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Understand Car Dealer Cost and Save on New Cars

Are advertisements on TV claiming to offer a new car for a few hundred dollars above dealer invoice truly a great deal?

Is the dealer invoice price really the true dealer's cost for a new car? Of course not. Unfortunately, many people fall for these advertisements and think they are getting a great deal, when in fact, they are overpaying for their new car – possibly by hundreds to thousands of dollars.

Don’t become a victim of their marketing campaign – request a free, no-obligation new car price quote and get the latest pricing information for the new car you want to buy.

  • A hassle-free, haggle-free new car buying experience
  • Find available $0 down new car offers
  • Low monthly new car payments
  • Incredibly low available APR rates
  • Secret & hidden new car specials/limited time offers
  • Totally free, no-obligation price quotes

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Can Car Dealers Sell a New Car Below Dealer Invoice Price?

You bet they can and here’s why.

In those catchy advertisements, the car dealership does not mention all of the financial help the auto manufacturer gives to them. Car dealers need to have a large inventory for buyer’s to choose from and oftentimes they have a large number of cars that aren’t selling. This can makes the manufacturer nervous.

Automakers know if the dealership cannot sell existing inventory they will not be able to buy more cars from them – so the manufacturer steps in and helps them by offering various incentives to encourage people to buy more cars. This assistance can come in the form of zero percent or low APR financing, rebates, employee discounts and even leasing specials.

Then there are the big incentives they offer to the dealerships and salespeople: Factory to dealer incentives/rebates and bonuses for reaching sales goals within certain time frames set by the manufacturer. You don’t see these dealer incentives, but they exist and the dealership uses them. This provides room to negotiate the sale price on a new car.

Dealerships approaching the end of a bonus sales cycle will be more willing to share their discount for you to save money and for them to get their bonus cash. Car dealers can easily sell a new car below the dealer invoice price when you factor in customer incentives being offered by the manufacturer, along with the hidden dealer incentives. Most auto makers and dealerships are willing to sacrifice part of their normal profits to sell a new car – it’s better than the alternative, which is not making a sale at all.

Profits: Dealer Holdback & How it Factors into True Car Dealer Cost

When it comes to profits, the dealer holdback is a general certainty. But what is a dealer holdback?

  • When the car dealership buys a new car from the automaker, they pay the dealer-to-factory invoice price – the invoice price also includes what’s called the dealer “holdback”. This is not advertised, but it is factored into the total cost the dealer pays to the manufacturer and can amount to hundreds, if not thousands of dollars in hidden profits.
  • The dealer holdback is between 2-3 percent of either the factory invoice price or the MSRP (Manufacturer’s Suggest Retail Price). The car dealer pays this amount upfront when they buy a car from the manufacturer, so it will factor into the total cost of buying the car.
  • Once the new car is sold, the manufacturer returns (rebates) the holdback to the dealership. Normally holdbacks are processed on a quarterly basis, along with quarterly sales bonuses and other incentives manufacturers offer their dealers.

This is a 'win/win' for a new car dealership – it helps them upfront and on the back-end when they sell the new car to a buyer. It allows them to make huge profits and sometimes a dealer will share these with you in the hopes of making a sale.

Incentives & Rebates Effect the Price You Pay for a New Car

New car rebates and incentives give you the ability to substantially lower the purchase price of a new car, combined with other negotiations you may conduct. The key to making sure you get a good deal on a new car is to understand exactly what rebates and incentives are available from multiple car manufacturers. The low sales price on one model might not be so low when compared to another model with substantial incentives.

When you request your free new car price quote, and review the current rebates and incentives being offered by top certified