complete. This is different from the walkthrough when you were deciding if you liked the RV, you are now learning how to use it. Take your time, ask lots of questions. Bringing a friend or relative along with a video camera is a great idea! You will not remember everything you are told, if the dealership does a proper job. Of course, if you are a seasoned veteran you may only want to see certain items, but we still caution every buyer to get the full benefit of the hands on training. Get important phone numbers: service manager, parts department, service contract numbers, association numbers (owners clubs), manufacturer's hotline numbers, etc.