• Sign in
  • |
  • Sign up

Car Buying

Buying a Car: How Much Do Dealers Mark Up a Car Over the Invoice Price?

RELATED READING
RESEARCH BY MAKE
Honda cars, trucks and SUVs Nissan cars, trucks and SUVs Ford cars, trucks and SUVs Toyota cars, trucks and SUVs Lexus cars, trucks and SUVs Acura cars, trucks and SUVs Mercedes-Benz cars, trucks and SUVs Chevrolet cars, trucks and SUVs
Acura cars, trucks and SUVs Alfa Romeo cars, trucks and SUVs Aston Martin cars, trucks and SUVs Audi cars, trucks and SUVs Bentley cars, trucks and SUVs BMW cars, trucks and SUVs Buick cars, trucks and SUVs Cadillac cars, trucks and SUVs Chevrolet cars, trucks and SUVs Chrysler cars, trucks and SUVs Dodge cars, trucks and SUVs Ferrari cars, trucks and SUVs FIAT cars, trucks and SUVs Ford cars, trucks and SUVs Freightliner cars, trucks and SUVs GMC cars, trucks and SUVs Honda cars, trucks and SUVs Hyundai cars, trucks and SUVs Infiniti cars, trucks and SUVs Jaguar cars, trucks and SUVs Jeep cars, trucks and SUVs Kia cars, trucks and SUVs Lamborghini cars, trucks and SUVs Land Rover cars, trucks and SUVs Lexus cars, trucks and SUVs Lincoln cars, trucks and SUVs Lotus cars, trucks and SUVs Maserati cars, trucks and SUVs Mazda cars, trucks and SUVs McLaren cars, trucks and SUVs Mercedes-Benz cars, trucks and SUVs MINI cars, trucks and SUVs Mitsubishi cars, trucks and SUVs Nissan cars, trucks and SUVs Porsche cars, trucks and SUVs RAM cars, trucks and SUVs Rolls-Royce cars, trucks and SUVs Scion cars, trucks and SUVs smart cars, trucks and SUVs SRT cars, trucks and SUVs Subaru cars, trucks and SUVs Tesla cars, trucks and SUVs Toyota cars, trucks and SUVs Volkswagen cars, trucks and SUVs Volvo cars, trucks and SUVs
RESEARCH BY STYLE
AWD/4WD
Commercial
Convertible
Coupe
Hatchback
Hybrid/Electric
Luxury
Sedan
SUV/Crossover
Truck
Van/Minivan
Wagon

author photo by Doug DeMuro

If you're interested in buying a car, you're probably already familiar with the process: A dealership buys a car from a manufacturer or gets a trade-in, then marks it up to include some profit and sells it to a customer. But just how much markup is in each car? In other words, how much wiggle room does a dealership really have on pricing? We'll explain.

Invoice vs. Retail

When you buy a new car, it's important to understand that you'll almost always be paying an amount higher than the invoice price to make the purchase. The invoice price is what the dealer pays for the car from the manufacturer, the price you pay is called the retail price. Meanwhile, the price on the window sticker is the manufacturer's suggested retail price (MSRP), or what the manufacturer hopes the car will sell for.

What's the Spread?

What's the spread between invoice price and retail price? Unfortunately, the simple answer is: It depends. In many cases, it depends on the total price of the vehicle. A small car such as the Toyota Corolla or Mazda3, for example, will have a fairly small profit margin between invoice and retail price -- often 5 percent or less. A more expensive luxury car can have a much higher profit margin, sometimes stretching well beyond 10 percent and into even higher territory.

The profit margin can also depend on how high the demand is for the car. If it's a new model with long waiting lists -- such as the all-new Chevrolet Corvette when it first came out -- expect to see a fairly high retail price and little room for negotiation. On some in-demand new cars, you'll even sometimes expect to see a market adjustment to the MSRP where a dealer will be asking for more than the retail price. This is called "over sticker."

What Should You Pay?

Given that there are such wild variations between invoice and retail pricing, you might be wondering exactly what you should pay when you're buying a car. This is often tricky to figure out, though our friends at Kelley Blue Book take a crack at it by offering suggested purchase-price numbers.

The way it works is fairly simple. Enter the parameters of the vehicle you're considering -- model year, options, engine choice, transmission -- and Kelley Blue Book can bring up a suggested purchase price based on several factors, including the car's popularity and the spread between base price and invoice price. You might pay a little less than KBB's price or you might pay a little more, but it's a fairly accurate representation of where you should expect to be.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Close 
Buying a Car: How Much Do Dealers Mark Up a Car Over the Invoice Price?