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Woman shopping for a new car, talking to a car salesman.

What is Dealer Invoice and Dealer Cost?

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Many people assume that car dealers are giving you their best deal when they claim to be selling their vehicles at just over “dealer cost.” That term can be misleading, as it includes a wide number of incentives, rebates and other hidden expenditures the dealer makes to sell a car. The truth about buying any new car at a good price is that you must first understand the difference between dealer cost and dealer invoice if you want to find an actual bargain.

What Does Your Car Cost the Dealer – Including Everything?
Auto dealers will add the price of incentives, rebates and other expenditures into what they call their “cost.” Anyone who has studied seen auto advertising has likely heard the terms before — expressions like “factory-to-dealer incentives” and “instant cash back.” When all these sums are tabulated along with marketing and advertising costs, that figure is close to the total dealer’s cost for the car. Needless to say, this figure is significantly higher than what the dealers have paid the factory for initial delivery of that vehicle.

What Did the Dealer Pay the Manufacturer?
The “dealer invoice” is closer to the bottom line for dealers. That number — basically what the dealership has paid the factory minus some marketing considerations — is the closest you’ll get to something like a wholesale figure. If you can negotiate your car’s price closer to this number, you’ll be getting some actual concessions.

Of course figures such as these vary from manufacturer to manufacturer, so it’s important to understand how it works. For example, it’s not unusual for auto dealers that sell foreign cars to incur greater costs along the way, making their dealer invoice price an unrealistic negotiation starting points Considering tariffs, taxes and import fees that have to be added, the seller has to bump up his own invoice price in order to cover real costs.

Find a good car dealership you can feel comfortable working with and do your research ahead of time. When it comes time to negotiate, the more you know, the more effective you will be in getting a good deal.

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