Buying a New Car
Here’s what you need to know about car dealers; when they say “hello,” they're lying.
Hey, we're kidding. Some of our best friends are car dealers. Salt of the earth they are. But they're out to make a buck. Just like the rest of us. So let's talk a bit before you storm in there all full of piss and vinegar.
Thing No 1
Know the dealer invoice.
This is what the dealer pays the manufacturer for the car. It is readily available on the Internet, invoicedealers.com. Anything you pay above this is profit. But, not the only profit by a long shot – like options, warranties and financing (holdback incentives -- see below). And it is very different from the MSRP (manufacturers suggested retail price). MSRP is what's on the sticker on the window which shows base price plus, installed options, freight, and transportation charge. It is the manufacturer's recommended selling price, it is available at edmunds.com and kbb.com and doesn't mean squat in terms of figuring out what to pay.
Thing No 2
Find out what everyone else is paying.
If you are suddenly feeling sorry for your little dealer friend and fear your karmic bank account is in jeopardy, don’t. The little sneaker is getting what’s called a “holdback” incentive from the manufacturer likely equivalent to 3 percent of retail. Dealerships have cars on hand so that people can browse and eventually make a choice. Dealers pay for these cars when they get them from the manufacturer and the amount the dealer pays is the price reflected on the invoice from the manufacturer to the dealer, the so-called "invoice price.
Here's the rub: holdbacks were introduced a few years ago and manufacturers inflated invoice prices by 2-3% of MSRP. The dealer pays that extra percentage and then later gets the money back from the manufacturer. So, invoice prices are no longer that accurate a gauge. If you want all the details on these holdback shenanigans check out Edmunds.com's explanation.
While you're at Edmunds you should also check out their True Market Value tool for evaluating what others typically paid for the same car you're considering.
Thing No 3
Familiarize yourself with the packages
They bundle options together. If you know what the bundles are you’ll avoid the part where you become discombobulated when he springs the news on you that the moon roof you want only comes with the leather interior.
Thing No 4
Find out if the dealer is getting any additional incentives.
This is called “trunk money.” You can find this out @checkbook.org. Or, buy a seven day pass at autonews.com ($10). This is a trade rag but you don’t have to prove that you’re in the industry. Finally, you can go to cardeals.com and pay $7 for the latest report (issued every Wednesday) indicating current incentives that manufacturers are offering dealers.
Thing No 5
A rebate is not always real.
Sometimes, rebates are anticipated by the dealer for a few weeks, sometimes they are announced by the factory out of the blue. Sometimes they last for months, sometimes only for a few days. Sometimes a rebate is nothing more than a re-packaged incentive that has already been in place.
