WTF is “invoice” ….. really?

[philsey]

With all the “what’s the best price” threads, I’m prompted to start a dialogue, as the constant reference to “invoice” amuses and perplexes me.

I’m hoping for FACTS, vs MYTHS, from those knowledgeable on use of this term, as it applies to the sale of a new vehicle.

Many prospective buyers think they are seeing some sort of “dealer cost” when using the term “invoice”, which (I believe) the car industry promotes as nothing more than a sales tool. No business with a brain reveals their actual costs to prospective buyers.

So, (hoping for civil discourse) what say you?

 

[Atlanta_man]

Invoice is a real, though maybe virtual computer based, document.
It does not include enough numbers to give you a precise "dealer cost".
Other documents, with their discounts and adders, come along a few months later after the sale to allow the dealer to know his 'net' on the particular sale.

 

[Yotta]

As far as I know, "invoice" is the price that circulates through certain accounting systems and is printed on a few sheets of paper.

It is NOT the cost to the dealer. My understanding is that the cost to the dealer is usually about 3% below invoice but can vary.

I think historically, at some simpler time in the past, "invoice" was an actual invoice price, what the car maker billed to the dealer. I doubt this is the case now.

I treat invoice as an anchoring point in price negotiations. Empirically, dealers seem to be ready to sell cars at invoice plus-minus a few hundred dollars. It's hard to buy a new car thousands below invoice (unless some special case applies) and people who pay MSRP aren't too bright (or have too much money).

 

[13S4]

Many prospective buyers think they are seeing some sort of “dealer cost” when using the term “invoice”, which (I believe) the car industry promotes as nothing more than a sales tool. No business with a brain reveals their actual costs to prospective buyers.

I have no facts to provide but I completely agree with your opinion. In Canada they never list "Invoice" on anything. Dealerships get sale incentives and other bonuses for selling high volumes of vehicles.

They do not LOOSE money when they sell under invoice. I think it may refer to the "MSRP" of the vehicle without the added dealership extras Freight, Administration, Inspection?

 

[The Waco Kid]

I found this to be pretty interesting.

Edmunds

Can't really say more than what was mentioned in the article. I know when I bought my truck. I studied up on what people were paying, what each item/option truly cost, and what I could afford to pay.

I feel I got a good deal from my dealer. It was below MSRP, around "Invoice" and below Market. Market to me is more important. It's a better indication of what the car is truly selling for in my area. You could pay invoice all day long, but if most other people are getting the car for less than invoice, you're screwing yourself.

 

[RG79]

With all the “what’s the best price” threads, I’m prompted to start a dialogue, as the constant reference to “invoice” amuses and perplexes me.

I’m hoping for FACTS, vs MYTHS, from those knowledgeable on use of this term, as it applies to the sale of a new vehicle.

Many prospective buyers think they are seeing some sort of “dealer cost” when using the term “invoice”, which (I believe) the car industry promotes as nothing more than a sales tool. No business with a brain reveals their actual costs to prospective buyers.

So, (hoping for civil discourse) what say you?

I am in car dealerships nearly everyday and "Ivoice" is actually what the dealer pays for the Car.....

That being said you would be hard pressed to go in say a Ford or Chevy dealer and get invoice pricing. The reason for this is Toyota is a huge volume manufacture they sell there new cars at cost or under cost all the time. The Factory (Toyota) gives the dealer rebates and incentives based on their volume of sales. The dealer can also sell the car at $100 over invoice and you think your getting a great deal when in turn their making two points on the apr rate and selling a pleathora of items in the finance office.

In a nut shell Toyota is well known for selling their cars at or below invoice where as other manufactures ie: Ford, Chevy, Dodge ect..... still try to stay as close to sticker price as possible. This is why a Toyota Dealer will sell close to 350 cars a month and a Ford store is lucky to hit 200. Well thats also because Toyota's are Fing Awesome. These numbers are based on larger urban areas SD, LA............

Hope that helps....

 

[Yotta]

Ford, Chevy, Dodge ect..... still try to stay as close to sticker price as possible.

Except for the fact that half the time they have some promotion or incentive or cashback or something like that going on.

 

[HwyChile]

Invoice is a meaningless term. What is shown as "invoice" on any document, website, or other source that you will ever see is not really even close to the what the dealer pays for a car. In fact, NOBODY, and I mean nobody (no sales people, finance people, etc.) at a dealership knows what the dealership pays for a car except for the owners of the dealership and certain very select people who write the checks. Also, all the crap that you read about how to back into the dealer cost is 100% wrong too and not even remotely close. It amuses me seeing Consumer Reports and all these other places writing about how much a dealer makes and what the cost is when they are dead wrong and not even close.

