What Buying A New Car Below Invoice Means
Many new car buyers are aware that if you purchase a car at invoice price you are getting a very good deal. You may wonder whether or not the dealer make any profit on invoice price sales. You may be asking, how is it possible for dealers to sell cars for below invoice price or at dealer cost and still make money. It is important to note that how much the dealer pays the car manufacturer is elusive.
Why? According to TrueCar.com, an outfit which research the auto industry, the term invoice price in the auto industry does not mean a set define cost as it does in other industries . Take for example an invoice for a car price $20,000 may not include a holdback (a discount dealers receive from auto makers which the dealer utilizes to help offset the cost of financing cars on the lot) of say, $1000.
In certain circumstances the dealer can also receive financial incentives from the auto maker to quickly sell certain models, particularly prior to the introduction of new models. The main objective of the dealer is to complete the sale, and they have the flexibility of using any assistance from the auto maker to make the sale.
Negotiate the Sale
An intelligent car buyer will do the extra research to see which incentives are available to dealers and negotiate with the dealer for the best price. Keeping in mind that there are a host of other options available to the dealer such as rebates, allowances, discounts, collections and other incentives .
Toyota Camry 4dr Sedan I4 Auto SE
Take for example that you are in the market for a Toyota Camry 4dr Sedan I4 Auto SE with a sticker price of $24,000 and invoice prices of $22,500. However the true cost is $3,000 below the invoice price. This includes $720 for the holdback (3% of base MSRP)and $2,280 in other incentives.
The dealer also receives incentives for carryover, which basically means the auto maker gives the dealer financial support for quickly selling the prior years model to make room for this year’s newer models. Volume bonuses and customer satisfaction bonuses are also available.
Let Dealers Compete for Your Business
Having a good knowledge of the dealers cost and incentives gives you good negotiating leverage. However, to get the best bargain price you should let dealers compete for your business.
Most dealers within a certain geographic area will receive the same holdback and incentives. Do not go to a car salesman. Try speaking to managers because they are more volume driven and a more keenly aware of the incentives available. Seek bids and prices over the phone and internet.
In fact the internet is now becoming the best way to negotiate a deal and get a list of options from different car manufacturers. You can use a service provided by CarBargains.com. For the price of $200 they will solicit bid from up to five car dealers in your area.
Ask the dealer for all the fees that are included in the invoice price. They have the responsibility to share this with the car buyer. These fees usually include cost the auto maker passes on to the dealer: destination fee (The fee charged by the auto maker to transport the vehicle to the dealer), regional ad fee and fees for optional features in the vehicle.
Addition fees may include fuel charge, floor plan fee, vehicle preparation fee, document fee (ranges from $0 to several hundred dollars depending on the state) and administrative fee
