In the automobile industry, dealers purchase cars from manufacturers at invoice prices and sell them to retail customers by making a profit. This article gives insights on invoice price and its importance in the automobile industry.
Meaning of invoice price
The invoice price is the price paid by the dealer to the manufacturer. This term is usually used in the automobile industry. There is no set procedure to get the invoice price. Rebates and discounts generally reduce the dealer’s cost further from the invoice price.
In simple words, the invoice price is the price that appears on the invoice when a dealer orders the vehicle from the manufacturer. Dealers get discounts depending upon their s, ales, decreasing the dealer’s final cost.
Importance and benefits of mentioning invoice price
A manufacturer can generate the invoice once you book the vehicle. The price mentioned in the invoice is the final price which the dealer will have to pay to the manufacturer after availing discounts. The benefits of saying the invoice price are:
- The invoice price is an agreed price between the dealer and the manufacturer. So, in case of disputes, it serves as evidence of the agreed-upon price.
- The manufacturer may give the dealers additional discounts on this invoice price on bulk purchases. Thus, invoice price serves as a benchmark for negotiation on a fair price.
- The customers can check for the invoice price for further negotiation with the dealer. It gives the customer an additional chance for further negotiation.
Type of invoice discounts
There are three types of invoice discounts:
- Trade discounts: Trade discounts are usually given to bulk buyers. It is calculated on the catalogue prices. The invoice price is fixed after reducing the trade discount amount. It is not accounted for by the seller as well as the purchaser.
- Quantity discount: The discount offered by the seller to the buyer on crossing the minimum sales target is called a quantity discount. It is issued after giving a normal trade discount.
- Cash discount: A cash discount is given to the buyers if they make the payment within a set timeframe. This inspires the buyers to make payments on time. It is accounted for by both the buyer and the seller.
Comparison between invoice ready car versus MSRP
| Invoice price | Maximum suggested retail price |
|---|---|
| The invoice price is usually lower than the MSRP. It is the cost borne by the dealer. | It is the maximum suggested retail price of a car as indicated by the automaker. It is usually higher as compared to the invoice price. |
| It can be obtained from the dealer or verified from various online sites. It acts as a rough estimate of the dealer's cost. | It is also called the sticker price, and as per law, it should be kept visible. It serves as an official price tag. |
| It is the price paid by the dealer to the manufacturer for a vehicle. | It acts as a standard price. It also protects from unfair deals and provides a competitive field for dealers. |
