Every car on a dealer's lot will have a window sticker showing the manufacturer's suggested retail price. (This sticker is known as a Monroney sticker in the trade.) But a dealer will often add a second window sticker. This can be a gold mine of added profit for a dealer. The sticker may include charges for worthwhile dealer-installed options, but it may also include goodies such as documentation fees, dealer preparation charges and, most blatant of all, "market value adjustments" (MVA) or "added dealer profit" (ADP).

These extra charges - except for the dealer-installed options that you want on the car, and a reasonable destination charge that covers the manufacturer's cost of delivering the vehicle to the dealer - are profit-padders. You should not pay them unless the car is in great demand and you absolutely must have it now rather than wait until the market cools and demand drops.

Dealer Advertising Fees

As stated earlier, the dealer's cost on a vehicle may be lower than the figure we publish because manufacturers often offer hidden incentives to dealers, known as holdbacks. These discrete incentives are paid to the dealer by the manufacturer, rewarding the sale with typically 1-3% of either the base MSRP or total MSRP. Simply put, with the exception of a half-dozen luxury marques the dealers can still make hundreds or more on a sale, even if the transaction price is just $1 over the invoice price.

On the other hand, the dealer cost may actually be higher than the figures on our website because some dealers are required to pay an advertising fee for each vehicle they sell. This fee is charged by the manufacturer and is used to promote the brand in the dealer's geographic area. The dealer will tell you that he must sell the vehicle at a price that covers his advertising fees. This is a legitimate fee, but you shouldn't hesitate to ask the salesperson to show you his invoice for the vehicle. If he has been straightforward, he should have no problem unveiling his cost to you. If you do have a chance to see the invoice you may find it somewhat complicated, but the dealer advertising fee should appear on the invoice. If it isn't clear, ask the salesperson to point it out for you.

Make sure you question any charge you do not understand, and remember to find out if there is a dealer holdback on the vehicle. (This should also appear on the invoice.) If the dealer insists that you cover the cost of his advertising fee, you should make sure that he deducts any holdback offered by the manufacturer. If there is a holdback, it usually more than offsets the advertising fee.

Ultimately, your goal is to find out what the bottom line cost is to the dealer and try to aggressively negotiate the best deal you can.