The manufacturer's suggested retail price, or MSRP -- the "sticker" price -- is just what the name implies: suggested. You can probably get a few hundred dollars off the sticker price of a new car by just asking the dealer. Saving thousands off the sticker price will be more work. You may not be able to get that much discounted on a hot-selling model, but dealers are open to negotiation on most of the cars they have on the lot.
Research the dealer cost on the model or models of cars in which you are interested. A dealer has an invoice cost on each car and will base her negotiations and profit margin from the invoice cost. Invoice values for different car models can be found on the websites of Kelly Blue Book, Edmunds, Cars.com and other online sources. Remember to include the optional equipment you want in your invoice price calculations.
Find the current incentives for the models you are researching. The manufacturer's website for the specific car types will show what cash incentives and rebates are currently available. The dealer invoice cost less the current rebate is your base negotiating price for a car.
Go to the dealer, select the car you want to buy and verify the sticker price is in line with the car for which you determined the invoice cost. Also, ask the salesperson about current rebates and make sure the numbers match your research.
Negotiate the price of car, starting your offer at or just below the invoice price minus the rebates. The goal is to buy the car $300 to $500 over the net cost. For example, you want a car with a sticker price of $25,000. The dealer invoice cost is $22,500 and the car has a $1,500 rebate, producing a net cost of $21,000. You would like to buy the car for $21,500 or less, a savings of $3,500 off sticker.
Tips
To negotiate with a dealer, you must stick to your price and be willing to walk away if the dealer will not meet your offer. Try a couple of dealers to get the best deal if the first is unwilling to negotiate. More expensive cars, SUVs and pickup trucks have a higher dealer margin and more room to knock thousands off the price. An inexpensive car may have less than $1,000 in negotiating room for the dealer. Car dealers have the most financial incentive to sell cars which have been on the lot for a long time. Previous model-year vehicles may sometimes be purchased for less than the net cost.
Warnings
If you negotiate a low price on a new car, the dealer may try to make up lost profit on your trade-in offer or in the vehicle financing. If you have a trade, negotiate a net price difference between the new car and your trade. Prearrange for financing and only take dealer financing if the rate is better.
References
Tips
- To negotiate with a dealer, you must stick to your price and be willing to walk away if the dealer will not meet your offer. Try a couple of dealers to get the best deal if the first is unwilling to negotiate.
- More expensive cars, SUVs and pickup trucks have a higher dealer margin and more room to knock thousands off the price. An inexpensive car may have less than $1,000 in negotiating room for the dealer.
- Car dealers have the most financial incentive to sell cars which have been on the lot for a long time. Previous model-year vehicles may sometimes be purchased for less than the net cost.
Warnings
- If you negotiate a low price on a new car, the dealer may try to make up lost profit on your trade-in offer or in the vehicle financing. If you have a trade, negotiate a net price difference between the new car and your trade. Prearrange for financing and only take dealer financing if the rate is better.
Writer Bio
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.