Knife catching isn't just for real estate

August 20, 2009 5:59 AM

How can I increase my chances of buying a new car below dealer cost? Would you get an additional discount if you paid cash in full?

There are many articles on how to negotiate a good deal for a new car which usually involves offering slightly above dealer invoice.

I am trying to increase my chances of scoring a new car that has become a sunk cost to the dealer.

Some reasons I am choosing new over used:
-It is an apples to apples comparison once you have the configuration you want.
-It is easier to weed and screen dealers via email, as there is no reason to have to come in to the showroom
-There is a chance of getting a sunk cost car for about the same price of a used car.

I am looking for Hondas or Toyotas, preferrably top of the line Rav4s and CRV, but not opposed to sedans or other brands.
I had an offer of $27k for an Honda CRV EX-l w/Nav, and I wanted $25
I also had an offer for the above without Nav for $25k

These offers came two hours of very frustrating blah blah blah from the dealer.

I know the cash for clunkers program may have an effect.
I plan to have financing lined up with my own bank.
I plan on doing all negotiations through email.
I am in the New York area, so there are tons of dealers.

As always, thank you in advance.

posted by MrMulan to shopping (13 answers total)

There are a few new-car buying threads on here with good advice; this answer in particular is a classic. If you are not doing the cash-for-clunkers deal I would definitely wait until it is over as it will be more of a buyer's market then.The hard part is determining dealer cost; there are holdbacks, advertising subsidies, incentives, and all sorts of deals between the manufacturer and the dealer that are never made public, so the invoice price that you can easily find is sort of a fiction. I generally look at Consumer Reports (and spring the $14.00 for their new car pricing service), Edmunds.com, and Cars.com for and idea of what to pay. All of those tend to agree pretty well. Kelly Blue Book (kbb.com) tends to be a good bit higher on their estimated selling price in my experience. Finally, paying cash or having financing prearranged can hurt you in negotiations as it robs the dealer of one last chance to gouge you with financing, but in the long run it will save you money. I have paid cash for the last two cars I bought but didn't bring it up until we were already nearing a deal. On the other hand, some dealers are happy to get the money all at once and so are more willing to work with you.
posted by TedW at 6:11 AM on August 20, 2009

We just recently used the method for the answer TedW links to above, and took the poster's advice and using the out-the-door price as our target. We got exactly the car we wanted for the price we wanted. We also paid in cash.

One thing that would have helped us get the price lower was if we had wanted a different color and transmission combination. The manual, orange Fit Sport was in short supply in our area, so we couldn't get the price any lower than our target. So, I would recommend checking inventories of cars on-line in your area before you send out emails so you can check to see how likely it is that you can get the price lower.
posted by chiefthe at 6:21 AM on August 20, 2009

Why do you think that any dealer would let something off their lot for less than what they paid (or are paying) for it? They do have to make some profit to stay in business, you know.

The only way I can see this working is if the car is a model that doesn't sell well, and is from the previous model year or something like that. Your "top of the line Rav4s and CRV" are probably not going to fit in that category.
posted by ArgentCorvid at 6:22 AM on August 20, 2009

Why do you think that any dealer would let something off their lot for less than what they paid (or are paying) for it? They do have to make some profit to stay in business, you know.

Because dealer invoice isn't the true cost of the car given the holdbacks and other factory programs.

Because the next model year is coming up soon, and every month the car is on the dealer's lot it's costing him.

Finally, this is a capitalist society where screwing each other is expected. If you want socialism move to France.
posted by @troy at 6:30 AM on August 20, 2009

If you live in CA use cartelligent . It's a flat fee of about $300 but you don't deal with a dealer at all, and they got us the exact car we wanted for a good chunk under the invoice price. Well worth it.
posted by zeoslap at 6:55 AM on August 20, 2009 [1 favorite]

I did read and re-read the very informative answer in TedW response before posting. My train of thought is more like @troy.

Why do you think that any dealer would let something off their lot for less than what they paid (or are paying) for it? They do have to make some profit to stay in business, you know.
There are probably many reasons a dealer would want to sell a car at a loss and not just the one you listed. That is the purpose of my post-to identify what other factors would contribute a dealer to sell a car at a loss.

My post also indicated that I was very flexible in the kind of car I would get.

Here is an explantion of sunk costs and why it is sometimes better to sell something at a loss than make a profit on it.
posted by MrMulan at 6:56 AM on August 20, 2009

I've seen people pay less than invoice by taking "the dog" -- last year's model with the weird color and all the wrong accessories/add-ons that absolutely nobody wants. It requires being not-picky at all, even about make and model.

These links might help you:
TrueCar: "Find out what others really paid"
Edmunds CarSpace: "Prices Paid"
posted by Houstonian at 6:56 AM on August 20, 2009

I know someone who just got a new Toyota, and it took them a couple WEEKS to find one for them. When it was finally delivered they were told if they had waited two more weeks there wouldn't have been any cars of that model to sell them. The lots around here, particularly Toyota and Honda, are bare.

