Welcome to Mountain Americas money moment, a quick video on the latest financial tips.
Today’s topic is “Get the best car deal- Dealing with car dealers”. During this presentation, we will discuss ways to prepare for price negotiations.
First of all, let’s consider some of the jargon you will encounter on your way to the dealership.
MSRP is the vehicles published retail or based price without options, destination charge, or other fees. Dealers are free to sale the car at a higher or lower price.
Optional equipment refers to features or packages for which you can pay extra. You can negotiate the price of optional equipment.
The destination charge fee covers the cost of delivering the vehicle from the factory to the dealership. It’s non-negotiable. It’s usually the same cost for all models within a brand and it doesn’t depend on the actual shipping distance.
A market adjustment is a fee that dealers tack on, typically to cars that are in high demand to make additional profit. You can try to negotiate this figure but if the vehicle is selling well the dealer won’t have much incentive to work with you.
Sticker price is the total retail price for the vehicle including MSRP, options, destination charges, and market adjustment. The dealer usually tries to sell the car for as close to this price as possible or offer you a token discount or manufacturer discount.
To get the best price, negotiate up from the dealers true cost rather than down from the sticker price. Dealer invoice is the dealers cost for the vehicle only, not including dealers cost for ads, selling, preparing, displaying, or financing. There may be behind the scene bonuses giving the dealer more profit margin. It’s a good bargaining tool but look behind the dealer invoice to see hundreds of dollars.
A rebate is a direct buyer incentive from the manufacturer. The rebate comes from the automaker, so disregard it when negotiating with the dealership, because you’ll get the rebate no matter what price you pay for the vehicle.
A dealer incentive is money the manufacturer pays the dealer for selling certain models, usually slow selling models. This money can be passed on to the buyer in the form of a price reduction or kept as added dealer profit. This is how the dealer can afford to sale cars for dealer cost or below. These incentives can come and go quickly and they aren’t announced to the public. To learn more about these dealer incentive discounts, go through consumer reports, “new car price reports”.
A holdback is a percentage of the MSRP manufacturers offer to dealers as a refund when the car is sold, typically two percent to three percent. This means the dealer can still make a profit on a car sold for invoice.
Dealers true cost is the dealer invoice price minus any incentives and holdbacks. The cost estimate of the dealers true cost is included in consumer reports- new car price reports. Consider starting negotiations of four to eight percent over the dealers true cost.
The dealers invoice price can be found at NADA.com. The true market value price reflects what others are paying for the car in your geographic area and can be found at Edmunds.com. Research the value of your trade in at KBB.com, Edmunds.com, or by checking the classifieds section of your local newspaper.
More than half of the new car buyers trade in their old cars because it’s more convenient. Used car values drop between October and December, so try to wait until January to get more for your trade.
Get a professional detailing job, and research the value of your trade in before selling. Negotiate the price of the new car before talking about the trade in, or the sales person may give you a high trade in value and make up for it with a higher value for the new car.
As you prepare to purchase a car, be mindful of the dealers pricing strategies. The better you understand these strategies, the better prepared you will be to negotiate the price of your new car.
For more helpful tips and advice, be sure to visit our auto center.