You folks are kidding yourselves if you think a dealer only makes a few hundred dollars on a $40k vehicle. Folks who own dealerships are some of the wealthiest people in your town, and they don't get all that wealth by making a few hundred dollars on a $40K plus investment in inventory. They have a lot of overhead, salesmen, etc. to pay for and a few hundred dollars a car won't do it and leave them a profit or return on their investment.

There are a lot of folks who also say the dealers make all their money on service and parts, but that is not true. They make plenty in those areas too, but they make a lot more on cars (to pay for expenses and overhead and for a decent return on their investment) than you think.

I am an estate planning attorney for high net worth clients (like doctors, business owners, car dealers, etc.), and I can tell you what people think and write about profit and "invoice" and "cost" is 100% wrong. Invoice means absolutely nothing. It is just a number to work off of if you are a buyer.

 

[ebru]

So invoice is your first net window sticker to invoice second there should be a HB with a number next to it that is called hold back. Holdback minus invoice is what the dealer owns the car for the more expensive the car usually means more hold back $1400-$1600. Lastly there are rebates which the dealer get reimbursed for and if you buy a car at invoice - HB - rebates you have just purchased a car at triple net and the dealer hasn't made a penny. Kickbacks from the dealer only get paid if the dealership hits the required amount of units the manufacturer set to get paid the bonus. Hold back is typically displayed on a invoice it's sometimes hidden though.

Any other questions ask Ill do my best to answer

 

[HwyChile]

So invoice is your first net window sticker to invoice second there should be a HB with a number next to it that is called hold back. Holdback minus invoice is what the dealer owns the car for the more expensive the car usually means more hold back $1400-$1600. Lastly there are rebates which the dealer get reimbursed for and if you buy a car at invoice - HB - rebates you have just purchased a car at triple net and the dealer hasn't made a penny. Kickbacks from the dealer only get paid if the dealership hits the required amount of units the manufacturer set to get paid the bonus. Hold back is typically displayed on a invoice it's sometimes hidden though.

Any other questions ask Ill do my best to answer

Even considering what you wrote, when you add the $1,400-$1,600 holdback, plus the bonus (that nobody knows what it is and which is much higher than you think), plus the amount over invoice that most folks pay (usually $500 or more) that adds up to thousands of dollars over what the dealer actually pays for the car, not the few hundred dollars that folks think and read. There has to be that kind of money over cost to pay all the dealer overhead and expenses and provide a reasonable return on investment. No matter how good of a negotiator you think you are, you are not going to buy a Toyota anywhere near what the dealer paid for the car. By the way, I disagree that the published invoice less holdback, less bonus is what the dealer pays for a car. Again, that invoice number is meaningless. I've had salesmen and managers explain what you just wrote, but that is just what they are taught and think is true. Again, those folks don't have a clue what the cost is.

 

[Donkey]

If you ever purchase a new vehicle through a manufacturer purchase program you receive a copy of the invoice, it shows what the dealer paid for the vehicle, the factory holdback and any ad fees for that particular manufacturer. It is not voodoo. The cost listed on this sheet has little to do with what it costs the dealer to sell the car but it is a starting point. Floor plan financing, holding costs, rebates, incentives all factor in to the final cost. The market determines what a given vehicle is worth, if a dealer does not make profit they go under. Pretty simple concepts at play here.

A car dealership is a business, they are not inherently evil or the bad guys they are sometimes made out to be. People get all bent out of shape over invoice price and what amounts to 1% or so then turn right around and finance a depreciating asset. To each his own and all but it is almost comical.

You can read the financial statements for publicly traded dealerships to better understand where a dealership makes money. For example this 2012 annual report for sonic automotive: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTc5MTM3fENoaWxkSUQ9LTF8VHlwZT0z&t=1

For that company 56% of their revenue came from new vehicle sales while 47% of profit came from fixed operations. There is no second set of books, it is all there for anyone to read. Margin is low on new vehicles.

As a consumer I would rather buy factory direct and cut out the cost of the middlemen, but I do appreciate the service a dealership provides. Just look at Tesla motors and the state of Texas if you want to see a circus...

 

[Biggcrisp]

Government purchasing (discounts) are currently running around - $ (8,000) per vehicle.

Doesn't bother me to pay sticker price on a private sale. Dealers and employees have to eat.

I know that everyone is looking for a "deal". However, your gain is someone elses loss. And I am no fan of low wages.

