The price that a dealer pays for a new vehicle and the price you should pay to the dealer are two different numbers. To calculate the price that you should pay for the car, you first have to know the specific details of the features that the car has. You also need a copy of the factory invoice, which is not the Manufacturer’s Suggested Retail Price (MSRP) sticker that the dealer sticks to the car, along with the added charges the dealer puts on the sticker price.
Identify the manufacturer’s invoice price for the car. You can obtain copies of the manufacturer invoice for the car you are pricing on various automobile information websites. To find the invoice with the correct pricing, you need to input the features on the car, such as number of doors, sunroof, navigation system and alarm system. The invoice lists the base price of the car and then itemizes and adds the cost for each of the additional features.
Subtract the holdback charge from the manufacturer’s invoice from the total price on the invoice. This is a fee that the dealership pays upfront to get the car on its lot, but that is reimbursed once the dealership sells the car. You should subtract the holdback fee since it is not a lost cost for the dealer.
Subtract the floor-plan or dealer floor assistance from the manufacturer’s invoice. The same holds true for the floor-plan fee as for the holdback charge. Since the dealer gets a reimbursement of this fee from the manufacturer when they sell the car to you, subtract this fee from the price of the car when calculating what you should pay.
Keep in mind that even if the dealer sells you the car at the sticker price and subtracts the holdback and floor plan fees, the dealer is still making a profit. Three additional ways that dealers make money are from factory rebates, if you trade in a car to buy the new car and if you finance the car with the dealership.
When reviewing the invoice that the dealer prints at the dealership, look once again for the holdback and floor assistance fee. You may also see additional fees that the dealership charges, such as advertising fees or membership fees to be part of a particular dealership association. Inquire about any additional fees you see and then use your judgment as to whether or not you should be paying this fee to buy a car. Almost every fee or charge is negotiable, so it does not hurt to ask for it to be removed from the price you pay for the vehicle.
Be aware, however, that the MSRP sticker as displayed by the dealer is not the actual factory invoice. The factory invoice, which is the invoice the manufacturer sends to the dealership is not the sticker the car dealership displays on the car window. This is why you need to pull the factory invoice from your own research rather than rely on the sticker the dealership places on the car up for sale.
- Blue pen in front of invoice image by millann from Fotolia.com