4. The sticker on the window of the car is the “asking price” or the manufacturers “suggested” retail price.

Who cares? You shouldn’t.

You want to know the invoice or what the dealer has paid for the car.

And that’s easy enough for you to get at by visiting Edmunds, Great New Cars, or Value Pricing. Always work your negotiations from the invoice price up NOT the sticker price down. Forget the sticker price.

NOTE: Keep in mind if you are going after a car that is very popular in the market place the dealer will be less likely to negotiate. Remember your research and your best time to buy cars.

5. Holdback: I get a lot of questions on this little topic and have taken a shot at explaining it. Here’s a review on dealer holdback for you. Holdback is a bit of a sacred cow for dealers. You won’t see it advertised… unless it’s the fine print blurb at the bottom in the fine print telling you that in order to get this fabulous price…

“offer good for a limited time only with approved credit. Dealer retains all incentives, customer cash back, and holdbacks associated with this vehicle.”

It can be tough to get at the holdback during the course of your negotiations but don’t let that stop you from trying. For more on the actual holdback dollars and dealer incentives visit Edmunds, Great New Cars, or Value Pricing.

6. Get yourself pre-qualified for your loan at Automotive.com or Great Car Rates and know how much, how long, and at what interest rate you’ll be borrowing the money for.

In recent months, manufacturers have offered zero percent financing on many of their models. Granted this does sound like a great deal. And in many cases it is, but this shouldn’t preclude you from running the numbers for yourself and doing the math.

First of all know that these great rates may only be applicable to short term financing (which would mean significantly higher monthly payments), and your credit will pretty much have to be spotless in order to even qualify. Even if you can (and don’t mind) afford the higher monthly payments, still you must run the numbers.

For example: If your bottom line amount finance is $15,000 (after your trade, taxes, fees, etc) for 48 months at an interest rate of 4.25%, you will pay $1,337.59 in interest over the life of the loan.

Now let’s say that the car you are looking is enticing you with zero percent financing for the same period and a $2,000 rebate. As you can see, if you take the 4.25% financing and take them up on their $2,000 rebate you’ll actually come out some $600 plus ahead.

Certainly worth about the two minutes it takes to plug the numbers in a monthly payment loan calculator and find.

Car Buying Review wrap up next…

Bravo!

Does this mean finding a nice reliable car for a reasonable price?

To many people this may be the ultimate goal as they trek through one car dealership after another in search of their best automobile deal.

Think for moment.

Does getting a good price on a car mean getting a good value for your hard earned bucks? Is the price you pay for the new car what the car is going to actually cost you? Yes?…. No? ….. Maybe…..

I bring this up at this point just so we can take a brief respite from the hard work of car price negotiating. And to make sure that during all the research and self education that you actually take into account what the vehicle cost is going to actually cost you.

The price you pay to purchase your automobile is not the cost of the car.

Although price and cost are certainly blood relatives (no pun intended), there is a distinct difference between the two.

The price you pay for your car is merely the exchange of cash for the title. The title which either goes to you or the lien holder. There is no expense involved at this point in the car purchasing cycle, just consideration exchanged for a product.

In other words, say… you have just exchanged with the dealer $20,000. The dealer has $20,000 and you now have a vehicle valued at $20,000….. well…. almost.

Of course, part of that $20k you just shelled out or signed loan papers for included the profit the dealer made on the deal, taxes, and fees.

In reality, the actual vehicle market value of your new car never was $20,000. Every car is marked up above the market value. Essentially, this is know as profit.

With the dealer profit attached to the car, the car itself isn’t really valued at $20,000. On a tangible basis your car itself really is not valued at $20,000. Even if you walk straight out of the finance department, don’t even touch your car, and try to sell it, you’ll not see your $20,000 again (at least not from any dealer).

And once you drop yourself behind the wheel and head off to make all your friends and neighbors jealous, you begin to run up the tab.

We all know the typical costs of owning a car, but for you parents out there looking at this with your son or daughter, a quick reminder:

• Your car is already depreciating (ouch!)
• Fuel costs (large and growing)
• Ongoing finance charges and insurance costs
• Routine maintenance and repair

So, back to the question….. is the price you pay for your car, what the car costs you?

Not really.

As you can see it is much more financially prudent to consider all of the costs involved in vehicle ownership rather than just the price of the car as you begin doing your homework on car buying. Consider this. By the time most cars are five year old the cost of ownership will exceed the original purchase price.

Also, while we’re on the subject, and even more critical to think about, is that similar cars with similar or even the same purchase prices can have very different cost of ownership.

This is why it is very important to understand the difference between car price and car cost and how the two relate to each other as you begin your search for the car that will afford you the best value. Don’t limit your thinking to price alone as you begin your quest for finding your best car deal.

