Invoice and MSRP prices we quote are updated regularly. Some
changes in option packages or discount upgrades or downgrades occur at the
manufacturer's discretion. There will be variations at times, BUT beware of
dealers who tell you the prices found on this website are "way out of the
ballpark." It is highly unlikely.
NOTE: Some manufacturer's invoices now include charges for
Advertising, Certificate of Origin, and Consumer Communication Programs as
items on the invoice. Previously these items, although they do represent
legitimate costs, were included in the price of the car. These are
non-markup items; i.e., a $1.00 invoice charge for a certificate of origin
adds $1.00 to the invoice, but not to the MSRP of the car. In the case of
advertising, the dealer previously had to pay these amounts in addition to
the invoice price for the car. Now advertising is included in the invoice
price and as an item on the invoice.
DESTINATION CHARGES: Destination
charges are predetermined charges to the dealer for the delivery of a
specific vehicle to a specific destination. These charges are shown at the
bottom of a dealer's invoice and at the bottom of the window sticker on the
car. There is no markup on freight, and the amount listed must be paid by
the dealer to the manufacturer.
DEALER HOLDBACK: Dealer holdback is a
specific percentage of the car's price that is credited to the dealer's
account periodically by the manufacturer and reduces his cost by 2-3%. As
you can see, 3% on a $40,000 car is substantial - $1,200. The dealer could
sell you the car at his invoice and still have big profit in the
deal. Remember this when you are getting down to the final price. (for
amounts by manufacturer see the Dealer Holdback Chart http://carcost.com/holdback.html )
FACTORY INCENTIVES: Factory incentives
are usually given by a manufacturer to move excess inventory or to close out
the previous year's models. When a manufacturer wants to move slow-selling
stock, they will usually heavily advertise rebates directly from them. You
should not figure this rebate into the deal you are making with the dealer
until the very last step. It has nothing to do with his costs unless the
advertisement states, "offer good at participating dealers only." In that
case, the dealer may be paying part of the rebate. "Participating dealer's"
rebates are not used too often. Year-end incentives (usually 5%) are given
directly to the dealer by the manufacturer.
DEALER CHARGES: Dealer charges are
usually charges additional to the sticker price affixed to the car when it
is received from the factory. Sometimes this is for added equipment, and
sometimes the dealer has found a way to build up the price of the car (and
therefore his trading margin).
A lot of dealers will charge "dealer prep" charges, added rustproofing,
special interior or exterior protection treatments, extended warranty, or
body side moldings. These are high markup extras, and you shouldn't buy them
if you don't want them. "Dealer prep" charges are provided for by the
manufacturer, and you should not have to pay for them. To figure out what
you should pay for a given car, you must take into account:
1. Factory invoice
2. Destination charges
3. Dealer holdback
4. Factory incentives
5. Dealer charges.
TARGET PRICING
We have compiled
Target Prices: How much you should expect to pay because there is a need for
consumers to understand what is a fair and reasonable deal in the
marketplace. These prices are based on deals that have been reported to us
for the makes and models listed.
As a general rule-of-thumb, if you can buy a car from $100-$300 over
invoice (for the base car + accessories + destination charges), you have a
good deal - so does the dealer. He has his holdback, and he has his amount
over invoice. His profit is fair, and he'll be able to stay in business to
service your new car. If there are factory incentives in effect, you should
be able to get the full benefit of these incentives after buying the car at
$100-$300 over cost. The "dealer charges" are another matter. Don't buy
anything you don't want, and don't pay for something you already have
coming. Beware of "supplemental" or dealer generated price stickers. They
are usually for high markup items that you may not want or need.
Most people I know hate the experience of buying a new vehicle. Whether
it is a car, truck or minivan, the experience can be a very harrowing one
because most people don't go about it the right way. Since a new vehicle is
a very expensive item, it is worth your while to invest some time and effort
into getting the best deal you can. This article deals with how to buy the
specific vehicle that you have already picked out. Our job is to make it
easier for you to negotiate and to help you get the best deal possible.
There is one thing to remember when buying a car.
The average buyer is in the market once every five years, whereas
the average salesman sells a car or truck every day or two.
WHO DO YOU THINK HAS THE ADVANTAGE?
It is possible to save more than $2000 on a new car or truck if you do
your homework. The calculations we use apply to cars, trucks or minivans. As
a buyer, it is important for you to focus on your objectives:
1. To buy the vehicle you want (not what someone wants to sell
you),
2. To pay the price you want to pay (within
reason),
3. To get a fair price for your trade-in,
4. To obtain financing at the lowest possible cost.
The new car salesman also has some objectives:
1. To sell a
car or truck,
2. To make the biggest profit he can,
3. To "steal" your trade-in,
4. To sell
"Dealer Installed Options,"
5. To make a profit on your
financing package,
6. To sell credit life insurance,
7. To sell you an extended service warranty.
The easiest way for the dealer to achieve all of his objectives is for
him to "package" all of the items he is trying to sell into one monthly
payment. BEWARE - THIS IS NOT THE WAY TO BUY A CAR. I once had a
friend who would say, "I'm like a kid with a new car - I don't care how much
it costs - what's the payment?" Well, an extra $30 multiplied by 60 months
is equal to $1800 of your hard-earned money. Follow our advice, and you will
get the best possible deal.
