NEGOTIATING TO SAVE THOUSANDS OF DOLLARS ON A NEW CAR

By
Real Estate Agent with The Michigan Group - Livingston

In order to understand what price you might expect to pay for your next car, in Livingston County including Brighton, Howell, or Fowlerville area, you must first understand how new car pricing really works. As you know, pricing is very important whether you lease or buy.

Different customers can pay widely different prices - for the same car, at the same dealer, on the same day - depending on each customer's knowledge of how car pricing works.

RULE 1. BREAK THE CODE. 

When you walk into a car showroom you'll see two prices. (1) The Manufactures Suggested Retail Price (MSRP)  (2)    The Dealers Invoice Price. Naturally most people think it's wise to negotiate down from the MSRP to close to the Dealers Invoice Price as you can get. And that's exactly what the dealer wants you to think - but it won't get you the best deal. The reason: both the MSRP and the Dealer Invoice Price are "artificial" numbers created by the car manufacturer and the dealer to serve their negotiating purpose.

You should use neither price as a starting point in your negotiation.  What you need is the real price the dealer paid for the car. This is based on the Dealers Invoice Price and is modified by factors such as the dealers holdback.  If you know the real price, you will have true negotiating power because you'll know who much "wiggle" room you really have. You should bargain up from this price.                                                                                                                     

Rule 2. Prepare your own financing, and only use the dealer's if they can beat your rate.
The finance office is often where dealers make most of their profit. Part of that is the dealer's technique of finding the bank with the lowest finance rate, and then bumping it up 2% for the dealer to pocket. You'll never know what kind of rate you deserve unless you go get approved by an unbiased party like a Credit Union. When your credit union promises 5% on $30,000, that's when you come to the dealer and see if they can get you 4.5%. Even if they make a bit of money off you, it's better than going into the finance office blind and being told your rate is 6.5%.

Rule 3. Salesmen do actually serve a purpose.
You don't have to walk into the dealership wielding your sword of distrust. A good salesmen can give you a lot of insight about your purchase. Are you the type of driver who can benefit from buying the newest model year, or are you better off getting last year's leftover model? Should you lease or buy? What's the resale value of the car you're interested in? Many of these questions can be answered by your salesman; just remember that they do have an agenda after all, so take everything with a grain of salt.

Rule 4. Buy at the end of the month.
Dealers never learn. For decades, the end of the month has been the proverbial chicken-with-its-head-cut-off time for dealers, and they never see it coming. They always have a few more units they need to hit, and if they're successful, they'll all be showered with bonus money. They will take a short deal on one measly unit in a New York minute if it means hitting their monthly numbers... so let them do just that.

Rule 5. Do your research on the Internet. If you're doing research anywhere else, you're doing nothing.
Don't look for deals in the newspaper. Don't listen to the deal your stupid-ass brother-in-law says he got on his car, because he's either lying or has no idea what kind of deal he got anyway. Don't waltz into a dealership at all before you've done all your research on the consumer-driven utopia of information that is the Internet. You'll be the most well-informed consumer out there, and you'll have the upper-hand from the start.

Rule 5. Pre-owned is the way to go.
No one should buy a car anymore without considering a pre-owned option. You can find used vehicles that have less than 10,000 miles on them nowadays, and the price is drastically reduced. Any quality vehicle built in this millennium will go 100,000 miles easy... unless you have a "thing" about owning something brand new, the best values are often used and certified used vehicles.

 

Comments (2)

Gail Reeves Reid
Re/Max Realty Specialists - Mississauga, ON
Thanks Bill for the tip. I am in the market for a new vehicle. I am looking at pre owned vehicles since new vehicles depreciate as soon as it leaves the lot. These tips will come in very handy.
Nov 18, 2007 01:09 PM
Bill Fear
The Michigan Group - Livingston - Brighton Township, MI

Gail, Thanks for the comment, It's my pleasure to help.

Warm regards,

Bill Fear

Nov 19, 2007 04:59 AM