Buy Your Next Car At The Lowest Possible Price – Key Steps

For new car buyers, the internet is a great resource to get reliable price information that will give you a much stronger negotiating stance.

Step 1 - Get Educated - Do Your Research

Car Dealers have a price point at which they will gladly sell you a car and yet make a decent profit. Like any business, their job is to generate the most money from every sale. You can heavily influence the price at which a car is sold this will depend on the experience, research and understanding you apply to this important decision. 

Knowledge is power. Buyers who have researched their cars online and know the factors that go into negotiating the best car deal often end up getting the lowest car price, while an uninformed buyer who is not aware of the various “reasonable prices” may end up paying much more for a new car.

Getting FREE price quotes will help you greatly during your online research. We provide you with a number of the better online auto dealers that will give you a free online quote for your new car.

This site has been designed to provide valuable FREE information for all car buyers. Apply the tips from this web site and get that new car or truck at the lowest possible price. 

Step 2 - Know The Factors That Affect Your Purchase Price

It’s important to understand what affects the eventual Purchase Price of your car. You can expect a markup on the price of the car on each additional service they perform for you, on any additional accessory you add to the car, on any loan you get from the dealership, on your trade-in, and on any extended warranty or car insurance you buy from them. Such is the nature of the business.

Never ever go to an auto dealer to buy a car, without knowing in advance what car you can afford and having your financing already pre-arranged. Visit Auto Loans for getting the lowest online auto financing rates. You should NEVER buy a car first and then worry about financing. Also, NEVER sign a car purchase contract, that is “subject to financing”. You will invariably get scammed.  

At the end of a car negotiation, many dealers are willing to part with a car for a typical profit margin of $1,000 (lower end) to $1,500 or higher.

If you plan to buy from a dealer, know your target price before you start shopping. Get the MSRP and Invoice Price of your desired car. Carprices.com can tell you the Manufacturer's Suggested Retail Price (often called the "list price") and the Dealer's Invoice Price, or what the car cost the dealer.

A dealer’s job is to makes money on every aspect of the car sale. Therefore, it is vital that you consider these factors that will drive down your purchase price: (Note that these cost savings estimates only and are usually not publicized by the dealer or the manufacturer.)

Dealer Holdback

About 2% to 5% of MSRP is often held back by the manufacturer of the car, and will be paid to the dealer when the dealer actually sells the car. This amount does not depend on how many cars the dealer sells. Action: Subtract this amount from the Invoice Price.

Factory To Dealer Cash

About $300 to $2000 per car is given back to the dealer to sell slow selling cars. (If the manufacturer has not made this factory rebate known to the public, the car dealers are not required to pass along these savings.)

Action: If the dealer has over 30 cars similar to the ones you are seeking to purchase, and these cars have been sitting on the lot for over 25 days, there may be manufacturer incentives that reduce the Actual Price. Ask the dealer about his dealership's quantity of similar cars they have on the lot, and factor in this information into estimating the dealer’s Actual Price.

Dealer Inventory And Carry Over Allowances

The "days supply of inventory" for the dealership also determines the dealer's motivation to move cars from his lot. The more cars the dealer has on his lot, the more eager the dealer is to sell the cars. The auto manufacturers usually start pressuring dealerships to start moving their inventory when their inventory gets high.

Dealers get as much as 5% back to move year-end inventory from their lots. You can usually gauge if this saving should be factored in by noting if the newer year's car models are out on the lot together with the current year's models. Action: If this factor is true, reduce the estimate of the dealer’s Actual Price by 3-5%.

Advertising Charges

Dealers may get as much as $200-$300 from the manufacturer to use for advertising the car. Some dealers don’t take this into account when pricing the car. Action: Some dealers have a practice of billing the car buyer for this expense even though car manufacturers pay dealers for the car advertising they incur. Prudent buyers can negotiate off this charge when reviewing the car Invoice Price.

