What Is the Dealer Invoice Price of a Car?

What Is the Dealer Invoice Price of a Car?

Posted on Wednesday, August 9, 2017

The dealer price invoice is good knowledge to have.

What is the dealer invoice price of a car? The simple answer is that it is what the dealer pays for the car to put it on the lot. Some people feel that this price represents the “floor” to negotiation on a new car. How realistic is this price in the first place, and how should you use it when negotiating to buy a new car?

Understanding The Dealer Invoice Price

The most basic question any savvy shopper will ask is why do consumers even know this price? It seems, after all, like the kind of thing that car dealerships would keep close to the vest, both to disguise their overall markup and to have an advantage when negotiating the price.

The short answer is that the dealer invoice prices you see are likely, at best, ballpark estimates. In fact, researchers have uncovered that as the internet became more commonplace, these invoice prices ballooned; if you took them at face value, dealerships were paying more for cars while the MSRP, aka the “sticker price,” grew at a much slower rate. In theory, if you just look at the data, car dealers have been getting the short end of the stick for a long time. Of course, that is not the case.

The truth is that wholesale purchase of cars is a complicated business and the real price your dealer pays can be affected by a wide range of factors. Holdbacks, for example, are money paid directly to the dealership to stock cars on the lot. Furthermore, if a car has a “factory-to-dealer” incentive, rest assured, the dealership is keeping at least some of that incentive for themselves. After all, the dealer is in business to make money.

In short, the “dealer invoice price” probably is not the real price the dealer pays for the car. Even so, it is still worth knowing.

What price does the dealer pay?

Why Should You Know The Dealer Invoice Price?

At its most basic, it is worth knowing the reality behind the dealer invoice price so you know when a salesperson is trying to take you for a ride. Anybody with a familiarity with basic economics knows that you rarely get sold something for less than the price a business paid to stock it. So if you get that pitch, you can lob it right back at your salesperson.

The dealer invoice price also offers you an advantage in that you can treat it as the “real” price and just ignore MSRP completely. That nobody pays the sticker price for a car has been a truism for a long time. At this point, there is no reason to pay MSRP. Treat the dealer invoice price as a good starting place and go from there.

Finally, it is a good way to know what the real price range is. While it is probably just a ballpark figure, you likely cannot get too far below dealer invoice before getting some real pushback. That means that the dealer invoice price offers you an awareness of just how low your dealer is willing to go on a car.

So, when looking at cars, get to know the invoice price. It may not have much to do with reality, but it is a useful guide to what you might really pay. For more on buying cars, start with the research from CarFoundMe.