I've read that the "invoice price" is artificially inflated, because manufacturers give dealers hidden "incentives" and things like that to lower the real cost to the dealer. Any thoughts?
I wouldn't call it artificially inflated, in that often times there are just no incentives (especially if ordering a car and not buying from existing stock).
There are two kinds of incentives: publicly advertised incentives (often called "cash back") and manufacturer-to-dealer incentives. The first kind is fairly common. For example, towards the end of a model year (or especially last year of a generation of a car), it's common for manufacturers to offer $1 or $1.5K cash back. The second, "advertised to dealer" kind is much more difficult to find out about. It might hinge on the # of cars the dealer sells that month. It might target a very specific model. Sometimes Edmunds has such incentives listed on a regional basis.
Many people don't bother checking even the manufacturer's own site for incentives. Right now, for example, Toyota has a $500 cash back on Corollas in my area. If I walk into a dealership and demand invoice, I am going to be actually paying $500 over invoice. Most salesmen will withhold available incentives and will happily nod and say "sure, here you go, invoice, you are robbing us blind here buddy."
About the only "inflation" is that the invoice price does include dealer holdback, which helps offset financing charges of holding a car on the lot in stock. A car that was held for a while will accumulate more financing charges (and thus less of the holdback will go into the dealer's pocket), whereas a car that is sold right away will let the dealer pocket the entire holdback. Typically we are talking anywhere from $200 to $800, depending on the car price and car manufacturer. This is an extra sensitive area and dealers are particularly unwilling to negotiate "into the holdback."
