Assuming you have the money, buying a new car has never been easier — or less stressful. If, that is, you aren’t still buying cars the way people did back in the ’90s . . . before the Internet.
The ‘Net has made it simple to do almost everything you need to do except sign the papers and pick up the keys without ever leaving your home and — most important of all — without ever having to deal in-person with salesmen.
First, figure out exactly which new car you want to buy. Not merely the make and model — but also trim, color, engine/transmission, optional equipment — and so on. This information will enable you to “build price” the specific car you want, with the equipment and features you want.
Next, price it.
The starting point is the manufacturer’s suggested retail price — the MSRP, or “window sticker.”
The MSRP is the profit-padded price the dealer hopes he can sell you the car for. It does not reflect the dealer’s cost to purchase the car from the manufacturer. Dealers are independent franchises; when you buy a new Ford, you are not buying the car from Ford Motor Company; you are buying it from a Ford dealer. The dealer paid less for the car than MSRP. This lesser amount is the dealer invoice price — and it should be the starting point for your calculations — and subsequent negotiations.
How does one find the dealer invoice vs. the MSRP? A few strokes of the keyboard is all it takes. Sites such as kbb.com and edmunds.com (and many others) publish MSRP and dealer invoice prices for most new cars.
Best of all the info is free — my favorite price.
Jot the number down on a pad.
Next, you’ll need to price the options (if any).
Just as the car itself has both an MSRP and a dealer invoice price, so also the optional equipment. Scan the window sticker and you will see things like GPS or a sunroof itemized (some a la carte, others listed as part of a package that includes other equipment) with the “suggested” price added to the car’s bottom line MSRP. In fact the actual cost — to the dealer — of these options (like the cost of the car itself) is also less than stated on the window sticker.
You want the invoice prices for these options — also available on the sites mentioned previously.
Now add everything up — twice. One column for the car at “sticker” price — the other, dealer invoice price.
To give you a sense of the difference between MSRP and dealer invoice, let’s consider a current (2014) model year new car as a case in point.
The Nissan Versa Note I reviewed a couple weeks ago (see here for that) has an MSRP of $13,990 in base (as it sits, without optional equipment) “S” trim. The dealer invoice for this car is $13,500 (see here for the details). The optional Sport package — which includes an upgrade 15 inch wheel/tire combo and a decklid spoiler) adds $760 “sticker” (and $637 dealer invoice) to the price. An Interior Illumination Package adds $455 MSRP ($340 invoice). There is also an $810 destination fee — which covers the cost to ship the car from its assembly point to the dealer. This fee, incidentally, is what it is — there’s no MSRP vs. invoice price; however, that doesn’t mean it can’t be negotiated. More on that in a moment.
Ok, let’s add ‘em up.
Equipped with the options listed above — plus the $810 destination fee — the MSRP window sticker of our 2014 Versa Note will come to $16,015 — vs. a dealer invoice price of $15,287. The difference comes to $728, or roughly 5 percent — which represents the nominal profit to the dealer if you bought the car at full MSRP.
However, even the dealer invoice price is — frequently — to some extent padded by manufacturer-to-dealer incentives (e.g., “holdbacks”) such that the actual profit he stands to make on the car — if you paid full MSRP — could be closer to 8 or even 10 percent.
Your object should be to buy the car for about 3 percent over invoice. This represents a fair deal for both parties.
Not too much for the dealer — not too much from you.