No dealer actually PAYS invoice for their stock units.
Holdback, as mentioned before. It's extra money the manufacturer includes for various costs...advertising, floorplan, etc.
So the longer a car sits on the lot, the less the dealer makes on it, because it eats into the holdback.
Now, when you see cars advertised for "under invoice", that just means there is a manufacturer rebate on the car.
Sometimes when they're trying to move old units, such as leftovers from the previous year, the manufacturer will help out by paying the salesmen a flat fee...which will encourage the dealer to cut the price to the REAL price, which is invoice minus holdback, to move the unit.
The salesmen are motivated to be okay with this because they are getting paid anyway.
Example: In 2002 I was in internet sales at a very large Ford dealer. We had some 2001 Focuses left over. Ford came to us and said they'd pay a 200.00 dollar "spiff" on those units.
A salesman typically gets 20% or so of the profit on a new vehicle. "Profit" is defined (at least at that dealership) as, however much over the REAL cost you sold it for. Not how much over invoice, but how much over the invoice price minus the holdback.
THAT price, at least on a Ford product, is known as "Memo". That's how it's listed on the invoice.
Less expensive cars have less markup.....therefore, you don't make as much money.
Well, the profit on a Focus if you sold the damn thing for sticker was hardly enough to make you much more than the 200 bucks Ford was giving us, so we were eager to sell them for "Memo"......and customers were eager to buy them at that price. Win/Win.
We sold cars for memo all the time, especially at the end of the month or if they were pushing a certain model.
What sucked was, if you were competing with another dealer, and to get the sale the manager chopped your deal to memo when there WASN'T a spiff on that model. Memo deal means there's no profit, which means no commission....and all we got was a flat 50 bucks for those deals.
And the hell of it was, customers who got those deals were almost always the biggest pains in the ass, and were the ones you had to do the most work to get the sale.
More about invoice sales:
Didn't bother me at all to sell a more expensive vehicle, (over 30k) like an Expedition or a decked-out F-150 for the invoice price. That would still be approximately a 12-1500 dollar deal because there was so much more holdback on the more expensive models. So you could make 2-300 bucks on an invoice sale of one of those vehicles, and the customers were typically easier to get financing for, whereas your Focus-type customers tended to be second-chance finance or first-time buyers.