One way to eliminate some the confusion about car costs means knowing the basics. One of these is to know what the dealer invoice price is.
Simply put, the invoice price is the price the dealer pays to the manufacturer for a particular vehicle. The same car is priced the same for every dealer across the United States.
But the dealer rarely sells the car to the customer for the invoice price. The price the dealer starts at with negotiations is the sticker price, which often turns out to be hundreds to thousands of dollars above the dealer’s invoice price.
There are some instances where a dealer might be inclined to sell a car at or below invoice price. It may be that the dealer has a vast quantity of a certain make and model on the lot and wants to clear the inventory so he can turn it for new models, likely more popular-selling models that can command a better price from the customer.
To help the dealers move these cars, manufacturers often offer what are called “hidden factory-to-dealer rebates” and sales bonuses to the dealers. These hidden dealer incentives, which the customer is not privy to, on top of available discounts to the consumers that manufacturers may offer, combine to equal a selling price that may be at or below the dealer’s actual invoice price.
A good car-buying strategy is to negotiate from dealer invoice price up, not manufacturer’s suggested retail price or sticker price down. Where do you find the dealer’s invoice price? Check out The Car Connection's new-car reviews for information about dealer invoice price.
One point to remember is that a dealer may be willing to show you his invoice price if you ask for it. But never demand it. Although it contains some items you may not understand, there are other pieces of valuable information such as advertising fees or other regional costs the dealer may have paid.
Bottom line: As the consumer, it always pays to shop around, to know what price cars you’re looking at are being sold for in your area, what the available incentives are, and the dealer’s invoice for the vehicle. Then, use your negotiating skills to nail down the best deal.