Chapter 3: Setting The Price You Want To Pay (continued)

•  Shortcut to good Total Cost
  
•  Determine the dealer's invoice price
  
•  Negotiate for a good deal
  
•  Check out these information sources
  

Negotiate for a good deal

• Offer the invoice price for your opening bid (Don't forget options and incentives)
  
  
  • Add the invoice price of the options. An option or options package will cost you more than it costs the dealer-these can be an added source of profit for them or an added negotiating factor for you.
    
    
  • Minus at least 50% of the value of any dealer incentives that you may know about from your independent research. For example, if a $500 incentive is available, deduct at least $250 from your first offer.
    
    
  • If a good dealer incentive is available because a vehicle is heavily oversupplied, you shouldn't pay more than the invoice price minus 50% of the incentive. Stick to your guns and shop around.
  
  
• Separate your extras from your offer, add these in to the equation afterwards to determine your Total Cost.
  
  Extras include the following:
  
  
  • Customer rebate should not be included in the negotiation. Let the salesperson know that you will be subtracting it from whatever price is agreed upon.
    
    
  • Dealer advertising cost is a non-negotiable regional fee that a salesperson should tell you, and that can often be confirmed by checking the fine print in newspaper ads.
    
    
  • Sales tax and freight are not negotiable amounts. If a dealer "throws in half the tax" it is actually coming out of his profit: either from his margin over the invoice price, from a dealer rebate, or from his expected holdback. (The additional discount off the invoice price received from the manufacturers on a quarterly basis.)
  
  
• Set a maximum by thinking in terms of how much the dealer will take over his cost - NOT how much discount you can get from the MRSP! Consider the following factors when setting your maximum:
  
  
  • Look for the over-supplied vehicles. Gauge the demand on the vehicle you are interested in. A dealer will be less flexible on a hard-to-find hot-seller than on a vehicle that is over-supplied. Oversupply can lead to rebates and deals.
    
    
  • Go for 1 or 2% over the invoice price on a vehicle $25,000 or less, and with average sales. A dealer will expect to average around 3 or 4% profit on these vehicles. If you can get them to take half of that you are doing well.
    
    
  • Better than 5% over invoice for a luxury car (over $40,000) is a good deal. These vehicles are expected to command a higher profit (6 to 8% over invoice) for the dealer.

Check out these information sources

• On paper
  
  • Buy Car Bargains and/or Lease Finds at 1-800-475-7283
    
  • Find Automotive News at a library or specialty magazine shop. This weekly auto industry publication provides a constantly updated list of rebates and dealer incentives
    
  • Edmund's New Car Prices and Edmund's New Pickup, Van and Sport Utility Prices provides dealer costs, MRSPs and additional pricing for special options packages.
    
  • ArmChair Compare will sell you information through their toll-free line: 1-800-227-2665.
    
  • Check the paper. Look for the big leasing ads with the lowest payments. This is often an indication of a subsidized leasing deal.
•  Online
  
  •  Go to any of the homepages of the any of the manufacturers to find out the basics (mileage, MRSP, options available, etc.) on whatever car you are interested in
    
    

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