It’s Easy to Buy a New Car

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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.car shop lede

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.

Here’s how:

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.monroney 2

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. money pic

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.monroney 3

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.Versa sticker

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.HARVEYA1_WE_C_^_WEDNESDAY

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.

Via e-mail.

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. car dealer ad

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 the 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.online buy pic

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.online buy 2

* 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 included “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!

Throw it in the Woods?

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  30 comments for “It’s Easy to Buy a New Car

  1. Helot
    March 19, 2014 at 9:25 pm

    Here’s a cool chart, What Owning a Car Really Costs You

    http://www.economicpolicyjournal.com/2014/03/what-owning-car-really-costs-you.html

    • Gil
      March 19, 2014 at 11:05 pm

      If you buy a new car . . .

  2. Randy
    March 19, 2014 at 12:50 pm

    When shopping at dealers I always ask for the “driveout” price: Bottom line, including all the tax, BS fees, etc. The amount of the check. Any other approach will result in added costs when it’s time to do the paperwork. I’ll ask each dealer for the bottom line, and tell them that I’m ready to pay the lowest bidder. Bought a new Ford Ranger in 1995, and my job as a traveling salesman enabled me to go to dealers all over. Amazingly enough, the three lowest, unassociated bidders were within a dollar of each other for trucks equipped the same! I knew that I was getting a good price.

  3. JoePA
    March 19, 2014 at 9:50 am

    Eric, good advice. When I’m ready to “flip” my car I found it beneficial to be informed. I found all dealerships especially used car lots to be sharks….nothing more. The true cost of a vehicle to a dealer is a closely guarded secret and they get “kick backs” as an add on to further mask their profits. My strategy is to know exactly what car I want, know my true trade in value and always reduce the MSRP by several thousand. I tell them I want to drive the car home today and tell them financing is unnecessary. I always have my current title and check in my hand to further excite the salesman…..someone I already know not to trust. My goal is not to be taken, nothing more.
    Quick story. Me and my buddy as a motorcycle ride would visit Toyota dealers making offers on a specific model. It was a $28,000 car and I would offer $22,000. Dealer after dealer would decline….until one dealer said yes. The joke was it went on sale selling for that price a week later. At least I didn’t get taken, lol.

    • eric
      March 19, 2014 at 11:00 am

      Good stuff, Joe!

      Having cash in hand conveys seriousness – and imparts urgency.

      It’s one of the best “tools” in the kit!

  4. Mike in Boston
    March 19, 2014 at 12:57 am

    I actually hope Tesla succeeds in breaking the dealer cartel once and for all. No matter how good a “deal” you get you’re still getting screwed over; one of the biggest dealers in my area has a private jet that he flies to Paris for French dinners on his black (no limit) AMEX card, another on has a penthouse at the Ritz Carlton among his many properties.
    I would love to be able to order my exact car from Manufacturer.com and pick it up at the local freight yard for whatever it cost to that point. Keep the warranty cost out also, I’ll take my chances on any repairs, there are a lot of good mechanics in the area for stuff beyond my expertise.
    I see that Gov. Cartman…er Christie has banned Tesla from selling in NJ now that he’s done effing up traffic wherever possible, dealers in my state are also pressuring the pols to do likewise, which I’m sure they’ll succeed at once the bribes, whoops, campaign contributions start flowing.
    How did this whole song and dance come to be anyway? If I go to Sears to buy some big ticket appliances I might luck into a sale, but the price is the price and I don’t have to dance with the salesperson. More power to Elon Musk, but I doubt even his billions will be able to break the dealer stranglehold.

    • eric
      March 19, 2014 at 6:00 am

      Hi Mike,

      Absolutely agreed.

      The dealer model is a relic of a long-gone time.

      Tesla’s concept – not the cars, but how to sell them – is spot on.

    • Jason Flinders
      March 19, 2014 at 7:57 am

      Speaking of Sears, they tried to buck the dealer system many years ago by selling the “Allstate” car through their stores and the Sears catalog. The effort was not very successful for a variety of reasons. There was pushback from dealers, of course. The Allstate was actually a Kaiser-Fraser “Henry J” that cost less and came better equipped than what the dealers were selling.

      The real problem though was that tradeins were not accepted (you’d have dispose of that old Nash yourself) and of course Sears did not have service facilities. (This was before the days of Sears auto service centers.)

      In the case of the Allstate I believe it was the market that dictated the failure of the alternate, non-dealer distribution network. I don’t know how Tesla deals with the issues of tradeins and service in their direct sales system.

  5. Garysco
    March 18, 2014 at 11:54 pm

    Eric, a couple of questions.
    Are you saying to not pay any extra for “dealer prep” or local charges beyond transportation? What about DMV doc prep that dealers usually add on when their in-house people do the paperwork.

    In California rebates and such ignored for sales tax (I pay the whole tax before rebates). So if I negotiate a new car at 3% over invoice, and the dealer says yes, do I then put the total rebate amount (or like Kawasaki is offering 0% for 60 months) back in my pocket?

