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Tell Fact From Fiction with Dealer Invoices- Learn The Fair Price To Pay For A New Car

Some of the most common new car ads go something like this: “Drive down today and we’ll sell you a brand new car at only $150 above our dealer invoice price!” – “We have to move these cars off of our lot and we’ll sell below dealer invoice prices to the first five people who come to our showroom!”

A new car dealership that will only make $150 off a sale to you or even take a big loss??? What we’re going to do is help you negotiate a real deal on your new car by helping you understand fact from fiction in new car dealer invoice prices. Then after you have received your free price quote and you’re ready to start negotiating, you’ll have the edge.

Is The Dealer Invoice Price The Same As The Dealer’s True Cost?

The dealer invoice price (also referred to as the factory invoice price) is what the dealership paid to the manufacturer for the cars you see on the lot; the dealership has to pay the manufacturer up front for all of the vehicles.

This invoice should include all charges the car dealer had to pay and usually includes the MSRP (the manufacturer’s suggested retail price). It will also include the following:

  1. The base cost of a certain model of vehicle
  2. Any options/packages installed at the factory
  3. Destination/delivery fees to transport the car from the automaker’s factory to the dealer’s lot
  4. The dealer holdback which works out to around 2 or 3 percent of the MSRP or invoice price
  5. Regional advertising by the manufacturer and/or advertising geared towards a dealers specific target market

Look back at No. 4 again; the dealer holdback. This is the perfect example of why the dealer invoice price isn’t the true dealer cost on that new truck you want to buy; this holdback is returned to the dealer. While the destination/delivery charges are non-negotiable (all dealerships have to pay to have vehicles shipped) the holdback can be used to negotiate a better price.

Dealer invoices also don’t take into account all of the incentive programs, volume bonuses, rebates, discounts, etc. that manufacturers offer to spur as many sales as possible. The faster a dealership sells cars, the higher their incentive money. When you factor all of this together it’s pretty clear that the dealership paid a lot less for a new vehicle than what dealer invoices show.

Understanding The “Four-Square” Game So You Can Beat It

What is the “Four-Square Game?” Car salesman will literally take a piece of paper and draw out 4 squares that encompass car payments to the value of a trade-in. This helps them see the total profit the dealership will make, as well as effortlessly see every piece of the sales transaction. This is what the four sqares contain:

  1. The vehicles purchase price and what the car dealer is asking for it; sometimes they will note the base price and then add something like “plus charges/fees”. This means that further costs (licensing, sales tax, etc.) needs to be paid by the buyer.

  2. If you’re trading in your old car, the dealer will give you a trade-in allowance/credit and how much will be applied towards your new car.

  3. The next section will have any down payment you are making in cash and/or on your credit card. While it can differ between dealerships, ideally they would like you to put down around one-third of the sale price.

  4. Last comes the monthly auto payment and the salesman will put down the amount of money you have said is the max amount you’re willing to pay. Do take note, as this number is what the salesman will focus on since it’s such a big part of your monthly budget and smaller amounts just sound better versus the long term costs.

All four sections are related and as such any modification to ‘one square’ can be adjusted for in one of the others. For example, let’s say you tell the salesman you want a higher trade-in allowance and they immediately tell you no problem; it’s because they’ll bump up another square to get what they wanted and so you’ll think you were a master negotiator. Here’s how you can beat them at their own game:

  • The best way is not to let anyone make it so darned complicated to begin with; think about selling your old car on your own and having all cash for a down payment- maybe talk to your bank about financing your new car through them and not with the dealership’s financing? Both of these examples simplify the process and takes a large portion of the 4 square off the table.

  • If you want to get a better deal, don’t play their game; make the dealership play yours.

By doing exactly what you’re doing now and deciphering fact from fiction when it comes to dealer invoices, along with how to play the 4 square game you’ll be able to make an informed decision when you buy your new car. Then use your free competing new car price quotes and available manufacturer incentives to negotiate a real deal on that new car or truck you’ve got your eye on.

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Car buyers equipped with pre-approved price quotes, dealer rebates and incentives are guaranteed to pay less. Know actual dealer cost, factory invoice price, and MSRP. Pay less than sticker price, deduct bonus cash rebates, secret dealer incentives, and special internet discounts. Informed new car buyers never need to haggle. Request free competing new car price quotes and uncover the savings today!