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.
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