Step 1: Do your Homework
Before you set foot in any dealership, you need to do your homework. First, decide what vehicle you want: which car or truck best fits your needs, your wants, your lifestyle and your pocketbook. NADAguides.com offers a complete new vehicle information center where you can build and price new cars from the ground up, compare new models side-by-side, find the vehicle that best suits your personal lifestyle, research safety information, read expert reviews about the vehicle you're interested in purchasing, and much more.
Before you set your sights on one particular vehicle, be sure to research comparable makes and models. There are a variety of vehicles on the market today with similar features, safety ratings, body styles, engine performance, handling, interior room and more, so explore comparable vehicles to ensure you're making the most economical purchase possible.
Next, determine what you can afford. It doesn't matter if you're a master of negotiation; no amount of bargaining is going to help you afford a car that's pricier than your budget. Be sure to check out the NADAguides.com new vehicle information center, where you can research the price of virtually every new car on the market today. We offer standard invoice pricing (what the dealer pays for a vehicle) and standard MSRP (the manufacturer's suggested retail price of a specific vehicle) as well as any manufacturer-to-consumer incentives and rebates that might be applicable to your car. Certain incentives and rebates could ultimately reduce a vehicle's purchase price.
Additionally, now is a good time to determine the specific vehicle features and options you want, including paint colors, interior colors, transmission type (manual or automatic), leather seats, CD-players, navigation systems and more. There are a variety of new-car options out there and many will increase the price of your vehicle, so be sure to do your homework first. Factor into the vehicle's price your must-have options and their respective costs to come up with a working idea of what your new ride will cost. Most importantly, be realistic about your finances and choose a vehicle that best fits your budget.
Then determine how you plan to pay for the vehicle. If you're financing the car, be sure to research what you can afford to spend for car payments on a monthly basis. Don't forget to factor in a down payment, if applicable, to determine exactly how much you'll need to finance. Down payments and other credits, such as credit for a trade-in vehicle, will impact the amount of money you need to borrow and, ultimately, your monthly payment.
Now it's time to take a test drive. No amount of online research can replace the experience of an actual, physical test drive, so be sure to take that new car prospect for a spin. You could test drive the vehicle at a local dealership, you could ask a family member or friend who owns the vehicle model you're interested in purchasing to take their car for a ride or you could rent a similar car with similar options for a day and spend some quality time examining and driving it before you make your decision. A test drive is extremely important in determining whether or not a particular car is right for you, so take the time and do it right.
Finally, look for advertised specials about the car you want, with the options you want, by examining dealer websites, local newspaper ads, or local circulars and flyers. And now lets learn about Step 2 in New Car Negotiating Strategies Getting a Price Quote for the car you're interested in buying.
Step 2: Get a Quote
Now it's time to get a price quote from a local dealer. There are a variety of ways in which you can get a quote: submit a price quote request via NADAguides.com to a local dealer in your area; visit a dealership in person; or call, email or fax a dealership to request a price quote. If you choose to visit a dealer or call the dealership directly, be sure to find out if they have your vehicle on the lot (with the options you want and in the color you desire) ahead of time. If a dealer doesn't have the inventory on their lot, they might be able to locate the car for you. Dealers want to build relationships with their customers and are usually willing to do what it takes to get you the vehicle you desire. Be sure to inquire beforehand.
Now lets learn about Step 3 in New Car Negotiating Strategies learning commonly used car lingo to help you become a better, more informed negotiator.
Step 3: Know the Lingo
Before you begin the negotiation process, it's important for you to know some common pricing terminology. There's a good chance you'll run into some of this terminology during the car shopping and buying process.
Invoice price: Essentially, the is the price the manufacturer charges the dealer for the vehicle.
Base price: The vehicle's base price is the cost of the car without options. This price reflects the standard equipment and factory warranties available on the car.
MSRP: MSRP stands for manufacturer's suggested retail price. MSRP is commonly referred to as the sticker price and is the price at which the manufacturer suggests the vehicle be sold. In many cases, a consumer can negotiate a vehicle sales price that is lower than the MSRP.
Monroney Sticker Price: This is the label affixed to the car window that is required by law and can only be removed by the purchaser. According to the Automobile Information Disclosure Act of 1958, all new cars must have a Monroney sticker attached to a side or front window. This sticker includes information such as the vehicle's make and model, the final assembly point, its destination, the manufacturer's suggested retail price for the vehicle (or MSRP), the manufacturer's suggested retail price for each accessory or item of optional equipment, the manufacturer's transportation charge and the fuel economy.
