Where there are cars, there is a lot of money being spent and being made. I want to help even the playing field a little bit. I have obtained the invoice to a 2012 Chevrolet Camaro SS, and I will use this invoice to demonstrate why cars cost so much, how much money can be made off of this car, and where that money goes in the sales process. I have concealed a lot of information about this particular car to protect the parties involved. As far as Camaro5 will know, this is just another black Camaro 2SS. We have a lot of those around here.
MODEL IDENTIFICATION
Let's start from the top. At the top, make sure you have the right model year. The very first thing in the top-left corner is the model year of the car. Here, it reads "2012 CAMARO 2SS COUPE." If you have asked your dealer for a 2012 and your dealer has shown you a 2011 model, you may be entitled to discounts.
In order to make sure you are negotiating the car you were promised, the invoice can help you keep the dealer accountable. It includes a lot of information about the car:
- Line 1: model year, model, trim, type
- Line 2: exterior color
- Line 3: interior color
- Line 4: order number and stock number (unique to your dealer's inventory)
- Line 5: vehicle identification number (VIN) and vehicle invoice number
- Lines 7-10: various dates regarding production and transit (right side)
- Line 15: dealer number
- Bottom-Left Corner: dealer currently in possession of vehicle
- Bottom-Right Corner: dealer number
I have blocked out this information in an effort to keep all parties confidential. I then bought a new computer and called an air strike on the computer with the original invoice so that no one will ever know wherefrom it originated.
OPTIONS
Following the left side of the paper, there are various 3-digit alphanumeric codes. These are called RPO codes. GM and other manufacturers use codes like these to build cars. On this one, we can see that GBA means that the exterior of the car is black and that AFM means that the interior is black. Additional RPO codes are on the left below the line of asterisks.
PRICING
Further down below the asterisks, there are more RPO codes, what they mean, and how much they cost. These are the options on this particular car. Each option has two prices. The first is the retail value of that option. The second is the invoice value of that option. This list starts with the price of the car. In this case, the difference between the retail and invoice prices at the top of the list is $1,418. As you add options, the difference between MSRP and invoice grows. If you follow these columns past the gap in the middle of the page, there is a section that breaks down the total prices for the car with options. The difference now is $1,625.60. With those options, the dealer has the opportunity to make another $200 in gross profit in the sale if you calculate gross profit based on invoice pricing. At a 25% commission, those options give the salesperson another $50 before taxes.
Let's talk about the various prices on the page. On the right side of line 19 is the line labeled "PREFER." This is the GM Preferred Pricing. You may also know this as supplier pricing. Certain companies and individuals are entitled to this price. If this price is higher than invoice, then you should ignore this price and talk to your dealer about invoice pricing instead. MSRP and invoice prices for a car of this quality with no options is listed at line 5. Follow those columns to the bottom of the gap in the middle of the page. 3 lines above the asterisks is the total price of the car. The one on the left is MSRP plus destination. All you have to add is the stuff you want to add in accessories plus taxes, title, and license (TTL). The one on the right is invoice. Once again, all you have to add is accessories and TTL. If you get an invoice deal, this is usually a fair deal.
I want to point out the lines between "TOTAL MODEL & OPTIONS" and "TOTAL." In the invoice column, there are a couple of lines. These are regional contributions the dealer is required to make. For example, all Chevrolet dealers in Chicago contribute to any Chicago media campaigns for the entire community. These costs increase the price of invoice. You cannot negotiate these away because your dealer has to pay them. If you live in an area with these charges, be aware that there is no profit in them.
HOLDBACK
While you are welcome to discuss holdback, I will not be doing so. I believe businesses do not have to share their costs with their consumers. We don't ask Taco Bell to sell us their tacos at cost, and we don't ask contractors to work for free, so I don't know why so many people expect car dealers to sell vehicles at a loss. If a dealer promises you a deal below invoice, you have gotten a great deal at the dealer's expense. If you get a deal below holdback, with all likelihood either something is wrong with the car or something is wrong with the dealer. Asking for holdback is not a good way to be taken seriously when negotiating for a deal, and it certainly won't be shown to you during the sales process. In my opinion, invoice is a fair deal. Holdback is robbing the car lot. MSRP is robbing the customer. I'd rather not see anyone on Camaro5 get robbed.
VALUE AT PURCHASE
People are under the impression that cars lose value when you drive off the lot. This is only the case when you get a bad deal. Buying a vehicle at invoice is buying a vehicle at the value that the car is insured by the finance company or manufacturer. Take a look at the bottom-right corner of this document. If this vehicle is destroyed, this is the value of the car. Notice that the invoice price is what is written there. When your car is signed in your name, your new car becomes a used car, and its value is only what you can insure. Invoice is your magic number when you drive the car home. After that, the value of your car depends on how hot they sell, how many miles you put on it, what condition you keep it, and wholesale guides that dealers uses, like NADA and Black Book.
APPLICATION
Invoice pricing applies in the US and Canada. Costs that change include TTL, advertising fees (the lines above the invoice total), and destination.
NEGOTIATION EXAMPLE
Before I begin this section, I want to point out Camaro5 dealers tend to be pretty good people. People that are allowed to sell cars on Camaro5 do a lot of business here, and they have reputations to uphold. Those that don't sell cars here don't have reputations to protect and future business to earn. When you choose to do business with a dealer or any company, try to consider whether the person earning your commission is a good person who deserves your hard-earned money.
Follow this dialogue, and I guarantee that you'll get a better deal than many buyers. Remember to be as polite and respectful as possible. Your local dealer may not be used to this sort of request.
The salesperson comes to the desk with the pricing. With a pen, he points at a sheet divided into 4 corners (a 4-square). "This is the new car. This is your trade. This is your down payment. This is your monthly payment. Just sign here."
