How much money you pay for a new car is a somewhat arbitrary number because it is partly based on factors that cannot be quantified, such as demand. Learn the whole picture of how car sales work to arrive at a fair price. Overall, you should pay what the car is worth and understand that the dealer will and should make a profit.
What Is an Invoice Price?
The invoice price is basically what the dealer pays for a car. A dealership has to buy the cars from the manufacturer and the invoice price is how much the dealership pays. But the dealer may pay incentives or holdbacks when a dealer sells a car. A holdback is a small percentage of the invoice, or MSRP (manufacturer's suggested retail price), the price the manufacturer thinks the car should and can sell for.
Getting the Best Deal
Every car dealership and every car buyer is different. Research the automobile market to see how hot a car is to determine the demand. Also, pay close attention to the trade-in value of your car and the financing. Often, car dealers make up a lot of what they may lose on a car's price by giving less money for a trade-in or by getting money from dealer financing. Sometimes dealers also will tell you that they have to add in extra costs over invoice, such as paperwork fees, transportation fees and other fees. Dealers are charged a delivery fee, but you should not pay any more than what they pay. You also should not get charged delivery fees and destination charges. Dealers also make money by selling extended warranties and gap coverage. The dealer will only sell a car where he can make money, while the buyer's goal is to find a fair price somewhere between the invoice price and the MSRP. In the end you should only pay what you are comfortable paying.
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