Six Secrets To New Car Buying

Want a great deal on that new car? Fortunately negotiating the best price when you're sitting in the dealer showroom may be easier than you think. Just apply the following secrets to new car buying. Be sure to take notes as you read through this.

1. The Price Dealers Really Pay

What's called the MSRP or "Manufacturer's Suggested Retail Price" is the basic retail price that dealers should list the car for. Of course many buyers know they can do better than that, and they often look for the Dealer Invoice Price, information which is typically right on the car. Getting a price close to that is considered the best that can be done. After all, the dealer has to make something on a sale, right.

But this does not necessarily define the lowest you can go, because the invoice price is not what the dealer actually pays. All it really is is a marketing ploy manufacturers and dealers create to help THEM better negotiate with customers. Their real cost is almost always substantially less than this, so keep that in mind when you start negotiating the price you pay.

2. What Are Incentives and Holdbacks?

One of the things that lowers the dealers true cost is special incentives offered by the manufacturer (discounts for volume, for example). Another is holdbacks, which are amounts paid to the dealer by the manufacturer upon the sale of each vehicle. Rather than simply selling the cars to the dealer for less, it is done this way to artificially inflate the cost on paper, which helps the dealer in negotiations with "smart" consumers.

You can find out about holdbacks and incentives from some services. For example, Consumers Reports, in addition to having some information about these things in their magazine, also can provide you with all of this sort of information (for a fee) about any car you are considering. Watch for their "New Car Price Service," which is usually advertised in the magazine and online.

3. Your Trade In

Finish negotiations before you mention that you have a car to trade in. If the dealer knows you have one, he may hold out for a higher price on the new car just so he can offer more on your trade in, making it look like he's treating you well. Before you even start car shopping, look up the value of your existing car in one of the used car price guides (available online or in your public library), so you know what you might get selling it yourself. If the dealer offer if is anywhere near this, take it.

4. Extras

The profit on a new car is often made from the "extras." A radio or safety feature may be worth the price, but many other extras are almost worthless or at least grossly overpriced. There are exceptions, but as a rule avoid undercoating, rustproofing, fabric protection, and windshield etching.

5. Buy At The Right Time

What's the right time to buy if you want the best price on your new car? Watch for sales, special manufacturer rebates of course. They might save you hundreds of dollars. However, one of the lesser known secrets to new car buying is to shop near the end of the month.

Many car dealers pay bonuses to employees based on total monthly sales. Near the end of the month then, the sales people are sometimes trying to meet a goal that might win them a bigger bonus check, which gives you more negotiating power. Try mentioning at some point "I might wait until (name the day that's the first of next month) to decide." At that point you might see the sales person step out to talk to a manager about offering you a lower price.

6. Used Cars Are A better Value

Here's a secret that is more about millionaires than about new car buying. They may buy more Mercedes or BMWs than Honda Civics, but about 40% of them buy them used. They recognize value (perhaps part of why they are wealthy?). Repair cost surveys and other data show that a three to four-year-old car typically costs less per mile to own as a new car. The savings can be as high as 50% (less if you are paying cash, because part of the savings is in the interest savings on a lower-priced smaller-loan auto). And don't worry - a car should look almost new at three years old.