Ever wonder just what goes into new-car prices?
What you pay represents more than just the aggregate cost of steel, glass, rubber, chrome and labor. But getting to that bottom line can be confusing.
Here are some of the behind-the-scenes items that can affect the total price of your new car, truck or SUV:
Dealer invoice price. This is what "the dealership is presumed to have paid for the car," says Jeff Bartlett, deputy editor online, autos for Consumer Reports. But that price "may not reflect the cost to the dealership of acquiring that car," he says. One big reason is something called a "dealer holdback," which is a "percentage the manufacturer awards the dealership" for selling the car, he says. Typically, a holdback is about 2 percent to 3 percent of what the buyer pays for the auto, Bartlett says. "This insures that the dealer makes some money on the car."
With a little research, you can find dealer pricing data, but don't expect the dealer to show you the actual dealer invoice on the car you buy, he says.On the bright side, "there's no real need," Bartlett says. "You're much better off doing your homework before you get to the lot."
You can get the information at auto buyers' sites like Edmunds.com and Kelley Blue Book, as well as the Consumer Reports' New Car Price Reports, says Bartlett. "All the major sites update weekly," he says.
Options. The base price is often for a stripped down model. While there are some makers who will include a host of "extras" in the base price, many don't. On average, figure about $3,000 to $8,000 for the options included on the model you'll drive home, says Mike Caudill, auto expert for NADAguides.com.
Dealership add-ons. Sometimes you'll see a second window sticker, next to the main one from the manufacturer. It will detail anything the dealer has done to the car, from pin stripes to special after-market options. The cost of add-ons can reach into the thousands.
Dealer incentives. Also called "manufacturer-to-dealer incentives" or "direct-to-dealer incentives." This is a short-term offer carmakers offer dealers to get them to sell certain models. This money is separate from the holdback, says Bartlett. Typically, amounts range from $500 to $1,000, but can go as high as $1,500, he says. And knowing about these incentives can put the buyer in a stronger bargaining position.
Customer rebates/cash-back/buyer incentives. Money that the carmaker or dealer can give the buyer. These price breaks can also include discounts for people who meet certain criteria -- military families, students, owners of certain auto brands, etc.
Information on these can be found on the manufacturer's Web site.
Dealer prep. When the fee is listed but there's no breakdown of what exactly goes into "dealer prep," essentially they're saying, '"We'd like a few extra dollars,"' says Bartlett.