When it comes to new cars, the number you are bound to run up against most often in advertisements, brochures and on the sales floor is the sticker price. However, the price of a car is so much more than the big black number on the window. This common-sense, comprehensive car price guide can help you avoid marketing traps and pitfalls so you get the best vehicle for your driving needs.
This is the price the dealer wants you to pay. It is the MSRP, or Manufacturer's Suggested Retail Price. The price the dealer charges you may, in fact, be higher or lower than the MSRP price, depending on demand and your negotiation skills. Despite the impression a salesperson may give you, the sticker price is almost always negotiable.
The term invoice price refers to the price a dealer pays to purchase the car at wholesale cost from the manufacturer. Because car dealerships are retail businesses, which must make a profit, you will probably not be able to purchase a brand new, in-demand car for the invoice price. It isn't impossible, however.
Philip Reed of Edmunds.com writes, "A dealer could sell a car at invoice price, tell the customer that's he not making one penny on the deal and still get a check from the manufacturer a month later for $500." This is because of manufacturer incentives called "holdback" rebates that the manufacturer pays to the dealer after a car sells. In most cases, your final cost will fall somewhere between the invoice price and sticker price.
If a car is hot off the assembly line and there is high demand for it in your area, the market price could run higher than the sticker price. But once things have died down a bit, market price usually runs somewhere between the invoice price and sticker price.
What you pay for your car and what your neighbor would pay for the same car could be very different. Car buying advisor Al Hearn notes, "Selling prices can vary considerably for a particular vehicle make and model, depending on the dealer, area of the country, city size, competition, time of month, time of year, negotiating skills of the buyer, and available incentives." So what can you do to make sure you are getting the best car price possible?
Reed advises that this can be a strong starting strategy. Dealers have become more open to showing the invoice in recent years. If you politely ask to see it, you can take a look at the dealer's buying price and use it as a car price guide. Offer a reasonable profit, say $800 over invoice. This gives you a strong starting point in the negotiations, instead of trying to work backward from the sticker price.
There are a lot of little extras on the final bill you sign to pay for your new car. They can add up to a tidy sum for the dealer. These are usually semi-legitimate expenses on the dealer's part, such as transport and delivery, dealer add-ons and financing. Some buyers work to negotiate these fees into the agreed price of the vehicle to avoid any extra fluff in the final tally.
The used car trade is often more profitable for dealers than their new car business. When you agree to a trade in your car, you are usually letting it go for much less than you could have made on the open market. Why not sell it yourself and have that much more to put down on your new vehicle?
When you buy used, you have the advantage of foregoing the big black sticker price altogether. Pricing becomes much more specific to the age, wear, mileage and location of the specific car you would like to purchase. It is up to you to find the best deal around, whether it be on a used car lot, in an online marketplace ad or in your neighbor's driveway.
For used car pricing guidelines, you will need sources like Kelley Blue Book, NADA Guides and your local Car Trader leaflets. These car pricing guides can give you average amounts for the make and model you need, at different levels of wear. However, the actual used car prices will depend on each car's specific troubles and strengths, as well as the willingness of the owner to negotiate. Don't be afraid to ask for a lower price if you feel the need to. And if the owner rejects your offer, don't be shy about checking back in a week or so to see if the seller has reconsidered.
If you plan to take out a loan for your new car, try to secure financing before you ever go to the sales lot. The financing room is where the dealership makes some of its biggest profits, and it does not help you one bit. Your local credit union or bank can usually offer you much more reliable advice and interest rates. Jason Fogelson writes for Forbes, "Know how much you qualify for, and what interest rate you can get on your own. Better yet, arrive at the dealership with a loan pre-approval in hand. Then, you will be in a position to assess the offer that the F&I guy slides across the desk."
It doesn't do you much good to get a great price on your car and then overpay for insurance year after year. It always pays to shop around and make sure you're getting the best price out there for your vehicle coverage. A local independent agent can serve as a car pricing guide for policies from a huge variety of insurance companies so that you can be sure you're getting the best premium and coverage possible. Trusted Choice® agents are independent and ready to help you when you're buying that new car.
Once you have this car price guide safely committed to memory, you can hit the car lots and seller ads with confidence that you're getting the best deal on your new car.