Invoice price Definition

Deeper definition

Though multiple industries use the term “invoice price,” it is especially prevalent in the auto industry. When the dealer orders a vehicle from the manufacturer, the invoice price appears on the car’s invoice.

However, the invoice price is usually different from what the manufacturer ultimately pays for the vehicle. Most of the time, it is higher than the dealer’s actual cost. Depending on their sales, dealers often receive cash incentives or holdbacks that decrease the final cost.

The holdback is a percentage of either the manufacturer’s suggested retail price or invoice price of a new car that the manufacturer repays to the dealer. It is designed to supplement the dealer’s cash flow and indirectly reduce “sales commissions” by artificially elevating the dealership’s paper cost.

Consumers frequently use the invoice price to gauge how good of a deal they are getting on their purchase. Due to these discounts and kickbacks, it is possible to strive for a lower price.

Invoice price example

The next time you shop for a new vehicle, take into account the invoice price when negotiating your transaction with the dealer.

For example, the MSRP for a new truck is $30,000. The stated invoice price for the truck is $27,000. You might think that if you can get the dealer to go close to $27,000, the truck is a great buy. But remember that the dealer usually gets even more discounts for buying the truck.

Though you likely cannot find out the exact discounts that the dealer received for the truck, you can use auto-buying tools to get an idea of both the true invoice price and what the fair market price is for the vehicle.