By Eric Peters, Automotive Columnist
Assuming you have the money, buying a new car has never been easier — or less stressful. If, that is, you aren’t still buying cars the way people did back in the ’90s . . . before the Internet.
The ‘Net has made it simple to do almost everything you need to do except sign the papers and pick up the keys without ever leaving your home and — most important of all — without ever having to deal in-person with salesmen.
First, figure out exactly which new car you want to buy. Not merely the make and model — but also trim, color, engine/transmission, optional equipment — and so on. This information will enable you to “build price” the specific car you want, with the equipment and features you want.
Next, price it.
The starting point is the manufacturer’s suggested retail price — the MSRP, or “window sticker.”
The MSRP is the profit-padded price the dealer hopes he can sell you the car for. It does not reflect the dealer’s cost to purchase the car from the manufacturer. Dealers are independent franchises; when you buy a new Ford, you are not buying the car from Ford Motor Company; you are buying it from a Ford dealer. The dealer paid less for the car than MSRP. This lesser amount is the dealer invoice price — and it should be the starting point for your calculations — and subsequent negotiations.
How does one find the dealer invoice vs. the MSRP? A few strokes of the keyboard is all it takes. Sites such as kbb.com and edmunds.com (and many others) publish MSRP and dealer invoice prices for most new cars.
Best of all the info is free — my favorite price.
Jot the number down on a pad.
Next, you’ll need to price the options (if any).
Just as the car itself has both an MSRP and a dealer invoice price, so also the optional equipment. Scan the window sticker and you will see things like GPS or a sunroof itemized (some a la carte, others listed as part of a package that includes other equipment) with the “suggested” price added to the car’s bottom line MSRP. In fact the actual cost — to the dealer — of these options (like the cost of the car itself) is also less than stated on the window sticker.
You want the invoice prices for these options — also available on the sites mentioned previously.
Now add everything up — twice. One column for the car at “sticker” price — the other, dealer invoice price.
To give you a sense of the difference between MSRP and dealer invoice, let’s consider a current (2014) model year new car as a case in point.
The Nissan Versa Note I reviewed a couple weeks ago (see here for that) has an MSRP of $13,990 in base (as it sits, without optional equipment) “S” trim. The dealer invoice for this car is $13,500 (see here for the details). The optional Sport package — which includes an upgrade 15 inch wheel/tire combo and a decklid spoiler) adds $760 “sticker” (and $637 dealer invoice) to the price. An Interior Illumination Package adds $455 MSRP ($340 invoice). There is also an $810 destination fee — which covers the cost to ship the car from its assembly point to the dealer. This fee, incidentally, is what it is — there’s no MSRP vs. invoice price; however, that doesn’t mean it can’t be negotiated. More on that in a moment.
Ok, let’s add ’em up.
Equipped with the options listed above — plus the $810 destination fee — the MSRP window sticker of our 2014 Versa Note will come to $16,015 — vs. a dealer invoice price of $15,287. The difference comes to $728, or roughly 5 percent — which represents the nominal profit to the dealer if you bought the car at full MSRP.
However, even the dealer invoice price is — frequently — to some extent padded by manufacturer-to-dealer incentives (e.g., “holdbacks”) such that the actual profit he stands to make on the car — if you paid full MSRP — could be closer to 8 or even 10 percent.
Your object should be to buy the car for about 3 percent over invoice. This represents a fair deal for both parties.
Not too much for the dealer — not too much from you.
Now, armed with info about what the car (roughly) cost the dealer — and knowing about what it ought to cost you — it’s time to go shopping.
If you are shopping for a Nissan Versa, as in our example above, you’ll want to make a pitch to all the Nissan dealerships within whatever seems to you to be reasonable distance from your home. Because eventually, you will have to go the dealer to sign the papers and pick up the car. But don’t limit your inquiries to just the one or two dealers that happen to be close by. Keep in mind that any Nissan dealer (or Ford or Honda or whatever) dealer can handle warranty claims if they should arise — and can certainly provide factory-authorized service. You do not have to have the car serviced where it was bought.
Now, it’s certainly nice if you can buy the car from a dealer that’s 10 minutes down the road — but there’s no reason to limit your search to just that dealer, especially if another one offers you a better deal on the car. Which will often be the case. A dealer in a rural area, for instance, may be hungrier to close a deal than a dealer in an urban/suburban area where there’s a lot of floor traffic. If you can save $1,000 (or more) on the cost of the car, wouldn’t it be worth a two hour drive?
Most dealerships have web sites — and publish contact info for their sales staff. Contact them — via e-mail. Write a brief note explaining that you are interested in buying (again, using our example car) a new Nissan Versa, list the specific trim, features and options you want, along with the color — and the price you are willing to pay. Tell them you’re ready to buy; you’re not “just looking.” Tell the salesman you’re prepared to come down and buy the car today. . . at that price . . . and that if they are agreeable, to contact you right away. Make it very clear, however, that you are not interested in making the trip down to the store to talk — much less haggle — and that if you are lured there on false pretenses, you’ll turn around and walk out the door, never to return.
Send the same e-mail to salesmen at the other Nissan (or whatever the make happens to be) dealerships. Let each know you’ve contacted other dealers and will say “Yes” to the first salesman who accepts your offer.
Then, sit back and wait for your In box to jingle.
It shouldn’t take long.
Excepting exotics, high-end cars and a few trendy-for-the-moment cars, most dealers want to clear inventory as quickly as they can, so long as a reasonable profit can be made on the deal. Three or so percent over invoice is a reasonable deal, no matter how much of a show the salesman might put on for your benefit.
Now all you’ve got to do is sign the papers — and drive your new car home.
A few more tips:
* Always negotiate up from the invoice price — not down from the MSRP sticker price.
* Be sure to research — and factor in — rebates and cash-back offers. As an example, Chrysler Corp. recently offered a $2,000 cash back deal on the 2014 Dodge Dart sedan.
* Your haggling position will be stronger if the model you’re trying to buy is not extremely popular (for instance, a Prius hybrid) or “new” (like the new Corvette Stingray). For the best negotiating position, shop for a car that’s more or less the same this year as it was last year (what’s called a “carryover” in the industry) or a model that’s scheduled to be significantly updated next year. Dealers will — usually — be eager to get rid of their stock of “old” models in order to make way for the “new” ones.
It’s easy enough to find out what’s popular (and not) and which models are “carryovers” — or scheduled to be updated — via your computer. Just Google around. Read the new car reviews (reviewers will almost always mention whether the car being reviewed is about to be updated — or has just been updated) and scan sites such as KBB and Edmunds, which publicize what’s new — and what’s not.
* Line up your money first. Don’t offer to buy a car you haven’t lined up financing for — or can’t afford to just cut a check for. Dealers hate tire-kickers. If you’re ready to buy — be ready to buy.
* Be sure that “extras” you did not agree to in your offer are not included in the paperwork when you go there to do the deal. This would include “prep,” “advertising fees” or (and this one’s pretty brazen) “additional dealer mark-up.” Be ready to walk out if they spring any of that on you. The only extra costs that should be added to your final tab are applicable sales and title taxes — and you should double check rates with your local government/DMV to be sure the dealer hasn’t padded either of them.
Finally, don’t sign anything until you understand everything. Do not let yourself be pressured. It’s your money — take your time. Be sure.
Then, be happy!