Dealer cost and dealer invoice brought to you by carinfo.com. A common mistake made by new car shoppers just thinking that dealer invoice is the same as the dealer cost; they are not the same. It is true that manufacturers bill the dealers for new cars based on the invoice but there are fund built into the invoice price that are rebated back to the dealer later. A good example of this is called dealer holdback, which is a fixed percentage of the new car price that is paid to the dealer on a quarterly basis.
Holdback is typically 2% to 3% of the MSRP, which means that a dealer selling a $30000 car at the invoice price, is actually making a profit of at least $900 if the holdback is 3%. Some manufacturers base their holdback on the invoice price and a few don't use holdback at all. So the exact holdback percentage needs to be uncovered during the research. In addition to dealer holdback there may be factory-to-dealer incentives that rebate even more money back to dealers after the sale. These incentives come in all different sizes; for example, at the time this video was made some models had $500 factory to dealer incentives, some had $5000 incentives and some had no dealer incentives at all. When these exist on a car that also has a dealer holdback; a dealer could potentially make anywhere from $1500 up to $6000 or more, when selling a new car at the invoice price. The following chart will illustrate how all this works.
These dealer invoice and dealer cross charts were based on real MSRP, invoice and incentive figures for a 2009 Ford truck, at the time this video was made. The vehicle price and destination charge were rounded off to make this easier to follow. The first chart shows a $3000 margin between invoice and MSRP, if you didn't know about dealer holdback and other incentives; you might think the dealer's profit is only $3000 if you pay the full MSRP.
The second chart shows how the 3% dealer holdback adds $963 to the dealer's profit margin increasing it from $3000 to $3963, if the vehicle has sold at MSRP. Notice that no dealer incentives are mentioned yet and the profit margin is already huge.
The third chart shows the dealer receiving a $1000 factory to dealer incentive in addition to the $963 holdback bringing the total dealer's profit margin to $4963 if the vehicle is sold at MSRP. The last chart shows the kind of discount that smart shoppers get when buying new cars. On this vehicle, the total of all customers' rebates and dealer incentives came to $4000 and typical price paid for this vehicle by smart shoppers was $4000 below the invoice price. Not $4000 below MSRP but $4000 below invoice. The dealer still made a profit of at least $963 from the holdback and he probably made even more because dealers often get secret bonuses from the manufacturers that no one knows about. This is why you should never pay anywhere near MSRP for a car.
As you can see it's important to research all of the factors that go into the real dealer cost before negotiating with dealers. Along with actual prices the smart shoppers are paying for the same vehicle.
Here is how you can get free, no obligation price quotes on new cars plus accurate dealer cost information and the prices that smart shoppers are paying for the same vehicle. Go to carinfo.com and click on the link in the menu bar that says new cars free quotes. Use the links in that section to request a bunch of free quotes which may take up to 24 hours. While you're waiting for those quotes to come back, click on the link in the menu bar that says rebates dealer cost. This will take you to the best new car dealer cost information that you'll ever find. Their information is up to date extremely accurate and you can even talk to a real live car buying expert, if you have any questions. Well that's it for today's lesson. Remember to visit carinfo.com for a free quotes on new cars, auto loans, leases, car insurance and a lot more.
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