Buying a New Car - Part I

A new car is second only to a home as the most expensive purchase many consumers make. According to the National Automobile Dealers Association, the average price of a new car sold in the United States as of June 1998 was $23,480. That's why it's important to know how to make a smart deal.

Buying Your New Car

Think about what car model and options you want and how much you’re willing to spend. Do some research. You’ll be less likely to feel pressured into making a hasty or expensive decision at the showroom and more likely to get a better deal.

Consider these suggestions:

1. Check publications at a library or bookstore, or on the Internet, that discuss new car features and prices. These may provide information on the dealer’s costs for specific models and options.

2. Shop around to get the best possible price by comparing models and prices in ads and at dealer showrooms. You also may want to contact car-buying services and broker-buying services to make comparisons.

3. Plan to negotiate on price. Dealers may be willing to bargain on their profit margin, often between 10 and 20 percent. Usually, this is the difference between the manufacturer’s suggested retail price (MSRP) and the invoice price.

Because the price is a factor in the dealer's calculations regardless of whether you pay cash or finance your new car - and also affects your monthly payments - negotiating the price can save you money.

4. Consider ordering your vehicle if you don’t see what you want on the dealer’s lot. This may involve a delay, but cars on the lot may have options you don’t want�� and that can raise the price.

However, dealers often want to sell their current inventory quickly, so you may be able to negotiate a good deal if an in-stock new car meets your needs.

Learning the Terms

Negotiations often have a vocabulary of their own. Here are some terms you may hear when you’re talking price on a new car.

Invoice Price is the manufacturer’s initial charge to the dealer. This usually is higher than the dealer’s final cost because dealers receive rebates, allowances, discounts, and incentive awards. Generally, the invoice price should include freight (also known as destination and delivery). If you’re buying a new car based on the invoice price (for example: "at invoice", "$100 below invoice", "two percent above invoice"), and if freight is already included, make sure freight isn’t added again to the sales contract.
Base Price is the cost of the vehicle without options, but includes standard equipment and factory warranty. This price is printed on the Monroney sticker.
Monroney Sticker Price (MSRP) shows the base price, the manufacturer’s installed options with the manufacturer’s suggested retail price, the manufacturer’s transportation charge, and the fuel economy (mileage). Affixed to the new car window, this label is required by federal law, and may be removed only by the purchaser.
Dealer Sticker Price, usually on a supplemental sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer markup (ADM) or additional dealer profit (ADP), dealer preparation, and undercoating.

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Buying a New Car - Part II.

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