Buying a new car can be one of the most exciting and important purchases you’ll make. You want a good vehicle, at a considerable value, and don’t want to overpay for what you need. Unless you’re within the automotive dealership industry already, understanding what a fair price is for a new vehicle can be daunting.
So how can you know that the price you’re paying is fair, reasonable, and appropriate? Knowing the dealer invoice is a vital component to knowing whether or not you’re overpaying, and can help you negotiate a fair sale.
What is a Dealer Invoice?
So what is the dealer invoice? Specifically, the dealer invoice represents the price that the dealership paid the factory for that vehicle. This is distinct from the MSRP, which represents the manufacturer’s recommended retail price for the vehicle.
The dealer invoice can be tougher to track down but will be lower than both the sticker price, and the MSRP. Let’s assume that a dealership pays the factory $60,000 for a new vehicle. The price suggested by the manufacturer for this model may be $63,000, and some dealerships will ask the public to pay up to $65,000 for the same vehicle.
This is $2,000 higher than the MSRP and a disquieting $5,000 above the dealer invoice price. Understanding what the dealership paid for this vehicle can help you negotiate better, and get a much fairer price.
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How is the Dealer Invoice Calculated?
Dealer invoice is calculated by tallying
- The basic price of the vehicle itself
- The price of any additional options or features
- Destination fees that cover the transport of the car from the factory to the dealership
- Manufacture fees which often cover advertising and marketing
Additional options and features may include luxury interior materials, added cameras, wireless charging stations, heated seats, and other features that don’t come with the base model.
Destination fees factor in fuel costs, driver pay, the distance the vehicle must travel to the dealership, any import fees if the vehicle was built abroad, and the size of the vehicle being transported.
Manufacturers’ fees cover the cost of advertising and promotion, e.g. televised ads, magazine promotions, and newspaper advertisements.
Hidden on the dealer invoice are possible incentives and rebates that the dealer can be offered to sell a particular make and model. The company may give dealerships what is called a “holdback rate” for selling the vehicle. It’s a bit like buying something on a rebate.
Meaning, once the vehicle is sold, the dealership gets a check in the mail for moving that particular vehicle. This added profit is not factored into the invoice or the MSRP, meaning that the dealer could be making more from the vehicle than what you’re paying.
Importance of Knowing Dealer Invoice
Once you understand what the dealer paid for the vehicle, you can get a much more realistic view of the vehicle’s true value, and negotiate better. If you were to assume that the dealer paid the sticker price for the vehicle, you might be less inclined to request a lower price and over-pay for your new car.
Remember, the sticker price or MSRP is never the price that the dealership originally paid for the vehicle. So while viewing the MSRP can make you feel as though you’re getting a great deal, remember that this number only reflects what the dealership *could* sell the vehicle for. The actual price you pay for the vehicle could feasibly be lower than this.
How to Find Out the Dealer Invoice Price:
How do you get ahold of the dealer invoice? As this is an industry-specific document, it’s something you may have to request from the dealership itself. Contacting the dealer via email may be the simplest, least-intimidating way to request and view the invoice. The dealership’s manager should have a business email listed on their website.
This is a great way to keep the correspondence friendly yet direct and avoid some of the emotional confusion and sales pressure that many buyers experience in a physical dealership. Feel free to keep the message brief and polite, and request the dealer invoice on the vehicle you’re considering.
If management refuses to allow you to see the invoice paperwork on a vehicle, you may be able to find the dealer invoice on a make or model-specific discussion forum. These are great places to talk anonymously with other car enthusiasts, and someone may post the dealer invoice, as seen here.
Is there another way to get a hold of a dealer invoice that doesn’t involve sending an email, or interacting with a salesman? Some websites may be able to give you a rough estimate of the dealer invoice price. Edmund’s can give you a ballpark estimate of what a dealer may have paid for the vehicle. This website tallies factors such as average dealer markup, incentives and rebates coming to the dealership should they sell the vehicle, and a fair price.
J.D. Power also has a fantastic car pricing website that can show you the invoice price for a vast number of makes and models, as well as indicate what an average buyer in your area pays for a vehicle.
Other resources to look at include apps, such as Edmund’s app, which can help you get a clearer sense of a vehicle’s true value, and what other buyers have paid. Other car-buying apps like the Cars.com app can steer you in this direction, and provide the MSRP as a guideline.
Tips for Negotiating Based on Dealer Invoice
When you know what the dealership has paid for a vehicle, it can give you a keen weapon in your bargaining arsenal. This cuts directly through the MSRP and allows you to potentially wind up paying below the suggested retail price for your next vehicle.
If you have a trade-in, this can also lower the price you pay for the car, and having a good sense of your trade-in’s value is important, too. Negotiating and bargaining are much easier when you’re paying cash, but even buyers who finance can negotiate for lower interest rates.
Be firm on what you can and will pay, and don’t be afraid to walk away rather than over-pay for a vehicle. There are other dealerships out there, and if you leave your contact information with an initially stony salesman, you may be surprised by a call-back message of “let’s talk”.
Factors to Consider When Determining What You Should Pay
When buying a new car, it’s also important to not go over your budget, and carefully consider which vehicle options are must-haves, and which you can do without. Do you need a moonroof? I mean…do you really need a moonroof? If this is a feature you can do without, your sacrifice can save you hundreds. The more extras you can do without, the more you’ll save out the door.
Understanding what value this new car has to other consumers is important, too. If you know what your fellow drivers are willing to pay, this can serve as a useful negotiating tool.
Having a good sense of market value can also help you determine the price you can get if you ever decide to sell your car. This vehicle may be a hot item today, but what value will it have in five years? In ten years? If the vehicle is likely to lose value quickly, consider whether this is the best car for you. You may be better served by something less popular, but better built.
Conclusion
Dealer invoice is the actual price that a dealer paid for a new vehicle, from the factory. This price incorporates the base vehicle price, as well as the cost of transport and the price of any additional features. This is lower than the MSRP and can be used to negotiate a lower price for a new vehicle.
Be firm on your price, and be willing to walk away from a bad deal. When you come armed with the dealer invoice price, this can help you bypass extra costs and fees, and get an excellent deal for your vehicle.
Consider the features you need vs. the features you want, as sacrificing extras can save you a considerable amount of money. Be aware of the value this vehicle will have in the long run, and always stay within budget.
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