Very good!

You are still hanging in there with me. I am surprised and humbled by your presence (really!)….

Check out our handy car cost comparison calculator to give you the whole picture when it comes to ownership costs.

Car Insurance in more detail next….

Actually there are about three different prices the vehicle will carry with it; the manufacturers suggested retail price, the car’s sticker price, and the car dealer costs or the factory invoice.

Every new car will have a window sticker showing the manufacturer’s suggested retail price for the car (this is known as the Monroney sticker).

This sticker will contain all of the information about the car.

At the top of the sticker you find the manufacturer’s suggested base price for the car with standard equipment only. Just below that you will see a list of optional equipment the car possesses that was installed by the factory.

Also included on the sticker will be the destination charge the dealer must pay the auto maker to get the car shipped. At the bottom of the sticker will be the total manufacturer’s suggested retail price for the car including the options on the car and the destination charge.

Many times stuck somewhere else on the window will be the additional dealer add-ons to the factory sticker price. This sticker, to put it bluntly is loaded with profit!

The dealer add-ons may contain something that you may want on the car, but the markup on these items is huge. The profit from these add-ons many times represent cash bonuses for the salesperson as well as the gravy for the dealer.

Don’t pay for these items. It may take some digging in on your part, but don’t don’t pay for dealer add-ons.

Let someone else pay but not you.

These items add no additional value to the car whatsoever. If the dealer isn’t willing to drop these charges you should go somewhere else.

You might even see such terms as value adjustment, additional dealer markup (well at least this one is truthful), documentation fees, dealer preparation fees, etc.

These are just blatant profit for the dealer. You should not have to pay for this arrogance… in fact, refuse to pay for this stuff. You may experience difficulty getting this done if the car you are looking at is in great demand and the dealer knows that chances are the next person will pay for them.

Try as you might, if you don’t have these add-ons removed to your satisfaction, try a different dealer, a different time of the month, a different time of year, or take a look at a different model.

If you elect to pay for these items with the large mark up and car dealer price, they could end up costing you a bunch of money up front and don’t forget you will pay finance charges in the form of your interest rate each and every month if you are borrowing to purchase the car.

A look at new car incentives next…

However, for anyone who has gone through the car buying process and car pricing, you know that what the dealer is often times willing to sell the car for can sometimes be thousands below what the sticker price of the vehicle is.

And if you haven’t bought a car before… keep this information on car pricing firmly planted in your mind.

O.K. you ask. That’s all well and good and I know that the sticker price is just the asking price for the car, but how do I know what to pay or where to begin my negotiating the price of the car?

Well, first of all you have found your way here and that is a good thing. Since you are here, it would be a reasonable assumption that you are internet active. There are a vast number of resources on the internet that deal with car prices and car pricing.

One of the most reliable and best out there for you to Find Car Incentives & Rebates is at Edmunds.com. One great features at Edmunds is that you can easily find out what particular vehicle models are selling for in your specific geographic region. The figures that you find are based on actual sales figures. This is great information to have because now you’ll know what the true market value is of their car that they are trying to sell you.
compare car pricing

Now that you have a good idea of the actual market value of the car that you have been researching, you now need to factor in any of the incentives and rebates that you researched in the previous article on rebates and incentives. Remember you want to begin your car price negotiating and going after your best deal on a new car after you deduct any rebates and incentives from your now determined market value of the particular car you are attempting to buy.

Once you have put all of these car pricing figures and information together for your target price, you can easily calculate what your monthly payments will be with our monthly payment calculator.

Having this basic information under your belt. Well… wait a moment. I really shouldn’t say ‘under your belt’. I should emphasize at this point that you should have a folder made up with all of this information printed out.

Do not try to rely on memory to recall all of your information on a vehicle. Doing so, will give the sales person an opportunity to distract and redirect your thinking and this could be a very costly mistake.

Make a folder.

The time you have spent gathering your car buying information is time well spent and a powerful negotiating tool to use. So be sure to have it with you and use it.

The ingredients of the car price next…

Now days buyers like to address the question of the price of the car before they even venture out to a dealership.

Like so many other aspects of shopping for us consumers today, the internet has become a vital tool. If for no other reason, the use of the internet to do our research will save hours of our personal time and frustration when it comes to the car buying experience.

Many dealerships today have equipped themselves with an internet sales department in which the sole purpose of the sales people are to discuss car prices via the net or over the phone once initial contact is established with a potential car buyer.

Often times internet sales people will offer up the selling price of the car. This is a big departure from not too many years ago when you would inquire about the price of the vehicle and you would get all kinds of offers (sales ploys) to come into the dealership to test drive the car and then discuss the price.

