How Much Should You
Get a Fair Price on Your Next Car
Find out what the dealer
actually paid for on a new car before walking into the car showroom. Just 10
years ago, it was much more difficult to find accurate dealer cost information. The
internet has put the consumer more at equal leverage when negotiating with dealers.
However, despite this added advantage, the majority of buyers still do not do their home
work before one of life's most important purchases. Check pricing at Edmunds.com.
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Step 1: Get the invoice price on the cars you chose before
shopping and add $200 to $300 dollars or 2% of sticker price (whichever is higher) to that
invoice cost. That is the general position you want to arrive at for purchase price. Once
you decide what cars you are interested in, call the dealerships you intend to visit and
find out if the cars you have in mind have promotional rebates for the cars. Subtract the
rebate or fraction of it from the cost of the car. This would be the new target price you
are shooting for. You may not be able to subtract the rebate or a fraction of it if the
rebate is not substantial. Rebates above $750 usually indicates that the dealer needs to
sell the car.
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Step 2: Timing can also play a role in getting a
better deal too. If the car is going through a major redesign, the dealer may very well
have the existing year's models still in stock. Knowing about the redesign, you can take
about 2-3% of the MSRP (retail price) and subtract that off the price too. The reason for
that is that dealerships get what is referred to as the holdback. The holdback is an
amount of money paid from the manufacturer to the dealership once the dealer sells the
cars. Dealerships are more eager at times to sell off models that are changing designs.
You won't always be able to use this plan of attack depending on the dealership and the
car you want. Use your best judgement.
Step 3: The dealer may simply have an overstock of the car
you want and again you may be able to negotiate an even better deal in regards to the
dealer holdback and in this circumstance you'll subtract the 2-3% from the cost in step 1
(or step 2 whichever is applicable) above. You probably won't know about overstocks until
you go to the car lot unless the dealer discloses this during the phone call.
However, don't count on the dealer to sell below the invoice price unless
there are significant rebates involved or if they have lots of overstock. The majority of
the time, it's not possible to get the dealer to sell below invoice. Step 1 may be the
lowest you can go depending on when you buy the car.
Sometimes there are dealer incentives that encourage dealers to sell slow
moving cars. The dealer incentives are paid by the manufacturer to the dealer to help
motivate dealers to sell the cars. It's harder to find out about such incentives. If you
ask the dealer about these incentives and they exist for the car you want, that can be
used to negotiate the price a little bit lower. Perhaps you can subtract half of the
incentive from the resulting cost figured in earlier steps above.
Don't expect as much savings from hot selling cars, trucks, and SUVs.
Dealers know people want them and you won't be able to get them to part with them as
easily for the lower price. Some vehicles will sell at sticker price (or MSRP) and dealers
will get that price. Again, use your best judgement.
Dealing with dealers is a dance of the tango of sorts. Put on your poker
face and do your best to stick to your guns. Ensure that you get the car you want. Dealers
may try to up-sell you to a higher priced model. This will throw your existing plan out
the door if you accept their suggestion. If you decide to go for the up-sell, tell the
dealer you need a day or 2 to think it through. After all, this is a major purchase and
nobody should rush you through it. This will give you time to do more research on the
pricier model and come back to negotiate. It also strengthens your position with the
dealer a bit.
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