Chapter 3: Setting The Price You
Want To Pay (continued)
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
- 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.
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
- 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.
- 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
TIP: When dealers compete for your business -
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