Dear Tom and Ray:

I'm planning to buy a Chevy truck. I got a price from one dealer and am now going to other dealers to see if they will beat it. The first dealer showed me the invoice price with all the options I wanted and added $700 to that, saying, "That is what they have to add when they order a truck." The second dealer cut that to $300. My question is, what IS this "invoice price"? Is this the actual price they pay for a vehicle, or just a bunch of bull? -- John

Tom: It's a bunch of bull, John. Years ago, the world had absolutely no idea what cars really cost dealers. And now, thanks to services like Consumer Reports and others who publish the "dealer invoice" price ... we STILL have no idea what cars really cost dealers.

Ray: The "dealer invoice" number, which is widely available now, is supposed to represent what the dealer actually pays for the car and the options. Armed with this information, lots of consumers think they've got some sort of inside information. But they really don't.

Tom: The actual price that dealers pay for a car (or "dealer net") is known only by Wayne Huizenga, the Amazing Kreskin and, perhaps, God. We do know it's less than the publicized "dealer invoice" price. There's something called a "dealer holdback." That's a chunk of money the manufacturer gives to the dealer after the car is sold. How much is the holdback? We don't know; that information is held back! They say it's another 2 percent to 4 percent of the price of the car. But who knows? There's also financing assistance, marketing money and other money paid to the dealer and that brings the real cost down even lower.

Ray: Maybe there's someone in our audience who has owned a dealership who is ready (on his death bed!) to break the blood oath of secrecy and tell us how it really works? If that's you, write to us in care of this paper, or e-mail us from our Web site, cartalk.com. We promise not to tell anybody else -- except for the people who read our column and listen to our radio show!

Tom: But we know the "dealer invoice" is bull. If a dealer was selling $20,000 cars for $300 over his actual cost, he'd be out of business in no time. That wouldn't even pay for the coffee and donuts in the waiting room. That's a markup of 11/2 percent. It's unheard of in the retail world. It sounds too good to be true, and it is.

Ray: Now, that's not to say that "dealer invoice" isn't a FAIR price to pay for a car. It may provide a pretty good guideline as to what price to shoot for in a negotiation. But don't believe that it's the actual price the dealer is paying. We'll let you know when we learn some more.

* * *

Tom: Well, you asked for it, and here it is. My brother and I sat down and wrote down everything we know about how to make your car last forever.

Ray: And it only came out to eight lousy pages!

Tom: But now this gold mine of information can be yours....

Why do unmitigated cheapskates like Tom continue to buy nothing but old clunkers? Find out by ordering Tom and Ray's guide "How to Buy a Great Used Car: Secrets Only Your Mechanic Knows." To order, send (check or money order) to Ruin, P.O. Box 536475, Orlando, FL 32853-6475. You can also order online.

© 1998 by Tom and Ray Magliozzi and Doug Berman Distributed by King Features Syndicate, Inc.

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