 

[ebru]

Well despite what you think I run the desk at a dealership... You have a fast start and since you know about dealerships you know what that is. Then you have final goals certain model kick backs if you move a certain amount. Those are the other variables and it truly is dependent on the number of vehicles you sell. When you sell a car below invoice minus holdback it is because you are trying tk achieve a end goal which could be worth $60000 -$100000 I've lost up to $9000 on a car to hit a number. You have floor planning on your vehicles the upkeep hourly wage employees which you pay with hold back and when you sell a car triple net you hope you can make money back in the finance office. All of these are variables that are not garunteed so yeah of it is a kick ass month then yes the dealership will hopefully own the vehicle for less but these last three months have been the worst months in the automotive industry in 6 years. So chances are triple net is the best it's going to get until feb. And that's simply to move old units so you don't pay more floor planning on them.

 

[ebru]

Also rember most sales staffs are payed 100% commission so they don't get paid when you buy a vehicle like that also don't waste their time.

 

[Yotta]

Dealers and employees have to eat.

It's often the case of "Dealers have to buy the second summer house and the cigarette boat to go with it"...

 

[RG79]

You folks are kidding yourselves if you think a dealer only makes a few hundred dollars on a $40k vehicle. Folks who own dealerships are some of the wealthiest people in your town, and they don't get all that wealth by making a few hundred dollars on a $40K plus investment in inventory. They have a lot of overhead, salesmen, etc. to pay for and a few hundred dollars a car won't do it and leave them a profit or return on their investment.


I am an estate planning attorney for high net worth clients

Actually Dealers will sometimes loose money on a 40k car to just hit their volume goal from the Factory. Yes they make a ton of money but for a Toyota dealer it's usually not on the front end gross of a vehicle sale. Invoice is not a loose term and anyone in the dealership with access to the DMS system can see exactly what the dealership is in the car for i.e. sales managers, finance managers. The dealers make most of their $ on used car sales, financing and backend products along with service/parts not, front end gross of new cars, that margin is very skinny.

Obviously not all dealers are the same but, in my location this is how some dealers practice.

I have been in the car business for 15 years and work directly with owners and their staff.

 

[Quentin]

My employee purchase plan on Toyota and Lexus is dealer invoice minus holdback and reserve plus the ad fee. Yes, the invoice is an actual document that the dealers have access to. Is it related to what they actually paid for that car? Who knows. It should be the same from dealer to dealer and car to car, though. The price I pay is generally 3% under dealer invoice plus the $500 or so ad fee when all is said and done considering the vehicles' base price. Depending on the model, there is generally an additional incentive. This incentive usually matches what Toyota is offering people off the street. Something like a local built Tundra or Camry? Pretty good incentive. 4Runner? Zero dollar bucks. I'm sure TMS or TMC covers that 3% and the additional incentive to the dealership when the employee certificate goes back to the mothership. My 4Runner that stickered for ~$36,500 was mine for ~$32,000 before the fees related to West Virginia (tax, doc fee, etc).

So, my advice when buying a new Toyota is to target dealer invoice minus whatever additional incentive they are offering on that model. On a 4Runner, you did well getting invoice. Yeah, I'm sure that Toyota throws more money at dealers for hitting sales goals and such and you can use that to your advantage, but unless you have some insider knowledge, that is difficult to apply to what you *should* pay for a new vehicle.

Note: I did not trade a vehicle in when I purchased my 4Runner. That is a whole other can of worms and it comes down to how much they offer for your trade.

 

[2013Trail]

My understanding is that the "invoice price" is what dealers pay for a vehicle but does not include any dealer incentives that they may receive. These incentives do not include customer rebates and dealers may or may not be willing to let customers have a piece of their incentive pie.

 

[jrandom]

The question really should be "How much does is actually cost to develop, build, and distribute a vehicle"

I think this is much more coveted information than the secret ingredient in Coca-Cola or how much gold is really in Fort Knox.:nod:

 

[Goofy_Craig]

Well despite what you think I run the desk at a dealership... You have a fast start and since you know about dealerships you know what that is. Then you have final goals certain model kick backs if you move a certain amount. Those are the other variables and it truly is dependent on the number of vehicles you sell. When you sell a car below invoice minus holdback it is because you are trying tk achieve a end goal which could be worth $60000 -$100000 I've lost up to $9000 on a car to hit a number. You have floor planning on your vehicles the upkeep hourly wage employees which you pay with hold back and when you sell a car triple net you hope you can make money back in the finance office. All of these are variables that are not garunteed so yeah of it is a kick ass month then yes the dealership will hopefully own the vehicle for less but these last three months have been the worst months in the automotive industry in 6 years. So chances are triple net is the best it's going to get until feb. And that's simply to move old units so you don't pay more floor planning on them.

I could not agree with you more! I also am a manager at a car dealership and we have taken huge losses on cars to hopefully hit our volume goals.