Politely, you ask, "Can you please show me an invoice with these prices?"
Confused, the salesperson responds, "We don't show internal invoices to our customers." After this, he says something about how the cost is irrelevant to the value and that you're buying a great value at this price.
You have to keep being polite here. "I know it isn't normal for you to share invoices, but I have been promised invoice pricing elsewhere and know that I can get it. I want to see the invoice on this car so that I can get the best deal. If I don't see an invoice, how will I know that I've gotten the best deal?"
Determined, the salesperson will try to deflect using the 4-square. A good salesperson will have asked you earlier what payment you are trying to reach. Now, the salesperson will talk to you about how close the payment is to your goals. He will ask you to sign again. "If I can get your payment to [insert number here], will you buy the car?" They write the number in the square with the monthly payment.
Ignore the distraction. You respond, "That depends on whether I see an invoice. If that is how the math works out for invoice, then we might have a deal."
The salesperson will leave, talk to a manager, and will either come back with an invoice or come back with a manager. Say the same things to the manager. Do not get angry and do not leave. Stay in your seat, relaxed, until you see an invoice. You've already spent a long time talking to the salesperson, driving the car, and asking questions that the salesperson probably couldn't answer. Make it all worthwhile. Wait for an invoice. A lot of people miss a good deal because they didn't negotiate like a professional. It doesn't matter how many cars you've bought in your lifetime. These salespeople sell more than you will ever buy. They are better at it than you, and you need to stay focused on the price of the car. Eventually, they will give you what you want so long as you are reasonable.
HOW THE SALESPERSON GETS PAID
The salesperson probably makes 25% above invoice or what is called a mini deal depending on how the math works out. On top of this, a salesperson can make bonuses, but those depend on total cars sold at the end of the month, high gross awards, manufacturer awards, and additional products and services the dealer sells you.
If you buy a car at invoice, your salesperson makes a mini deal. This varies from dealer to dealer. If someone sells a car, they will always make at least this amount. I know a salesperson who used to work somewhere that paid $50 mini deals and someone else who sold cars with $200 mini deals. A decent salesperson sells at least 10 cars per month. If your salesperson falls in this category, that $50 is 3 days of work. In other words, a $50 mini deal is like making $17 per day. New cars are not where the money is. Allow me to demonstrate.
Let's say your dealer guaranteed MSRP. On the invoice attached to this post, MSRP is $38,080 and invoice is $36,826. Subtract the invoice from the MSRP and divide by 4. That is your salesperson's commission, $313.45. The dealership, after paying the salesperson, made $940.35 in profit. Keep in mind that invoice has some built-in revenue to cover dealership advertising, non-commissioned payroll, bills, and other costs of running a business. There is some profit in there, too, but it isn't a whole lot. If you bought this Camaro from your dealer at full price, they still made less than $1,000 off of you, which goes to show the money really isn't in new cars. Even if your dealer sold 100 new cars in a month with that profit margin, there is less than $95,000 in gross profit for the whole month in the new car department. That's pretty low considering the value of the merchandise. The days of big markups are long gone—a big win for consumers. Lower markups mean better lease residuals, higher resale values, and better loan terms.
EXPLAINING STUPID CAR DEALS
In business, it is reckless to sell below cost without a reason. Dealers rarely explain why they may be compelled to offer below cost deals.
Keeping a car on the lot costs about 1% of MSRP. If there's a $40,000 car on the lot, it therefore costs $400 to keep it month after month. If this car has been on the lot for over 6 months, this car needs to go. The dealer, in hopes of saving another $400, will offer at a substantial discount. As a buyer, you should ask how long the car has been there. Be careful of any signs of lot rot. There are dates on the right side of the invoice that indicate the age of the car. These are in the black box on the right side under the asterisks. Use these to get some idea of how old your car is.
The next reason that a dealer might woo you into an exemplary deal is to truly earn your business. They will ask the following of you: that you give them a perfect survey and that you use them for service. This applies to first-time customers more than anyone else. Statistically, someone who bought a car somewhere is more likely to use them for service. That's important because the dealer can make up the bad sale in service costs.
Another good reason to give you a deal that costs them money is that they'll earn another sale. That doesn't make sense until you consider GM's internal bonus structure. Basically, dealers can get big chunks of change from GM when they hit certain milestones, and that money can be collected quarterly depending on how the dealer is signed up for these rewards. If a dealer is the number one dealer in sales, GM rewards them. If they exceed GM's sales goals for that dealership, GM rewards them. I'm sure you can see how it is lucrative to sell you a car for way under cost in order to earn huge gobs of green from the manufacturer.
Finally, the last reason to give someone a ridiculous deal is because someone messed up. If someone prints you a buyer's order with a really low price on it, it's probably a mistake. If they promised you invoice, and you find yourself $1,000 under invoice, it's up to you what you want to do. It's like finding $1,000 on the side of the road. Are you going to turn it in or make it rain at the nearest bar?
It is also worthwhile to consider that relative to holdback the dealer receives money monthly or quarterly depending on how the dealer is signed up. If you get a crazy deal, your dealer may be waiting a while to get its money back.
USE IT WISELY
In conclusion, the invoice I have posted is meant to be a tool to keep all the players in the car game honest. The reason you want one of these in front of you is that it makes sure the dealer is using GM's invoice price in the deal. After this, all you need to do is take off any qualifying incentives. Your dealer gets reimbursed for those incentives.
This invoice is also a reminder that your dealer is not making a killing on Camaros. While Camaros are profitable for GM, they are not the reason your dealer is in business. I hope you found my invoice guide both educational and useful in your search for a great deal on your new Camaro.