Dealers typically have between 5% to 10% of a new car's Manufacturer's Suggested Retail Price (MSRP) as potential negotiating room. This markup, known as the "dealer holdback," is usually 2-3% of the MSRP or invoice price, reserved as a dealer incentive from the manufacturer. The actual amount of movement depends heavily on the vehicle's popularity, the time of the month or year, and the specific dealership's current sales targets and inventory levels.
For high-demand models, there may be little to no discount, with some vehicles even selling above MSRP. Conversely, on a slow-selling model or at the end of a quarter, a dealer might be willing to dip into their holdback and even sacrifice a portion of their own profit to meet a volume bonus target from the manufacturer.
The key to unlocking the best deal is knowing the invoice price—what the dealer paid the manufacturer. Negotiating from the invoice price up, rather than from the MSRP down, puts you in a stronger position. Remember, the dealer also earns money through manufacturer-to-dealer incentives, which are hidden rebates you can sometimes negotiate against.
Here is a general breakdown of potential savings based on vehicle segment:
| Vehicle Segment | Typical MSRP Range | Average Dealer Markup (Profit) | Potential Negotiating Room (incl. incentives) | Key Factors Influencing Discount |
|---|
| Economy Compact | $20,000 - $25,000 | $1,200 - $1,800 | $800 - $2,000 | High inventory, competition |
| Mainstream Sedan | $25,000 - $35,000 | $1,800 - $2,500 | $1,500 - $3,500 | End-of-model-year clearance |
| Popular SUV/Crossover | $35,000 - $50,000 | $2,500 - $4,000 | $2,000 - $5,000 | Model refresh timing, loaner car sales |
| Luxury Performance | $55,000 - $80,000 | 6% - 8% of MSRP | 4% - 10% of MSRP | Dealer allocation, optional packages |
| In-Demand Hybrid/Electric | $30,000 - $55,000 | Minimal | $0 - $1,500 | Tax credit eligibility, waitlist status |
Ultimately, your bargaining power increases with your willingness to walk away and your knowledge of the true market value of the car.
