Auto Invoice: A Definition

March 18, 2013

Information on finding invoice prices, the accuracy of websites that show invoice prices, what goes into the true invoice cost, and more.

The auto invoice price is what the car dealership pays to the manufacturer for a vehicle. It is typically a wholesale price as they buy more than one car at a time. The invoice price is how much the dealer is out on car. These prices are static, meaning that they do not change and they are the same for all dealers. However, there are added costs.

Shipping to the destination is an extra charge. This fee is also the same for all dealers. Of course, they pass that along to the consumer, but with no markup, just like shipping charges on many Internet shopping sites. Also included in the invoice price may be a built in advertising price. For example, a Cadillac dealership may have to pay a certain amount that will go towards the national advertising of Cadillac, and also possibly regional ads. This is all built into the invoice price. The invoice price is what the dealer pays in total for the car, meaning the total investment.

How to Find Car Invoice Prices
A good place to start researching a car's invoice price is Consumer Reports. They offer several books, magazines and online services that help consumers determine the price of new and used cars, hidden dealer charges, bottom line prices and vehicle comparison tools. Other good resources include sites such as Edmunds.com, or our own CarsDirect search page. Simply enter details such as the make, model and year, and cost and pricing information will be displayed. You will see the MSRP (the manufacturer's suggested retail price) and the car invoice price.

It is common for dealers to get incentives from car manufacturers for every new vehicle they sell. These incentives usually range from 1 to 3 percent of the invoice price. Thus, it is possible for car dealers to sell cars at near-invoice prices and still make a profit. Buyers should understand these facts, and look to get deals when dealerships feel pressure to get rid of excess inventory.

Knowing the car invoice price can give you ammunition to help lower the final price you pay for a vehicle.

How Accurate Are Websites that Show Auto Invoice Prices?

Websites that show auto invoice prices provide important research when you are shopping for a car or truck. Despite this, there are some charges on invoices that are not always accounted for by websites that detail this type of information.

District Advertising Charges
Most manufacturers offer a regional advertising group that dealerships may choose to participate in. These district advertising charges are used to pay for newspaper and television advertisements. The charges for being part of a local advertising group are passed on to the new vehicle invoice. As regional marketing expenses vary from state to state, and even city to city, it is impossible to account for these charges when doing website research.

Online Marketing Fees
Manufacturers offer web design services to dealerships, and these comprehensive online marketing tools are not free. Online marketing fees are charged directly to a dealership by way of the new vehicle invoice. Not all dealerships elect to participate in online marketing programs, so you may find that some local dealerships do not have this charge on their invoices.

Mid-Year Pricing Adjustments
Manufacturers regularly adjust their prices at the halfway point of a model year. The timing of mid-year price adjustments can be difficult to determine. Manufacturers may not always disclose this information, so it can be difficult for a website's pricing data to reflect such changes. If you notice that one vehicle is slightly more expensive than another, mid-year adjustments may be the reason. A mid-year adjustment is a verifiable and legitimate reason for the price of a vehicle to be increased.

Determining the True Car Invoice Cost

While dealerships try to make as much as they can on the sale of any new vehicle, most are usually willing to sell a vehicle if there is any profit margin at all to be made. If the dealer is aware that you know the invoice amount of the vehicle, they may be willing to make a better deal. In some cases, you may even find a dealer that is willing to sell a vehicle at invoice cost, in order to improve sales numbers needed for a quota, or to get rid of a hard to sell vehicle.

Base Vehicle Cost
The base vehicle cost on an invoice is the dealership cost for a vehicle with no options on it. The base invoice cost is the top line on a vehicle invoice, and it does not include any optional packages or additional fees associated with purchasing a vehicle. Many websites that offer invoice pricing information list only a base vehicle cost, so you may need to use the "build a vehicle" tool to get a better approximation of the invoice and manufacturer's suggested retail prices for a vehicle with additional options on it.

