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Dealer Cost

"Anyone who isn't confused here doesn't really understand what's going on."

Sticker price, invoice price, factory-to-customer incentive, factory-to-dealer incentive, rebates, 2% money, backdoor money, holdback-- Holy Cow!

If you are confused about cost, don't feel bad. When I managed a car dealership this stuff got me confused. The point here is that there is a lot more to dealer cost than the invoice, and you need to know cost if you want a fair deal with no run-around. This is one area where dealers can confuse and frustrate you.

Let's start with factory invoice. This is the amount actually billed to the dealer for the car. The dealer pays invoice, less holdback. Holdback is compensation to the dealer from the manufacturer for advertising and other expenses. It is usually a few hundred dollars, and the exact amount can often be found on the factory invoice.

The factory invoice for the car you want is available from almost any dealership, the library, the Internet, consumer guide books and countless other sources. With some manufacturers, that's it. This makes finding the true cost much easier (many Honda models are this way). For most however, true cost or 'dead cost' may be much less, sometimes by thousands.

Next come factory-to-dealer incentives, often called 'backdoor money.' These are usually the big ones. These are not publicized and can be very significant (from hundreds to several thousands of dollars). They can be tricky to find out about and are also very time sensitive. They often change month to month, or even more frequently. So how do you find them?

1. Be up front and ask the dealer how much the dealer incentive or rebate is.

2. Check advertisements for the car you want. Often large dealers will advertise cars at just over 'dead cost' in order to generate traffic.

3. We offer a free service that will find all the incentives available for you.

Customer rebates are the next item to be aware of. These don't always exist, but are easy to find out about as they are heavily publicized by the manufacturer and dealers. They usually take the form of cash back deals or low financing. So true dealer cost would look something like this:

     Invoice price
-Dealer cash
-Customer cash
=Dead cost

So now what. Now you need to determine what is a fair profit. Forget about one hundred dollars over cost. When you hear those hype ads for $100 OVER INVOICE!!! that is because of the hundreds or thousands of dollars of hidden profit we just discussed. So what is a fair price? $500 over cost is a great deal for most domestic cars in good supply, $800 to $1000 over is fair for imports and some domestics in good demand, $1500 or more may be necessary on hard to find or specialty cars.

Make sure to try our free Quote Finder to find target price, incentives and rebates.


Table of Contents
First Things First
Before You Buy
Your Trade In
Buy or Lease
Dealers' Cost
Negotiating the Deal
After You Buy