A car is one of the most expensive items most of us will ever buy. It's not uncommon for a car to cost $25,000 or more, especially if it's brand new. This can be a lot of money for many people to pay, and unfortunately, car dealers are often unwilling to budge much when it comes to the price.
However, by finding out the vehicle's invoice price, you can lessen the haggle and hassle involved with buying a car. You can learn to negotiate more effectively and get the best deal possible on a new vehicle.
What Is the Invoice Price?
You may wonder: what is the invoice price of a car, and why is it important? The invoice price is the initial price the manufacturer charges the dealer. While other industries use invoice pricing, it is most commonly used with cars.
The invoice price includes freight, which is also known as the destination charge. The manufacturer charges this fee to deliver a vehicle to the dealership. This cost is passed on to the consumer. It is not included in the Manufacturer Suggested Retail Price (MSRP) of the vehicle and is typically not negotiable.
However, the invoice price is not usually the final cost the dealer paid. The final cost is typically lower because dealers often receive cash incentives or holdbacks that bring down the cost. A holdback is a percentage of either the invoice price or MSRP that the vehicle manufacturer repays to the dealer. This helps supplement the dealer's cash flow.
Why Is the Invoice Price Important?
The car dealer wants you to use the MSRP as the starting point for negotiations. This is the car's sticker price, which can often be found on the vehicle at the dealership.
However, by using the invoice price as your starting point, you can better see what kind of a deal you are getting on a vehicle. By knowing both the invoice price and MSRP, you can get the best possible deal since these two prices can vary widely. It's not uncommon for the MSRP of a vehicle to be 20% above the invoice price.
Invoice Price Example
If the MSRP of a car is $24,000, what is the invoice price? Probably close to $20,000. If the invoice price is $40,000, then the MSRP may be around $48,000. This is based on the dealer charging 20% above the invoice price.
However, there is a formula you can use to get a more accurate idea of how much the dealer paid for the vehicle. If you know the invoice amount, you may also be able to find the factory holdback percentage and the dealer incentive amount with some research. The holdback percentage is the amount paid to the dealer to offset the cost of doing business.
By taking the invoice price and subtracting the factory holdback amount - along with any dealer incentives - you can determine how much the dealer paid for the vehicle.
How to Find the Invoice Price of a Car
If you want to find the invoice price of a car, there are a couple of options:
Invoice Pricing. Use our application to find the invoice price for the vehicle of your choice.
Consumer Reports. This resource offers books, magazines, and online services to help consumers find hidden dealer charges and bottom-line prices of new and used vehicles.
Can You Afford It?
Once you find the invoice price of a car, plug these numbers into Invoice Pricing's calculator. Our Monthly Auto Loan Payment Calculator can help you understand how much you can afford to pay each month for a vehicle. You can use this information to look for vehicles within your budget.
How to Buy a Car at Invoice Price
Once you learn how to find the invoice price of a car, you can use that information to buy a vehicle at that price. Here's how:
Negotiate
Once you find out the invoice price, use that - not the MSRP - as the starting point for your negotiations. How much you can negotiate will depend on the popularity of the vehicle. You'll get a better deal if the vehicle is not that popular and the dealer is having a hard time selling it. For more popular vehicles, a discount of several hundred dollars is considered very good. Keep in mind that certain manufacturers, such as Chevrolet, Ford, GMC, Dodge, Chrysler, and Jeep, are known for offering large incentives, so you have a good chance of buying these vehicles for under invoice price.
Shop Around
The invoice price does not vary from dealer to dealer - it is pretty much the same all over. This means that if you can't get the price you want from one dealer, you should try a competitor. You already know the invoice price, so it doesn't hurt to shop around.
Choose a Less Popular Vehicle
If dealers aren't willing to offer you a deal on the vehicle of your choice, then your only other choices are to pay the full price or choose something else. Popular vehicles are money-makers for dealers, so discounts are rare. Instead, opt for a vehicle that's more likely to stay on the lot longer. Dealers will want to get rid of these vehicles quickly, especially if it's toward the end of the year and they need room for vehicles from the new model year. For some vehicles, you may even be able to pay below invoice price.
Contact Us Today
Now that you know how to find the invoice price of a car, you can avoid overpaying for your new vehicle. Invoice Pricing offers calculators, apps, and a variety of information to keep you informed about the car-buying process. Contact Invoice Pricing today to get the best deal possible on a new vehicle.
