How to Find the Invoice Price for a New Car?

When purchasing a new car, the invoice price is one of the most important numbers for buyers to know. The invoice price represents the wholesale cost of the car that the dealer pays to the manufacturer before any incentives or rebates. This is different from the Manufacturer's Suggested Retail Price (MSRP), which is the price the manufacturer recommends the car be sold for at the dealership. Knowing the invoice price gives car buyers leverage when negotiating, as it reveals how much wiggle room the dealer has to come down on price. This article will cover everything you need to know about finding and using car invoice prices to negotiate the best deal.

Car Invoice Prices

Finding Accurate Invoice Prices for New Cars

The first step to leveraging invoice pricing is finding the accurate invoice price of the specific new car you want to buy. There are a few ways to obtain invoice prices:

Online Car Pricing Services

The easiest way for most buyers to find invoice pricing is by using free online car pricing services like Edmunds, Kelley Blue Book, or TrueCar. After entering the make, model, trim level, and options for your desired vehicle, these sites will provide both MSRP and invoice pricing. The invoice price can sometimes show as "dealer cost" or "dealer invoice." Keep in mind that the invoice price from these sites is an estimate based on average dealer prices, not necessarily what an individual dealer paid.

Request Invoice Paperwork from the Dealership

For the most accurate invoice specific to the car you want, request a copy of the invoice paperwork from the selling dealer. Dealerships will often oblige this request as a part of negotiating a sale. The invoice paperwork will show the exact amount the dealer paid the manufacturer for that specific car. Having the true dealer invoice price gives you the most negotiation leverage.

Third-Party Invoice Services

There are also third-party services like Fighting Chance and Car Cost Canada that provide more granular invoice prices for specific vehicles. For a small subscription fee, these services give buyers access to dealer invoice pricing that is updated down to the VIN-number level. This can account for latest month-to-month fluctuations in invoice prices that online pricing sites may not reflect.

Using the Invoice Price During Negotiations

Now that you have the car's accurate dealer invoice price, how do you actually use it during price negotiations? Here are some tips:

Invoice Gives a Starting Point for Negotiations

View the invoice price as the baseline starting point for negotiations - assume you will pay a certain amount above invoice, not MSRP. Focus the conversation on how much you will pay over invoice, rather than taking off MSRP. For example, offer to pay $200 over invoice, rather than $2,000 under MSRP.

Aim for Paying 2-3% Above Invoice

Shoot for paying only 2-3% above the dealer invoice price as your target goal. This generally equates to 5-8% under MSRP. Paying several percentage points above invoice allows the dealer to still make a small profit on the car itself. Be prepared to negotiate up from here if needed.

Gives You Leverage on the Final Price

reference the invoice price to exert leverage when the dealer pushes back on your offer. Pointing out how much higher their proposed sale price compares to the invoice gives you justification to negotiate the price back down. Use a firm yet friendly tone, and be willing to walk away if needed.

Knowing the exact dealer invoice price for a car's VIN gives buyers important context on what a fair sale price should be. Use this insider information during negotiations to argue for a final sale price as close to the true dealer cost as possible.

Dealer Markups and Profits on New Cars

Now that we've covered using invoice prices, it helps to understand exactly what the invoice price means in relation to the rest of a dealer's costs and profits.

Markup Covers Overhead Costs

The difference between MSRP and dealer invoice is referred to as markup or "overhead." Markup covers the dealer's operating expenses and their profit. Expenses covered include:

• Salesperson commissions
• Finance and insurance department costs
• Advertising and marketing spending
• Facilities, real estate, and admin expenses

Markup Averages 5-10% of MSRP

Across the auto industry, the average markup from invoice to MSRP is 5-10% for most vehicles. Mass market brands tend to be on the lower end around 6%, while luxury brands markup closer to 10%. This markup amount goes straight to dealer profit on the sale.

Market Demand Also Impacts Markup

Dealers will often markup certain vehicles with high market demand more than the average. Trucks and SUVs are commonly marked up higher when supply is constrained and demand is hot. Rare or specialty vehicles also typically carry higher markups.

Invoice price

Other Invoice Pricing Factors to Know

While dealer invoice establishes a baseline for negotiation, there are some other important factors that impact the true dealer cost.

Incentives and Volume Discounts

Manufacturers offer dealers various incentives and discounts to lower costs, especially on slow-selling models. These can range from dealer cash back to volume discounts. Make sure to factor any current discounts or incentives on your desired car into the true dealer cost.

Factory-Installed Options Not Included

The base invoice price does not include factory-installed options, packages, or accessories. The dealer likely paid extra for options fitted on a car you're looking at, so account for these costs.

Advertising Fees and Aftermarket Add-Ons

Beyond the base car, dealers make significant profit on advertising "addendums" and aftermarket accessories like fabric protection and extended warranties. Be prepared to say no to these.

Taxes, Titles, Fees Can Vary

Lastly, remember that taxes, government fees, titles, registrations, and document preparation fees are added onto the negotiated purchase price. These can vary by location.

Summary

Equipping yourself with a car's accurate dealer invoice price gives buyers important context and leverage when negotiating the final purchase price. While not the sole factor, targeting 2-3% above the dealer invoice price is a smart starting point to aim for on your next new car purchase. Use online resources or the dealer's own paperwork to find the invoice, but be prepared for additional fees outside of the base price. Knowing the dealer's true cost for the car you want will help you negotiate the best deal.

FAQs

What is an invoice price?

The invoice price is what the dealer pays the manufacturer to acquire the vehicle. It is typically lower than the MSRP.

How can I find the invoice price?

Online pricing services, asking the dealer, and third-party invoice services can provide this information.

Should I pay the invoice price for a new car?

No, you can typically negotiate 2-3% above the invoice price to get a good deal.

Does the invoice price include all fees?

No, it usually just covers the base price. Options, addons, and fees are extra.

How much profit do dealers make on new cars?

The average dealer markup is 5-10% above the invoice price. This is their profit on the sale.

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