Wouldn't it be ideal to go to the car dealer and buy the perfect car at the best price possible?
It is possible, but only if you know what you are doing. Car salespersons can often spot an inexperienced consumer. Those who don't understand the basics of purchasing a car may wind up paying more than someone who knows which discounts to ask for, and how much to expect off the sticker price.
Sites like CARandDRIVER.com and Motor Trade Insider offer long lists of car-buying terms to help familiarize consumers with this process. Thanks to a poll conducted of five different car salespeople, three experienced car buyers and three car dealers, we've compiled the top five terms.
Learn and understand what these terms mean and you will be one step closer to negotiating a better deal on your next car purchase.
No. 5: MSRP
The "Manufacturer's Suggested Retail Price" or MSRP is also called the sticker price.
This is the amount that the car company estimates their car is worth. This is the full retail amount of the car without any discounts or incentives. Consumers should have the goal of never paying the full MSRP for a car. There are almost always discounts available on a car.
"Never, ever pay sticker price for a new car," said Ronald Kuykendall, a Henryville, Ind., resident who has purchased a new car every two years for the last 50 years. "You can always get a discount. Just ask for it."
In fact, NewCars.com suggests that market price is a better reflection of the actual price a consumer should pay for a new car. You can even order reports that will show you the average cost paid for a new car just like the one you're looking at. Such services are either free or cost very little, but can save you thousands of dollars.
Knowing how much someone else paid for the same car is a valuable bargaining tool.
No. 4: Dealer invoice price
The dealer invoice is how much the dealer paid to the manufacturer for a particular car. Most dealers guard this information carefully, because they are in the business of making a profit on the cars they sell.
Having an idea of the dealer invoice price can provide car buyers with a valuable bargaining tool.
Many consumers don't realize there is a separate invoice showing what the dealer paid. Simply knowing this car-buying term shows the car salesman that you have done your research and are aware of the information you need to get the best deal possible.
Even though this price will give you a good idea of where to begin bargaining, it still does not completely show what the dealer paid for the car as there are holdbacks, rebates and other fees that apply.
No. 3: Factory incentives
Factory incentives are offered directly from the manufacturer to the consumer.
These are often offered in the form of a certain dollar amount off the purchase of a particular car or model of car. The incentives might be in the form of $1,500 off a new car or in the form of a reduced interest rate on the financing of the car.
Most dealers make it clear what factory incentives are currently available, because it can help convince a buyer who is sitting on the fence about whether or not to purchase a new car. What might be of great benefit to you is to ask the salesperson what the different incentives are, which one is best and compare the amount you'll save on different car models.
"Don't let the car dealer convince you that this money is coming out of their pocket," Kuykendall added. "This is bonus money provided by the manufacturer. Dealer incentives are a separate offer."
No. 2: Option packages