In the days before the Internet gained widespread use, most consumers had no idea how much a new car actually cost a dealership. Now, car invoice information is widely available. Car invoices are a useful car shopping tool, but some consumers don't realize that the invoice might not represent the actual cost to the dealer. If you educate yourself about car invoices, you will know what they really mean and how they can be used most effectively.
Definition
A car invoice is a document that lists the dealer's cost for a new vehicle, including any options and equipment packages. These will be itemized in detail. It also includes the destination charge, a legitimate fee that covers transportation of the new car to the dealership.
Misconceptions
Many new car buyers believe that a car invoice represents the price that a dealer pays for the vehicle. This is not necessarily true. If you buy a car from a dealer for the amount on the invoice, that does not mean you are getting it at cost. There is a "holdback" amount that can be a flat amount or a percentage of the invoice price. This money is given to the dealer by the manufacturer, effectively reducing the invoice cost. Periodically there are also factory-to-dealer incentives that reduce the invoice price.
Benefits
Even though a car invoice may not represent the true cost of the vehicle, it gives consumers a useful point to start negotiations. Savvy car buyers know that it's foolish to pay the manufacturer's suggested retail price (MSRP) for most cars unless you want a particularly popular model. The MSRP is an artificial price; the car invoice is a more useful tool when negotiating a deal.
Research
It is not difficult for a consumer to find a car invoice. Invoices are available online from a variety of websites, such as Kelley Blue Book and Edmunds. Select the car in which you are interested, add on any options and packages, and you can see the invoice prices along with the manufacturer's suggested retail price (MSRP). Many dealers will also show you a copy of the invoice if you request it.
Warning
If you make a deal to purchase a new car based on the invoice price, beware of additional fees that might be added on the back end of the deal. For example, a dealer may agree to sell you a car at the invoice price or a certain percentage below that total. However, there may be a "documentation fee" or something similar included on the contract. This fee may be anywhere from $75 to hundreds of dollars, and it is nothing but profit to the dealer. In some states, if a dealer charges a documentation fee to one customer he must charge it to everyone. However, he can subtract it from the negotiated price of the car. If he will not, find a dealer who will.
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