Consumers think the dealership has the upper hand when it comes to buying a new car. To get the deal you want, try these car buying strategies when you're ready to car shop.
Best Car Buying Strategies
Once you test-drive the car or truck of your dreams at the first dealership you visit, it might be difficult to tell the salesman that you want to shop around. A good salesperson will understand that; an aggressive salesperson will not. Choose at least three different dealerships to visit and take your time. Keep in mind that when it comes to new cars, every dealer pays the same amount to buy that car from the manufacturer. Don't pass on smaller dealerships thinking that big city dealers will give you the best price.
Many salespeople hit the customer with, "We're selling this car at the dealer's cost." To make sure they are, ask to see the dealer invoice and search for what looks like a code at the bottom of the car option list. That's where you'll find dealer holdback dollars, which can range from $400 to over $1,500 depending on make and model. Holdback will appear on the dealer's invoice like this: "HB1000". That means that the dealer received holdback dollars of $1,000 for that car. Ask if the dealer will split those holdback dollars with you. If the selling price is $20,000, by splitting the holdback you've brought the selling price down to $19,500. This is one of those car buying strategies that few consumers are aware of.
Dealer Advertising Dollars
Every franchised dealership receives advertising dollars for each new car they have in stock. These dollars range from $200 to $500 and also appear on the dealer invoice. On the invoice, they appear as an option on the vehicle and look like this: "DAA 200", or "PPA 200". What consumers don't know is that the way manufacturer's list these advertising dollars on the invoice make it look like it's an option on the vehicle, or something that you have to pay for. What dealers won't tell you is that the $200 on that invoice was already paid to the dealer in their monthly advertising dollar payout. Tell the salesperson that you don't want to pay for advertising dollars and you can additionally cut the price of that $20,000 car down to $19,300.
Dealers receive what is called dealer cash, and it's not a rebate for the consumer. Manufacturers offer dealer cash as incentives to the dealer to sell their models. Dealer cash can range from $1,000 to a whopping $6,000, depending on the vehicle. Ask the salesperson what dealer cash they've received on the car. If the dealer cash is $4,000, ask if you can use that as an in-house rebate, bringing your $20,000 car down to $15,300.
Ask if there are any rebates or incentives on the car you want to buy. For example, if there is a $2,000 rebate, make sure the salesperson offers it to you, bringing your final sales price from $20,000 down to $13,300.
Do Your Research
Research car prices, rebates, incentives, and holdback at Internet websites such as Edmunds, NADA, and Kelley Blue Book. Nothing is better than that information in black and white from a reliable source, so print out your research and take it with you. Remember that your research will ensure that you will get the best deal on the car or truck you want.
What You Can't Negotiate
On the dealer invoice you'll also see a line item called destination charge. Depending on where you live, the destination charge is the cost the dealer pays to ship the vehicle to their lot. This is an expense for the dealer so don't ask them to deduct it from the selling price.
Dealers will try and make money by having you finance through one of their finance companies. Unless you're going for zero percent financing, you'll be better off obtaining financing through your bank or credit union. You can finance your vehicle at the dealership, but if you do and they offer you an interest rate, ask to see the loan call sheet. The loan call sheet is what finance companies email or fax to the dealership, and shows the dealer's buy rate or interest rate. Dealers make money by marking this up, and it's perfectly legal. If the call sheet says the buy rate is seven percent and they offer you eight percent, they are making what is called a point on your financing. The call sheet clearly states what the buy rate is, so before you agree to an interest rate, ask to see it.
Most dealers and their salespeople love what they do and no one should expect them to sell their products and make nothing. You might not get all the deductions off that selling price, but if you ask, you'll get some of them. Be firm on what you can afford to pay for that car and if the salesperson tells you they can't do it, visit another dealership because they probably will. Selling cars is a competitive game, but with a little research, you have the upper hand when it comes to buying a car and getting a monthly payment that you can afford.