Successfully negotiating the price of a new car isn't a deep, dark mystery.
In a dealership experience that by design confuses and wears down car buyers,
getting the lowest price on a new car requires research, commitment, patience and
the right attitude.
advice editor, negotiating doesn't have to be an all-out war. It should be a business
negotiation. "It can be done honorably and honestly," he says.
But consumers who don't regularly negotiate may find the thought of matching wits
with a professional negotiator to get the best new-car price more than a little
intimidating. However, nothing levels the negotiating playing field like knowledge born
through research.
Knowing the manufacturer's suggested retail price, or MSRP, is the initial step in
researching price. However, if your intention is to negotiate a lower price, an estimate
of the dealer's actual cost can be valuable in establishing an opening offer for your
negotiations. According to Reed, the factors contributing to dealer cost include:
• Dealer Invoice. The price the manufacturer charges the dealer for a car. Reed says
before negotiations begin, ask the dealer to show you the actual invoice. Through
your online research, you should already have a sound idea of what the dealer paid
for the vehicle, but the invoice will also tell you how long the vehicle has been on the
lot. "If it's been on the lot for a month or more, they will be eager to get rid of it," he
says.
• Dealer Cash Incentives. Manufacturers often provide the dealers with temporary
cash incentives to sell specific car models. These are dollars the customer never
sees and often doesn't know about without digging into the research.
• Destination Fee. The amount the manufacturer charges the dealer to deliver the
vehicle to the dealership. It is itemized on the MSRP.
• Regional Advertising Fees. These are the costs of advertising the car in the
dealer's market.
• Dealer Holdback. This is a percentage of the MSRP that the manufacturer
sometimes reimburses to the dealer at some point after the consumer has taken
delivery. Something like profit sharing, it is cash the dealer receives over and above
profit generated from the transaction price.
Reed recommends that you decide what you want to pay for the car and then begin
negotiations at a number below that, moving up from there, "adding $500 or so to
make them think they are making progress as you move toward the price you have in
mind," he says.
Here are Reed's negotiating tips:
• Shop around and play dealers off of one another.
• Don't try to negotiate when the dealership is busy, like on Saturdays.
• Line up your car financing before going to the dealership so you are a cash
customer and can avoid any dealer's attempt to negotiate the monthly payment.
• Be prepared to walk out if you don't get the price you want.
Websites like Edmunds.com, TrueCar.com and KBB.com (Kelley Blue Book) not only
provide the MSRP and dealer invoice price for cars, they also compute the real-world
average transaction price. But a successful negotiation will put the final transaction
price on the car somewhere between the dealer's invoice and MSRP.
"The invoice price and the sticker price define the low and high end of the pricing
scale," Reed says. "You want to wind up somewhere in between."
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