Buying a new car? How much will a car dealer come down, negotiate, or haggle on price?
1. Buying a new car? How much will a car dealer come down,
negotiate, or haggle on price?
Many people think his goal is to sell vehicles. Wrong!
Selling vehicles is a given at a car or truck dealership. The primary function of the car or truck
salesmen is to make the dealership the most profit possible, while also satisfying the customer. This
might seem like a subtle point, but the distinction is important.
Conversely, what is the purpose of the buyer? What is his goal? Is it to acquire a new vehicle? No.
That's a given. The car buyer's goal is to negotiate the most favorable deal on the vehicle possible.
Don't be bitter. "Profit" is not a dirty word. Remember that. Don't get disenfranchised, or upset that
the dealership is going to make money of your purchase, or that the salesmen is going to benefit
from your sale. Be happy that you can also get a good deal, the dealership make money, and the
salesmen can make a living. The balance is real, and achievable.
"Excessive Profit" is definitely a dirty word. Excessive profit translates directly into negative equity
for the buyer. No matter what, you want to avoid negative equity as much as humanly possible.
I'm sure many of you have heard, or will hear from a salesmen, that your new vehicle is "an
investment". They will use that word, investment, as a way to encourage you to purchase certain
upsells like warranty, roadside assistance packages, leather seats, accessories, insurance, and all
sorts of other stuff. And a new vehicle can absolutely be an investment, for several reasons, but NOT
if you get taken on the purchase price, gutted on your trade it, and wheeled all the way into the
driver's seat by paying MSRP for a new vehicle and accepting the KBB value for your trade ... read
on.
MSRP is an acronym that stands for the Manufacturer's Suggested Retail Price. This number is
decided by the manufacturer - NOT the dealer. This price serves as a starting price for negotiations.
Sometimes the dealer's will post an "Invoice" price for the vehicle underneath the MSRP and use
this as a selling point. This is common ...
"Look at the invoice price," says Frank, of Bayside Toyota. "We're only making a few hundred dollars
selling you this car at this price, and plus, you're getting almost one thousand dollars off MSRP."
"Oh," says Sally, as she fondles her hair nervously. "That's not too bad. I guess you can't really do
much better than that, right?"
Frank smiles, thinking to himself, Excellent. We're done negotiating. "Exactly. You know you're
getting a good deal, and we've got to make a little something on the vehicle ..."
What Sally doesn't know is the Bayside Toyota gets a $2,000 rebate from tshirt printing Avalon the
manufacturer every time they sell that vehicle, and the Southeast Division of Toyota Dealerships
rewards Bayside Toyota with another $3,000 of dealer-cash/incentive each time they sell this vehicle,
plus it puts them one vehicle closer to their corporate mandated quota / or dealer bonus check. Plus,
they charge a $599.99 dealer fee on top of that (or something similar).
2. Even at invoice price the dealership might have anywhere between $2k and $4k dollars of profit to
work with on a new vehicle. Imagine their margin at MSRP?!
