In the automobile industry, retail dealers buy their vehicles directly from the manufacturer at the new car invoice price, then they resell them to the public at higher prices, which are usually around the sticker price. For this reason, car shoppers should know the new car invoice prices to help them negotiate better deals. This actual figure seems to be quite mystical to the general public as well as to employees of the dealership. Only the owners really know exactly what they paid for each vehicle at the wholesale level. However, when shopping around for the best deal, we find that one dealership may quote a particular price, then a completely different price will be quoted at the next dealer. To begin with, every dealer pays the same amount to the manufacturer for the same vehicle. The numbers change with the added charges and fees that are tacked on to each dealer, like delivery fees and transportation charges, all of which increase the invoice price. However, this number is the same regardless of the location of the dealer. This figure is just tacked on to the individual cost of the vehicle that is passed on to the consumer. Where things change from one dealer to the next is the financing that dealers take out directly from the manufacturer to pay for their vehicle purchases. They must pay interest on this financing.
The longer a car remains on the lot, the more money that car will cost the dealer. These loans are known as floorplans in the business. In addition to floorplans there are other charges known as holdback. But holdback is not a real expense, since the dealer receives the holdback amount as a rebate from the manufacturer after the sale. In addition to the above charges, there could be advertising fees added onto the invoice price. These fees can come directly from the dealership or from a regional dealer group. After having pointed out all these various added charges and fees, the consumer has to figure out a way to purchase a brand new vehicle below the wholesale cost. One way to do that is through taking advantage of slow car sales where there is a buildup of inventory on a lot. It certainly is not the ideal situation, for both the dealers and the automobile manufacturing company. If there is an abundance of inventory on a lot, the dealer simply won’t order more vehicles. Therefore, in order to be profitable and move their inventory along, the manufacturers provide incentives to both dealers and consumers. We have all heard of the various incentives they offer, like zero percent financing, low lease rates, rebates, etc. New car dealers can only have these special sales when the manufacturer steps in. Therefore, a consumer cannot expect to purchase below the invoice price if incentives are not in place. They are expected at some time throughout each year, and they have expiration dates. When one ends, a new program may begin in order to do away with the old and bring in the new.