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Dealer Car Cost - How to Determine Dealer Car Cost

new car dealer cost

Getting a good deal on a new car requires doing some homework and using a sound buying strategy. Part of this strategy is knowing what the dealer paid for the car you want to buy. This seems like a simple prospect at first, but it is more difficult once you discover what goes into auto pricing. Before you begin, it is best to understand that there is a huge difference between invoice price and dealer cost. Invoice price is what the dealer, and the entire auto industry, wants you to believe he paid for the car. The invoice price is not very well hidden, if hidden at all. The dealer uses this fake number as leverage to make the sale to you with a maximum of profit for himself. True dealer cost is always lower that the invoice price.

While it is true that the invoice price is the list price charged to the dealer by the auto manufacturer, there are several reductions before you get to dealer car cost. The first is called holdback. Holdback is generally 2 – 3 percent of the invoice price. Holdback is justified as compensation to the dealer for expenses such as advertising.

The next deduction from invoice price is the factory-to-dealer incentive, also known as backdoor money. These are very rarely publicized and can be difficult to determine. They can range from non-existent to several thousand dollars. They also change from month-to-month. Unless you know someone in the business, the best way to know the incentive is to just ask the dealer outright.

Finally, customer rebates on new automobiles come straight off the dealer cost. Not every car will have a rebate every month, but if your car has one, it is included in the invoice price, so it has to be deducted, too.

Once the dealer car cost is determined, to get the best deal on a new car, it necessary to agree with dealer on how much profit is fair. This can vary by the type of car and the dealer. For most domestic cars, $500 to $1,000 over dealer car cost is fair. For imports, a fair profit is in the range of $800 to $1,500 over.

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