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Why It’s Important That You Know The Dealer Invoice Price On New Cars

February 18, 2014

There are many wonderful benefits from buying a new automobile versus used, including the fact that you won't have the headaches of major maintenance issues since new cars come with a basic warranty of 3 to 5 years, depending on manufacturer. Owning also has advantages over leasing, like lower monthly insurance premiums and putting as many miles on the car as you want without getting dinged for overages.

It is important that you know the dealer invoice price on new cars and trucks; to have leverage when it comes time for negotiations.

When you avail yourself of our no-cost and easy service to request a free, no obligation new car price quote not only will you receive competing new car price quotes from certified dealerships, you will also receive the dealer invoice price on new cars or trucks that you're looking to buy. Then use the information in this article to pit them against each other to get the sweetest deal.

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Is The Dealer Invoice Price Really The Car Dealers True Cost For The Car I Want To Buy?

No, it isn't. One reason it's so hard for many new car buyers to determine the fair price to pay for a new car is because so many different price points are thrown out during the buying experience. Then they drive off the lot thinking they negotiated a sweet deal; only to have a friend or neighbor tell them they paid substantially lower for almost the exact same vehicle.

Following are the 3 primary price points you'll hear during the buying process and how they can result in you receiving new car price quotes that are as different as day and night – on the exact same new car , truck or SUV.

  • The MSRP (the sticker price) is the highest value the car manufacturer feels the new vehicle could sell for; however, the car dealerships can sell the vehicle for any amount of money they want.

  • The Dealer Invoice Price is the amount the manufacturer bills the dealership for the vehicles they buy and that price also includes optional equipment that was installed at the manufacturer's factory. There are several fees/charges, that will vary between the dealerships.

  • Now the Factory Invoice Price is supposed to be the entire cost for getting a new car or truck from the automaker's factory to the dealer's showroom; however, that's not totally accurate but it is a number you need to know and utilize during negotiations. The factory invoice is comprised of 4 sections:

  1. The vehicle's base price without the options;
  2. The price of the vehicle after the factory installed options have been added;
  3. Destination/transportation charges that every dealership has to pay for having a new car or truck shipped from the factory;
  4. Specific manufacturer fees/charges for regional advertising; as well as any specific advertising targeting new car buyers within a dealership's area. This fee will vary between the dealers and while it really should be considered their cost of conducting business, some will attempt to pass on those costs to a buyer.

Why You Need To Know The Dealer Invoice Price If You Want A Great Deal

  • There are many factors that reduce the dealership's actual cost substantially lower than what the paperwork shows; like special incentives and holdbacks, that could amount to thousands of dollars in hidden profits. When you know the dealer invoice price and the factors that lower that amount, you can use it to negotiate a much better deal.

  • The dealer invoice price is always much lower than the MSRP and while technically, from an accounting point of view, the dealer's invoice price is the cost the dealership paid for the new car, there are several factors that lower the dealer's 'true' cost for the vehicle.

  • The first and foremost is the dealer holdback, which is a percentage of either the MSRP or the dealer's invoice price that inflates the price the dealer is charging. It doesn't show up on the dealer's invoice paperwork, but that percentage (2 to 3%) gets kicked back to the dealership after a vehicle has been sold. Many dealers won't want to use their holdback during negotiations, as it is part of their profit; however, knowing about it will give you leverage during negotiations. Just because one dealer would rather shoot himself in the foot and lose a sale doesn't mean another would.

  • Then come all of the special factory-to-dealer incentives that the manufacturer offers their dealers on certain new vehicle makes/models. These types of bonuses are different than rebates as they're given directly to the dealership – not the customer. Incentives like this further reduce the dealer's cost and they can choose to take the extra profit or use it to discount the car.

  • Then there are other ways some dealers markup the car to increase profits, even if they say they're selling you a new car or truck for the price shown on their invoice; such as a documentation fee that could run several hundreds of dollars. Different dealers call it by different terms, but the bottom line is it's the dealer's profit over and above the dealer's invoice cost.

While it would be pretty much impossible to calculate to the penny the new car dealer's actual cost, knowing about all of the incentives and holdbacks will help you calculate a ballpark figure. Then when you request your free, no obligation to buy new car price quotes and receive the dealer invoice price for the new car or truck you want to buy, you'll have a good idea of where to begin your negotiations with the dealerships that sent you free price quotes.

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