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What is the Best Price for a New Car?

A Guide to New Vehicle Pricing

by Dan Stechysin, Managing Director and Owner, CFS

How do you know that you are getting the best available price on a new car? Typically, what you see on the web or at dealerships is the MSRP or “Sticker Price.” This is what is suggested by the manufacturer as a selling price for a car. The actual cost to the dealer (not counting other incentives that they may get depending on how many vehicles or types that they sell) is what is known as “Net Price”. This, the retail customer rarely sees. This is the cost of the car to the dealer.

If a dealer is desperate enough to sell a car, then they may be inclined to show the “Net Price” or use this as a tool to sell a vehicle. But only if they need to clear inventories or meet other obligations generated internally or imposed on them by the manufacturers.

Certain manufacturers also have what is called an “Invoice Price” which includes amounts ranging from $300 to $700 over the actual “Net Price”. This may also be used by a dealer as their “rock-bottom” in order to sell a vehicle.

So where do you start negotiating? Unfortunately, since the dealer’s Net Price will usually not be divulged, the hope for a starting point for you to negotiate from is dim. You can only hope that the dealer may let you know what is the Net or Invoice Price. From that point on, keep in mind that the salesperson gets a commission on the sale, which typically ranges from around $500 to as high as $1000 if the buyer is ill-prepared; or as low as $100 if the buyer is well-informed. So, whatever is left between the Net Price (or Invoice Price) plus whatever is the bare minimum commission that the representative is expecting and the MSRP price – that is what is negotiable.

Manufacturer programs change monthly. Either the rebates are adjusted, lease or finance rates are changed, or residual values are modified. You can always wait and see what happens next month if you feel that the final price is not right for you, but sometimes rebates may be removed, finance or lease rates increased, or residuals dropped. So, you may be worse off if you are really set on a specific car.

Next time, some more insights into how to prepare yourself for a negotiation!

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