Toyota Prices: MSRP vs Factory Invoice vs True Dealer Cost
The Dealer Invoice Price has hidden mark up such as holdback and other fees built into the price.
The following Toyota price guides strip these hidden dealer profits out and illustrate the MSRP, the invoice price, Holdback and the true dealer cost. (See price definitions below.)
Why You Should Know the True Dealer Cost...
Knowing the dealer cost of a new Toyota gives you needed leverage when it comes time to negotiate a great price. Negotiating from the cost up and not the MSRP down can save you thousands on your next purchase.
Toyota Price Terms & Definitions
Car dealers have a lot of leeway in how much they can charge you for a car. With some basic knowledge of car pricing, you can knock hundreds of dollars off the final price you pay. Here are some key terms used in car pricing.
Manufacturer’s Suggested Retail Price (MSRP)
The MSRP is the selling price recommended by the manufacturer. However, no one ever really pays MSRP. Your dealer has many ways to sell you a car for less than the MSRP.
Dealer Invoice Price
The Dealer Invoice price is the amount the dealer supposedly paid for each car on the lot. However, the dealer’s real costs are usually less than the invoice due to incentives and rebates such as the Holdback (see below).
Dealer Holdback (HB)
Holdback is a rebate the dealer receives from the manufacturer after a car is sold. Generally, HB is 2-3% of the final sales price and helps cover the dealer’s overhead costs. Holdback usually appears at the bottom of the invoice. You may be able to negotiate with the dealer to take it off the final price.
Manufacturer Incentives and Rebates
Manufacturer incentives and rebates are used to stimulate sales. Incentives might include special pricing for first-time car buyers, price reductions on certain models, or options packages. Rebates are refunds that the manufacturer offers the car buyer after the car is purchased.
Dealer incentives are unadvertised deals between manufacturers and dealerships that can be passed on to customers. They often appear in ads as “special offers”.
Destination fees are the cost to ship a particular car to the dealer.
Regional Ad Fees
Car dealers in the same region are usually members of dealer associations that pool money for advertising. When you see an ad for a car without a specific dealer, it was probably paid for with regional ad fees.
Before you go car shopping, do some research on the current incentives offered by the manufacturer, as well as incentives offered by specific dealers. The more you know, the better your ability to negotiate the best deal.
True Deal Cost - The actual price Toyota dealers pay for their new vehicles. Here is how it is calculated:
Formula for Calculating Dealer Cost of a New Toyota:
- Base Toyota Invoice Price + the dealer Invoice price of Options + Destination - Holdback = Total Dealer Cost.
- What is Dealer Holdback? A hidden amount that manufacturers give back to a dealer. It is a percentage of the MSRP or the Invoice price. The holdback for Toyota is 2% of the Base MSRP. (See the New Car Dealer Cost Example.)
Total Dealer Cost (calculated above) + Taxes / Licensing Fees - Rebate / Incentive = True Cost (See Toyota Rebates and Incentives.)