As you’ve been out looking at a new car to buy, I’m sure you’ve noticed quite a lot of information on the window sticker of the car.
One of the dollar amounts that you no doubt ran across was a shipping charge. There is a shipping charge from the manufacturer that is added to the price of each new car. This shipping charge is not figured into the holdback amount of the car, but it is figured into the MSRP on the window sticker.
The shipping charge is going to depend upon the manufacturer and the type of vehicle. You will generally see the shipping or destination charge just above the total MSRP number.
Keep in mind that shipping charges by the manufacturer are not a means of profit for the dealer. It is a very real cost that the dealer pays the manufacturer for shipping that vehicle.
There are however other factors such as dealer cash that do go into the final price of the car. Dealer cash allowances are simply a tool used by the manufacturer that they give to a dealership in order to help them move their inventory and stay competitive. This type of incentive is generally used on and the model year cars, or cars that for whatever reason are becoming aged and aren’t selling well. So, when the manufacturer takes note of a particular dealership’s inventory and sees cars that are moving they may very well offer the dealer some various forms of dealer cash incentives in order to move these units.
The amounts of these dealer cash incentives for car buyers is going to vary anywhere from $100 to thousands of dollars depending upon the inventory and the situation. So as you shop around you may be quite able to cash in on some of the use dealer incentives that are out there.
There are also advertising allowances that can be figured into the price of the car, but these advertising allowances are usually for legitimate advertising expenses and not necessarily open for negotiation. Having said that however, there are times when a dealer may use this money if it means putting a deal together and keeping you from going across the street to another dealership.
If all of this seems somewhat confusing, don’t feel alone because it is.
Let me give you an example… when dealers determined their cost on the vehicle they will start at their invoice price. But that’s only the starting point. But for the sake of our example invoice price would be known as net price. From the net price they would then subtract whatever holdback there is on the car. This is then known as net, net price.
But wait… it gets better.
From net, net price the dealer can then subtract out any dealer cash or marketing allowances that they may have. I know this is some really fuzzy type of math and the actual numbers will vary depending upon how the dealer defines their cost. But essentially we’ve gotten to net, net, net price… otherwise known in the business as the dead cost of a new vehicle.
The moral of the story is for you to know that what may seem like an invoice price really isn’t what the dealer actually did or is going to pay for that particular car.
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