Dealer Invoice $

[MAC]

Invoice price: What's it really worth?

It's easy to find out what the dealer paid for a car. But that might not be what the dealer paid.
December 2, 2003: 12:39 PM EST By Peter Valdes-Dapena, CNN/Money Staff Writer

NEW YORK (CNN/Money) - These days, buyers often go into car dealerships armed with what they think is valuable insider information: a car's "invoice price."

That's the price the manufacturer, supposedly, charged the dealer for the car. Buyers are often advised to use that number as a starting point for price negotiations.

Invoice prices are no big secret. They are available online from several auto-related Web sites. But the information is not as valuable as buyers might think.

In many cases the invoice price is far from the last word on how much a dealer paid for a given car. In fact, your knowledge of the invoice price could work against you.

Picture a dealer saying this to you: "You can see for yourself how close we are to invoice; we couldn't possibly do any better." You're more likely to believe it. After all, you did your own research.

Actually, you might do better. Often, a little better. Sometimes thousands of dollars better.

Invoice price a good deal?
Some cars, especially popular models that are in tight supply, sell for close to the manufacturer's suggested retail price (MSRP) -- thousands of dollars above the invoice price -- and sometimes more than that. On one of those cars, any deal that approaches the invoice price would be a great deal.

On many vehicles, though, it is possible to negotiate a transaction price -- the price of the car without factoring in any money from consumer rebates -- that is lower than the invoice price, mainly because the dealership itself actually paid less than the invoice price.

Through something called a "holdback," dealers often get money back from the manufacturer once the car is sold. That adds to the dealer's profit and gives you more room for negotiation.

Manufacturers' holdback policies and amounts don't change often, said Mark McCready, director of pricing strategy for Carsdirect.com. They can vary from dealer to dealer, though, often according dealerships' customer service ratings.

"The holdback is still pretty sacrosanct," said Robert Ellis, director of operations for the car buying service Carbargains.org. "You don't see a whole lot of dealers going into holdback."

Holdbacks usually amount to a few percentage points of the invoice price, or a few hundred dollars.

Just as manufacturers offer targeted rebates to customers, they also offer essentially the same thing to auto dealers.

Manufacturer-to-dealer incentives are applied to specific models and they can amount to thousands of dollars, said Bob Kurilko, vice president for industry communications with the autos Web site Edmunds.com. Again, when a vehicle with a manufacturer-to-dealer incentive is sold, that money goes to the dealer.

This type of vehicle-specific dealer incentive can vary from month to month and from one part of the country to another. In some cases, manufacturers can offer manufacturer-to-consumer cash rebates and manufacturer-to-dealer incentives on the same vehicle, Kurilko said.

More is less
Also, manufacturers often add so-called volume incentives on cars. If dealers sell a certain number of cars in a given month or quarter, they get a financial reward from the manufacturer.

The trouble is, the dealer can't always predict whether it will meet that goal. So he can't know, for sure, whether to let you keep that extra money.

If you're lucky, and your timing is right, a dealer may be willing to drop that extra couple of hundred dollars in order to meet a quota and get that manufacturer incentive cash.

Ordinary cash incentives also tend to get ratcheted up toward the end of a month or the end of a quarter, Kurilko said, since manufacturers want to report strong sales figures.

"You wouldn't get any more or less profit from my dealership, but the manufacturers tend to put a little push at the end of the month," said an auto dealership sales manager who asked not to be named. (Dealership sources contacted for this story either did not want to discuss the topic or did not want to be named.)

Who knew?
So how do you know if the car you're looking at has manufacturer-to-dealer incentives on it? These incentives vary greatly from one place to another and one time to another. Unlike rebates and other consumer incentives, manufacturers don't announce these incentives to the public.

"You'll never know as much as they know," Ellis said. "But the more you know the better you're going to do."

The Web site Edmunds.com provides some information about manufacturer-to-dealer incentives. A spokesperson for Edmunds.com said most auto manufacturers had granted the site access to Web sites used by the manufacturers to communicate with dealers.

Kelley Blue Book's Web site, KBB.com, provides what it calls "New Car Blue Book" values for cars. These include the average, high and low prices people are actually paying for vehicles, as well as notes on "market conditions." The market condition information will say whether manufacturer-to-dealer incentives are being applied to a vehicle.

