How to Determine Dealer Cost for a Car

Determining a dealer's cost for a car may seem simple. Many car buyers believe the invoice price represents what the dealer pays to the factory. In reality, the invoice is just one element. There are other things, like holdbacks and factory to dealer incentives, that bring the true cost down below the invoice total. You must know all the factors if you want to calculate an accurate cost and use it to negotiate the best deal.

Instructions

1

Calculate the invoice price of the car, including any packages or individual accessories. You can easily find invoice information on automotive research sites like DriveNow or Edmunds. Choose the correct make, model and year of the vehicle you are pricing. Add any accessories and packages to determiine the total invoice price.

2

Add the destination charge, which is the cost of transporting the car from the manufacturer to the dealership location. This is a legitimate cost, and it will be listed by the automotive research sites when you bring up vehicle information.

3

Subtract the holdback amount, which varies by manufacturer. It usually runs between 1 and 3 percent of the invoice price. Edmunds says the holdback is money that is given back to the dealership. The dealer pays the whole invoice amount, and the holdback is paid back on a regular basis, usually quarterly. The automotive research sites typically list the holdback rates for each manufacturer. Some luxury car manufacturers do not have holdbacks.

4

Subtract any factory to dealer incentives. Edmunds says this is also known as "dealer cash." It is money that goes directly to the dealership, unlike rebates that are given to consumers. It may be offered to dealers in a specific region or be attached to certain slow-selling models. Automotive research sites typically list current incentives and the specific time frame they are being offered.