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Negotiate for a Good Deal on a Car

Chapter 3: Setting The Price You Want To Pay (continued)

Offer the invoice priceNegotiate for a good deal
  • Offer the invoice price for your opening bid (Don't forget options and incentives)

    • Add the invoice price of the options. An option or options package will cost you more than it costs the dealer-these can be an added source of profit for them or an added negotiating factor for you.

    • Minus at least 50% of the value of any dealer incentives that you may know about from your independent research. For example, if a $500 incentive is available, deduct at least $250 from your first offer.

    • If a good dealer incentive is available because a vehicle is heavily oversupplied, you shouldn't pay more than the invoice price minus 50% of the incentive. Stick to your guns and shop around.

  • Separate your extras from your offer, add these in to the equation afterwards to determine your Total Cost.

    Extras include the following:

    • Customer rebate should not be included in the negotiation. Let the salesperson know that you will be subtracting it from whatever price is agreed upon.

    • Dealer advertising cost is a non-negotiable regional fee that a salesperson should tell you, and that can often be confirmed by checking the fine print in newspaper ads.

    • Sales tax and freight are not negotiable amounts. If a dealer "throws in half the tax" it is actually coming out of his profit: either from his margin over the invoice price, from a dealer rebate, or from his expected holdback. (The additional discount off the invoice price received from the manufacturers on a quarterly basis.)

  • Set a maximum by thinking in terms of how much the dealer will take over his cost - NOT how much discount you can get from the MRSP! Consider the following factors when setting your maximum:

    • Look for the over-supplied vehicles. Gauge the demand on the vehicle you are interested in. A dealer will be less flexible on a hard-to-find hot-seller than on a vehicle that is over-supplied. Oversupply can lead to rebates and deals.

    • Go for 1 or 2% over the invoice price on a vehicle $25,000 or less, and with average sales. A dealer will expect to average around 3 or 4% profit on these vehicles. If you can get them to take half of that you are doing well.

    • Better than 5% over invoice for a luxury car (over $40,000) is a good deal. These vehicles are expected to command a higher profit (6 to 8% over invoice) for the dealer.

Research onlineCheck out these information sources

  • On paper
    • Buy Car Bargains and/or Lease Finds at 1-800-475-7283
    • Find Automotive News at a library or specialty magazine shop. This weekly auto industry publication provides a constantly updated list of rebates and dealer incentives
    • Edmund's New Car Prices and Edmund's New Pickup, Van and Sport Utility Prices provides dealer costs, MRSPs and additional pricing for special options packages.
    • ArmChair Compare will sell you information through their toll-free line: 1-800-227-2665.
    • Check the paper. Look for the big leasing ads with the lowest payments. This is often an indication of a subsidized leasing deal.
  •  Online
    •  Go to any of the homepages of the any of the manufacturers to find out the basics (mileage, MRSP, options available, etc.) on whatever car you are interested in


TIP: When dealers compete for your business - You Save!

Compare dealer prices from multiple discount dealers in your area using Edmunds.

With multiple price quotes you'll be able to get the best deal on the vehicle you want.

It's the fast, easy and headache free way to shop!

Although checks with auto manufacturers and their representatives to confirm the accuracy of the data, it makes no guarantee or warranty, either expressed or implied with respect to the data presented here. All specifications, prices and equipment are subject to change without notice.

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