Pricing Information
All invoices include information on the dealership's cost and the manufacturer's suggested retail price. The dealership's cost, also known as the invoice price, is an approximation of what the dealership paid the manufacturer for the vehicle. The dealership may own the vehicle for less than the invoice price, if the manufacturer pays holdback money or is offering any dealer cash incentives at the time of the sale. Comparing the invoice and MSRP pricing information allows you to determine the amount of markup on a new vehicle.

Option Information
All invoices include a list of major options and equipment packages on a car or truck. This information can be a useful resource if you are comparing multiple vehicles and want to make sure that they have the same equipment. A dealership may also be able to print a more detailed list of options on a car or truck.

Dealers try to sell a variety of options and accessories such as rust proofing, security systems, window etching, interior treatments, extended warranties and credit insurance. These items generate a large amount of profit for the dealer, and help to reclaim any profit lost by lowering the actual sale price. In addition to these optional services and accessories, the dealer may attach a variety of fees to your sale. Some of these fees include documentation and administration fees, fees for preparation and cleaning, as well as charges for securing an auto loan on your car if applicable. Other charges, such as tax, title and licensing fees, are generally unavoidable. All of these add up on your sales invoice to inflate the actual price well above just the base vehicle's value.

Many of the miscellaneous fees listed on your sales invoice are fees you can't do anything about. They are simply the cost of doing business with a dealership. It is important to look especially close at the various charges for optional services to ensure you are only charged for what you have agreed upon. If you find that many of these charges are missing from your invoice, it is possible they have been rolled into an inflated sticker price in order to look like a better deal.

Destination Charge
All invoices also itemize the destination charge for the vehicle. This amount is passed on from the manufacturer to the dealership and finally on to the purchaser of a vehicle. It is non-negotiable, and is set by the factory. This amount may not be marked up by the dealership, so the destination charge is one of the few non-negotiable items on an invoice.

Advertising Charges
Most manufacturers offer district advertising opportunities, to increase the exposure of local dealerships via newspaper, radio and television ads. These services are not free, and manufacturers charge the dealership directly on each invoice. You will find advertising charges itemized near the bottom of the invoice, under headings like ADV or DAA. Advertising fees can range from 1 to 3 percent of a car's base MSRP, depending on the manufacturer's standards. Advertising charges are non-negotiable, and as the charges are added to the invoice, the invoice price may be higher than you researched online.

Holdback
Like advertising charges, holdback is itemized near the bottom of a vehicle invoice, normally under the heading H/B. Holdback is money paid from the manufacturer to the dealership, to offset normal costs of doing business, like facilities maintenance and sales commissions. Holdback is a credit assigned to an individual vehicle in the dealership's inventory, so this money ultimately lowers the dealership's cost below invoice.

Invoice Costs to Avoid

On the new car invoice there are three different costs to avoid. By making sure to avoid these costs, you can save significant amounts of money on your next new car purchase.

Pre-Selling Maintenance Costs
Dealers, especially pre-owned and used dealers, may need to perform a series of safety and mechanical checks on each vehicle prior to selling it. This may include small fixes such as filling the car with gas or oil, but can also be a bit more involved, with some cars requiring a full new set of tires or a transmission overhaul. Some dealers will try to pass these costs on to the consumer by adding them into the invoice price. Negotiate with the dealer so that they absorb this cost in their profit margin. You didn't create the need for this maintenance, so don't pay for it. Note that these costs will be minimal, if nonexistent, for new cars.

Extended Warranties
Many dealers will try to include the costs of an extended warranty on the vehicle, even though the factory will warranty the vehicle for a period of time following purchase. The dealer supplied warranty is of the same quality as the factory warranty, but this is often unneeded. The factory warranty covers most major repairs due to defect, so an additional warranty that covers time beyond the length of the factory warranty is fairly redundant.

Features You Don't Need
If you walk into a dealership and want a car without OnStar technology or without other modern conveniences, and the dealer can't offer you a vehicle without these additional "bells and whistles," offer to purchase one of the other vehicles minus the amount on the invoice for the features you won't use. Sometimes you will get lucky and the dealer will agree.