To make a profit, new car dealers buy vehicles at (lower) wholesale prices and sell them at (higher) retail prices. Specifically, they buy cars at the new car invoice price and resell them to the public at close to the sticker price. So car shoppers who want the best deal must first discover the new car invoice prices to make sure they are not overpaying. It is safe to say that most people will attest to the fact that this number is quite secretive. Only a select few know what the real dealer’s cost is on a new vehicle. We all know that most dealerships quote different prices for the same vehicle but most of us do not know why. The consumer should understand that the wholesale cost any dealer pays is the same, regardless of their size or location. Expenses are added to the new car invoice prices as the dealers factor in the delivery fees charged by the manufacturer. No matter where the dealership is located with regards to distance from the manufacturer, each one pays the same amount for delivery. These fees are simply added on at the retail level. An interesting fact is that most dealers will order vehicles from the manufacturer with borrowed funds whereby they are responsible to pay interest on those loans.
Floorplan is the term used in the industry to describe such financing to dealers. If a vehicle sells quickly, there will be less interest to pay, thereby reducing expenses so the dealer makes a bigger profit. What is commonly referred to as holdback is where the dealer gets a rebate from the manufacturer after the vehicle sells. Advertising on a regional or individual basis could also be a factor in increasing the wholesale cost which will affect the consumer at the point of purchase. That being said, it is time to do some calculations and discover one or more ways to end up with a new car but at a discounted price below wholesale. One way to do that is through taking advantage of slow car sales where there is a buildup of inventory on a lot. It certainly is not the ideal situation, for both the dealers and the automobile manufacturing company. If there is an abundance of inventory on a lot, the dealer simply won’t order more vehicles. So the manufacturers usually step in to provide incentives in order to push more sales. These incentives come in a variety of ways, such as rebates, interest free loans, reduced lease rates and other deals under this umbrella. It is important to explain that consumers must be reasonable when expecting to purchase below the invoice price. If there is no help coming from the manufacturer, it just isn’t possible because this really is a combined effort. Consumers who miss out on a temporary incentive should know that these programs are often followed by new programs that might be even better.