Car Buying Terms with Definitions

Here are car buying terms that are used at car dealerships. These are good to know whether you are a consumer or are a car dealer.

Ad Unit Cars (Ad Units, Advertising Units): These cars are advertised at really low prices to try to get you on to the car lot so they can sell you something more expensive. They are usually loss leaders for the car dealership and are advertised in local newspapers with a picture and text that will say something like "Only 2 available at this special price".

Allotment (Dealer Allocation): A system used by the car manufacturers to give cars to their dealerships.

Asking Price: This car buying term is about an ad for a car that says something like "asking $3000.00" then you just need to know that the price is usually negotiable. If the ad said "$3000.00 Firm" then obviously they aren't going to be very negotiable unless they end up sitting on it a long time.

Book (Book Value): Book value is referring to the prices of used cars found in the Kelley Blue Book or NADA guides. These publications are used as a guideline when trying to figure out how much a used car is worth.

Carryover Allowance: As car manufacturers start releasing cars for the new model year, the dealers will discount their inventory of last years cars. Its a good way to get a fairly deep discount on a new car.

Churn & Earn: These are low-demand vehicles that new car dealers have to buy from the car manufacturers when they are buying high-demand vehicles. Its just a way for the manufacturers to move cars that nobody wants. The dealership will advertise these at a discount mainly just to bring in potential buyers for their more profitable vehicles.

Commission: The cut that a car salesperson gets from selling a car. The more units (cars) they sell per month then they are also in line for bonuses.

Customer Incentive (Incentive, Rebate): These are discounts available on low-demand vehicles or when sales are slow in general.

Dealer Holdback (Holdback, Giveback): Car dealerships don't like to reveal what Holdback is to customers because even if you bought a new car that was just $10.00 over invoice price, the manufacturers might still be offering the dealership 2% to 5% under the invoice price. When you know what the Holdback is then you can get the best deal on a new car.

Dealer Invoice Price (Invoice, Tissue): This is the price a car dealer pays for a new car.

Destination Charge (Delivery Charge): This is what car dealers have to pay the manufacturer for having the car shipped to them. Its the same price whether the dealership is 5 miles or 500 miles from the manufacturer.

Manufacturer's Cost (Auto Maker Costs): Simply the cost for the manufacturer to build a vehicle. All those things like energy, payroll, machinery, insurance, taxes, property and building costs, maintenance and repairs must be factored in to the cost of a vehicle.

Manufacturer to Dealer Incentive (Dealer Incentive, Factory To Dealer Incentive): When car manufacturers build too much of a certain vehicle they will offer their supply to the dealers at a discount. Its up to the car buyer to find out when these are happening to be able to negotiate an even lower price.

Market Prices: They are the price differences for the same vehicle based on the where it is selling because a convertible, for example, might sell for a few thousand more in a warmer climate and less in a cold climate. Market prices change over time because they are based on supply and demand.

Minimum Deal: A sale where the profit is small that the dealership will pay the salesperson a flat fee to sell the vehicle instead of a percentage. Ad Unit vehicles usually fall into this category.

MSRP (Manufacturers Suggested Retail Price, Sticker Price, Sticker, Munroney, List Price, Retail Price): This is merely the price the manufacturer is suggesting the dealer sells the car for. You will see the sticker on the side window. Munroney was the senator that introduced the law that makes it mandatory that this sticker is on the window.

Non-Commissioned Sales: This is a relatively new thing where dealerships sell new cars for a non-negotiable price. The psychology is that its supposed to be a no-pressure relaxed environment for the buyer. These places are for pussys that are afraid to negotiate and the truth is that they are probably paying way more these cars.

Option Packages: Car manufacturers will offer a package deal on accessories that might include something like an "Off Road Package" or a "Sports Package" or whatever, that might have: special wheels and tires, different interior, pin striping, a more heavy duty suspension, etc., etc.

Retail (List Price): This car buying term is about the top price a vehicle could sell for without the buyer doing any negotiating whatsoever.

Special Circumstances Dealer Incentives: The car manufacturers might offer special discounts on vehicles to a new car dealership just to help them get started and establish a customer base.

Wholesale (Wholesale Value, Actual Cash Value): This car buying term is about the value determined when a car lot takes in a trade-in vehicle that they plan to sell to wholesale dealer or at a used car auction.

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