Final Negotiations

First a quick review, then some information vital to successful negotiations. 

Review - Different Dealers Offer Varied Experiences: Dealing with Salespeople; Qualifying - The Goal Of A Good Salesperson; Buying Today (they do their job, you do yours).  Negotiate For Car and Financing Separately:  Get Your Financing Before You Purchase - (why, and how).  Loans versus Leases: what you're really paying for with each; what to look for in the contract.  Trading In Your Car: how to know what's reasonable; why you shouldn't discuss it with the dealer yet; what else to do with your old car.  Internet Buying Sites: get free quotes on new cars. Fair Market Value For A Used Vehicle: find out what a used car is worth.

What Else Should You Know Before Negotiating? -  There is more money available to play with than your salesperson will admit to. Not all of the items below are negotiable, however they all add up to additional hidden profits for the dealer. Several thousands of dollars can be made by a shrewd dealer who sells a car "at invoice".  As a friend of mine says, "a sucka needs to know!"

Holdback - Manufacturers pay a hidden financial incentive called a holdback to their dealers when a new vehicle is sold.  Most dealers finance their inventory through the financial arm of their manufacturer, or through a local bank (called a floor plan). Manufacturers return the interest the dealer has to pay on those loans by issuing them a "holdback" check every 90 days.  The amount is based on the MSRP or retail invoice - less destination charges, and averages between 2% and 3%, depending on the manufacturer.  Since most dealers rotate their inventory in less than 90 days, the holdback more than covers their finance charges, and ends up as additional profit to the dealer. Cars that remain on the lot longer than 90 days starting eating into that profit, so dealers try to move those cars first. To see how dealer holdback can effect your deal and to view current holdback percentages see our Holdback Page.

Carry-Over Allowances - Domestic manufacturers traditionally offer their dealers cash incentives, or discounts, to purchase end-of-model-year vehicles. When new 2001 models start arriving at dealers, in-stock and previously ordered 2000 model-year vehicles are considered to be carry-over vehicles and are eligible for the incentive which ranges from five hundred to several thousand dollars, depending on the vehicle.  Although they're not required to, dealers usually pass some of this savings on to customers in the form of special year-end clearance sales.  Keep in mind that carry-over allowances are in addition to rebates and other manufacturer to dealer incentives.  As with most other behind the scenes payments, don't expect your salesperson to acknowledge it, some dealers don't let their salespeople know about them either.

Dealer Incentives - Manufactures offer their dealers special incentives on stagnant inventory during different times of the year.  As with carry-over allowances, the biggest incentives occur at the end of the model year, although some older models scheduled for replacement or euthanasia may be eligible as well (current incentives range from $500 to $6000). The best source for researching current manufacturer-to-dealer incentives is Edmunds. As with all "secret" manufacturer to dealer incentives, they must be factored in separately from any manufacturer rebates. Dealers are not required to pass incentives on to the consumer, they are a "secret" manufacturer-to-dealer discount. Rebates are entirely different, they are an "advertised" manufacturer-to-consumer discount.

Packs - Dealers take the total of their advertising budget, utility bills, and insurance payments, divide it by the number of cars sold in the previous year, and come up with a per-vehicle overhead charge that is "packed" or added into the price of every vehicle. Packs range from $300 to $500 per vehicle (depending on the market) and are generally non-negotiable just like dealer holdback payments. Some dealers only charge for advertising, or split up the overhead in different ways. It doesn't really matter how they do, you'll end up paying for it either way.

Special Manufacturer's Financing and Rebates - Before you go shopping, look at Rebates, Incentives & Special Financing on Internet Resources, to find out if any of the models you're looking at gets a rebate.  Some manufacturers offer you a choice of taking special low financing (currently as low as 0.0%) instead of a rebate if you qualify.  We STRONGLY suggest getting your financing first, then applying the Manufacturer's Rebate to your purchase price. Combining a manufacturer rebate with pre-approved financing through someone like or PeopleFirst.com (both highly recommended) is a great way to maximize your savings. Rebates and special financing are factory sponsored discounts intended to give new-car buyers a deal on slow-moving inventory.  However, some unscrupulous dealers see them as icing on the cake, and may try to tell you there isn't one when in fact there is.  If a dealer successfully shields the existence of a rebate from a qualifying customer, the dealer gets to keep it.  Speak up about any rebates or special financing you know about.  Certain manufacturers (Chrysler, Ford, & GM) are currently offering the highest rebates in their history ($500 to $3500) on slow moving inventory, so now is the time to take advantage of them. You'll rarely see a rebate on a hot-selling car, because they don't have to offer one; the car is selling itself.  

Do Your Research Before You Go To Negotiate With The Dealer! - When the time comes to negotiate the price, do so BEFORE you discuss the financing, BEFORE you admit you have a trade-in, and BEFORE you subtract your rebate.  Some dealers try to charge MSRP (Manufacturer's Suggested Retail Price, or sticker) instead of fair market value (or negotiated value) for vehicles with rebates.  The dealer may lead you to believe that the factory-to-customer rebate is part of their dealer's discount, subtract it from the MSRP, and announce that negotiations are over.  Don't fall for this.  The dealer's holdback already takes care of the dealer.  The rebate is part of your down payment, and is not to be taken off the MSRP.  The same goes for first-time-buyer and college graduate incentives.  Don't let the dealer take manufacturer's money meant for you. 

If you have ample cash on hand for your down payment (at least 20%), the special (1.9%) financing could save you money over the course of your loan.  If you are short of cash for your down payment, you'll probably want to apply the rebate to the down payment.  Again, make sure the rebate is applied as a cash down payment, and not just subtracted from the MSRP.  

A deal with a rebate should be written as follows: the dealership adds up the negotiated purchase price, applicable taxes, license fees, document fees, etc. into a grand total.  Then your down payment, including the rebate and any cash you submit, is subtracted from that total.  The resulting balance will be your final price (the amount due at delivery or amount to be financed).

Is There A Good Time To Buy A Car ? -  The best time to buy a car is when you're ready to buy it.  However, dealerships track their sales on a monthly basis, so purchasing at the very end of the month may get you a better deal.  Don't fall for the special sales advertisements you see in the paper and on TV, with the exception of year-end model closeouts, which can be a good deal -- if you plan to keep the car more than four years.  Otherwise depreciation erases your savings: as soon as the new model comes out, yours is officially one year old; when you've owned it a year, it's depreciated two years' worth.

Dealer's Tactics You Need To Be Aware Of are on the next page >

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