The MSRP & What It Means To You
This Auto Buy Sell Guide focuses on figuring out the price you want to offer, which
starts from the MSRP and works 'backwards'...
As mentioned earlier, when you walk into a dealership, have all of the
pricing info of the car that you are looking into buying.
You should also know the manufacturer’s cost and the dealer’s cost. These things
can be gotten online ahead of time.
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You need to calculate the cost that the dealer paid for the car and then make a
reasonable offer to him if you want to get somewhere. Make sure you rehearse your
offer ahead of time; know ahead of time what you will accept if the dealer doesn't accept your offer.
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You should also know that the dealer’s price is not the invoice
price from the factory. You should know that the dealer’s cost is much lower than the factory’s
cost. In order to make a fair offer to a dealership, you need to learn to read a factory’s
invoice.
Here is what you can expect to find on the factory invoice:
Quick Tip: DO NOT confuse the invoice with the MRSP window sticker
because they are not the same.
Contrary to popular belief, dealers don’t have to tell you the invoice price on any
car. This gives the dealer leverage over you.
They can offer you one dollar over the invoice, making it look like you are getting a killer
deal. You should also know that there are hidden factory incentives in the invoice price that lowers the cost of the car for the
dealership; It’s no bargain for you.
Another quick tip:
If a dealership is very quick to show you the invoice, you should know this: This means
that they are fully aware that they will be making money on that car off of you; So you should immediately know that they can and will
settle for a lower price for the car.
So knowing this before you walk into a dealership can be your best negotiating strategy. You
see, they will tell you that you can afford to buy the car at MSRP hoping that you will not wonder what the actual worth of that car
is....
So knowing this will allow you make them the same offer; the ball is now in your
court for you to play. But if you aren't aware of this, the ball will "stay on your side of the net" (to use a tennis analogy), and
you won't know to swat it back at them.
If you offer a few dollars over the factory invoice (which is the actual worth of the car) then
you can open your bid and let them know how much profit they can make off of your offer. Check out the following websites if you want
to know the factory invoice of a car---a definite advantage for you!...the first on the list, "InvoiceDealers.com" is the company
represented by the handy calculators right on this website--on the left. All four sites are popular and offer the same stuff.
But, as we said earlier, compare invoice prices from at least 2, preferably 3.
http://www.InvoiceDealers.com
http://www.CarsDirect.com
http://www.Car.com
http://www.Autoweb.com
Dealers are always going to try and tell you that they paid more for the cars than they
actually did so that they can make a higher profit off of the sale. They'll often try and make you feel guilty by telling you “I’m losing my shirt off of this
deal”. If you're like my wife, initially their ploy will work, but remind yourself of your mission and keep your buyer's folder (we cover
its contents shortly) close to keep you focused.
Remember that in truth, you are the one that is losing your shirt off of the deal, so don’t buy
into the malarky. And remember that the MSRP is a "Manufacturer's SUGGESTED Retail Price". For one, everyone knows you
shouldn't ever pay retail for anything except in a small retail store.
To calculate what your offer should be to the dealership, you should get the factory invoice
price (don’t forget to include the options in this price), and add 5% to that amount. This is a good way to calculate what your
offer to the dealership should be.
When I mentioned the "options", I meant the ones that you can’t avoid;
Some vehicles come equipped with a CD, sun roof etc. and these are add-on fees that you can’t avoid paying so be sure
to account for these at the beginning.
You should also be sure to account for any buyer rebates as well in calculating your offer. So
in the end your offer should be calculated like this:
Dealer's Cost + 5% - any Buyer Rebates = YOUR OFFER
Calculating your offer to a dealership is as simple as that. Just make sure to do your
background checks online for the actual dealer invoice. So when you are considering how much you can afford to pay for a new
car, ensure you don’t get sucked into paying more than that amount. Stick to your guns.
If you are unwilling to pay more than your opening offer, let the salesman know that your offer
stands firm and how they will profit from the offer. If they end up flat out refusing your offer, politely tell them you may be back
but you're gonna shop around for a day or two. Here's what will usually happen: They'll call your bluff and allow you to start
walking off. Once it becomes evident that you are actually walking away for good, they will stop you with a counter offer of some
sort. At this point, just use your judgement on what you should do but keep in mind the price you didn't want to go above.
Another tactic is to allow you to get away, but they'll call you to say "the manager finally
relented" or something to that effect.
In the end you will get what you want on your own terms.
To be certain that you get the point, check out the following example:
You are hoping to buy a
Dodge Stratus. You do your research at DealersInvoice.com, and find that the invoice price is $19,922; MSRP is $22,385. The dealer may offer you
the car for $22,000, and shows you the invoice.
You learned from research that there is a $600 factory to dealer incentive; and a
$447 holdback on the MSRP (2%).
Based on the above calculations, the dealer’s real cost is $19,922 (invoice) - $600 (incentive)
- $447 (holdback) = $18,875. This is far below the factory invoice number.
But add the 5% for your offer to that price, which will raise the price to
$20,379. Now add, for instance, $455 for the destination charge that is always present. So you see that---based on the
offer that the dealership offered---you just saved yourself $3410.
This may seem complicated but there is a sure-fire way of taking any and all guesswork out of it: Go to
CarsDirect.com or AutoUSA.com and download the online spreadsheet for this; the program does all the calculations for you!
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