Looking to buy a luxury vehicle, but have some sticker shock? Before you buy, it's important to know all your options and your potential for tax savings with a Montana LLC.
It is important to begin by understanding the cost of manufacturing cars. While it is not possible to get an exact figure, it is generally more cost-effective to manufacture larger cars or when there is a bigger production volume. This means that building a limited number of exclusive versions or adding luxury features to a car will significantly push up the cost. For this reason, some cars are usually more expensive than others. Forming a Montana LLC can go a long way in helping you save money on taxes.
Cars fall into different categories of expense. This means that the cost of manufacturing one model will not be the same as that of building another. Mostly, manufacturers will not disclose the expenses incurred during the manufacturing process. However, here are the costs of manufacturing a number of cars. (Updated to reflect 2023 statistics.)
Toyota – Toyota is probably the most popular car brand globally. Fiat Group World has listed the Toyota RAV4/Wildlander, Toyota Corolla, Toyota Camry, and the Toyota Hilux Truck all in the top 10 cars sold worldwide in 2023. Toyota relies on huge production volumes to lower their costs. For a car that sells for $5,000, the manufacturer can make about $2,500 in profits, leaving the cost of manufacturing at about $12,500.
Porsche – Most Porsche cars sell for between $50,000 and $150,000. For every car, the auto manufacturer makes an estimated $17,000. This makes the cost of manufacturing about $33,000 to $ 133,000. (DYK: Porsche's adaptive all-wheel-drive system, found in models like the Panamera 4 and 911 Carrera 4S, offers an optimal blend of performance and safety for winter driving! Read more here.)
Ford – for every average-priced car that Ford sells for about $22,000, they make $2,200 as gross margin. This means that the cost of production could be somewhere in the neighborhood of $20,000. *UPDATE: In recent years, Ford's profit margins have fluctuated. Factors like supply chain disruptions, increased material costs, and the shift toward electric vehicles have impacted profitability. While it's still reasonable to assume that Ford maintains a profit margin on each vehicle, the exact figure is likely to be different than the simplified example above.
Ferrari – In 2023, the iconic Italian car manufacturer recorded total revenues of 5.97 billion euros (around $9.7 billion) from just 13,663 deliveries, up 17 percent and 3.3 percent in 2022 respectively. (Article)
Just as with Ferrari, other high-end cars such as McLaren and Lamborghini cost a lot to produce, and luxury and supercar manufacturers prioritize exclusivity over volume. While their price tags may be $200,000+, the manufacturing costs are also high.
Manufacturing cars involve two types of costs: fixed and variable costs. Fixed costs cover expenses such as the cost of maintaining facilities, finding suppliers, testing prototypes, among others. Variable costs, on the other hand, include the cost of labor, raw materials, and other related things. Below is a breakdown of manufacturing costs.
Raw materials and auto parts – this is by far the biggest cost driver in the auto industry, accounting for up to 57% of the total price. Research and development – mandatory research and development must be done before any new vehicle model is manufactured. This takes up about 16% of the manufacturing costs.
Direct labor and advertising charges – auto manufacturers also have to factor in the cost of labor and advertising charges for the units.
Sales tax – to make a profit, manufacturers have to include sales tax to the cost of production. This helps in determining the price of the car in the market.
Other factors – some of the other factors that contribute to production costs are depreciation, logistics, overheads, and dealership markups.
It’s apparent that building any car involves a lot of costs. However, taking into account the different factors that affect the final cost, the expenses vary from one vehicle model to another. Considering the costs involved in manufacturing high-end cars, it is clear why automobiles are expensive.
The good news is that you can reduce the financial demands by getting a Montana LLC to take advantage of the no sales tax in the state. With LLCTLC, you can purchase your dream luxury car and take advantage of Montana's no sales tax policy. By setting up a Montana LLC through LLCTLC's easy and seamless process, you can potentially save thousands on your vehicle purchase.