Floor Plan Kickbacks

Car manufacturers usually give the dealers $100-$300 to offset the dealer's interest costs for keeping the car on the lot. Action: Many times the dealer incorporates the interest charge into his price to you. Be vigilant on any extra costs which may be added to the price of your car and negotiate to offset any interest charges.

Factors That Affect The Purchase Price Of Newer Cars

Newer cars which are in hot demand are not likely to sell for less than invoice. For cars with a waiting period, many are sold at MSRP (or more). As a guide, cars which spend 0-40 days on the floor tend to sell at or near MSRP, 40-80 Days on the lot at or near the official Invoice Price, and vehicles that spend greater than 80 Days on the lot can often be purchased for lower than the official Invoice Price.

Your gender and age group

Your gender and age group may also influence how the dealer negotiates the car price with you. This negotiation will ultimately determine the price you pay for the car. Young adults, women, and minorities statistically pay more for the car than adult men. This disadvantage in buying a car can easily be addressed by first getting car quotes online, and discussing the quotes with the dealers over the phone.

Trade-ins

Trade-ins affect the price you pay for the new car. Always research your car's trade-in value before going into the dealership. Dealers are usually willing to give you a better price if you indicate to them that you are considering trading in your old car. Go to kbb.com to calculate your old car's value.

Dealer margins

Dealers prefer making larger margins per car sold, rather than making smaller margins and selling more quantities of cars. As there are many people who don't know how to negotiate and buy cars, car sales people always try their best for bigger margins.

Car loans from dealers

Dealerships are more willing to give you a bigger discount if you get a car loan from them. If you get a pre-qualified loan before going to the dealership using online loan sites or your bank’s website, some dealerships may match (or beat) your rate. When that happens the dealer stands to make some money from the loan, and pass some of these savings to you.

Payment or price buyer

What type of a buyer are you: monthly payment or total price buyer? Dealers prefer selling you on the monthly payment model. It is possible for the dealer to keep the monthly payment the same and yet sell you a car at a higher price. If you are planning to be a payment buyer it is very important that you understand how this payment pricing works with different interest rates. We recommend that you conduct all negotiations on the various prices first before looking to get a loan from the dealer. Getting a pre-approved loan elsewhere and having the dealer meet or beat it is a great approach to get the most out of the car purchase.

Your financial standing for the car loan

Ideally dealers are looking for 600 to 700 FICA rated customers. These loan customers command a premium over customers rated 500 (poor financial rating), or customers near 800 (a perfect financial rating). The buy rate and sell rate of the loan enables dealers to make extra profit.

Accessories

Always shop around for any car add-ons you may want to install in the car. If not negotiated effectively with dealers, you can pay 2-3 times more for accessories (such as remote access, alarms, sound systems, automobile undercoating, spoilers, stain guarding, etc.) than what you would have to pay elsewhere. Being prudent means finding out costs of any accessories you want before going into the dealership. The dealer is very likely to match the outside pricing, after they find out that you have done your homework.

After subtracting the relevant deductions from the Invoice Price above, you would have arrived at the Actual Price of the car. Note: The price you pay for the car will always be above this price. 

Step 3 – Plan In Advance The Other Aspects Of Your Auto Purchase Decision 

Car Loans: Visit Auto Loans and check out online loan sites to get free quotes for the lowest auto loan rates and  get a pre-qualified loan before going to the dealership. Sometimes dealerships may match your bank and if that happens, dealer loans may be worthwhile. Visit our sister site for free quotes and deals on Auto Loans

Your Existing Car's Trade-in Value: Always research your car's trade-in value before going into the dealership. Dealers are usually willing to give you a better price if you indicate to them that you may consider trading in your old car. Go to kbb.com to calculate your old car's price. Caution: Some dealers may under value the price of your trade-in car. Be smart on what trade-in value you get from the dealer.

Auto Insurance: Visit Auto Insurance  for a list of online insurers and get free quotes for the lowest auto insurance rates before going into the dealership. Dealers might steer you towards expensive insurance as it is another source of revenue. Being prepared with an insurance quote allows you to have dealers either match or beat your researched quote. Vists our sister site for free quotes and deals on Auto Insurance.

