Explaining Car Prices

Invoice prices are made available by Cars.com and are not dealer advertising. All prices are subject to regional variations.

Knowing the manufacturer's suggested retail price (MSRP), invoice price and Cars.com's Smart Target Price can help you make an informed decision when purchasing a new vehicle. However, they do not always present a complete picture. For example, regional costs to dealers and some advertising fees are not shown in the national factory invoice or MSRP available from Cars.com. Understanding the factors that determine the final selling price of a vehicle can make you a smarter shopper. Click the links below to learn more.

  1. The source of the dealer cost information (currency and reliability) — read more
  2. Buyer incentives — read more
  3. Factory-to-dealer incentives — read more
  4. Dealer holdback — read more
  5. Other charges — read more
  6. Dealer profit — read more
  7. Market value — read more

In the end, your actual price is the one you negotiate with your dealer. Click here for more information.

Knowing the manufacturer's suggested retail price (MSRP), invoice price and Cars.com's Smart Target Price can help you make an informed decision when purchasing a new vehicle. However, they do not always present a complete picture. For example, regional costs to dealers and some advertising fees are not shown in the national factory invoice or MSRP available from Cars.com.

Understanding the factors that determine the final selling price of a vehicle can make you a smarter shopper.

Invoice prices are made available by Cars.com. Our vehicle data comes from a number of sources, but is not supplied by dealers.

Invoice price is often defined as the factory charge to the dealer for the vehicle and its options, but it may not represent the cost of the vehicle to the dealer. Market conditions — including limited vehicle production — will always play a part in dealer costs. Also, manufacturer rebates such as dealer incentives often are limited to vehicles already in stock or are available only in lieu of incentive financing. Furthermore, these rebates and dealer incentives usually vary by region. It is recommended that you check your local paper for information about manufacturer rebates in your area.

Your vehicle price will reflect some or all of the following: the price of the base vehicle and selected options, destination charges, local and state fees and taxes, manufacturer's advertising fees, dealer incentives and dealer holdback.

Invoice pricing information is an excellent starting point for pricing your new vehicle, as long as you take these things into account:

  1. The source of the dealer cost information (currency and reliability)
  2. Buyer incentives
  3. Factory-to-dealer incentives
  4. Dealer holdback
  5. Other charges
  6. Dealer profit
  7. Market value
  1. The invoice pricing source
    The dealer cost you look up must be current and from a reliable source. Invoice prices change often. Cars.com works with many sources to provide recent and accurate figures.
  2. Buyer incentives
    Manufacturers may offer cash incentives to help sell certain models. If such an offer is made in an advertisement, make sure it gets figured into your deal as well. You can look up incentives in our Rebates section, but make sure you use the correct dates. Also, buyer incentives usually vary by region. Check your local paper for information about buyer incentives in your area.
  3. Factory-to-dealer incentives
    Like buyer incentives, dealer incentives are offered by automakers to move certain models. In this case, however, the offer is made to the dealer. Whether dealers share the savings with customers is at their discretion. If you learn from the Cars.com Rebates section that a dealer incentive has been granted on the model you're buying, you'll have more insight into the dealer's true costs. But be careful — some incentives kick in only after the dealer sells a certain quantity of that model, and you have no way of knowing if that minimum has been met. Don't hang your negotiating hat on the dealer-incentive peg — just know that it can be a factor. Also, dealer incentives may be regional. Check your local paper for information about dealer incentives in your area.
  4. Dealer holdback
    What is holdback? Holdback is a portion of a car's sales price (typically 2 percent to 3 percent of either the invoice price or MSRP) that an automaker returns to a dealer, usually on a quarterly basis. It's a way of boosting the dealer's cash flow and helps the dealer keep his lights on. Most dealers see holdback as something that they're entitled to. In a general sense, everything is negotiable, but this is one item on which dealers seldom budge. And we mean seldom. If a dealer claims he wouldn't make any money on the deal you propose, you may be able to use your knowledge of dealer holdback to call his bluff.
  5. Other charges
    Advertising fees: Dealers pay a percentage point on top of the invoice price toward a national ad fee and sometimes 1 percent or less as a local dealer association advertising fee. Documentation or conveyance fee: Documentation fees (sometimes called conveyance fees) attempt to recoup some money for the documentation and administrative tasks associated with the sale. Some states have laws that limit the amount.
  6. Dealer profit
    Dealers can't make a living by selling vehicles at cost, so you won't get far by walking into a showroom and demanding to buy at invoice price. Naturally, you'd like to start at the invoice price and work upward, while they'd like to start at the MSRP and work downward. Together, you must dance your way to an agreement.
  7. Market value
    Market value is a reflection of market conditions such as current manufacturer inventories and consumer demand. Some highly desirable vehicles will sell for more than list price (MSRP), while soon-to-be-discontinued models can sometimes be snapped up for invoice price or less. The reason is as simple as supply and demand: a popular vehicle in its first year of production most likely will have low inventories. Other factors include the time of year you are shopping, where you live and when you want to have the vehicle; for example, four-wheel-drive vehicles will be much more in demand in your community the week after a record snowstorm. There is no single national standard. In the end, your actual price is the one you negotiate with your dealer.

For more information about negotiating the purchase price of a new vehicle, read the full text of our Negotiating With Dealers article in our Advice: Shopping section.

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