back to articles | December 31, 2018 | Dale Peterson
Categories:   Tips & Insights For Car Buying    Vehicle & Buying Research
Auto Invoice Prices
What is the auto invoice price?
Auto invoice prices are no big secret. Invoice prices are available online from several auto-related Web sites. But the information is not as valuable as you would like to think. These days, buyers often go into car dealerships armed with their own direct auto loan and with what they think is valuable insider information: a car's "invoice price". Keep in mind the invoice price might not be what the dealer paid for the car. That's the price the manufacturer, supposedly, charged the dealer for the car. Buyers are often advised to use the invoice as a starting point for price negotiations. In many cases the invoice price is far from the last word on how much a dealer paid for a given car. In fact, it's possible that knowledge of invoice prices could even work against you if you are not careful.
Invoice Prices: A Good Deal?
Some cars, especially newer and popular models that are in tight supply, sell for close to the manufacturer's suggested retail price (MSRP), or sticker price -- thousands of dollars above the invoice price -- and many times, dealers can get more than that. On one of those cars, any deal that approaches the invoice price would be a great deal. On many vehicles, though, it is possible to negotiate a better sales transaction price, the price of the car without factoring in any money from consumer rebates, that is lower than invoice prices, mainly because the dealership itself actually paid less than the invoice price.
There are different mechanisms through which dealers can end up paying less than invoice prices. Through something called a "holdback," dealers often get money back from the manufacturer once the car is sold. Holdbacks usually amount to some percentage (points) of the invoice price, or a set fee of say a few hundred dollars. Holdbacks do vary from dealership to dealership by measurements such as customer satisfaction and service ratings.
Invoice Prices and Dealer Rebates
Just as manufacturers offer targeted rebates to customers, they also offer essentially the same thing to auto dealers. These Manufacturer-to-dealer incentives are applied to specific models and they can amount to thousands of dollars. This is not reflected in invoice prices. When a vehicle with a manufacturer-to-dealer incentive is sold, the money goes directly to the dealer. This type of vehicle-specific dealer incentive can vary from month to month and from one part of the country to another. In some cases, manufacturers can offer manufacturer-to-consumer cash rebates and manufacturer-to-dealer incentives on the same vehicle. These are thousands of dollars that are not deducted from the invoice price.
Invoice Prices and Dealer Incentives
Manufacturers often add so-called volume incentives on cars. If auto dealers sell a certain number of cars in a given month or quarter, they get a financial reward from the manufacturer, which is not reflected in the invoice price. The trouble is, the dealer can't always predict whether it will meet that goal. So he can't know, for sure, whether to let you keep that extra money. If you're lucky, and your timing is right, a dealer may be willing to drop that extra couple of hundred dollars in order to meet a quota to get the manufacturer incentive cash.
So how do you know if the auto you're looking at has manufacturer-to-dealer incentives on it? These incentives vary greatly from one place to another and one time to another, and are never reflected in invoice prices. Unlike rebates and other consumer incentives, manufacturers don't announce these incentives to the public. It is impossible to know as much as the dealer knows about what the incentives are and when they get applied. However, the more you know about the true invoice price, the better you're going to do. Kelley Blue Book's Web site, KBB.com, provides what it calls "New Car Blue Book" values for cars. These include the average, high and low prices people are actually paying for vehicles, as well as notes on "market conditions." The market condition information will say whether manufacturer-to-dealer incentives are being applied to a vehicle. Volume discounts are very difficult to find out about. They are highly localized and highly variable. In addition, individual dealers vary in their strategies for using volume discounts and maintaining profits. Some make it a priority to hit volume incentive targets, others would rather not hurt their profits on individual deals in hopes of hitting those goals.
Invoice Prices: Final Word
The smartest thing to do is to shop at the right time of the month or year and ask for prices from several dealers. Continue to do your research on sites like myAutoloan.com and learn as much about the auto you want to purchase. Getting your financing online is another way to save a lot of money in the process and keep you focus on the sale transaction price, not the invoice prices, of the car you are searching for.
It's important to remember that invoice price is just one part of a car deal. As we have pointed out, getting your car financing pre-approved and settled before you go to the dealer is a great way to save a lot of money. Understand that invoice on some popular autos is a great price. We recommend that you negotiate the three components of the Auto-Purchase Transaction separately:
- Price of the new or used auto
- Trade-in value
Don't ever let a salesperson talk you into trying to negotiate more than one transaction at a time. The more prepared you are the better your final sales price will compare to the invoice price. so, get your financing direct and go online to find the best loan for your credit history.