Have you ever gone shopping for a car and been totally intimidated because you don’t understand what the dealer’s are talking about? It’s probably happened every single time. Here are 5 terms you need to know before you make that very important purchase.
1. M.S.R.P. (The price the dealer wants you to pay)
The Manufacturer’s Suggested Retail Price, commonly known as the List price or window sticker, is the price set by the manufacturer. This is typically the price that the new car dealer would like you to pay. Although the overwhelming majority of new cars are sold at less than the M.S.R.P., some dealers will hold out for this price on a very hot-selling vehicle that is in high demand and limited supply.
2. Dealer Invoice Price (The price the dealer pays)
Every manufacturer sends an invoice to the dealer for their vehicles as soon as they are delivered to the dealer. The dealer will typically pay for the vehicle via a prearranged line of credit. Commonly, the dealer will start paying interest charges from the first day onwards. The dealer invoice price is confidential.
3. Hold Back/ Marketing Assistance
Most manufacturers help subsidize the interest charges and marketing/advertising that a dealer incurs by paying the dealer a holdback and or marketing assistance dollar amount, after the vehicle has been sold. This amount typically ranges from 2.0% to 2.5% of the dealer invoice price. Dealers will rarely consider this when negotiating a new car deal.
However, since this helps cover some of the dealer’s expenses, he/she will typically accept an offer of only 3%-5% more than the dealer invoice price.
4. Factory To Consumer Incentives (Savings for you)
In an effort to stimulate sales, many manufacturers will offer incentives to the consumer (you). These incentives are commonly advertised in the media and can consist of low rate financing/leasing rates, such as 0%, cash rebates, such as $2,000, or a combination of both. If a manufacturer is offering you 0% or $2,000 cash, the emphasis is on the word OR; which means that you cannot get 0% financing and $2,000 cash. You have to decide between the two. In some cases, you can combine the 0% and $2,000, but not very often.
5. Factory To Dealer Incentives (Additional savings for you)
Commonly referred to as hidden or secret rebates. Internally these non-advertised dealer incentives can be known as marketing credits, trading dollars, factory cash, dealer cash, dealer bonuses, invoice credits, etc. They are user to encourage dealers to further discount their prices and thus, sell more vehicles. In some cases, the manufacturer may not want to advertise that they are offering incentives to avoid tarnishing their image, where others will use these incentives to encourage dealers to carry more inventory and thus, sell more vehicles. Most dealers will factor in these factory to dealer incentives when negotiating a deal. Effectively this may allow the buyer (you) to buy/lease a new vehicle for less than the dealer invoice price.
Please note; since these incentives are not advertised, the dealer is not obligated to pass these incentives on to you, which could save you addition hundreds or thousands of dollars on a new vehicle.
1. M.S.R.P. (The price the dealer wants you to pay)
The Manufacturer’s Suggested Retail Price, commonly known as the List price or window sticker, is the price set by the manufacturer. This is typically the price that the new car dealer would like you to pay. Although the overwhelming majority of new cars are sold at less than the M.S.R.P., some dealers will hold out for this price on a very hot-selling vehicle that is in high demand and limited supply.
2. Dealer Invoice Price (The price the dealer pays)
Every manufacturer sends an invoice to the dealer for their vehicles as soon as they are delivered to the dealer. The dealer will typically pay for the vehicle via a prearranged line of credit. Commonly, the dealer will start paying interest charges from the first day onwards. The dealer invoice price is confidential.
3. Hold Back/ Marketing Assistance
Most manufacturers help subsidize the interest charges and marketing/advertising that a dealer incurs by paying the dealer a holdback and or marketing assistance dollar amount, after the vehicle has been sold. This amount typically ranges from 2.0% to 2.5% of the dealer invoice price. Dealers will rarely consider this when negotiating a new car deal.
However, since this helps cover some of the dealer’s expenses, he/she will typically accept an offer of only 3%-5% more than the dealer invoice price.
4. Factory To Consumer Incentives (Savings for you)
In an effort to stimulate sales, many manufacturers will offer incentives to the consumer (you). These incentives are commonly advertised in the media and can consist of low rate financing/leasing rates, such as 0%, cash rebates, such as $2,000, or a combination of both. If a manufacturer is offering you 0% or $2,000 cash, the emphasis is on the word OR; which means that you cannot get 0% financing and $2,000 cash. You have to decide between the two. In some cases, you can combine the 0% and $2,000, but not very often.
5. Factory To Dealer Incentives (Additional savings for you)
Commonly referred to as hidden or secret rebates. Internally these non-advertised dealer incentives can be known as marketing credits, trading dollars, factory cash, dealer cash, dealer bonuses, invoice credits, etc. They are user to encourage dealers to further discount their prices and thus, sell more vehicles. In some cases, the manufacturer may not want to advertise that they are offering incentives to avoid tarnishing their image, where others will use these incentives to encourage dealers to carry more inventory and thus, sell more vehicles. Most dealers will factor in these factory to dealer incentives when negotiating a deal. Effectively this may allow the buyer (you) to buy/lease a new vehicle for less than the dealer invoice price.
Please note; since these incentives are not advertised, the dealer is not obligated to pass these incentives on to you, which could save you addition hundreds or thousands of dollars on a new vehicle.