3% over factory invoice! $500 over factory invoice! Which deal is better? Unless the car is a stripped down sub-compact with an invoice of $10,000, the “$500 over” deal will always be the best way to go.
Consider the average selling price today is nearing $32,500. The factory invoice would be about $30,000. $500 over invoice is exactly that, or $30,500. But 3% over is $900, an extra $400 more. Add in the extra sales tax and license fees, plus the additional finance charge and that $400 more becomes closer to $1,800 over the term of the loan.
Some dealers prefer to use ambiguous figures, charging a percentage over invoice. Others work with hard numbers, or $XXX over. The average mark up from invoice to MSRP on compact cars is 6%. For mid-size cars it’s 8%. Depending on the car you’re interested in, subtract that amount from the MSRP and you’ll be within range of the dealer’s cost. Then you’ll know which dealer will give you the best deal. And most times, it will be the one offering the hard number, or $XXX over dealer invoice.