We recently purchased an 07 Honda Odyssey and the transaction was smooth and mostly to my satisfaction. However, I saw this post on Slickdeals.net with information on how to negotiate a better deal on a car and I had to steal it for my own information and save the numbers and the ideas. Original was here.
How to negotiate a great DEAL on a new car purchase
What I am telling you is based on 7 years in the business and personal purchases.
MSRP = Sticker(includes Dest. Charge)
Invoice = Can be found on Edmunds.com(include options) or kbb.com
Rebates = Vary by local dealership
Holdback (dealer’s profit) = see below portion to calculate holdback
Estimate True invoice = Invoice – Rebates – Holdback
tax = ?% x True Invoice
Tags = whatever your states charges (typically $100 – $400)
Low ball offer = True Invoice + tax + tags – $2,000
Target Price = [ (MSRP – Rebate – Low ball offer) ] / 2 + low ball offer (this is basically the formula I use)
TRY TO GET YOUR PRICE AS CLOSE TO THE TARGET PRICE AS POSSIBLE!
The car business is hurting right now. Dealers are happy with their “holdback”. Its the salesman that are starving. STOP NEGOTIATING WITH THE SALESMAN! Its a fact that the average car salesman only sales 8-10 cars per month. Its also a fact that a “flat”, the money a salesman is going to make on a new car sales with no profit(invoice) is $50-$100. So do the math thats only $800-$1000 in commission per month. Thats why dealer are always hiring salesman. Its also why salesman are constantly getting fired.
GET THE SALESMAN ON YOUR SIDE! Tell him up front he’s not gonna make any money on you, this will be an invoice deal. Tell him you’ll slip him a $100 after the deal if you get your price. So when he goes up to the “salesdesk”, he’s fighting for you. When the salesman comes back to you with numbers on the paper, they call it an “A” sheet. Cross it out with a big “X”, flip it over right your number on the back, next to it write “T/T out the door”, then underline it. The first number you write should be at least $2000k below invoice. His manager will either send someone over or come his self. This is a good sign it shows that you werent talking to a “closer”. He might even write a note, asking where r you getting your numbers. If this happends, write “I was thinking the same thing about you numbers”.
Typically his second number will be $2000 above invoice. If it is, you write,” Split the difference, with T/T, out the door” They usually will jump at it.
DONT BE SCARED TO WALK AWAY.
CONFIDENCE IS KEY.
DONT DRIVE THE VEHICLE FROM THE DEALER YOU ARE BUYING FROM.
DONT DISCUSS CREDIT, FINANCE, INTEREST RATE, ETC BEFORE YOU GET INVOICE PRICING.
(THESE ARE BUYING SIGNALS, THEY WILL SMELL IT LIKE BLOOD TO A SHARK)
DONT LISTEN TO YOUR FRIENDS. EVERYBODY CLAIMS THE GOT A GOOD PRICE. MOST DONT KNOW WHAT INVOICE IS.
DONT ANSWER ANY QUESTIONS DURING NEGOTIATING FOR INVOICE.
(YOU MAY GIVE AWAY A BUYING SIGNAL WITHOUT KNOWING)
SHOPPING DURING THE LATTER PART OF THE MONTH CAN WORK TO YOUR ADAVNTAGE.
(DEALERS HAVE A PROJECTED SALES IN UNITS THEY NEED TO MEET, SO DO BANKS. THEY TYPICALLY WILL WORK BETTER DEALS AT THIS TIME TO MAKE THEIR MONTH)
IF YOU SUBMIT YOUR EMAIL ADDRESS TO A DEALERS WEBSITE LET THEM KNOW “NOT TO CALL YOU, NOT TO NEGOTIATE, YOU WILL ONLY ACCEPT INVOICE W/TAX&TAGS, IF THEY DO CALL YOU, YOU WILL NOT DEAL WITH THEIR DEALERSHIP, IF THE EMAIL YOU ANYTHING OTHER THAN INVOICE, YOU WILL NOT DEAL WITH THEIR DEALERSHIP” THIS IS THE MOST EFFECTIVE WAY TO NEGOTIATE, AS OPPOSE TO IN PERSON.
THEY KNOW IF YOU NEGOTIATING THIS WAY YOU ARE A SERIOUS BUYER.
THEY WANT YOU IN THE DEALERSHIP SO THEY PLAY THE “GAME” WITH YOU. ITS SET UP TO WORK AGAINST YOU. LIKE A CASINO THE HOUSE ALWAYS WINS.
MOST DEALERS HAVE THE “NEGOTIATING” TABLES IN THE MIDDLE OF THE DEALERSHIP OR OPEN OFFICES.
(THIS CREATES A “BUYING FRENZY”)
IT HELPS TO HAVE YOUR FINANCING ALREADY DONE BEFORE YOU SHOP FOR THE CAR.
If a holdback is calculated from the:
Total MSRP: consumers must include the MSRP price of all options before figuring the holdback.
Base MSRP: consumers must figure the holdback before adding desired options.
Total Invoice: consumers must include the invoice price of all options before figuring the holdback.
Base Invoice: consumers must figure the holdback before adding desired options.
Acura 3% of the Base MSRP
Audi No holdback
BMW No holdback
Buick 3% of the Total MSRP
Cadillac 3% of the Total MSRP
Chevrolet 3% of the Total MSRP
Chrysler 3% of the Total MSRP
Dodge 3% of the Total MSRP
Ford 3% of the Total MSRP
GMC 3% of the Total MSRP
Honda 3% of the Base MSRP
HUMMER 3% of the Total MSRP
Hyundai 2% of the Total Invoice
Infiniti 1% of the Base MSRP
Isuzu 3% of the Total MSRP
Jaguar No Holdback
Jeep 3% of the Total MSRP
Kia 3% of the Base Invoice
Land Rover No Holdback
Lexus 2% of the Base MSRP
Lincoln 2% of the Total MSRP
Mazda 2% of the Base MSRP
Mercedes-Benz 3% of the Total MSRP
Mercury 3% of the Total MSRP
MINI No Holdback
Mitsubishi 2% of the Base MSRP
Nissan 2% of the Total Invoice
Pontiac 3% of the Total MSRP
Porsche No Holdback
Saab 2.2% of the Base MSRP
Saturn 3% of the Total MSRP
Scion No Holdback
Subaru 3% of the Total MSRP (Amount may differ in Northeastern U.S.)
Suzuki 3% of the Base MSRP
Toyota 2% of the Base MSRP (Amount may differ in Southern U.S.)
Volkswagen 2% of the Base MSRP
Volvo 1% of the Base MSRP
2007 Toyota Camry LE auto w/ minimum option needed (from edmunds.com)
Holdback: $420 (2% of MSRP)
Tru Inv: $18352
Tax in CA :$1514
Tag: 200 (est.)
Low ball: $18066
Target: [ ( 20975 – 0 – 18066 ) / 2 ] + 18066 = $19520 (out the door price, all fees included)
Never pay full price on a new car again!