Identification

A car's invoice price equals the amount of money that the dealer paid for the car in wholesale, reports Lease Guide. The manufacturer charges a standard price to all auto dealerships.

Function

Part of the process of buying a new car from a professional auto dealer involves bargaining on the price. The invoice price sets the lower boundary for how much a car dealer earns in a transaction, reports Lease Guide. The higher above the invoice price a dealer can sell a car, the more profit he makes.

Misconceptions

An invoice price and the Manufacturers Suggested Retail Price (MSRP) are not the same thing, reports Cars.com. The automobile manufacturer sets the MSRP, the price at which they think the car should sell.

Tips

When negotiating a car price, do not assume that the invoice is truly what the dealership paid, reports CNN Money. Manufacturers pay the dealer a "holdback" on each car---a rebate for a percentage of the car's invoice price or MSRP.

Expert Insight

The invoice price can net you a bargain on a car, but you must also get a fair value for any trade-in and reasonable terms on any dealer financing, reports CNN Money.

Source:

LeaseGuide.com; What Dealers Won't Tell You About Car Prices

Cars.com; What does the invoice price mean?

CNN Money; Invoice price: What's it really worth?