It is crucial to know the differences between invoice price vs MSRP before you even think about stepping foot inside a dealership. That’s because car invoice price vs MSRP are like day and night – but sometimes the consequences of these magic numbers can surprise you.

It’s worth knowing about the tricks that every car dealer has up his or her sleeves; the more you know, the more money you can save.

A Quick Guide to Invoice Price vs MSRP

At first glance, it seems that the only difference between MSRP vs invoice price is that MSRP is always higher. That means it’s a bad deal, right? Not always – MSRP stands for “manufacturer’s suggested retail price” and yes, it is usually a very inflated number.

On the other hand, new and trendy vehicles are often sold at prices far higher than the MSRP during times of high demand.

Unless you’re buying one of the cutting-edge vehicles mentioned previously, you’re better off thinking about auto invoice price vs MSRP as a battle of good against evil. The invoice price is close to what the dealership paid for the car – in other words, the number on the invoice is one of the best prices that you can get.

But you can’t really expect to get closer to invoice price vs MSRP every time; there are a lot of costs associated with running a dealership, making sure salesmen get their commissions, and running financing departments. On the right day, though, you just might snatch up a stellar deal on a car that just has to go.

So what is MSRP and invoice price in terms of a good deal?

Only you know what you’re willing to pay for the vehicle of your dreams. New car invoice price vs MSRP is only one way to measure the value of a new car, and when in doubt, you’re really better off letting your budget call the shots.

Many new vehicle shoppers ask, “What is invoice price for cars, and why is it important?” The answer is not very complicated: the invoice price is what the dealer paid the manufacturer for the car, and it is typically considered the “best deal” that you can get.

But is this really true? Aren’t there other ways to save on a new car? Of course!

Better Than Invoice

There are several ways that a dealership can buy cars for less than the number on the invoice. Volume discounts, holdbacks, manufacturer incentives, expensive financing, and transaction fees are just a handful of the techniques that car dealers use to squeeze more cash from the deal. If you have the number-crunching capabilities to combat these practices you can knock thousands of dollars from the marked up price.

You can save money by buying at the right time of the year (when car dealerships are pressured to meet volume discount requirements), comparing invoice prices with actual sales prices using the Internet, and asking the dealer plenty of questions. But don’t be too obsessed about the details. After all, what is invoice price for cars besides a simple benchmark for negotiation?

As long as you focus on the invoice price instead of the sticker price you’ll still be getting a better deal than most consumers.

Unfortunately, many consumers don’t know (and will likely never find out) about the discounts that dealers get on the advertised invoice price. But in the end, supply and demand dictates the cost of everything, and that’s why some new cars can even sell far over the high MSRP value.

What is Invoice Price for Cars?

It is just a number – the price you’re willing to pay is always the right one.

The idea behind checking the new car invoice price is fairly straightforward – every consumer wants to buy for a price that is as close to the dealership’s cost as possible. It seems simple in theory, but the invoice price for cars is just a number that has no real reflection on the price that you are likely to end up paying.

What makes the relationship between invoice price and end buyer price such a complex situation? These 5 surprising facts can help answer that question…

1. The Invoice Price Doesn’t Include Holdbacks

Some manufacturers charge dealerships an extra chunk of money on top of each car purchase – this figure is called the “holdback” and is an added fee that equates to a percentage of the suggested retail price. After the dealership sells the car, the manufacturer will return the holdback. These holdback values can inflate the invoice price by thousands of dollars.

2. Almost Any New Car Invoice Price can be Found Online

If you don’t want to ask for the invoice and risk getting into the haggling war on the wrong foot, you could go ahead and find the new car invoice price online. Edmunds is just one service that lists national invoice prices and other common fees publically.

3. A Near-Invoice Price May be Distracting You from a Rip-Off

Don’t let one of those “$1 off invoice” deals catch you off guard. Although it is preferable to seek out deals near the new car invoice price, the dealership may be using this gimmick to distract you from high fees or a bad trade-in policy.

4. You Can Buy a Vehicle for LESS than the New Car Invoice Price

Dealerships sometimes receive volume discounts and holdback bonuses from the manufacturer, meaning that they’re actually buying for far below the invoice. In certain cases, a dealer may find it more profitable to sell to you at below invoice because they’ll make up the difference in incentives.

5. Real Market Value is a Better Benchmark than the Invoice

Kelly Blue Book and Edmunds both figure car values based on more than just the invoice and MSRP. These and other reputable price comparing websites will tell you the prices that other consumers are snagging, as well as certain incentives and discounts that manufacturers are currently offering to dealers.

Consumers who haggle without knowing these surprising facts about invoices usually pay for their oversights. In the end, knowing the right numbers can help you come out on top even when the new car invoice value isn’t a true representation of the dealer’s lower limit on negotiation.