Your new car will be expensive. There's no way around that. Developing a smart negotiating strategy can, however, help you get the best possible deal - and it all starts with finding the car's invoice price.
Not sure why, or what invoice pricing even is? Consider this your new car buyer's negotiating crash course! Arming yourself with the information dealerships would rather keep to themselves puts you in a much stronger position to get a fantastic deal on your new vehicle.
What Is a Car's Invoice Price?
Think of a car's invoice price as the wholesale rate - the initial price your dealership pays the manufacturer for the vehicle before subtracting incentives (more about those later). This price, determined entirely by manufacturers, includes:
- The realistic manufacturing cost - including raw materials, labor, energy costs, and so on.
- The freight charges associated with transporting the vehicle to the dealership.
- Advertising costs that the manufacturer incurs to market the model.
All these costs are passed on to buyers. The Manufacturer's Suggested Retail Price (MSRP, also called sticker price - the price dealerships aim to sell a car at) includes all of these components, plus more.
Fair enough, right? The dealership also has to make a profit. Keep in mind, however, that the invoice price isn't necessarily the final price a dealership pays for a vehicle. Various factory-to-dealer incentives, volume allowances, and dealer holdback all converge to create a situation where dealerships acquire vehicles at prices below invoice pricing.
Why Should a Car's Invoice Price Matter to Buyers?
If you smell a fantastic negotiating opportunity, you're on the right track. While it's incredibly common for car buyers to negotiate for a better deal, dealerships aim to sell vehicles at a price as close to the MSRP as possible. Because most buyers negotiate down from the sticker price, they usually get what they want.
If you use a vehicle's price as your starting point and negotiate up from there, you're likely to get a much better deal. It's not uncommon for a vehicle's MSRP to be 20 percent above the invoice price. By knowing the difference between the sticker price and invoice price, you're in a wonderful position to find the sweet spot - that one price point that's favorable for you and your dealership.
How Does Knowing the Invoice Price Help You in Practice?
Let's say a car you're interested in buying has an MSRP of $24,000. What is the invoice price? Based on that 20 percent we looked at earlier, it's probably close to $20,000. If the invoice price is $40,000, the MSRP is likely closer to $48,000.
Once you know the invoice price, you can also use math to get a better idea of the realistic dealer cost - what your dealership actually ended up paying for a car after subtracting incentives like discounts, rebates, and holdback. The dealer holdback is a percentage the dealership "holds back" to offset the cost of doing business, and by subtracting this amount, you'll have a much clearer understanding of what the dealership paid for the car.
How to Find the Invoice Price of a Car
If you want to find the invoice price of a car, you have a few different options:
- Rough math. If you go by the idea that the MSRP can be as much as 20 percent higher than the car's invoice price, you can work the rest out from there. This method is imprecise, because invoice pricing depends on quite a few different factors.
- Consumer Reports. This handy resource offers books, magazines, and online services to help consumers find hidden dealer charges and bottom-line prices of new and used vehicles.
- Invoice Pricing. You can also use our application to find the invoice price for the vehicle of your choice without any hassle - and start negotiating from a place of knowledge.
Can You Afford That Car?
Once you find the invoice price of a car you're interested in, plug the numbers into the Invoice Pricing calculator. Our Monthly Auto Loan Payment Calculator helps you find out how much you can afford in monthly payments, allowing you to look for vehicles that fit your budget nicely.
How to Buy a Car at Invoice Price
While it's rare to be able to buy a car at invoice price, knowing what that number is will definitely help you get a lot closer. Here's how:
Negotiate
Once you know a car's invoice price, you can shift your negotiating strategy. Rather than negotiating down from the MSRP, you can work your way up from the invoice price until you arrive at a mutually beneficial price point.
How successful is this strategy? It depends on how popular the vehicle is, how eager the dealer is to sell it quickly, and how big the manufacturer's incentives are. Chevrolet, Ford, GMC, Dodge, Chrysler, and Jeep are all known for offering large incentives, giving you a better chance of buying these vehicles at or below invoice price.
Shop Around
Invoice pricing varies greatly from region to region, but it's usually the same for all dealerships in a single area. Once you know the invoice price, you can shop around to get the best deal possible.
Choose a Less Popular Vehicle
Dealerships might not be willing to offer you the deal you're hoping for on the most popular vehicles. However, if you're open to considering other models, including those that have been on the lot for a long time, you have a great opportunity to get a big discount. You can sometimes get a car at invoice price or below if the dealership is trying to free up showroom space for new models.
Contact Us Today
Don't overpay for your new car! Find the invoice price and start negotiating from a place of power. Invoice Pricing has calculators, apps, and handy sources to keep car buyers informed. Contact Invoice Pricing today to get the best possible deal on a new vehicle.
