Entering a car lot can feel like you entered a different world. However, most industries have their customs and unique trading terms. Indeed, not knowing the language and vocabulary of the car business can put you at a distinct disadvantage.
Learn the basics from the list below: What does the manufacturers sticker mean? Sticker price, Manufactures Suggested Price, MSRP, Maroni and Tissue are all words for the price the manufacture thinks a new car should sell for. With all product lines except Saturn, this price is negotiable. There is an average of 12% mark up from invoice (Approximate dealer cost, see invoice) to MSRP. Less expensive automobiles have a lower percentage of profit. Luxury automobiles usually have a wider profit margin.
The sticker price is usually located on the bottom line of the factory window sticker and says, “Manufacturers Suggested Retail Price” Any other sticker will have a bottom line price that says “Dealer asking price”, “Fair market value” or something along those lines. (See dealer added stickers.) What about dealer added stickers? (Addendums) Dealers will often add a sticker to the factory MSRP price. Sometimes it even resembles the factory sticker. However, rest assured it is not. It is the dealer’s asking price.
Dealer sticker asking prices are almost always inflated. So don’t pay too much attention to them. In fact, its smart to inform your salesperson upfront that you will not be negotiating from the dealer’s sticker. On the contrary inform them you will be only negotiating from the dealer invoice.
What is dealer invoice? Invoice refers to the actual invoice that the manufacture sends to the dealer with the vehicle. Each vehicle has a unique invoice. The Vehicle ID number on the invoice will match the vehicle ID number on the vehicle. On the invoice you will also see the MSRP price. Many invoices are confusing; there will be many different numbers. Somewhere however at the bottom will be the “Invoice” and “MSRP” price. It is the invoice price that you want to work from. The invoice price does not reflect true dealer cost due to holdback and factory to dealer incentives.
What is dealer holdback? Dealer hold is usually around 1.75% of the invoice price. It is what the manufacture rebates back to the dealer. This is one of the reasons why the invoice price does not equal the amount the dealer actually paid for the vehicle. While the dealer does not get a check from the manufacturer for the hold back amount the dealer does receive a credit (equaling the holdback) towards the dealer’s next car purchase. Not all product lines have dealer holdbacks and the percentage does very a little.