What do shoppers looking for a minivan, truck, and sports car have in common? They all want to get the best possible deal on their new vehicle. Since most dealers aren't going to sell vehicles at a loss, understanding what the dealer paid for the model you're interested in can help set realistic expectations about how much you can negotiate. Researching the dealer invoice price will give you a competitive advantage. Here's how the dealer invoice price is defined, how it differs from a vehicle's MSRP, and how you can use it when negotiating with the salesperson.
What is the Dealer Invoice Price?
The dealer invoice price is the price that a dealer pays to purchase a vehicle from the manufacturer. Although it provides an estimate for the price the dealer paid, the dealer invoice price is usually higher than the cost the dealer paid, according to Edmunds. Automakers typically offer discounts to dealers in the form of dealer holdbacks and cash incentives. A dealer holdback is when a dealer pays a certain price to the manufacturer which is listed as the invoice price, and after the car is sold, the manufacturer pays some money back to the dealer.
The dealer invoice price doesn't include additional fees like the destination charge, tax, title, and registration fees. You should expect dealers to ask for more than the invoice price, but depending on the demand of the vehicle, you may encounter a price at or below the dealer invoice.
Finding the Dealer Invoice Price
According to NADA Guides, invoice prices were once heavily guarded, but have become much easier to find in recent years. Online searches and sources like Kelley Blue Book, Consumer Reports, and Edmund's True Market Value tools can offer insight into the dealer invoice price for your specific make and model. They also provide a fair market value which is an estimate of what the vehicle is actually worth. Although online searches can provide a good estimate to help you negotiate, the accuracy will vary depending on factors like region, online marketing fees, and mid-year pricing adjustments.
Dealer Invoice Price vs. MSRP
The dealer invoice price oftentimes gets confused with the vehicle's MSRP or Manufacturer's Suggested Retail Price, but they are not interchangeable. The dealer invoice price is essentially the wholesale price for the dealer, while the MSRP is the sticker price for the consumer. The dealer invoice price tells you the price of the car without the dealer markup, giving you some sense of what the dealer paid for the vehicle. However, this number isn't always a true indication of the cost to the dealer since it leaves out some incentives and manufacturer refunds that the dealer received.
The MSRP is the consumer-facing price the manufacturer assigns for each vehicle. As the name indicates, the MSRP is a suggested price and dealers are able to sell the vehicle above or below that number. "Total MSRP" or "sticker price" is the base price plus the destination charge and options. High demand for a vehicle can drive the vehicle's price up while low demand can drive it down.
Knowing the dealer invoice price is one of the best tools you can arm yourself with for negotiating. Although you may not be able to purchase the car for as low as the dealer's cost, doing your homework still pays off. Find out the dealer invoice price and the MSRP for the vehicle you're eyeing and shoot for a price somewhere in between.
After you've done the initial research, ask for new car quotes from all the dealerships in your area to use as leverage when you go in to buy the vehicle. When you're negotiating the car's price, make sure you avoid discussing your desired monthly payments. Insist on negotiating the lowest possible price on the car first and after you land on a comfortable number, you can move on to the financing and trade-in. Remember that it's ok to walk away from a deal if you don't get a fair price. You can shop around at multiple dealerships before you sign the contract.