Learn the Lingo
Before you talk price, there are some terms you should know and understand.
Invoice price – This is the wholesale price the dealer paid the manufacturer before any rebates or incentives. Do some research on this number. You likely can find out what the dealer paid for the car and the profit being made on each car. Then you’ll be ready to compromise between allowing the dealer to earn a living and making sure you get a good price.
The internet is a source of information. Use sites like Edmunds.com, truecar.com and kbb.com (Kelley Blue Book) to determine how much you should pay for your new car. Print the information and take it with you to the dealership.
MSRP (manufacturer’s suggested retail price) – Also referred to as the “sticker price,” this is the number on the Monroney (window) sticker. This is simply a starting price in your negotiations.
Dealer Incentives – Manufacturers sometimes give dealers extra money, bonuses and rebates for selling overstocked and undersold cars. There are ways to find out if the car you want has any available incentives. Visit sites like Edmunds.com or Cars.com. Subtract that amount from the amount you’re willing to pay.
Holdback – The manufacturer often gives money to the dealership to help reduce overhead expenses. The information may not be very helpful in the negotiation process, but if it comes up, you’ll know what it is.
Sales Tax – This is the same sales tax charged on everything you buy. It isn’t worth your time to try and go to a different county to get a lower tax rate. This amount is charged based on the county where you live, not where you buy the car. This cost is non-negotiable.
BEWARE OF THE ADD-ON
Dealers typically make a substantial profit selling accessories and add-ons for your new car after you’ve negotiated a price. Many times, they dealer will put a bunch of add-ons and accessories on a car and try to sell them by saying they can’t be removed. Feel free to refuse them.
Some of the more common add-ons include:
Destination Charges: Some manufacturers charge separately for shipping the vehicle to the dealer. You can’t get around this, but check the sticker to make sure it wasn’t already included in the price.
License and Registration Fees: These are necessary, but call your state’s Department of Motor Vehicles to make sure the dealer hasn’t padded the price.
Extended Warranties: Also referred to as service contracts.
Dealer Prep: Part of a dealer’s job is to get the car ready for you. This involves removing plastic from the car and seats, vacuuming the interior, washing the exterior, and checking fluids. This is one of the things you’re paying for already. Don’t pay twice.
Credit Insurance: This insurance will pay off your car loan if you die while leasing it.
Documentation (Doc) Fees: While there is some cost in preparing and filing documents, it has been common for some dealers to charge for documentation fees. This amount should be less than $100 and in many states, is limited by state regulations.
This content has been provided by Visa Money Skills and is intended to serve as a general guideline.