Dealer Sticker Price: A dealer's sticker price is usually an addendum sticker on the vehicle's window displaying the suggested retail price of any dealer-installed options, additional dealer mark-ups or additional dealer profit and dealer preparation costs and undercoating if applicable.
Dealer Holdback Payments: Dealer holdback payments are, in essence, monetary credits towards the purchase price of a vehicle, paid by the manufacturer to the dealer when the dealer sells a car. Typically, manufacturers issue holdback payments to dealers on a quarterly basis. Holdbacks vary from manufacturer to manufacturer, differ in price depending on the make and model and are contingent upon certain criteria, such as a dealer's customer service index, advertising budget and other associated operational costs. Dealer holdbacks are typically non-negotiable.
Carry-Over Allowances: Dealers are usually offered cash incentives by the manufacturer for purchasing end-of-model-year vehicles. Usually, these carry-over vehicles are anywhere from $500 to several thousand dollars cheaper, depending on the vehicle. Even though they're not required to, certain dealers will pass along these cash incentives to the consumer in the form of a discounted vehicle sales price.
Packs: There are many costs involved with displaying, maintaining, insuring, advertising and selling vehicles. Dealers take into consideration the total of their advertising budgets, utility bills, insurance payments and other related sales and flooring costs, divide these costs by the number of cars sold the prior year, and determine a per-car overhead charge that is added to the price of each car sold to help cover costs. These charges are called packs. In most cases, however, a dealer's costs to maintain and sell a vehicle is non-negotiable (similar to dealer holdback payments) and typically won't reduce the selling price of a vehicle.
Dealer Incentives: In some situations, certain vehicles may carry incentives programs (or cash rebates) to dealers depending on whether the vehicles are going to be replaced with new models or when production of certain vehicles is scheduled to stop. Similar to carry-overs, dealers may realize lower prices on these particular vehicles. As a result, they may be willing to pass that savings along to you, the consumer.
As we mentioned earlier in this section, there are also certain manufacturer-to-consumer incentives and rebates programs that might be applicable to the vehicle you're interested in purchasing. Be sure to research current offers at NADAguides.com to see if any apply to your new car. Sometimes manufacturers offer special financing programs - most recently 0 percent financing or cash-back rebates on certain makes and models. You can also ask your local dealer if any rebates and incentives apply to your particular car.
Step 4: Negotiate the Deal
Once you've determined the vehicle you want, including its price (with options), and you've located the car of your dreams at a local dealership, its time to negotiate. You might very well have received a rock-bottom price quote for the car, a reasonable total sales price (with tax, title and other applicable fees), one with affordable monthly payments and one that includes incentives and rebates that make the deal even more appealing. In this case, negotiation might not be necessary.
However, if you think there's some breathing room between what the dealer is asking and what you're willing to pay (based on your research), it's time to negotiate. Before you enter into the negotiation process, be sure to set a realistic high price limit you would feel comfortable paying for the vehicle.
Remember to keep in mind your budget and your price limitations when you enter into the negotiation process and be firm about those limitations.
First things first: it's time to discuss the sales price. Typically, most dealers are willing to negotiate a final sales price that falls somewhere between the invoice price and the MSRP (as listed at NADAguides.com). Often, dealers are willing to bargain on their profit margin and pass along certain savings to the consumer based on specific incentives programs offered by the manufacturers (sometimes referred to as current offers). Some of the incentives programs (or passed-along savings) are negotiable. Others are not.
Once you've agreed upon a fair sales price, it's time to talk about financing. Most dealers offer competitive financing programs. You might consider financing your vehicle through the dealership or researching other financing programs through independent lenders, such as credit unions, finance companies or banks. Finally, if you have a used car you'd like to trade in for credit towards the purchase of your new car, be sure to research its value at NADAguides.com prior to the negotiation process. Obviously, any value for your trade-in and any down payment you may have will reduce the price of your car and, ultimately, your monthly payment amount if you finance the vehicle.
Through it all, remember there are costs associated with selling cars, including advertising, maintenance and personnel. If dealers were unable to make a fair profit on cars, they simply wouldn't remain in business. And according to recent studies, it's getting harder and harder for dealers to make decent profit margins on the sale of new vehicles with each passing year. If you do your homework, including researching the invoice price and the MSRP of the vehicle you're interested in purchasing, if you set a realistic low and high range based on the price you're willing to pay for a vehicle (prior to negotiation), and if you know about certain manufacturer incentives programs ahead of time, you're more than equipped to negotiate a fair purchase price. At the end of the day, dealers will appreciate your flexibility in accepting a realistic, fair sales price and you'll feel better knowing you made the most educated car-buying decision possible.