Score a Deal on Your Next Car

Easier credit, low interest rates and pent-up demand for cars and trucks are helping position U.S. auto sales for their second straight year of growth. Experts predict sales could climb as high as 13.8 million in 2012, close to what is considered a healthy market (14 million). If you’re one of the millions of Americans expected to buy a new car or truck this year, here are some tips that will help you negotiate the best price.

The best way to start is to find out what the dealer paid for it. True dealer cost is made up of four components – dealer invoice, advertised rebates, unadvertised dealer incentives and holdback.   

• Dealer Invoice – Accurately determining the dealer invoice price is a major step to help you begin your negotiation. Websites such as Edmunds.com will help you determine the invoice price for the car/truck as well as each option package. It will also provide you the MSRP (Manufacturer’s Suggested Retail Price – or “sticker price”) for the car/truck and the options.
• Advertised Rebates - There may be advertised "Cash Back" rebates for the car/truck that you want. You need to know what the rebates are before visiting the dealership. Most of these rebate offers are listed on the dealership’s website.
• Dealer Incentives - There also may be unadvertised incentives that the manufacturer gives to the dealer. Some vehicles have a hidden factory-to-dealer incentive that you can only get if you know to ask for it. Otherwise, the dealer will keep the incentive.
• The Holdback - The holdback is a hidden rebate that is paid directly to the dealer by the manufacturer for each vehicle sold. Holdback is generally 2-3 percent of the vehicles’ MSRP .  The dealer uses these funds to help reduce various selling expenses.

Negotiating Tips

1. Invoice price versus MSRP or “sticker price.” Now that you know the invoice price of the vehicle you are interested in, you can make some educated decisions about what is a fair price. As a consumer, you want to negotiate from the invoice price up. The dealer wants to negotiate from the MSRP price down. 
2. Use the Internet. Get some email quotes on the vehicle you want before you actually go to the dealership to negotiate. Starting the negotiating process from home gives you an advantage. 
3. Friends and family discount. Do you have friends or neighbors who work for a manufacturer (Nissan, Ford, GM)? They may be able to get you a “friends and family” discount. This discount will set the price slightly above the invoice price. It is a very competitive price and will shorten the negotiating process. Keep in mind not all vehicles will be eligible for this discount. 
4. Know the value of your trade-in. You need to determine the market value of your trade-in before you offer it to the dealer. Resources such as N.A.D.A. will help you determine the value of your trade. Keep in mind that Kelley Blue Book provides lower values than N.A.D.A. 
5. No-haggle pricing. Many dealerships have adopted a “no-haggle pricing” policy where the price is noted on the vehicle. These dealers are pricing in some of the unadvertised manufacturer-to dealer-incentives discussed earlier. You can still do your research on the invoice price and compare it to the “no-haggle” price. 
6. “What type of payment are you looking for?” Although you should have determined what monthly payment works with your budget before you began the purchase process, there is no need for the dealership to know what it is. Sometimes dealerships will work “backwards” and price in optional products (warranties, guaranteed auto protection, credit insurance) that create a payment that matches what you revealed to them. While some of these optional products offer value, they should be considered separate from the actual price of the vehicle.              
7. Last day of the month. Some consider this tip a myth, but I still believe the end of the month is the best time to purchase your new vehicle. All dealers are trying to close their month on a high note, and selling a new vehicle to you helps them achieve that. Many dealers will be as flexible as possible when the month is getting ready to close.

We all know that a dealership is in business to make a profit. We just don’t want to be the customer that the dealership makes their month on. As with any other large-ticket purchase, you get the best deal when you do some research and become as knowledgeable about the product as possible.

Jeff Rhodes can be reached at 615-743-6135 or jeff.rhodes@pnfp.com.