Want to get a new car for the best possible price? Of course you do! But, as Chris Voss, former FBI hostage negotiator and author of the very practical book Never Split the Difference, says, "Hope is not a strategy."
You have to negotiate with the car dealership "in their world," and it takes information to make that happen. If you're still confused about what a car's sticker price is, and exactly what that includes, that's a solid place to start.
The two prices that trip most prospective car buyers up are the vehicle's invoice price vs. MSRP. Understanding what they are is the first step toward using these price points to your advantage.
What Is a Vehicle's Invoice Price?
A vehicle's invoice price is essentially the wholesale price - the base price your car dealership pays the manufacturer. The costs that contribute to this price include the raw manufacturing costs (including raw materials, labor, and energy costs), the freight charges involved in transporting the vehicle to the dealership, and advertising fees the manufacturer has invested in the model's marketing.
When you understand the factors that determine a vehicle's invoice price, it becomes clear why these costs can vary from one region to the next, but usually stay the same for all dealerships within a specific geographic area.
Keep in mind that the invoice price is not necessarily the actual price a car dealership ends up paying for a vehicle. Factory-to-dealer incentives (discounts or rebates to show a model or meet sales targets), advertising allowances, and volume bonuses (rebates for selling a certain number of cars), can all bring the realistic cost a dealer incurs down.
Buyers should also keep holdbacks in mind. These are costs or incentives that dealerships literally "hold back" from the manufacturer to invest in marketing vehicles.
If a car dealer sells the vehicle for more than the invoice price, they make a profit - but the margin depends on the precise sales price. It's Capitalism 101 at its finest. If a dealer opts not to apply trickle-down principles to manufacturer incentives, they make a bigger profit while you pay more.
It should now be clear why finding the invoice price of a vehicle is in your best interest, putting you in a stronger negotiating position. It's not easy, though, because invoice prices aren't public knowledge. You need specialized sites, like Invoice Pricing, to help you uncover the invoice price.
What Is a Vehicle's MSRP?
A vehicle's MSRP - "manufacturer's suggested retail price," also called the sticker price or Monroney label - is the price you'd pay for a car if you walked into a dealership and did no negotiating whatsoever. It's the number you'll see on a car's window sticker.
As the name suggests, the MSRP is the price the manufacturer advises dealerships to charge buyers for a vehicle. Guess what? A car's MSRP is very different from its invoice price.
Although the exact difference varies enormously, depending on the model, trim level, and additional options, it can be a lot. In some cases, the MSRP is as much as 20 percent higher than the car's invoice price.
The difference between a car's MSRP and invoice price is the source of all the power you hold as you negotiate with dealerships. The basic principle? Your dealership needs to sell a car at a price point over the invoice price to profit, and while they'd love for you to just pay the sticker price, they absolutely don't need you to pay that number to stay in business.
How Can You Use The Difference Between Invoice Pricing and the MSRP to Your Advantage When You Buy a Car?
By now, it should be obvious that knowing a car's invoice price gives you staying power during the negotiating process. The invoice price isn't advertised (for obvious reasons), so you'll have to do some research to get your hands on this number. Invoice Pricing is one platform that can effortlessly help you find invoice prices.
Being familiar with both the MSRP and the invoice price allows you to understand what offers are mutually favorable for you and the dealership. It's your secret weapon in negotiations. Most buyers negotiate their way down from the MSRP, which can knock a little off the price. By doing the opposite and negotiating up from the invoice price, you'll get a better deal.
Another thing that strengthens your negotiating position as a buyer is to get pre-approved for a loan before you walk into the dealership. This process anchors your negotiating strategy in a specific number and helps you avoid the trap of accepting a dealer-offered loan with higher interest rates.
Invoice Pricing's Monthly Auto Payment Loan Calculator helps you understand how much you can afford to pay for a new car, and even allow you to apply for loans. To get the best rates, choose a term that is under five years.
One final tip? Avoid buying optional add-ons. Extended warranties, protection plans (for tires, paint, and other car parts), and gap insurance tend to be overpriced. They can cause your monthly payment to shoot up dramatically. Want an extended warranty? You can always buy one later. Need gap insurance? Ask your auto insurance company. They typically offer much better rates.
How Invoice Pricing Can Help You Get a Better Deal
Invoice Pricing offers a range of tools to help you get the best price on a new vehicle. Our platform gives you the info you need to start negotiating from the strongest possible position.
Start by checking our Monthly Auto Payment Loan Calculator to find out how much you can afford to pay. Enter the car price, discover your estimated interest rate, and adjust the payment terms to find a monthly payment that works for you. Then, start shopping for cars in your ideal price range.
Discovering a car's invoice price can be extremely difficult - so we take care of that part. Complete our Invoice Pricing Application with details like the make, model, and trim of the vehicle you're interested in. Add your ZIP code and follow the instructions.
Leave us your contact details, and we'll be in touch with the information you need. Negotiating has never been this easy!
Contact Us Today
Invoice Pricing gives you all the tools you need to get a great deal at the dealership. Get the best price on a new car and drive away feeling satisfied (and maybe even a little smug). Contact us today to learn more about how we can help.
