If you know how to read the invoice for a new car, you’ll be in a better position to negotiate a better price. At its most basic, the invoice for a new car is the cost to the dealer for purchasing the car. However, there’s a lot more to it than that, and the more you know, the more able you’ll be to work with a dealer to agree on a price that works for you.1
Ask to see the dealer invoice for the car you are interested in. The invoice price will include a number of things like the cost to the dealer to buy the car, the cost of shipping the car from the manufacturer to the dealer lot and the cost of franchise advertising.
Ask the dealer about holdbacks and incentives. These are additional costs rolled into the invoice price that the dealer actually gets to keep when the car is sold. That means that the invoice price has some dealer profit built into it.
Ask the dealer how long the car has been on the lot. Often dealers have to finance the purchase of the cars on their lots, which means they carry interest costs on the vehicles. If a vehicle has been on the lot for a while, then the dealer has incurred more of an expense.
Use the information you’ve gained to offer a fair price for the car. Often, you can offer the dealer a five to eight percent profit and still come in well under the manufacturer’s suggested retail price.