You need to understand the meaning and differences between the MSRP, the selling price, and the invoice price of a car. Why should you understand the differences between them? Because it will help you understand how low of a monthly payment it is possible for you to get with some negotiation on your end. Let me illustrate an example of the significance of something like the invoice price. If you do not know what the invoice price is in general terms, and you do not know what the invoice price is for the specific car you are shopping for, you will not know how much the dealer has marked up the price of the car. You may think he has given you a good deal when he in fact has not. So let’s take a look at these terms.
The MSRP stands for the Manufacturer’s suggested retail price. This is the price you want to avoid at all costs. If the dealer is able to lease you a car using the MSRP as a starting point for calculating your car payment, you simply did not get a good deal. In fact, you got a horrible deal.
The selling price is the price the dealer is using to calculate your car payment. Obviously, this price is significantly lower than the MSRP but generally higher than the invoice price, which I‘ll explain next. The lower this selling price is, the lower your monthly payment will be. The selling price can more commonly be known as the gross capitalized cost.
The invoice price of the car is how much the dealer pays the manufacturer in order to buy the car and put it on it on his lot for customers to see. You should always know the invoice price of a car you are interested in before you even walk in to the dealership. To check the invoice price of a car just go to the Kelly Blue Book site.
The selling price is one of the most important things you can negotiate as a potential customer. Your goal is to force, manipulate, and deceive the dealer as much as possible in order to get him to bring the selling price as low as possible. How low is the dealer willing to go? Pretty damn low but this typically relies on whether or not it “matters” to them that they sell you the car. When they say something to you like, “This is the deal and frankly is doesn’t matter whether or not you buy this car” it generally means one of two things. It either means they have already met their selling quota for the day, and they genuinely don’t care about giving you such a good deal OR it could mean that they are using a deceptive psychological sales tactic to make you falsely believe that this is the best deal possible in order to lure you into signing the papers
Let me give you an true example of how much the dealer is willing to bring down the selling price. The MSRP on the 2010 Honda Accord that I leased recently was $22,565 and the invoice price was $20,732.16. What selling price was I able to get? The selling price I was able to get out of them was $20,209.76. As you can see, with some effort on my part, they were willing to sell the car to me at a $522.40 loss for them. To be honest, I feel a bit remorseful that I didn’t bring down the selling price even further, but I’ll explain why later. So always keep in mind that the dealer can and will go below the invoice price. In upcoming strategies, I’ll explain exactly how you can get a very low selling price.