How To Deal With A Car Dealer When Buying A Car
By Charles Hopkins
Published 11/28/2007 | Auto and Trucks
When buying a new car from a dealer, there are two things you need to know about car dealers in general.
First, they are hard working people trying to make right by
themselves. It's not their fault that their occupation comes with a bad
rep. Sure, they may have tricks up their sleeves. Alright, a lot of
tricks. But that's not saying they are going to use it all on you. Give
them better credit than that. They won't use all, one trick will
probably do it.
Second, they are not the enemy. Buying a new car is not a fight so
don't start picking one with you dealer. They are there to help you
make a good purchase, never mind if they make a whole lot of money
while doing it. They get a commission for each deal they close so
you're actually just helping them make money.
While it's true at some point, you have to remember that buying a
car is an investment and an expensive investment at that. It's your
money, it's your call and your car dealer has only got very little to
say on that matter.
But there lays the difficult part because your dealer probably
knows more about car buying than you do, he has an unspeakable
advantage over you even before you step inside the car dealership.
So what do you have to consider when purchasing a new car and how do you deal with the dealer?
First things first, you need to have an offer. No buts. No
exceptions. You have to have an offer or you're out. You can't get into
a deal without an offer of your own because that would be like walking
inside a store and handing the saleslady your wallet.
So now that we have that part settled, let's move on to the next
obvious question. How do you calculate the offer to the dealer? What
are the factors you need? Find out how much they paid for the car.
That's the game plan.
Every buyer has one goal in mind when looking to purchase a car and
that is to save money. The rest is secondary. Sure, you want one of
them new models, good horsepower, nice interiors, good set of wheels,
etc. But all that pales in comparison to how much cash you can save.
You might even be willing to skip over that cool add-on if it means you
can save some additional money.
But the road to saving cash in this kind of purchase in not paved
in gold. Chiseling off MSRP. It helps, but there's a better way of
doing it and doing it effectively. That's right and it all depends on
making an informed offer.
When purchasing a new car and dealing with seasoned negotiators
like car dealers, nothing compares to making an informed offer. An
informed offer is nothing but an amount of money over dealer's cost
based on the car's value. Of course, to do that properly, you have to
have patience as your research the information first.
To find out how much the dealer paid for the car, simply ask to see
the factory invoice for the car. The factory invoice in a bunch of
documents that list the base model of the car, and all option packages,
floor mats, body trims, and so on. Add to that the destination charge,
holdback, and dealer flooring assistance plus additional information
that you can dig through.
Since you now know what a factory invoice contains, the only thing
left now is to learn what all those figures mean. How to read a factory
invoice? Well, you have to know which figures your have to pay for and
which ones you can dispense with.
Let's start with the holdback. Most car makers give back the
holdback and floor plan to the dealer after they sell the car. So you
can actually have the dealer remove that additional fee from your cost.
You cannot remove the destination charge. It's non-refundable.
Basically, you pay the dealer, the dealer pay the factory, and
everybody lives happily ever after.
Now, knowing how to read the invoice will give you some idea on how
much the dealer paid for that car. But exactly how much is a well
guarded secret. And they are not even required to show you the invoice.
So any invoice research on your part you must do on your own. Don't
expect help from the dealer.
However, some car dealers actually volunteer to show you the
invoice. What's the deal? Chances are there are hidden factory
incentives built into this "invoice price" that reduce their cost. The
end result is the same, so watch out. Don't be fooled.
So what is the dealer's actual cost made of? The formula is simple:
get the invoice price, minus that with factory dealer incentives and
factory holdback and you have the amount you need. The dealer's actual
cost in not the factory invoice. That's a common misconception and it
could be fatal to unassuming car buyers out to make a good deal.
Don't forget about options! You can probably do without them but
the dealers are a smart bunch. They know how to sweeten a deal and they
know how to play with you.
Actually, the options are part of the reason why you should shop
dealers first. This is to see what typical option configurations are
out there and compare. That's the secret to making a good deal. A good
tip is to bring a pricing info and check off all the options as you go
from dealer to dealer. When you get home, you can study them and
determine which options are good to have and which ones you can do
without. Then you can plan your option package accordingly and make
sure you don't go over budget.
Making the offer. All of steps above were designed to get you to
this point. You have what you need: you know the invoice price, you
have a basic idea of what the dealer's cost is, and you have made your
decision on the option packages. Now to make the offer.
Your offer should be comprised of two parts. The dealer's actual
cost and 5% fair dealers profit. After all, the dealer does need to
make some money for all that sales talk he's doing. It's his job. The
fair dealer profit is based on the assumption that the deal was made in
However, there are instances in new car purchases that consumer
rebates are offered. Take the amount for that and subtract it from the
original offer. Hey, it's only fair that you don't pay for incentives
that are very clearly offered for your benefit.