![]() These incentives also explain how dealers can sometimes offer prices “below invoice” and still remain profitable. ![]() The effect on the dealer’s cost is that these factory-to-dealer incentives lower the dealer’s actual cost. This, in turn, results in dealers needing to purchase more cars from the factories. These incentives are occasionally offered by the factory to help dealers move cars off their lots. More interest paid to the lender for a certain car means a smaller profit for the dealer on that car.īesides holdback amounts which reduce a dealer’s actual cost, there are also factory-to-dealer incentives. This financing is often done through the factory, and the longer a car sits on a dealer’s lot without selling, the more interest is owed to the lender. Dealers, like many of us, borrow money to buy the cars that they have available on their lot. The purpose of this holdback is to help dealers cover some of their costs in borrowing money to purchase vehicles for their inventory. 2-3% of the retail price is a typical holdback amount. ![]() This can be either a percentage of the retail price of a vehicle or a flat fee. Dealers are given a holdback amount from the factory. Many consumers don’t realize it, but there is a difference between a car’s invoice price and the actual dealer cost for that car. ![]() Most car-related web sites, like Kelley Blue Book or Edmunds, provide information on both invoice prices and destination fees. This is simply the cost of shipping the vehicle from the factory to the dealer. In addition to the basic cost of the vehicle, the car’s invoice price includes other dealer costs that are simply passed along to the consumer such as the destination charge. The car invoice price is set by the factory and is the same for every dealer purchasing vehicles from this manufacturer. ![]()
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