New Lexus Prices: MSRP, Factory Invoice vs True Dealer Cost - w/Holdback
Most people mistakenly believe that the Lexus Invoice Price reflects what the dealer paid for a new vehicle - The true Dealer Cost. It is not!
The Dealer Invoice Price has hidden mark up such as holdback and other fees built into the price.
The following Lexus 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.)
Knowing the dealer cost of a new Lexus 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.
Lexus Price Terms & Definitions
When searching for a new car, the price of the car is going to be based on some words with pretty important definitions. It is financially wise to be familiar with the terminology.
MSRP (Manufacturer's Suggested Retail Price) is the price that the automaker publishes for a given model. Dealers are free to sell above or below the suggested price. The base price is price of the vehicle with no options or destination fees. The sticker price is price of the car with options plus destination fees minus discounts.
Dealer Invoice Price is figure printed on dealer's invoice from the manufacturer. Dealer may show this price to prove minimal mark up.
Dealer Holdback is the refund to the dealer after a vehicle has sold. Depending on automaker, holdback is 2% to 3% of MSRP or dealer invoice.
Manufacturer Incentives and Rebates are money saving programs designed to encourage car buyers to buy. Manufacturer may want to stimulate sales or clear old inventory. Some programs are open to only certain consumers like first time buyers, military or loyal customers.
Destination Fee is fee for moving the vehicle to sales point. The fee is $400 to $800 per vehicle. The manufacturer calculates fee based on "equalized delivery" or how much it costs to deliver entire line of vehicles. An equal fee is assigned to each vehicle from the line.
Dealer Incentives are price reductions to the dealer to increase sales volume for a certain model vehicle. Dealer may or may not pass on the savings to the consumer.
Regional Ad Fees result from advertising and promotions that a manufacturer runs in a dealer's area. The fees are not usually negotiable in the price because they are part of the dealer's cost.
True Deal Cost - The actual price Lexus dealers pay for their new vehicles. Here is how it is calculated:
Formula for Calculating Dealer Cost of a New Lexus:
- Base Lexus 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 Lexus is 2% of the Base MSRP. (See the New Car Dealer Cost Example.)
Total Dealer Cost - Rebate and Incentive + Taxes / Licensing Fees = True Dealer Cost.(See Mazda Rebates and Incentives.)