Ever wonder how car dealerships get new vehicles from the auto manufacturer? They buy them. Specifically, a dealership pays the manufacturer for its inventory. How much they pay for each car is represented on the dealer invoice — that’s the dealer invoice price.
What Is Dealer Invoice or Dealer Cost?
Dealer invoice is the amount the dealer pays the auto manufacturer to get a vehicle into its showroom and in front of customers.
Of course, it’s not as simple as it sounds in the auto industry. Other factors can affect dealer costs:
Dealer incentives: Automakers may offer bonuses when dealers meet specific sales quotas.
Dealer holdback: A dealer may be eligible for a rebate once a specific car is sold, typically 1% to 3% of the MSRP or invoice.
Sometimes, specific advertising or marketing campaigns funnel additional money from the automaker to the dealership. These conditions can all reduce a dealership’s actual price for a particular vehicle, even though the invoice price remains the same.
The dealer invoice price won’t be shared with you, but the information is available if you know where to look. Continue reading for more information about dealer invoices, where to find them, and how to use them.
What Is Included in Invoice Pricing?
The destination charge, or the price the manufacturer charges to deliver the car to the dealership from the factory, is fixed (non-negotiable). The dealer will pass this cost onto the buyer.
As for options, it depends on where and when the option was added to the car. Generally, there are three types of optional features:
Factory options are built into the vehicle at the factory.
Port options are installed at the port (for vehicles exported from factories in other countries).
Dealer options are added by the dealer, either at the customer's request or at the dealer’s discretion.
The dealer invoice usually includes factory and port options, while dealer options are not included.
What Is Not Included in Invoice Pricing?
The invoice price doesn’t include dealer markup or the premium a dealer may charge for a popular car. It also doesn’t include fees passed directly on to the buyer, such as taxes, title, and registration; these fees vary widely by state. All of those costs still contribute to the Out-the-Door price, which is the most important number for buyers. After all, that’s the amount that will actually be leaving your bank account!
How Do Dealers and Consumers Use Invoice Pricing?
Finding the invoice price of a car you want can be a good starting point for negotiations, and it’s usually readily available with a quick online search. Once you know the invoice price, it’s essential to understand how it can benefit you.
Though a dealer traditionally prefers to keep an invoice price under wraps as much as possible, there may be exceptions to this general rule. For example, some salespeople may show you the invoice price to demonstrate that they don’t have much room for negotiation on a particular vehicle, especially since savvy sales teams know more information is available to consumers than ever before, especially online.
The manufacturer’s suggested retail price, or MSRP, is the price consumers see in advertising or on the car’s window sticker. This “sticker price” is higher than the invoice price, but it isn’t necessarily how much the vehicle will sell for. Consumers looking for a deal generally try to negotiate a price above the dealer invoice but below the MSRP. Remember that the profit margin on a new vehicle is about 5% to 10% (a bit higher with used vehicles or luxury models), which should be close to the difference between its dealer invoice and its MSRP. In most cases, it’s unrealistic to expect to buy a car for its dealer invoice price or close to it, but remember, if you’re shopping for a less popular model or a model that’s being discontinued, the dealer may be more willing to negotiate just to move that vehicle off the lot.
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