Car Buying Tips: What Exactly Is Dealer Invoice?

My first answer to that would be..

My first answer to that would be... who really knows? It's a very elusive term thrown around by about all the car manufacturers' and car dealer's marketing departments. You know after many years in the business, I'm not sure I could tell you precisely what true dealer invoice or what is termed 'dead cost' is on any particular vehicle. I'm sure the owner or the ownership group could somehow calculate this elusive dollar figure but most of us humans will continue to search for the ever elusive animal we refer to as dealer invoice.

To say this term is a bit misunderstood is a rather large understatement. Maybe that's why it works so good for the folks in the marketing department. Many potential car buyers assume that what they uncover on the internet is the car dealer's invoice price. Well, not really. It's certainly one heck of a lot closer than checking the MSRP of a give vehicle, but it probably isn't going to be 'dead cost'.

You hear it all the time. In fact right here where I'm at there is a local dealer that says all you'll ever pay is $50 over factory dealer cost; and they have been selling cars this way since day one oh so many years ago. I guess it shouldn't, but it really baffles me how this works on the consumer. Just do the simple math; if this dealer sold 300 cars a month (about 10 cars a day!) times $50 over factory cost (the inference here is that you are paying $50 over what the dealer gets the car for) this dealer would be grossing $15,000 per month on new car sales. I can unequivocally tell you that this would never cut the mustard! Think about it $15,000 a month and this dealer hasn't even paid rent, utilities, insurance, salaries, benefits, and on and on. So, $50 over factory invoice... not hardly.

So what is it then... this thing car dealers call cost or invoice? Well, it's a bunch of numbers being added - subtracted - multiplied - and divided before anyone knows the dead cost of the car for the dealer.

What's a consumer to do?

Getting out on the internet and doing your homework is a very good start. The exercise of comparing the information you gather is a good one and is to your advantage if you want to start your negotiations at 'invoice' price. Which, by the way, you NEVER negotiate from the sticker price down.

While doing your research on dealer invoice prices it's important to make certain you are comparing exact features and option packages to one another. This will at least give you baseline comparisons with which to work. All car dealers receive different incentives from the manufacturer; factory to dealer - marketing incentives - dealer holdback, and on and on. The fact that much of this is not disclosed is why it is very difficult to come up with dead cost for the car dealer.

For instance, in the case of dealer hold back; the dealer doesn't even get this money until after the car is actually sold.

There are other expenses that the dealer has that are applied to the overall cost of a particular car, including how long a particular car has been sitting on the lot. You see the dealership finances their inventory and as such pays interest on this financing so a car that has been sitting on the lot for some time has cost the dealer more than the ones that they are just unloading from the truck.

As you can see, there are too many variables to any particular car at any particular dealership to know exactly what the dealer has put into a car in terms of cost. However, as we talked earlier, doing your research on the 'invoice price' is a good place to start. Just don't stop there thinking you have all you need and don't need to do any further negotiating on the selling price.

Purchasing cars and negotiating is almost synonymous. Getting a good feel for the invoice price is just a starting point. Now it's time to roll up your sleeves and work on getting the best possible price you can.

by: Jeff Neilan

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