How Much Over Invoice Should I Pay for a New Car?

The manufacturer's suggested retail price (MSRP) used to be the starting point for new car negotiations before the Internet made invoice prices readily accessible. Now smart consumers get the invoice price for the new car models in which they are most interested. A little further research lets them decide how much to pay over invoice. They may even discover that they can buy the vehicle at or below invoice in certain circumstances.

Invoice Total

Calculate the new car's invoice price as a starting point. Various websites like Invoicedealers.com let you do this for any new make and model, including accessories and option packages. They will add these items, as well as the destination charge for that particular make, to give you the total invoice price.

Dealer Money

Dealer money affects the amount a dealership actually pays for a new car. Carbuyingtips.com says the true cost is usually lower than the invoice price because most manufacturers provide something called a hold back. This is a percentage of the invoice price that is rebated to the dealer. You can find hold backs on Edmunds.com and other automotive research website. Other money is given periodically in the form of factory to dealer incentives, which are like rebates that go to the dealership instead of the consumer. These are especially common on unpopular and overstocked models or just before the new model year. The manufacturer may give bonuses for meeting or beating sales goals and other milestones. You can find many incentives on car pricing websites. If they are high, you may be able to get a new car at or even below the invoice price because the dealer is still making a good profit from the hidden dealer money.

Public Demand

Certain new car models are more in demand than others. You will generally have to pay a higher amount over invoice for these cars than you would if you chose a less popular model. Get a feel for high-demand cars in your area by visiting car buyer forums. Buyers often report on the total prices they are paying for each particular model in specific cities and states and whether they had trouble finding the vehicle. You may have to pay several hundred dollars over invoice for a model with high public demand, while a low demand model might sell right at the invoice amount. Cars for which the supply cannot meet the demand often sell for more than the manufacturer's suggested retail price. Salespeople will not consider an invoice-based offer on these models.

Season

Car sales are extremely slow right before and after Christmas, so you can offer to pay the invoice price or make an offer below invoice and have a decent chance of having it accepted. Dealers are also anxious to clear the lot right before the new model year starts, so offer to pay the invoice total for a current model during this season. Make a below-invoice offer if you know there are high dealer incentives to encourage sales.

MSRP

FirstCarGuide.com says you can based the amount you offer over invoice on the car's MSRP if there don't appear to be any significant dealer incentives and demand for the vehicle is average. It suggests offering $500 over invoice for cars under $20,000, $1000 over invoice for cars between $20,000 and $30,000 and $2000 over invoice for cars over $30,000.