If this is your plan wait until after cash for clunkers is discontinued. Otherwise, when you try to low ball them, the dealer will blow you off in favor of the dozens of other people clamoring for new cars. Right now there are tons of people screaming for new cars, and it looks like most of them want Toyotas and Hondas. The dealers there are holding all the cards.
posted by Kellydamnit at 6:59 AM on August 20, 2009

I was able to accomplish this. The two main factors were the choice of car and the time the car had been on the dealer's lot. I purchased a truck that gets 17 miles a gallon that had been on the dealer's lot for 7 1/2 months. THe new model year was coming up (as it is now). He would sell it for less than cost because his cost is changing (going higher) every month he does not sell the car. His floor plan (cost of borrowing) is approximately the same as what your monthly finance costs would be. I estimated on the truck I bought that it was costing him $400+/month. As I told the manager, "your first loss is your best loss." No one had purchased this truck from them for over 7 months. Was he expecting someone to walk in tomorrow and grab it? If not, it was going to cost him another $400+ to find out.

The deal you make will ultimately be dependent on the dealer not the salesman. The salesman will likely get about $150 for selling the vehicle at or below cost. The manager has to decide if it helps his overall costs. THe dealer gets rebates for total units sold so while he may not make any money on your car directly, it may help move him into a larger rebate category.

Also, I would not negotiate over email. There is no motivating factor for a sale like a customer who is willing to buy a car on the spot getting up to walk out because the deal isn't good enough. At the end of my negotiation, I got up to walk out and that set off the manager. I had a chrono on my watch and gave him 2 minutes to agree or I walked. When at two minutes I folded up my laptop and started to leave, he came around real quick. I also set the ground rules for negotiation that would not have worked via email I don't think. I had done enormous amounts of online research. I knew the VIN number, dealer cost, rebates, etc of every (EVERY) vehicle on his lot and other nearby (within 50 miles) dealers of the type of vehicle I was willing to buy. I knew the color schemes, the extra packages, etc.

When I sat down with the salesman, I gave him a choice. It was going to be a take it or leave it deal. Either he could give me his lowest selling price which I would either take or leave or I could give him my top buying price which he could take or send me on my way. He did as I expected and asked for my top price. I gave him my actual top price because I was willing to walk, it was a number less than his invoice including rebates and holdbacks and because I knew that while it was much lower than he would like to sell it for, I knew it would hurt him to not sell the unit that was sitting there. His initial reaction was no to my offer. I had my laptop with the spreadsheets I had developed with every units cost. We sat down and he had his own sheet on the car and we went line by line agreeing on numbers. I was off by around $20, so I knew I had hope. He complained about losing money on the car. I told him about his floor plan and the fact that it had not sold for 7 months. He told me they had added a few extras that were not on the invoice. I told him to take them off. (They left them on ultimately at no cost to me.) Finally, I gave him the two minutes and with his manager standing there, they agreed.

Also, do not pay the dealer ad costs. THey try to throw that on later. Why should you pay for his advertising? And, the deal is not done until you see the finance guy. At delivery they will try to upsell you all sorts of other crap. Be as prepared for that as for the car price. You may want an extended warranty. Usually the cost is better through an outside agency, but the dealer may have a decent price on it.

Good luck. Be willing to walk.
posted by JohnnyGunn at 7:23 AM on August 20, 2009 [2 favorites]

One piece of info I would add: fightingchance.com (I used their service but have no relationship with them at all). It costs a few bucks (40? I forget now) to buy their research but it was invaluable. I got my Highlander hybrid for $5000 under invoice (no, that's not a typo) because I let several dealers fight over my business, I wanted a car that wasn't really moving around here, and I chose small surrounding towns where they had less foot traffic.

The best time to buy is typically at the end of the month; dealers often have sales goals to meet and the profit they don't make on your car they can make on meeting that goal. There are also specific incentives from different manufacturers for models they need to move; letting the dealership know that YOU know about it can help, even if you don't get that money.
posted by tigerjade at 7:32 AM on August 20, 2009

I worked at a dealership for a month and a half and left after realizing that everyone there was getting paid minimum wage to wear nice clothes and stand around for 10 hours. ANYWAY.

At least with Honda, they will have dealer cash on certain models from month to month, as well as spins on certain models in efforts to move them. When the dealer is showing you invoice and is showing movement under that price, they're getting incentives from the mothership after the sale.

If the dealer is willing to eat it in the price of the car, they're going to try to make up for it in the trade-in. The salesperson is going to try to beef up their commission by taking your trade in for as low as they can.

Come in near the end of the month, too. Salespeople are trying to meet their targets, and by the end of the month they may be scraping by.
posted by tmt at 7:38 AM on August 20, 2009

Why do you think that any dealer would let something off their lot for less than what they paid (or are paying) for it? They do have to make some profit to stay in business, you know.

Along with the other things people mentioned, many dealers have quotas. If they don't hit a certain number in sales, they can miss out on bonus revenue. That's a big incentive for a potential buyer to use an email- or fax-bomb approach. The wider you throw the net, the higher the chance of finding a dealer who's just shy of making their numbers. The payoff is huge when you do -- a car at well below invoice.
posted by dualityofmind at 9:25 AM on August 20, 2009

Pick something other than Honda or Toyota. Really. They sell at near full retail unless it is a very strangely equipped vehicle.
posted by bz at 10:02 AM on August 20, 2009