When you understand where new car dealers generate their profits and how to decipher dealer price quotes, you’ll be in an advantageous position when preparing to negotiate the purchase price of a new car.
Request a free, no obligation to buy new car price quote and know how to decide which new car dealership is offering you the best deal.
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Factor Which Increase Dealer Profit
In almost every instance, the advertised invoice price of a new car is not the true dealer cost. This is because the factory invoice includes what’s called a dealer holdback. This is where the car manufacture inflates the invoice price by around 2-3% of either the MSRP (Manufacturer’s Suggested Invoice Price) or the factory invoice price (also called the dealer invoice). This is the automakers way of helping their dealers with overhead costs to maintain their inventory.
While car dealers feel they’re entitled to this holdback, when you are aware of these hidden profits it creates a good negotiating tool. One car dealership might not be willing to part with any of their profits, but their competitor down the road might be more flexible in order to make a sale.
Another factor that increases the car dealers profits are the factory to dealer incentives and rebates. Dealer incentives and rebates reduce the dealers true cost of a car; when combined with the dealer holdback, the true dealer cost could be thousands of dollars less than the dealer invoice price – the price they claim to have paid the manufacturer for the new car you want to buy.
Competition Works To Your Advantage When Buying A New Car
It wasn’t all that long ago when new car buyers had to shop for a new car by going from car dealership to car dealership and didn’t have the internet to do their research. Thanks to the advent of technology, those days are history.
The auto industry has traditionally been a competitive business, but over the past few years of a down trodden economy in which many automakers needed government bailouts, they are even more desperate to win a new car buyers business.
Now new car buyers can sit in a home office and request multiple new car price quotes without having to spend a dime. In fact, you can request new car price quotes from every new car dealership , then compare the dealer price quotes you receive to see which dealerships offer you the best initial prices.
When you know about the source of car dealers’ profits and create a bidding war between your local certified new car dealerships you’ll be able to negotiate a great deal on your new car.
The Destination Fee & How It Affects The Sale Price Of A New Car
While there are many things that can and should be negotiated in order to pay a fair price for a new car, there is one charge that is non-negotiable: The destination charge.
This charge is what the manufacturer charges the new car dealer to transport a car from the factory to the dealership. The amount isn’t normally calculated by the distance the car is being transported, but rather a fixed price the dealership has to pay; normally several hundred dollars. Since the dealership can’t get around paying this charge, unfortunately it will be passed on to you in the new car price.
Dealer Price Quotes & Inclusions: What Causes Price Quotes To Differ On the Same Make & Model?
You just received your free, no obligation new car price quotes and see that 3 new car dealerships have given you 3 different price quotes on the exact same make and model of car; 2 included fees and taxes, another doesn’t. This can be very confusing when you’re trying to determine which of the free price quotes is the best deal.
When you’re reviewing your online price quotes, look for any ‘disclaimers’ or other notations that explain what is included (or not included) in the price quotation. Start a list of the pricing information you’ve received, and jot down the prices along with any information in the disclaimer. If the disclaimer isn’t clear about what isn’t included in the price, make a note so you’re sure to ask the dealer when you contact them.
These are the typical types of fees that you should be on the lookout for:
- DMV fees are required in order to register a vehicle with the Department of Motor Vehicles. They should be the same amount for every car that’s the same make and model. This fee may not be included in the online price quote you receive.
- As mentioned above, the destination fee is always passed through to the buyer and it may or may not be included in your price quote.
- A sales tax will be charged when you buy a new car and it does vary from state to state. Familiarize yourself with your local sales tax and see if the disclaimer lists this amount.
- Finally, there are the dealer installed accessories that dealerships add to the sales price, most times they are not included in price quotes except if referenced in the disclaimer.
Now that you know the various ways car dealers can generate more profits, you are more aware of how to read dealer price quotes, the only thing left to do is request a free, no obligation to buy price quote. Request as many free price quotes from as many new car dealers as you want to find the right new car for your active lifestyle.
It’s fast, it’s easy but best of all, it’s absolutely free and there is never an obligation to buy.