Before you read any further about negotiating for your next car, please know that you can get some e-mail quotes on the car you want before you actually go to a dealership to negotiate. This allows you to start the negotiating process from home, with the Member Auto Center Preferred Dealers. By speaking to only the listed representatives, it will definitely be to your advantage. Also, by getting an e-mail quote, you identify yourself as a Credit Union Internet customer.
You should get three of four quotes from the Member Auto Center dealers nearest you, since this will give you a good lay of the land and a range of choices (remember, any dealer will happily service your car regardless of who you buy it from).
Buying a new car can be very exciting; the new smell and the perfect condition can nearly entice a buyer into forgetting that failing to negotiate successfully can have an overall negative financial impact. Most people perceive negotiating for a new car as an extremely difficult experience, if you look at it purely from a negotiator's perspective, you find something quite surprising. Negotiating for a new car is actually simpler than almost any other negotiation that you will ever undertake, if you prepare yourself with proper information.
The essence of negotiating, and what makes a negotiation difficult is that usually, you don't know the other party's bottom line. What makes new car negotiation easy from our point of view is that, based on the experience of a lot of people, with help from this information, you will pretty much know how to calculate the dealer's bottom line.
As a general rule of thumb, you can expect that the minimum profit that the dealer will accept for a car is around 3%. Where the Hold back is 3% (as it is for all American cars except Lincoln and many foreign cars) the dealer's bottom line price will normally be the Invoice price of the car, plus Delivery, plus the Advertising charge, less any advertised or hidden Rebates (I+D+A-R). The dealer keeps the 3% Hold back, consumer will normally pay an additional 1% above invoice.
What can make the whole process so frustrating for the consumer is that car dealers are very aware of the buyer’s negotiating vulnerability and may often use mind tricks, game playing, and psychological warfare to convince you that you will have to pay a lot more than you actually need to. Your goal is simple - move them to their bottom line while ignoring or sidestepping all of their nonsense.
Because of the potential frustrations tied to car buying, the Member Auto Center service provides a group of credit union-friendly auto dealer contacts that have the ability to sell from a volume standpoint and not a high-gross-per-vehicle basis.
The true dealer cost is made up of four components - Dealer Invoice, Advertised Rebates, Hidden Dealer Incentives and Dealer Holdback. So before we do anything else, we have to find out what the dealer paid for the car.
Advertised Rebates – There may be advertised "Cash Back" rebates for the car that you want. You need to know what the rebates are in advance, since it will affect your opening offer to the dealer.
Dealer Incentives – There may also be unpublished incentives that the manufacturer gives to the dealer, you can only get if you know it is there to ask for it. Otherwise the dealer keeps the incentive instead of passing it on to the consumer. These rebates and incentives change from month to month, to get the most recent information, visit Edmunds.com for a complete database both advertised and hidden rebates(they call the hidden rebates "Marketing Support") and return to this website to proceed with your auto buying help.
Dealer Holdback – The Dealer Holdback is a hidden rebate that is paid directly to the dealer by the manufacturer for each car sold; visit Edmunds.com for a Data Base of Current Holdbacks and return to this website to proceed with your auto buying help.
Let's say that you have decided on a "Vehicle XYZ" with an MSRP sticker price, including all options, of $26,000 plus $800 for delivery. Your research comes up with the following information:
|Dealer invoice (Car plus Options)||$23,000|
|Hidden dealer incentive||$-750|
|Invoice cost to the dealer||$22,400|
|Holdback of 3%**||$780|
|Final cost to the dealer||$21,620|
*The Advertising Charge – Most dealers participate in joint advertising campaigns with other dealers in their local market. They pay for this advertising by assessing themselves an amount per car sold. The advertising charge is a real per car cost to the dealer (i.e., it is not overhead since it is paid only when a car is sold) and that is why it is included in the calculation above to get the final dealer cost. However, it is not listed as part of the sticker price of the car. It is listed on the dealer invoice (which they may show you) although sometimes it is given a code and not called "advertising charge." It tends to be in the $300-$400 range (anything above that may mean that they are showing you a false invoice.)
**The Holdback – The Holdback of 3% of MSRP (Manufacturers Suggest Retail Price) on this car is $780 which the dealer gets in a check from the manufacturer for each car sold. This effectively reduces the dealer's cost for the car to $21,620.
No. No matter what you do, you are not going to get a better deal from some dealerships that advertise "No Haggle" pricing. With your knowledge of the dealership pricing structure, you can determine whether the prices offered by these dealerships are good deals or not. Additionally and very important to note, dealers with high demand and low supply type makes/models will normally be less likely and inclined to negotiate. This is referred to as Replaceability. Replaceability has to do with whether or not a car is in short supply. If people are lining up four deep to buy a hot car, and there aren't enough to go around, don't expect the dealer to give you much of a break, if any, on that car. In fact, some dealers will have an additional sticker on the window marked ADP (Additional Dealer Profit), or ADM (Additional Dealer Markup), and if you really want that car right now you may end up having to pay a lot for it. Fortunately, this situation is relatively rare - for most cars, supply exceeds demand.