What Does Dealer Invoice Mean?
When you're shopping for a new car, you might see a lot of references to the dealer invoice. Some dealers may offer to sell you a vehicle for a certain amount above the dealer invoice. Some may sell cars at, or even below, the invoice price. It sounds like a great deal, but you need to know what a dealer invoice really means before you decide if it really is a good price.
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Definition
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A dealer invoice for a new car reflects the cost of the car and its options rather than the maufacturer's suggested retail price for those items. For example, power windows and door locks may retail for $500, but their invoice cost might be only $300. The invoice also lists the destination charge, which is the cost of transporting the car to the dealership.
Cost
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While the dealer invoice includes the cost of the car, it does not reflect what the dealer actually paid for the car. Many other factors come into play, such as factory-to-dealer incentives that reduce the cost. Unlike rebates, which are given to the consumer, these incentives go to the car dealer, and he can pass them on to the consumer or keep them. A holdback, which is a flat fee or percentage of the invoice cost that is given to the dealer by the manufacturer, also brings down the cost to the dealer.
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Research
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Dealer invoices can be found on car-research websites, such as Edmunds and Kelly Blue Book. Because it is so easy to obtain this information from third-party sources, many car dealers will provide it to customers on request. You should get invoice information online before you start car shopping. When you find a car you're interested in, ask the dealer for the invoice so you can compare it to the information you obtained. If it doesn't match, ask the dealer for an explanation.
Time Frame
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Car manufacturers periodically raise the price of new vehicles, so if you use online sources to find dealer invoice information, make sure your information is up-to-date. If you pull a dealer invoice for the same vehicle from several websites and there is a discrepancy, it is likely caused by a manufacturer price increase.
Profit
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Because of the wide availability of dealer invoices and other information that lets consumers calculate the true cost of a car, many car dealers are finding other ways to boost their profit. They might add preparation fees or documentation fees, which are really pure profit. They might also pack a vehicle with extras, such as paint sealer or fabric protector that cost next to nothing but are sold at an inflated price. When you are buying a new car, be aware of this padding and don't pay for unreasonable costs or unwanted items.
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References
Resources
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