DEALING
You, as buyer, are trying to consummate three transactions:
1.
Buying a new vehicle,
2. Selling your old vehicle,
3.
Obtaining financing for 2, 3, 4, or 5 years.
This is exactly how you should handle your transaction: three separate
dealings.
BUYING YOUR NEW CAR, TRUCK OR VAN
By using the wholesale or
"dealer's cost" prices from carprice.com, you will have the inside
information on what your vehicle and all of its factory installed options
cost the dealer. Simply add up the wholesale price, or INV., the destination
charges, and every option listed on the sticker, and you'll have it.
To calculate the true dealer's cost, you must follow the aforementioned
procedure and further deduct the holdback amount. You must then add the
freight charges to the cost.
Assume the dealer will keep his entire holdback, you now must decide how
much you are willing to pay. Generally $100 to $300 over cost (not invoice) (total plus destination charges)
should be a fair price.
GETTING A FAIR PRICE FOR YOUR TRADE-IN
How much is your old
car or truck worth? Have you taken care of it? Did you bring it in for an
appraisal clean and shiny, or was it dirty? The best and easiest cars to
resell are those that show they have been taken care of. When you take
your car in for an appraisal, be sure it looks its best.
Your dealer is going to "buy" your trade-in. That's the bottom line.
Naturally, he wants to pay as little for it as he can. Ask if he is going to
resell it on his lot or if he plans on wholesaling the car to another
dealer. If he's wholesaling it, there are two middlemen's profits to be
made, and you might not get enough in trade. This situation may necessitate
a trip to another dealer who might give you more for your trade-in.
Do not expect to get the retail value of your vehicle when you trade in
on a new one as we've outlined previously. The dealer is entitled to make a
fair profit. Carprice.com offers accurate used car and truck prices that
will make it easy to determine the approximate value of your trade-in. The
amount you should get in trade is somewhere between the "average wholesale"
and the "average retail" prices listed. The condition of your trade and
market conditions for both new and used cars will determine whether or not
you can make a deal, do not hesitate to negotiate. Dealers expect
negotiation and are prepared for it. They leave bargaining room in the
prices they quote for "negotiation movement." Quite often, dealers will pull
out their "value guide" and show you a "market" price for your vehicle that
is REALLY LOW. Generally, these guides are put out for dealers to use in
just such a negotiation. I would be willing to buy almost any car, sight
unseen, at these prices and so would your dealer. You can and should
negotiate from these low prices.
If you are unsuccessful at negotiating a fair price for your trade-in,
consider either trading elsewhere, wholesaling it yourself, or selling it
privately through an ad in the paper.
FINANCING AT THE LOWEST POSSIBLE COST
Before you go shopping,
make some phone calls. Find out what the going rates are, how much down
payment is needed, what time terms are available, and anything else lenders
might require. With this information, you can compare what the dealer is
offering to what is being offered on the "street."
Arranging financing is a profit center for dealers. If you intend to
finance your vehicle purchase, you'll have to get the money somewhere. There
is no problem in getting it from your dealer as long as you don't have to
pay more for financing than you would at a bank, credit union, or other
lending institution.
BEWARE OF EXTRAS
There are so many aspects to dealing that it
is hard to know what will pop up and when. Here are some tips:
Do not buy "dealer installed options" such as undercoating, fabric
protection or special wax jobs. If you happen to want them, negotiate the
price. These are very high mark-up items.
Do not pay "additional dealer markup." This is designed to give
dealers more than normal profits on specific cars.
Do not pay "document handling charges." There should be no charge
for this. The dealer cannot sell a car to anyone without doing the
paperwork.
Do not pay "dealer preparation charges." The dealer is already
paid for this by the factory.
Do not buy "credit life insurance." This is the most expensive
form of insurance known to mankind. If the lender needs additional
collateral, find out why and how much. If you're not satisfied, find another
lender.
Do not buy an "extended warranty" unless you want it. Be sure to
check the warranty that comes with the vehicle. It may be enough, especially
if you keep the car for only two or three years.
If you want the extended warranty, be sure to find out exactly what it
covers, what the deductible is, and whether it can be transferred over to a
new owner.
If you study and apply the suggestions included in this article, you will
be more prepared than 99% of the people who are out buying at this very
moment. Getting the best deal is not difficult if you understand the
transactions you are making and follow the guidelines we have explained.
Good luck and good negotiating!
