Confidential
New Car Pricing Information
Warning! .
. . Do not buy a new vehicle without taking 5 minutes to read this report!
Buying a new car is a big decision,
but it doesn’t have to be a difficult one. The average person will buy 10-12
cars in their lifetime. Preparing yourself and doing your homework is the key
to being able to make the important decisions with total confidence.
Once you’ve decided on the car you
will buy or lease, you will need to be able to determine what is a good price. This is where it can get very tricky.
Before you sign on the bottom line you need to know how to recognize a good
deal when you see one.
Anatomy
of a new car price:
M.S.R.P. – The
Manufacturer’s suggested retail price, commonly known as the List price or
window sticker is the retail price set by the manufacturer. This is typically
the price that the new car dealer would like you to pay. Although the
overwhelming majority of new cars are sold at less than the M.S.R.P., some
dealers will hold out for this price on a very hot-selling vehicle that is high
in demand and limited in supply.
Dealer
invoice price – Every manufacturer sends an invoice to the dealer for
their vehicles as soon as they are delivered to the dealer. The dealer will
typically pay for the vehicle via a prearranged line of credit. Commonly, the
dealer will start paying interest charges from the first day onwards.
Holdback – Most
manufacturers help subsidize the interest charges and marketing/advertising
that a dealer incurs by paying the dealer a holdback amount, after the vehicle
has been sold. This amount typically ranges from 2.0% to 2.5% of the invoice
amount. Dealers will rarely consider this when negotiating a new car deal
Maximum
dealer margin/profit – The difference between the M.S.R.P. and the dealer
invoice price is the maximum dealer margin/profit that the dealer has to work
with when negotiating a deal.
Dealer
and buyer goals - The dealer’s
goal is to negotiate a deal as close to M.S.R.P. as possible and the buyer’s (your)
goal is to negotiate a deal as close as possible to the dealer invoice price.
Actual
dealer margin/profit
– The amount over the dealer invoice price that is
finally negotiated between the dealer and the buyer (you), is the dealer’s
actual dealer profit/margin, before sales and overhead expenses.
Dealer
overhead and bottom line profit
- From the actual dealer profit/margin
amount the dealer has to cover the sales rep and sales manager’s salaries,
commissions and bonuses. The remainder goes to the dealership to cover all
other expenses, with the final balance representing the actual net profit to
the dealership.
Factory-to-consumer
incentives
– In an effort to stimulate sales, many manufacturers
will offer incentives to the consumer (you). These incentives are commonly
advertised in the media and can consist of low rate financing/leasing rates,
such as 0%, cash rebates, such as $2,000, or a combination of both. If a
manufacturer is offering you 0% or $2,000 cash, the emphasis is on OR;
which means that you cannot get 0% financing and $2,000. You have to decide
between the two. In some cases, you can combine the 0% and $2,000, but not very
often.
Factory-to-dealer
incentives
– Commonly referred to as hidden or secret rebates.
Internally these non-advertised dealer incentives can be known as marketing
credits, trading dollars, factory cash, dealer cash, dealer bonuses, invoice
credits, etc. Many manufacturers will use them as additional stimulus for the
dealer to sell more vehicles. In some cases, the manufacturer may not want to
advertise that they are offering incentives to avoid tarnishing their image,
where others will use these incentives to encourage dealers to carry more inventory and thus potentially sell more vehicles. Most
dealers will factor in these factory-to-dealer incentives when negotiating a
deal. Effectively this may allow the buyer (you) to buy/lease a new vehicle for
less than the dealer invoice price.
As you can see, new car pricing can
be very complex. Knowing what you now know, would you ever simply walk into a
dealership and negotiate a deal on your own, without having all the information
above? I would bet that your answer would be a resounding NO!
After searching the web, I
discovered a number of sites that promised to offer this information, but after
digging, I would suggest that only one is credible enough for me.
Your best choice would be
CarCostCanada at www.CarCostCanada.com.
According to their website, they also supply this information to insurance
companies which are notorious for being very particular about their service
suppliers. CarCost has also been around since 1999 and judging by their
feedback page, appear to have a very strong following. When you consider the
size of your investment in a new car, to spend less than $40, to ensure that
you get the best deal, is a small price to pay.
Jeremy Andrew
TheCarMagazine.com
