What’s the deal with selling cars below invoice?

A lot of people immediately assume that invoice describes the the price that dealers paid for the car you’re about to lease, and selling you a car for under invoice means a dealer is losing money on it. “Invoice” describes the suggested retail price that manufacturers price the car at. Selling a car under invoice just means that the dealer is selling the car for less than it is suggested to sell for, not necessarily less than what they bought it for.

Incentives.

Keep in mind there are many incentives that consumers qualify for that will also allow you to buy a car for under invoice. Rebates like dealer cash, consumer cash, etc. will allow dealers to sell you a car for under the sticker value.

Quotas.

Every month, manufacturers set a certain amount of cars that they have to sell. If the dealership meets or exceeds their quota, then they get a significant bonus from that manufacturer. It is for this reason that dealerships are more willing to give you discounted prices on cars toward the end of the month — because they will make much more money off meeting their quota than they will off you.

Demos or service vehicles

Dealerships have demo vehicles for consumers to test drive before they purchase a car. This causes the value of the car to go down, allowing consumers to be able to purchase vehicles for substantially lower costs than they would otherwise be able to. A good tip to remember is that these vehicles still qualify for incentives, so you could be saving even more if you land one of these bad boys.

All in all…

Dealers aren’t “losing” money on anything — but that doesn’t mean that you’re not getting a great deal.