    • Jason Flinders
      March 19, 2014 at 12:17 am

      One thing to look out for that I’ve seen is the dealer will add another sticker with their own “enhancements” to the vehicle. Typically this consists of cheap taped-on pinstriping, door edge guards, and a wax job that they will try to get $1000 to $2000 for.

      I’m not a new car buyer myself but have gone shopping with friends and family, and this seems to be a pretty common scam. If you gave them even $50 for that crap it would be charity.

      • eric
        March 19, 2014 at 6:04 am

        Hi Jason,

        Yup –

        That scam is as old as the hills – and I’m perpetually amazed people (some people) still fall for it.

        $300 for “paint protection” (read: teenage kid out back who briefly wipes the car down with wax) and another $400 for superfluous (and possible rust-enhancing) “rust protection” – spraying some tar in the wheelwells… etc.

    • eric
      March 19, 2014 at 6:17 am

      Hi Gary,

      Yep.

      “Dealer prep” – is just a euphemism for “pay me more.”

      I worked doing “dealer prep” once, during summers in between college. It amounts to:

      Remove the plastic on the seats and other such protective materials, install minor parts (such as antennas) that might have been shipped in the trunk, clean the car’s interior and exterior. Takes maybe 15 minutes. The guy doing this is – usually – a summer job teenager or low-skill/menial “odd jobs” employee earning minimum wage or thereabouts.

      This minor expense is part of the dealer’s cost of doing business – like his utility bill – and it’s not your obligation to pay extra for it anymore than it is your obligation to pay for a portion of his electric bill. No, wait – you are doing that – via the profit he earns from the sale. If he hems and haws, quash the deal. Or just tell him to leave the plastic on the seats!

      Government-related charges of course you have to pay (as does the dealer). Those are non-negotiable.

      But “document prep” charges are price-padders, too. You need a title and perhaps registration/temp tags. The fees charged by the DMV are the fees the dealer has a right to charge – no more. You can also handle this stuff yourself, just as you would if you bought a car from a private seller.

      Rebates: If it’s a manufacturer incentive (e.g., Ford rebate) it’s a non-issue for the dealer and should have no bearing on the deal you negotiate since the money is not coming out of his pocket.

  6. Brandonjin
    March 18, 2014 at 11:27 pm

    Thanks for the article. My family has always used AAA’s car buying service, and we’re pretty happy with the results.

    • eric
      March 19, 2014 at 6:25 am

      You bet, Brandon!

      Car buying services are another option – though of course, you have to pay for that.

  7. Jason Flinders
    March 18, 2014 at 9:36 pm

    Not sure what you mean by “back in the ’90s before the internet.” I’ve been using the internet since around 1983 and know people who have been on board longer than that. Though of course it’s only fairly recently that it’s been possible to directly shop for a new car on it.

    Other than that sounds like good advice for those buying something new. I got off the car payment treadmill decades ago though and don’t intend to get back on it!

    • BrentP
      March 18, 2014 at 10:11 pm

      In 1983 that would have been a precursor TCP/IP network like APRANET that were being connected to each other by the ‘internet’, but it wasn’t as we know it until later. Not to mention the others that didn’t use TCP/IP such as BITNET or USENET. Command line internet, that grew out of the precursor networks came into itself in 1989 and then the precursor networks started to be shut down.

      What Eric is referring to is before the web, or roughly before 1995.

      • Helot
        March 18, 2014 at 10:39 pm

        X.

        That was about 1995 or 1998 or so, as I recall.
        That (!) would be the dividing line for, “pre-internet”.
        From a business transaction standpoint anyway. Imho.

        • Helot
          March 18, 2014 at 10:43 pm

          Ok, wow, if I put things in between sideways arrows they Do Not show up here.

          The ‘X’ above, marks the spot where I inserted a video of the CONgressman hitting the gavel and declaring “The Internet’ officially open for business transactions.

          It wasn’t 1983. That’s for sure.

      • Jason Flinders
        March 18, 2014 at 11:05 pm

        I know the term “internet” was being used back in the day, I still have old technical manuals from that period that use it.

        I was just pointing out that there was a pre-web internet, and it was quite active in the 1980s. (Also the very first internet worm took practically the whole thing down around 1988!) A lot of today’s users seem to think “the web” is the entire internet and it all just sprang into existence in the 1990s.

        • Helot
          March 18, 2014 at 11:23 pm

          But look, even you call it, “a pre-web internet”.

          It was a game in the 1990’s.
          A toy, for most.
          Of course the serious folks and the military used it as a tool. But for most people, it was a dumb DOS class.

          “The Internet” didn’t really happen until long file names and the gavel hitting the bench, or whatever podium the CONgressman used to make it “official” so that businesses could transact on it. You sure as heck weren’t looking at car dealership listings online before then,… unless you were someone Very special.

          [Gawd that sounds so anti-free market, excuse me. I’m sure there’s a better way of putting it. (Or, maybe not?) I’m sure you User Net guys were wheeling and dealing before then. But not like now.]

          Suddenly, I’m reminded of this dumb film I saw about the birth of porn on the internet and how they developed a way to accept transactions online…. a way to make money… using a special software – That – to me, is the birth of “The Internet”.