It's important to remember that price is just one part of a car deal.

"Invoice on some cars is a great price." said McCready. "But if you are not negotiating a very good finance price or a good price on your trade-in, it may be a terrible deal."

Experts recommend negotiating each part of the car-buying process separately: the price, the trade-in and financing. Don't let a salesperson talk you into trying to negotiate more than transaction at a time.

Dealer incentives
When an auto dealer sells one of these cars, the dealer gets a rebate.

Vehicle Dealer cash back
Volvo S60 $3,500
Acura RL $3,000
Mazda MPV $1,500
Saab 9-5 $5,000

[MAC]

Invoice price: What's it really worth?

It's easy to find out what the dealer paid for a car. But that might not be what the dealer paid.
December 2, 2003: 12:39 PM EST By Peter Valdes-Dapena, CNN/Money Staff Writer

NEW YORK (CNN/Money) - These days, buyers often go into car dealerships armed with what they think is valuable insider information: a car's "invoice price."

That's the price the manufacturer, supposedly, charged the dealer for the car. Buyers are often advised to use that number as a starting point for price negotiations.

Invoice prices are no big secret. They are available online from several auto-related Web sites. But the information is not as valuable as buyers might think.

In many cases the invoice price is far from the last word on how much a dealer paid for a given car. In fact, your knowledge of the invoice price could work against you.

Picture a dealer saying this to you: "You can see for yourself how close we are to invoice; we couldn't possibly do any better." You're more likely to believe it. After all, you did your own research.

Actually, you might do better. Often, a little better. Sometimes thousands of dollars better.

Invoice price a good deal?
Some cars, especially popular models that are in tight supply, sell for close to the manufacturer's suggested retail price (MSRP) -- thousands of dollars above the invoice price -- and sometimes more than that. On one of those cars, any deal that approaches the invoice price would be a great deal.

On many vehicles, though, it is possible to negotiate a transaction price -- the price of the car without factoring in any money from consumer rebates -- that is lower than the invoice price, mainly because the dealership itself actually paid less than the invoice price.

Through something called a "holdback," dealers often get money back from the manufacturer once the car is sold. That adds to the dealer's profit and gives you more room for negotiation.

Manufacturers' holdback policies and amounts don't change often, said Mark McCready, director of pricing strategy for Carsdirect.com. They can vary from dealer to dealer, though, often according dealerships' customer service ratings.

"The holdback is still pretty sacrosanct," said Robert Ellis, director of operations for the car buying service Carbargains.org. "You don't see a whole lot of dealers going into holdback."

Holdbacks usually amount to a few percentage points of the invoice price, or a few hundred dollars.

Just as manufacturers offer targeted rebates to customers, they also offer essentially the same thing to auto dealers.

Manufacturer-to-dealer incentives are applied to specific models and they can amount to thousands of dollars, said Bob Kurilko, vice president for industry communications with the autos Web site Edmunds.com. Again, when a vehicle with a manufacturer-to-dealer incentive is sold, that money goes to the dealer.

This type of vehicle-specific dealer incentive can vary from month to month and from one part of the country to another. In some cases, manufacturers can offer manufacturer-to-consumer cash rebates and manufacturer-to-dealer incentives on the same vehicle, Kurilko said.

More is less
Also, manufacturers often add so-called volume incentives on cars. If dealers sell a certain number of cars in a given month or quarter, they get a financial reward from the manufacturer.

The trouble is, the dealer can't always predict whether it will meet that goal. So he can't know, for sure, whether to let you keep that extra money.

If you're lucky, and your timing is right, a dealer may be willing to drop that extra couple of hundred dollars in order to meet a quota and get that manufacturer incentive cash.

Ordinary cash incentives also tend to get ratcheted up toward the end of a month or the end of a quarter, Kurilko said, since manufacturers want to report strong sales figures.

"You wouldn't get any more or less profit from my dealership, but the manufacturers tend to put a little push at the end of the month," said an auto dealership sales manager who asked not to be named. (Dealership sources contacted for this story either did not want to discuss the topic or did not want to be named.)

Who knew?
So how do you know if the car you're looking at has manufacturer-to-dealer incentives on it? These incentives vary greatly from one place to another and one time to another. Unlike rebates and other consumer incentives, manufacturers don't announce these incentives to the public.