Accessories: If you plan to add on extra car features (like car alarms, sounds systems, etc.), call your local electronics stores and find out their prices before going into the dealer.

Step 4 –Research Several Vehicles At The Same Time And Get Quotes From Multiple Dealers

Customers who seek multiple quotes from different dealers can compare quotes and are more likely to get a better deal than customers who work with only one dealer.

Individuals who are less fixed on the make, model, colors, or features on a car may get a car with equal or better class, or get a different make with equivalent features at a better price. By considering multiple new cars before you actually settle on buying a particular car allows you to compare vehicles features and cost.

Many people in the market for a new car eventually end up buying a car different from what they set out to buy. These people also report a high level of satisfaction with the value of their deal after exploring all their options.

Step 5 – Buy At The End Of The Month

When buying a new car, patience is a virtue. The time of month also determines the motivation of the dealer to sell you the car. Since car sales people have a monthly quota with rewards for good performance, they are more motivated to settle for a smaller margin towards the end of the month. The dealer stands to get rewards from the manufacturer if the dealership sells a certain number of cars.

Sometimes, it may be prudent to make the dealer an offer, and go home while the dealer considers your offer for a few days before agreeing to sell it to you.

Of course it is recommended that you don't wait until the end of the month to start the car buying research. Be ready when the time comes.

Step 6 - Negotiation Strategies

Not knowing how to negotiate the car price may cost you thousands of dollars for the two to three hours you actually negotiate. Play your cards right and you could result in getting a new car significantly below the MSRP or stated invoice price.

Take A Friend

Most people know if they are good negotiators. If you feel you may not be able to work a deal with a seasoned negotiator like a car sales person, it is prudent that you be honest with yourself about this fact and try to improve in this area. Car sales people are trained on the powerful skill of persuasion, and a novice car negotiator may be at a disadvantage getting a bargain deal. The only remedy to this problem is to take a friend with you who knows how to negotiate for a car, or use hard facts that sales people cannot refute as part of your negotiations.

Start with The Dealer Cost 

Focus any negotiation on that dealer cost and use the information from step to 2. For an average car, 2 percent above the Dealer's Invoice Price (that would be $400 on a $20,000 car) is a reasonably good deal. The Web site Edmunds.com gives you another useful figure - the True Market Value, or average selling price, for a particular vehicle in your region. Knowing that price will tell you immediately if you are being offered a good deal by an Internet service.

Have Dealers Contact You With Their Quotes 

Contact local and online dealers and submit your (relevant) information in order to get a quote. Wait for them to contact you by phone or by email. Be ready to negotiate when they contact you.

As disinterested as a dealer may sometimes appear in making a sale, never forget that the dealer's life revolves around selling cars. They want to sell you the car, but don't want to appear as an eager seller.

Dealers are trained to quickly evaluate the customer for the customer's willingness to spend. Car sales people find it difficult to drive up sale margins if the buyer is well informed and is working with different dealers for the best deal. Such customers are viewed as small margin sales. As such, sales are completed quickly as there is minimal room for negotiations. On the flip side, selling a car to a novice car buyer is usually a profitable but lengthy engagement.

Dealers don't want to lose money on the deal. They need to make a certain profit to stay in business. Typical comfortable profit margins range from $1000 (lower end) to $2400 or more.

If the sales person seems disinterested in making the sale (one of the strategies to get the potential customer to increase their initial offer price), ask to talk to the fleet manager!

Be prepared to walk away from the deal, so that the dealer may contemplate the next move. They want to make a sale more than you think, and may call you within a day or two!

Don't forget to get your auto financing in place first - Visit Auto Financing to get great advice and sources of online inline auto financing and loan companies that will give you free quotes on possibly the lowest financing rates based on your credit score.

You are now ready to purchase your car at the lowest price possible! 

–  Get your free  auto purchase quotes from the online dealers advertised on this page.