Cars: How to Get an Invoice Discount

January 27, 2012

Getting a car invoice discount at first may seem like an impossibility, but they are extremely doable and even easier to do with tough economies. The car invoice price is the price that the dealer has to pay for the car. These cars are not cheap. It isn't like they buy the car for $5,000 and then mark it up 400% to sell it for $20,000. The markups are much less and the profit margins are thinner than many expect. However, knowing the car invoice price is the whole key to getting a discount on your car. Follow these steps in order to be successful.

Step 1: Research

The most important step in the process is the research aspect. Go online and look at some comparison websites where they show invoice prices for various cars. The great thing about invoice prices is that all models have the same invoice price. So that means if you have the exact same car at a dealer in California and one in New York, the invoice price will be exactly the same. This makes it easier for your research. Once you know this number, you can start to breakdown the numbers.

Step 2: Breakdown

The next step involves a little bit of math. The invoice price is comprised of many different things and some of them are strict percentages. Shipping, advertising and other fees really can't be subtracted and are usually passed onto the consumer. However, there is one part of the invoice price that should not be passed along to you. The part that does not involve you is what is called dealer holdback. This is about 2% to 3% of the MSRP price. This actually increases the upfront invoice cost price. There are a few reasons for this, notably to lower taxes and lower commissions by lowering the gross profits from the sale. The surprise is that the dealer gets this back in a few months from the manufacturer. That is not your charge and you should negate this from your price.

Step 3: Negotiation

When you know the real invoice price for new cars, you are ready to make a deal. In negotiations it is key to be firm. Don't be afraid to start off with a low number. If you let the salesperson start out with the numbers, you are forced into using their numbers and moving on. But if you start off with a lower than invoice number, the numbers will go up, but not as much. Getting a car at the invoice price, or even at a discounted price below the invoice price is fully possible. The holdback cost above is one reason. Another reason is that the dealers get incentives from the heads of the corporations for selling cars. They can make even more profit this way. They rather not budge, but even if they do, they can sell a car at cost and still make money. One last reason is that they have to pay interest on the cars, and if they don't sell them, they are losing more money.

Related Questions and Answers

Where Can I find Out the Vehicle Dealer Cost of a Car?

The vehicle dealer cost is an important number for you to know when negotiating a new car deal. The dealer cost for a car is also known as the dealer invoice price. Many dealers advertise that they're selling at or below dealer invoice. You can check this by asking the salesperson to see the invoice for the car. Car makers also report the invoice price to a variety of vehicle research sites. The sticker price is the invoice price, plus destination charges, also known as transportation costs. Plus any dealer installed options and mark ups for profit margin.Who Sets the Automobile Invoice Price?

The major portion of Manufacturer's Suggested Retail Prices are automobile invoice prices. The invoice price is the base price of the car that the dealer pays. This is the price that gets the car on the carrier for transport to the dealership. The final price for the car will also include a markup to include the cost of transportation to the dealership. The dealer invoice price is the price the manufacturer charges the dealer for the car. This price is set by the car maker and takes all production and development costs into account. Including a markup to ensure a profit.

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