When a person is looking to purchase a car, one of the most important aspects of that purchase, regardless of whether it’s a new or a used vehicle, is the issue of car pricing. There are many opinions on what makes up the price of a vehicle and how a purchaser can get it for the lowest possible price. However, being an informed buyer is the best way to get a good price, especially when purchasing a new vehicle.
A lot of talk centers around invoice prices. This price is what the dealer pays for the vehicle. Often times, people are looking to get the invoice price for a vehicle. While this is a nice sentiment, it makes little sense for a dealer to sell a car to an individual at invoice prices.
The simple fact is that the markups that the dealers add to the price of the vehicle are the dealer’s profits. That doesn’t mean that a person can’t start with the invoice price as a baseline. However, it’s unrealistic to think that a sales person will actually sell the car at a no-profit price.
It is important to understand that there are other options that a dealer may have to make a profit beyond the dealer markups. For example, some manufacturers provide what they call hold out incentives. These incentives are paid by the manufacturer to a dealership when a new car sold.
It’s important to note that not every manufacturer provides hold out incentives. However, those that do will offer incentives of anywhere from 1% to sometimes as high as 3% of the invoice price. This means that even if a vehicle was sold at invoice price, the dealer may still receive a small profit.
However, these profits typically aren’t enough, which is why the dealer will include add-ons. The add-ons may be negotiable to a certain extent, especially if the dealer receives manufacturer hold back incentives.
There’s a lot that goes into pricing a vehicle, and there’s much that a potential buyer can learn to help get a better price for the new car that they’re purchasing. By being reasonable and informed, a potential buyer could typically get an extremely good price for a new vehicle with a little negotiation.