Dealer Invoice

The dealer invoice is what the car dealership has to pay the manufacturer to get the car.  However, it does not always mean the exact cost of the car for the dealer.

The dealer invoice includes the price the factory charges for the car and the price of any optional accessories.  The dealer must pay this amount to the factory.  But, because of rebates and holdback, the actual cost of the car to the dealer may be less, therefore allowing the dealer to sell the car for less than invoice.

Dealer holdback is actually money that the car dealership is paid by the factory.  The manufacturer does not just let the car dealerships have some cars to hold until they sell.  The dealer actually has to buy the cars from the manufacturer.  Since dealerships can have hundreds of cars, that can be a lot of money that the dealer has to pay.  The dealer gets loans for the cars.  The holdback is money that the manufacturer ends up paying the dealer that basically covers the interest of those loans in order to make the process cost effective for the dealer.

Let’s say the MSRP of a certain car is $18,000.  The holdback allowance on that car is $360.  The factory pays this amount to the dealer.  Sometimes with holdback, it can allow the dealer to sell the car below invoice but still make a profit.

Often, the factory offers incentives, known as factory to dealer incentives, to get rid of excessive inventory of slow-moving cars.  Once the car is sold, the dealer gets a rebate from the manufacturer.  The dealer can pass some of this savings on to the consumer, but it still makes the cost of the car to the dealer less than the invoice.

Whenever a dealer is excited about selling you a car at invoice or even below it, don’t think that you are taking their profit away.  As with any good business, the car dealership will be making a profit, likely through the holdback allowance and factory-to-dealer incentives.