Being a savvy car shopper takes some time and know how, but with many new cars priced upwards of $40,000, the time you spend will be well worth it. Where do you start? The first step is to understand the system. When you know where the negotiating room is, you’ll be able to get a better deal.
The car dealership must make a profit. If there’s no profit in it for them, they’ll turn down your offer no matter how slow sales are. Typically the dealership has a potential profit of 6 8 . That’s the difference between the sticker price and the price they pay for the car. Once you know the model you want, you can buy a report from Consumer Reports that will give you all of this information in detail. By doing this research, you’ll find out how much lower than the sticker price a dealership is likely to accept. Once you’ve reached that point, you can’t go any further with the price.
There is someone else, though, who is making a profit from this sale – the automaker. Automakers routinely offer incentives, and that money doesn’t come from the dealership. These incentives are not something that you can negotiate. Car makers offer limited time incentives, often on cars they want to move, and you need to learn about them and take advantage of them during the offer period. The most common incentives are rebates, low or zero interest loans, special lease deals and factory to dealer cash.
Rebates are paid by the automaker and go straight to you in the form of a price reduction. Dealerships will often try to tell you that you can’t get a discount from the dealer and a rebate from the factory. This is not true. Rebates apply after you’ve negotiated the price with the dealer.
Low interest loans are also funded by the automaker. Many also offer 0 APR loans on some vehicles. Usually you have to choose between a rebate and a low interest loan. Generally, a rebate is the better choice if it’s more than about $1,500. You need to do the math, though, to make sure it’s the best option for you. Also, if you have poor credit, you may not be able to take advantage of the special loans. In a few cases, you can get both the low interest loan AND the rebate. Check the automaker’s website for details before you go to the dealership.
If you’re considering a lease, automakers offer good special lease deals with low monthly payments. You usually have to make a down payment, but if you can afford it, you’ll usually come out ahead overall.
The last incentive is often difficult for the consumer to understand, since it’s not advertised and discussed. Automakers offer factory to dealer cash for a limited time. Again, these are often available on cars that the automaker wants to move. The dealer can use this money any way they wish to get these cars sold. Most often, they use it to discount the price to the consumer. This is how dealers can sometimes sell a car for less than the invoice price. The dealership still makes a profit and this extra discount comes from the factory. This is a favorite of luxury car makers, like BMW, Infiniti and Mercedes, since it doesn’t make them look like a discount brand.
If you’re thinking of buying a car, do your research. There’s a lot of money on the table. Make sure that as much of it as possible finds its way back into your pocketbook.
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