The Negotiator Magazine

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Negotiating New Vehicle Purchases

Charles B. Craver

Most people hate to buy new vehicles, even though they should enjoy the opportunity to drive new cars and SUVs. They find the haggling process distasteful, and they never know whether dealers are treating them fairly. Car dealers always make money from their sales transactions, because they know the one thing most buyers don't - what they actually paid for the vehicles being sold. How can prospective purchasers enhance their buying experiences? First, by not selecting only one specific vehicle to buy. If someone absolutely has to have a Chevrolet Corvette or a particular Mercedes sedan, their negotiating power will be limited. On the other hand, if buyers would seriously consider a Honda Accord, a Toyota Camry, or a Ford Taurus, they would gain bargaining power because of their willingness to deal with other sellers if particular dealers do not propose beneficial prices.

Vehicle buyers must prepare for the multi-step bargaining process dealers use to obtain one-sided terms from unsuspecting purchasers. If you do your homework and allow the negotiation process to unfold slowly, you can save significant sums of money. This article will discuss the different stages you will encounter.

I. DETERMINE THE TRUE DEALER COST

Once you have decided which vehicles to consider, you must determine the actual dealer cost for those cars or SUVs. Dealers almost never provide buyers with this information. They try to focus on the inflated Manufacturer's Suggested Retail Prices (MSRPs) set forth on the side windows of vehicles. They know that if they can anchor these figures in buyers' minds, they can usually induce purchasers to pay more than they should. During sale periods, dealers will occasionally display "dealer invoices" that indicate what the dealers paid for the vehicles. If these documents were in libraries, they would go in the Fiction Room, because they don't reflect true dealer cost. They omit the 2-5 percent dealer hold-back that dealers get if they sell the vehicles within a specified time period, and they do not include manufacturer-to-dealer rebates and incentives that are almost always hundreds of dollars and occasionally thousands of dollars. Whenever dealers offer to share the invoice with you, hold on to your wallet, since you are about to be taken in a big way.

Since manufacture-to-dealer incentives are usually determined by monthly sales figures, the end of the month is generally the optimal time to purchase a vehicle. Dealers hope to increase their manufacturer incentives by maximizing monthly sales, and tend to provide more generous prices during the last few days of each month. If you plan to keep your vehicle for a number of years, you may also wish to purchase a vehicle at the end of the current model year. As new models are being shipped to dealers, year old models depreciate and dealers must lower the prices of these vehicles to move them off their lots.

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July 2005