New Mercedes-Benz Prices: MSRP, Factory Invoice vs True Dealer Cost - w/Holdback
Most people mistakenly believe that the Mercedes-benz 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 Mercedes-benz 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 Mercedes-benz 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.
Mercedes-benz Price Terms & Definitions
Understanding the jargon used by car dealers will make buying a new car less of an adventure. Here are a few of the more common terms:
MSRP - Manufacturers know how much it costs to build a vehicle. They also have an idea about the price customers should pay for a vehicle. That amount, the Manufacturer's Suggested Retail Price, or MSRP, is a starting point for negotiating a final price.
Dealer Invoice Price - Dealers don't work directly for the manufacturers, so they have to buy vehicles from the manufacturer. The price the manufacturer charges is the Dealer's Invoice Price.
Dealer Holdback - A portion of the invoice price is returned to the dealer once the vehicle has been sold. Dealers will sometimes agree to sell a vehicle for the invoice price because they know this "Holdback" amount is going to be returned to them.
Rebates - When sales are down manufacturers will sometimes help dealers. They will stimulate sales by offering cash rebates and other incentives to bring customers to the dealer's lot.
Destination Fee - Getting a vehicle from the factory to the customer is charge dealers add to the bill as the "Destination Fee." Think of it as the postage you'd pay to have something mailed to you.
Dealer Incentives - Dealers will offer cash rebates, easy financing, and discounts; sometimes to special customers such as serving military personnel, senior citizens, first time car buyers, and customers who always buy from the dealership. This is also why hot dogs, door prizes and anything else that brings in customers are a part of car merchandising.
Regional Advertising Fes - To bring customers in to take advantage of rebates and incentives, dealers have to advertise. All the dealers for a particular brand help pay for advertising in their region. These advertising expenses will show up as a charge to the customer because it is a cost to the dealer.
True Deal Cost - The actual price Mercedes-Benz dealers pay for their new vehicles. Here is how it is calculated:
Formula for Calculating Dealer Cost of a New Mercedes-Benz:
- Base Mercedes-Benz 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 Mercedes-Benz is 1% of the Total 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.)