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To make a profit, new car dealers buy vehicles at (lower) wholesale prices and sell them at (higher) retail prices. Specifically, they buy cars at the new car invoice price and resell them to the public at close to the sticker price. So car shoppers who want the best deal must first discover the new car invoice prices to make sure they are not overpaying. It is safe to say that most people will attest to the fact that this number is quite secretive. Only a select few know what the real dealer’s cost is on a new vehicle. We all know that most dealerships quote different prices for the same vehicle but most of us do not know why. 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. No matter where the dealership is located with regards to distance from the manufacturer, each one pays the same amount for delivery. These fees are simply added on at the retail level. An interesting fact is that most dealers will order vehicles from the manufacturer with borrowed funds whereby they are responsible to pay interest on those loans.
Floorplan is the term used in the industry to describe such financing to dealers. If a vehicle sells quickly, there will be less interest to pay, thereby reducing expenses so the dealer makes a bigger profit. What is commonly referred to as holdback is where the dealer gets a rebate from the manufacturer after the vehicle sells. Advertising on a regional or individual basis could also be a factor in increasing the wholesale cost which will affect the consumer at the point of purchase. That being said, it is time to do some calculations and discover one or more ways to end up with a new car but at a discounted price below wholesale. To be a smart consumer means to take advantage of situations that arise, such as slow car sales. Manufacturers do not appreciate a huge inventory sitting idle on a lot because it means a reduction of orders. When this situation occurs, the automakers will offer incentives. Look out for these sales that offer zero percent financing or large rebates. Before making a move, do the calculations to figure out exactly how much you will be saving. 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.