Many consumers walk into a new car showroom thinking they can go toe-to-toe with the salesman, driving a hard bargain and getting an exceptional deal.
But keep in mind, while you may buy a new car every five years or so, the salesman is probably selling three or four cars a day. Who do you think is going to be the better bargainer?
That said, there is no reason to approach buying a new car with fear and trepidation. Some careful homework beforehand can build your confidence and help you get a fair price.
Automall Network, an auto broker used by consumers and insurance companies, now offers Competitive Market Price Reports through their recently launched website, IVONTaCar.com. The reports cost $50 but tell a new car shopper what a competitive retail price range is in their market for the vehicle they want, be it a cash purchase, finance or lease.
"If you can walk into a dealership knowing what a competitive price is, you can use this as a much better starting point for negotiations" says Viraf Baliwalla, President of Automall Network. "This saves time comparison shopping and makes negotiating much quicker and less painful."
Another shopping tool is the Dealer Invoice Price Report. The problem with it, however, is that many dealers don't typically sell vehicles at their invoice price. So it is important to consult a variety of sources and find out as much as possible about the competitive price of your vehicle choice. Even then, it can be a crapshoot.
Playing it close to the vest
"The problem with buying a new car is that most dealerships won't give you their best price until someone else has first" said Baliwalla. "Then they will match it or slightly beat it just to get the deal while you're in their dealership."
Because of the commission-based structure of the industry, the salespeople have the greatest incentive to sell you a car with a lot of profit. Time spent trying to charm the salesperson is pointless since, no matter how much they may like you, it's in their financial interest to get you to pay as much as possible for the car.
Automotive site Edmunds.com also offers new car-buying tools, including a True Market Value (TMV) formula.
Edmunds analysts look at the market, examine what other cars have sold for, consider the popularity of the car within your region and set the TMV price. It is the average amount that other buyers in your area are paying for the car. Usually, TMV is less than sticker price but more than invoice price.
Because it's an average, some people will pay much less than TMV and others will pay more. But by looking at TMV, you can get a rough idea how popular the car is and what you should expect to pay for it.
Closing the deal
Once you have made an offer the dealer will almost certainly counter with a higher price. If you feel, after considering your research, that it is a fair price, then its time to do the deal.
But if you think the salesperson will go a little lower, then simply begin to walk off the lot. If the salesperson is really willing to sell at, or near your price, it is at this point that they will let you know.