          Before that it was just Chat, and shit for fun. Shits and giggles and maybe some small time transactions. After the porn debit/credit software deal,… That was the real thing. Or, what we see as the real thing now.

          No?

          • Jason Flinders
            March 19, 2014 at 12:03 am

            I guess it’s a matter definition. I see “the internet” primarily as a collection of networking protocols, but that’s definitely a minority view at this late date.

          • Helot
            March 19, 2014 at 12:12 am

            Jason Flinders wrote, “I see “the internet” primarily as a collection of networking protocols, but that’s definitely a minority view at this late date.”

            Agreed.
            Technically.

            That was right after ‘The Wall’ fell.
            Things were supposed to be different. …

            • eric
              March 19, 2014 at 6:05 am

              1991 seems a lifetime ago…

              Winds of change… blew in a direction most of us never imagined.

          • Tor Minotaur
            March 19, 2014 at 1:02 am

            In 1985, I remember thinking my friends were loser idiots for using the “pre-internet.” One time in a college library in between bar crawl stops, I witnessed 300 young people with no adult supervision, voluntarily sitting in an overlit room silently giggling and typing alone in front of long tables filled with green-screen Unix terminals, like monks in some cyber monastery.

            No one was talking to anyone in the room. I assumed they were all just talking to each other, which made no sense, because they were all right there together. In hindsight, maybe they could already talk to other colleges and people back home by then?

            The first time I became interested in the internet, was in 1992, using the Lynx text browser. If there was a switch to turn off everything but text, I’d still prefer to access the internet that way almost all the time.

            When Mosaic came out the following year, it seemed cartoonish and stupid. Who would want to look at crappy low resolution pixel stickmen and other fluff? I wonder when rule #34 came into being, and when the first pixelated representation of a naked lady was even recognizable?

            In 1993, I ended my 5 year sabbatical from television, and started looking at picture screens again, but I don’t think I used a full featured browser until 1997. I think it was Netscape Navigator.

            Flashback to the 90’s Retro Internet – Good Times
            http://www.ugo.com/the-goods/flash-back-to-the-90s-with-retro-internet-goodness

        • Helot
          March 18, 2014 at 11:38 pm

          Jason Flinders wrote, “I was just pointing out that there was a pre-web internet, and it was quite active in the 1980s.”

          Point taken.

          I’m up too late at night after a long assed day.
          I shouldn’t have even hit the Post Comment button.

          P.s.

          You nerds and geeks who knew about the net and puters back then, bravo for doing that in spite of any flack you got from the jocks and the uppity clueless chicks.

          If you managed to do so without getting that flack, double-good for you, mang.

          Either way, it’s very impressive. I couldn’t have cared less about that stuff back then. I kind of wished I would’ve. …But then, if I did, I’d probably be dead from something I didn’t see coming, or some shit like that? Or, rich. Or, stuck in a job I hate? Or, God forbid, in a cubical. And in a DIlbert slot/square/ Or,…

          Who the heck knows?

          • Jason Flinders
            March 19, 2014 at 12:11 am

            No big deal. Really it was all just in a day’s work, “Hauling up the data on the Xerox line,” as Nigel Russel put it in his immortal “White Collar Holler” that memorializes the life of the 1980s tech worker. (A Youtube search will find it for those not familiar with it, the Stan Rogers version is probably the best known.)

          • Garysco
            March 19, 2014 at 12:31 am

            As I recall the main choice back then was (1) to be a jock, marry a cheerleader, and have 4 kids and a fat wife by 29 or (2) idealize Bill Gates and Steve Jobs, be ignored by the cheerleaders, drive a powder blue Ford falcon and bury yourself in code and hardware. Everyone else became an insurance salesman or blue collar mechanic.

          • Helot
            March 19, 2014 at 1:13 am

            “Hauling up the data on the Xerox line,” – sounds like a coal miners song.

            @Garysco, I don’t know if you’re kidding or serious. I suspect a little of both. Or, if you were in the right garage, you’re spot on.

    • Garysco
      March 18, 2014 at 11:27 pm

      I think he is referring to the ‘Web” as we know it with HypertextTransfer Protocol and Hypertext links (http), not green letters or amber on a black monitor.

      According to Tim Berners-Lee, the Web was mainly invented in the Building 31 at CERN but also at home, in the two houses he lived in during that time (one in France, one in Switzerland). In January 1991 the first Web servers outside CERN itself were switched on.

      The first web page may be lost, but Paul Jones of UNC-Chapel Hill in North Carolina revealed in May 2013 that he has a copy of a page sent to him in 1991 by Berners-Lee which is the oldest known web page. Jones stored the plain-text page, with hyperlinks, on a floppy disk and on his NeXT computer.

    • eric
      March 19, 2014 at 6:34 am

      Hi Jason,

      I should have qualified “Internet” more precisely, I suppose. I know the precursor to it existed in the ’80s, but what I meant was the WWW, which – IIRC – came into being in the early ’90s or thereabouts and didn’t really become a main street thing that almost everyone knew about and used regularly until the latter ’90s….

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