How to buy a car
Making an Offer on a Car
How Much Money Should I Offer the Dealer?
When you go into a dealership, you want to know all of the
pricing and costs of the car that you are planning to buy.
You should know the manufacturer’s cost and the dealer’s cost.
You need to calculate the cost that the dealer paid for the car
and then make a reasonable offer to him if you want to get
somewhere.
You should also know that the dealer’s price is not the invoice
price from the factory. You should know that the dealer’s cost
is much
lower than the factory’s cost.
In order to make a fair offer to a dealership, you need to learn
to read a factory invoice. Here is what you can expect to find
on the
factory invoice.
- Base model of the car on it.
- All of the options packages.
- Destination charge.
- Holdback and dealer flooring help
DO NOT confuse the invoice with the MSRP window
sticker
because they are not the same.
Contrary to popular belief, dealers don’t have to tell you the
invoice on any car. This often gives the dealer leverage over
you.
They can offer you one dollar over the invoice. You should know
that there are hidden factory incentives in the invoice price
that
lowers the cost of the car for the dealership. It’s no bargain
for you.
If a dealership is very quick to show you the invoice, you
should
be aware that they are fully aware that they will be making
money on
that car off of you and they can settle at a lower price for the
car.
Knowing this before you walk into a dealership can be your best
negotiating strategy.
Knowing this information can let you make them the same offer.
If you offer a few dollars over the factory invoice (which is
the actual worth of the car) then you can open your bid and let
them know how much profit they can make off of your offer.
Dealers are always going to try and tell you that they paid more
for the cars than they actually did so that they can make a
higher
profit off of the sale.
Salesmen often try and make you feel guilty by telling you “I’m
losing my shirt off of this deal�.
In truth, they are in the business to make money. They are not
going to sell to you if they aren't making a profit. They are
trying to get you to agree to a higher price. If you go in armed
with all the right information, they can't trick you.
To calculate what your offer should be to the dealership, you
should get the factory invoice price (don’t forget to include
the
options in this price), and add 5% to that amount. That is how
you
should calculate your offer the dealership.
When I mention the options, I mean the ones that you can’t
avoid.
Some cars come equipped with a CD, sun roof etc. and these are
fees
that you can’t avoid paying so sure to account for these at the
beginning.
You should also be sure to account for any buyer rebates as well
in calculating your offer. So in the end your offer should be
calculated like this:
Dealer Cost Plus 5% Minus Buyer Rebates =
YOUR OFFER
If you are unwilling to pay more than your opening offer, let
the
salesman know that your offer stands firm and he can take it or
leave it.
In the end you will get what you want on your own terms. Here is an example for you.
You are hoping to buy a Toyota Camry. You do your research and find that the invoice price is $19,922; MSRP
is $22,385. The dealer may offer you the car for $22,000, and
shows
you the invoice.
You learned by researching that there is a $500 factory to
dealer
incentive; and a $447 holdback on the MSRP (2%).
Based on the above calculations, the dealer’s real cost is
$19,922
(invoice) minus $500 (incentive) minus $447 (holdback) = $18,957. This
is far
below the factory invoice number.
Now, if you add the 5% for your offer to that price, which will
up
the car price to $20,379 due to the addition of $455 for the
destination charge that is always present, you will see that
based on
the offer that the dealership offered, you just saved yourself
$3410.
This may seem complicated but if your use a pre-designed
spreadsheet from CarsDirect.com or AutoUSA.com, the program does
all
the calculations for you.
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