"You'll never know as much as they know," Ellis said. "But the more you know the better you're going to do."

The Web site Edmunds.com provides some information about manufacturer-to-dealer incentives. A spokesperson for Edmunds.com said most auto manufacturers had granted the site access to Web sites used by the manufacturers to communicate with dealers.

Kelley Blue Book's Web site, KBB.com, provides what it calls "New Car Blue Book" values for cars. These include the average, high and low prices people are actually paying for vehicles, as well as notes on "market conditions." The market condition information will say whether manufacturer-to-dealer incentives are being applied to a vehicle.

It's important to remember that price is just one part of a car deal.

"Invoice on some cars is a great price." said McCready. "But if you are not negotiating a very good finance price or a good price on your trade-in, it may be a terrible deal."

Experts recommend negotiating each part of the car-buying process separately: the price, the trade-in and financing. Don't let a salesperson talk you into trying to negotiate more than transaction at a time.

Dealer incentives
When an auto dealer sells one of these cars, the dealer gets a rebate.

Vehicle Dealer cash back
Volvo S60 $3,500
Acura RL $3,000
Mazda MPV $1,500
Saab 9-5 $5,000

[WE H2]

Mac, love most of your posts. You are a very level-headed guy.

Hold back on GM 3%, pays the parts bill. Whoohoo. Spent some time in the car biz. Good time to get 3% is when new model year coming out. Personally, I gave mine up, knowing about it, because I didn't want roof or air suspension and they had to do an outright purchase from another dealer and lost the hold back. It's ok though, I got what I wanted and a fair price - but not the best. I could have got $1500 more truck same price in stock. Selection was very limited in New England first week of October. My grass is planted I want one today!

03 Pewter Lux - Bone Stock

[MAC]

Phil, I think these are more "lifestyle" stories, not news. It has its value. Months ago I asked on this forum about dealer invoice, what I got was no answer, nobody knew anything about it. I never believe the invoice is what the dealers pay, yet it is often used as a yardstick by many, and I always sort of know about incentives and bonus, yet not really know much about them. Our knowledge and experience came from books, magazines, trade publications and newspaper we read and the TV reports we saw, beside personal experience. Such knowledge and experience set us apart from the know-it-all kids, they are the difference of success or failure in business and personal life.

99% of the posts I read serve no useful purpose, yet that 1% of new knowledge may reward me handsomely one day.

[WE H2]

Well put Mac, as usual. You are very convincing and logical.

03 Pewter Lux - Bone Stock

[HUMMERDOGG]

C'mon MAC... 99% useless??? I beg to differ... I know that each and everyone of my posts are the most insightful, thought-provoking, fulfilling reads that one can find. That alone would easily increase your 1% useful up to at least 3%. You throw in some posts from Drtyfn, AlecW, BuckeyeHummer, Phil, Dan, and some other members of the SXB and that usefulness percentage jumps up to at least 13%... In the future, please don't be so negative regarding the wonderful posts that can be found at the H2Source.

Now that I think about it, you might be getting the posts you read here confused with those you read over there at the H2 fanatic website. You might want to make a mental note to separate the posts that you read between these two forums to ensure that you are getting the best reads possible.

Hopefully, you will find this post helpful...

-HUMMERDOGG

TROLL POACHER (I hunt trolls even if it ain't troll hunting season...)

TROLL TAXIDERMIST (For those of you who get to them before I can. I provide this service free of charge...)

[DRTYFN]

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by WE H2:
Well put Mac, as usual. You are very convincing and logical.

03 Pewter Lux - Bone Stock<HR></BLOCKQUOTE>

You should see his porn collection!! You'd be really impressed!!!

[MAC]

Well, OK, for old time sake, I will increase the usefulness scale to 3%.
The upside is the remainig 97% is fun, if not useful.

If I can get 1% usefulness out of everything I read and see and heard daily, that is exceptional. At 1% a day, every 100 days, I should be 100% smarter, at that rate, in 1 year I should be able to raise my IQ from 60 to 792 points, 2 years will be 10454 points IQ.

Thanks WE H2, if you are too nice to me, they will think MAC is WE H2.

On the serious side, most of the subjects we have seen many times before and I really don't need to know how to fix a truck, 37" mud tire, black chrome, DOT Xenon, buzzing noise from heater, etc. But I do enjoy reading them and talk about them.