New Car Buying Strategy

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Written by Jimmy D. Moody
Monday, 09 February 2009

For most people, car shopping is an unfamiliar and daunting experience, made worse because bargaining about price is expected. If you want to avoid the negotiating process, you can buy a Saturn. That make has a one price, take it or leave it policy. But if you don't happen to want a Saturn, the haggle free choices are limited. Some other automakers have established a one price policy for a few specific models, but those models are usually the less popular ones.

Truth is, you needn't be a skilled haggler to negotiate a good deal. You do, however, have to do a little homework. And you have to be willing to shop around that's the most basic tenet for getting the best price.

It goes without saying that falling in love with one specific car is a sure way to overpay. Have two or three models in mind. That way, if one dealer won't give you a good deal, you can price a competing make. Note that some models have "twins" similar models with different nameplates at increase your shopping opportunities. If you're considering, say, a Dodge Caravan, you can check out the similar Plymouth Voyager as well.

Visit dealers' showrooms to get a dose look at the models you're considering. Sit inside and check the fit. Ask for a test drive, and pick up any available brochures.

But don't let the salesperson talk price just yet. First, determine how much room you have for negotiating.

Learn the dealer's cost. If you have the invoice price in hand when you walk into the showroom, the salespeople may not be pleased, but they'll treat you with more respect. Bargain up from the invoice price, not down from the sticker price.

Make a worksheet. Whichever price source you use, write down the make, model, and trim line of each car you want to price. List each option or options package by name and manufacturer's code number (price guides give that information). Write down the prices of the basic car and each extra cost item the wholesale prices in one column, retail prices in another. Add the destination charge to both columns, since there's no markup on it. Then total the columns, and subtract any factory rebate from the wholesale column. The difference between the two totals wholesale and retail is your bargaining room.

The art of the deal. The simplest and most effective approach is to present your figures to the salesperson and say you want the lowest markup over invoice the dealership will accept. If your figures are challenged, ask to see the dealer's figures; that's only fair.

Keep the transaction simple. Don't discuss a trade in or financing until you have arrived at a firm price for the new car.

Explain immediately that you'll be pricing that model or other, similar models at several more dealerships, so you won't be buying right away. But make it dear that when you do buy sometime in the next few days the lowest bid will win the sale.

The dealer won't want to let you leave the showroom, but never mind. Resist any efforts to pressure you to buy the car immediately. Ask the dealer for the best price, and leave.

What constitutes a good deal depends on supply and demand. Generally, about 2 to 5 percent over invoice is reasonable. If the dealer is overstocked with a particular model, you may be able to do even better. But for new and popular models in short supply, you may have to pay more. Ultimately, the only way to find out the going purchase price is to shop around.

Don't feel too guilty about squeezing the dealer's profit. The domestic automakers and some foreign ones give their dealers an additional "holdback" of 2 or 3 percent of the sticker price for each vehicle sold.

One tricky item is advertising charges, imposed on some dealers by manufacturers' zone offices. Those charges typically, from $200 to $400 vary from region to region and model to model, and they don't show up in price guides. Advertising charges should be added to the dealer's cost, as long as they're legitimate. Before you pay, ask to see documentation.

Late in the model year, a dealer may offer a tempting deal on a "leftover" model. But realize that as soon as you drive such a car out of the showroom, it will instantly undergo a year's worth of depreciation. Two years from now, it will be a three year old car, and its resale value will reflect that fact. If the car is stolen or wrecked soon after you've bought it, your insurance will pay you much less than if you'd bought the latest model. If you keep the car a long time say, six or eight years depreciation is not a significant factor.

After you think you've agreed on a purchase price, the salesperson or the business manager may try to sell you dealer installed "packs" such as rustproofing, paint sealant, or fabric protection, or an extended service contract. Refuse them. They're generally overpriced or worthless. Some, like dealer rustproofing, may actually do more harm than good.

Trading in your old car. Once you've agreed on the price of the new car, you can discuss the trade in separately with the dealer. You can usually get a better price by selling your old car privately. But that's a hassle that may mean staying home to wait for calls and allowing strangers to drive your car and enter your home.

Last Updated ( Monday, 09 February 2009 )