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How to determine the dealer cost of a car
How you can see the wholesale price of any new vehicle
To find out the dealer cost on a vehicle you're considering, become a subscriber at www.carcostcanada.com. The service, which provided wholesale invoice prices on most new cars and trucks available in Canada, also has been able to identify a large number of low-priced dealers in many parts of the country that have committed to offer special members-only prices to subscribers.
Buying a new car is a big decision, but it doesn’t have to be a difficult one. The average person will buy 10-12 cars in their lifetime. Preparing yourself and doing your homework is the key to being able to make the important decisions with total confidence
Car buying advice from CarCostCanada
Once you’ve decided on the car you will buy or lease, you will need to be able to determine what is a good price. This is where it can get very tricky. Before you sign on the bottom line you need to know how to recognize a good deal when you see one
Understanding the complexity of new car pricing in Canada:
M.S.R.P. – The Manufacturer’s Suggested Retail Price, commonly known as the list price or window sticker, is the retail 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 high in demand and limited in supply.
Dealer invoice price – Every manufacturer sends an invoice to the dealer as soon as its vehicles 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.
Holdback – Most manufacturers help subsidize the interest charges and marketing/advertising that a dealer incurs by paying the dealer a holdback amount, after the vehicle has been sold. This amount typically ranges from 2.0% to 2.5% of the invoice amount. Dealers will rarely consider this when negotiating a new car deal.
Dealer and buyer goals – The dealer’s goal is to negotiate a deal as close to M.S.R.P. as possible and the buyer’s goal is to negotiate a deal as close as possible to the dealer invoice price.
Maximum dealer margin/profit – The difference between the M.S.R.P. and the dealer invoice price is the maximum dealer margin/profit that the dealer has to work with when negotiating a deal.
Actual dealer margin/profit – The amount over the dealer invoice price that is finally negotiated between the dealer and the buyer is the dealer’s actual dealer profit/margin, before sales and overhead expenses.
Dealer overhead and bottom-line profit – From the actual dealer profit/margin amount, the dealer has to cover the sales rep and sales manager’s salaries, commissions and bonuses. The remainder goes to the dealership to cover all other expenses, with the final balance representing the actual net profit to the dealership.
Factory-to-consumer incentives – In an effort to stimulate sales, many manufacturers will offer incentives to the consumer. 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 'OR'; which means that you cannot get both 0% financing and $2,000. You have to decide between the two. In some cases, you can combine the 0% and $2,000, but not very often.
Factory-to-dealer incentives – 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. Many manufacturers will use them as additional stimulus for the dealer to 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 potentially sell more vehicles. Most dealers will factor in these factory-to-dealer incentives when negotiating a deal. Effectively this may allow the buyer to buy or lease a new vehicle for less than the dealer invoice price.