What Is a Factory Invoice?

When you buy a new car, you should do thorough research to help you determine a fair price and get the best deal possible. One of the best research tools is the factory invoice. You should know exactly what a factory invoice is, what it contains and what it actually means. Factory invoices are widely available for virtually all car models, so when you understand the information they contain you can use it in your negotiations.

Definition

A factory invoice is a document that lists details about a new car, including its standard equipment and manufacturer-installed options. It will also list the cost for these items. The figures on a factory invoice represent the cost paid by the dealer rather than the suggested retail price for consumers. Invoices also contain the destination charge, a fee for transportation of the vehicle to the dealership.

Meaning

Many car buyers believe that the factory invoice represents the actual cost of the vehicle to the dealer. Terry Jackson of Bankrate.com says this is not true. While it gives a general idea of the vehicle's cost, this is offset by factory-to-dealer incentives and hold-back amounts that are paid to the dealer by the manufacturer when a car is sold. Invoice prices may also be discounted for high-volume dealerships.

Access

You can have easy access to factory invoice pricing from automotive websites like Kelly Blue Book or Edmunds. Look at more than one website to make sure the invoice pricing matches. If there is a difference, it may mean that the factory has raised its prices and some of the websites are not updated yet.

Use

Use the factory invoice as one piece of information when you are negotiating to buy a new car. Get information on factory-to-dealer incentives and hold-backs so you can subtract them from the factory invoice to determine an accurate wholesale cost. Check automotive forums on sites like Edmunds to see what consumers are paying for similar vehicles in your area. Use all of this data to come up with a fair offer for the vehicle you want to purchase.

Warning

Dealers will be reluctant to lose their hold-back and incentives, as they need to make a profit. They may be willing to sell you a car at, or even below, factory invoice if it is a slow-selling model or if they really need to make a sale. In the case of popular models, there will be much less room for negotiation. At best, they will want you to pay some amount over the invoice price. In the case of the hottest new cars, they may insist that you pay the retail price or more.