The golden rule then (and still a big part today) was you can’t close the deal over phone so don’t give away price information. Again, with today’s internet shopper, the internet sales departments have to be more up front and accommodating with their information because it’s out there anyway, and for many buyer’s it’s the price quote that drives the car deal process.

Once you get a price quote you’ll want to get back online and compare that quote. Sites such as Edmunds.com and Automotive.com are excellent sources in which to do this. If you find the price they have quoted you is at or below Edmund.com’s TMV, then you are in a good price range for your car.

Now having done this now is not the time to let your guard down. Remember, as we have talked about throughout the website, car dealers have much more than a single pronged attack when it comes to making profit on a car deal.

Don’t get too caught up in your apparent success of minimizing the dealer profit on the car price, only to have a brief lapse and allow the dealer to reclaim profit in another area of the deal such as in the finance office or on your trade value. Remember you can’t honestly determine if you’ve gotten your best deal on a car until you are actually out the door of the dealership.

So, stay focused.

Also, be warned that if you ask the dealer to cut his profit, he might try to take it back somewhere else.

Remember, a good deal isn’t just the lowest selling price. It’s the lowest total out-the-door cost on a car that meets your needs. This means that to ensure you get a fair deal and your best car price you have to be vigilant throughout the entire purchase process, even after you and the salesman agree on a price.

The test drive should include more than just the car… next…

The various trim and package options and other little “creature comforts” can mean comfortable profits for the dealer.

At least in relationship of what you get for your dollar spent on them.

And some which you might be enticed to purchase (add to the finance cost of the car) are actually quite worthless in terms of additional value. If you have done your research, you will know which option packages will at least add a bit of value to your car.

A basic rule of thumb is that manufacturer added option packages such as power packages (door locks, windows, sunroofs, etc) will give a little bit back on the trade-in side.

However, dealer added packages are generally made available to you to add to the dealer profit only. Actually many of the dealer add on’s pay for the cash bonuses that the dealer will give to the sales people…. known in the business as a ‘spiff’ to the sales people. Yep, those $69.95 custom pin stripes probably cost the dealer about $15 bucks. Of that (really) gross profit on the stripes, the salesperson may have gotten a $25 spiff.

Manufacturers will put together option packages on their cars, and do what is termed “value pricing.” By putting the most popular options together in a package the auto maker can save on the production costs since they have to produce fewer variations of the same car.

This type of package can be a good deal for you if the items included in the option package are the options you wanted to purchase anyway. Keep in mind though you can also waste your money if the package includes items that your really aren’t interested in having. An easy way to look at the package vs. what options you only want is to simply add up the cost of only the options you want and compare the price to the package that may have an item or two more than you want.
compare car pricing

It may happen that the cars that you look at on the dealer’s lot have more accessories and options already installed that you really want or want to pay for. The salesperson may insist that you have buy the car “as is.” If this is the case that you run into, and you have the time, you may want to wait or order the car directly from the factory.

But keep in mind ordering a car greatly reduces your ability to negotiate the price.

Keep in mind if you are considering a special order from the factory, you really aren’t in much of a position to negotiate the price of the car. Keeping within the perspective of this website, and from the perspective of a dealer, the dealer would much rather sell you a car directly out of their standing inventory.

Dealers have a much greater motivation to sell their on hand inventory, and it is this motivation you can use to get yourself the best new car deal.

Depending upon the demand for the car and options you are looking at and how long the car that the dealer would like to sell you has been sitting on the lot, you may be able to get those options or accessories that you don’t necessarily want or pay for taken off the selling price of the car.

Again, dealers would much rather reduce their own inventory. And depending upon the timing; they can be under a fair amount of pressure from the owner to do so.

A quick true story to emphasize my point.

I once had one of my assistant sales managers order a vehicle (not an order from a customer. Just a standard factory order) from our manufacturer.

A vehicle that… well let’s just say… came in with a rather unique set of options on it.

A rookie mistake to be sure, but a car that the minute it came off the truck, I knew was going stay with us for a while.

Anyway to make the point, and a long story short, to eventually sell this particular vehicle, I had to not only throw in the cost of the options that were on the car, I also had to put a cash bonus on it as an incentive to the salespeople.

The customer who eventually bought this car got a great deal on a car that I had to make go away. So, we both accomplished the best for each of us.

The whole time the car was on the lot, and as the model year began to change, I used to kid my sales manager (as the pressure on me to move the car kept increasing) ….

“man, you are really going to look good driving that car home!”

We’re still friends and stay in touch. And when we do you occasionally get together this story always comes up.

A few car buying tips up next…