how much do car dealers pay for new cars

[Elisa]

Car dealers typically pay the invoice price to the manufacturer for a new car, but this is not the final cost. The actual amount a dealer pays is often lower than the invoice price due to various incentives, holdbacks, and rebates from the manufacturer. This difference between the invoice price and the true dealer cost is where the dealership's profit margin is built, and it's the key to effective negotiation for a buyer.

The invoice price is the initial amount the dealership is billed. However, manufacturers provide a secret discount known as a holdback, which is usually 1-3% of the car's MSRP (Manufacturer's Suggested Retail Price). This holdback is reimbursed to the dealer after the sale, effectively lowering their initial cost. For example, on a $40,000 vehicle, a 2% holdback means the dealer gets $800 back from the manufacturer.

Beyond the holdback, manufacturers offer various incentives. These can be retail cash incentives (customer rebates) or more importantly, dealer cash incentives, which are direct payments to the dealership for selling specific models. These incentives are not always advertised to the public. The combination of these factors means the dealer's true net cost is often significantly below the sticker price.

Manufacturer	Typical Holdback (% of MSRP)	Example Model	MSRP	Approx. Invoice Price	Estimated Dealer Net Cost (After Holdback)
Ford	2-3%	Ford F-150	$45,000	$42,500	$41,400
Toyota	2%	Toyota Camry	$30,000	$28,200	$27,600
Honda	1-2%	Honda CR-V	$35,000	$33,000	$32,500
General Motors	2-3%	Chevrolet Equinox	$33,000	$31,500	$30,600
Stellantis (Jeep)	3-5%	Jeep Grand Cherokee	$50,000	$47,500	$45,800

Understanding this pricing structure empowers you as a buyer. Your goal should be to negotiate a purchase price that is close to the dealer's final net cost, not the MSRP or even the invoice price. Researching invoice prices and current incentives on automotive websites before visiting the dealership is the most effective strategy.

[DelArthur]

They pay the invoice price, but that's just the starting point. The real number is lower thanks to hidden money from the manufacturer called a holdback—usually a few percent of the sticker price. On top of that, there are often secret bonuses for moving slow-selling models. So, the price they actually have in the car is a lot less than what the invoice says. Your job is to get as close to that secret number as you can.

[MacPaislee]

Think of it like a wholesale price, but with a rebate. The dealer gets an invoice from the factory. However, the factory also promises to pay the dealer back a small percentage later, called a holdback. There are also periodic bonuses for hitting sales targets. So, the final cost is the invoice price, minus the holdback, and sometimes minus other hidden incentives. This is why there's room to negotiate below the invoice price on many vehicles.