New Car Dealership Price Negotiation
oraiatoxotis
Member Posts: 2
Sorry, if this exists already, but it doesn't come up searching, "price negotiation" so I think many others like me will never see it. So...here's another discussion.
I'm looking to buy my first car. The one I'm looking at is the 2014 Mitsubishi Lancer GT Manual Sedan. I've read a lot of these "us vs. them" type of guides. I've read about MSRP, Dealer Invoice, True Dealer Cost, Factory-to-Dealer Incentives.
Currently, I'm pretty sure a fair offer is somewhere between $16k to $17k for a base GT model(not including tax/destination fee/etc). As I've said, I'm totally new to all this and am not sure if I'm looking at these things correctly.
The listed MSRP in my area is $21,240. I've seen the car for 20,990(down to 18,490 after various factory rebates totaling $2500). As far as all the online sources stating Fair Market Price and Dealer Invoice for this vehicle, they are all 19k-20k, which, in this case, is fine, considering the rebates are from the manufacturer.
But here's the kicker: I've found one dealership that I can get the vehicle for 18500 BEFORE factory rebates. After would be 16k. I'm going out on a limb and thinking this dealership will still be making a profit off this car even at this low price. I'm thinking the $2500 rebate is actually kind of a preemptive Factory-to-Dealer incentive. I mean, it wouldn't make sense for the dealer to pay another $2500 to the factory to cover the factory-offered rebate. But the consumer is paying the dealer the $2500 and being reimbursed by the factory. In effect, it's basically a $2500 bonus to the dealer. Unless I'm looking at this all wrong.
So, removing that bonus and also Mitsubishi's holdback(which should be 2%, The true dealer cost should be closer to $15,575. Offering them 3-9% profit would be in the 16-17k range. Then all the tax and other fees piled on top to be paid by me...
Pretty long winded, but I tried to be as detailed as possible. Hopefully someone can shed some light on this and tell me whether I'm doing this right or wrong. One way or the other, it'll be helpful information for myself and any other wayward new car buyer.
Thanks in advance!
Comments
Oraiatoxotis,
It seems like you've done your homework on this car. However, the "Us vs Them," style is an outdated concept. These days, you can come to a fair price without much back and forth. Rather than rack your brain on what a fair offer is, or what profit the dealer will make, I suggest calling three dealerships and asking for the Internet sales manager at each. Let them know you want the Lancer GT with a manual transmission. Give the Internet sales managers your first and second color choices. Once each one finds the car, ask what the "Asking Price" is on it. The Internet sales manager will rarely give you the MSRP. Most likely, he'll offer it at a discounted price. Confirm that the car has the incentives you mentioned and that you qualify for them.
Once you have three offers, you can determine which one you like best. Don't worry about holdback or whether the dealer is making a profit. A dealer will always make a profit on the deal (sometimes that happens in finance and insurance, where the dealer offers extended warranties and the like). But just because a dealer is making a profit doesn't mean you're not getting a good deal.
At this point, you can either take the lowest offer or take the lower offer to the dealer you want to buy the car from and ask that dealer to beat it.
That's it: No stress, no hassle. This "non-confrontational" approach is what we use whenever we buy cars. You've negotiated from a position of knowledge, rather than trying to pull a fair price out of thin air.
Let us know how it works out.
Ron Montoya, Consumer Advice Editor
Hah...I guess I forgot to mention I didn't agree with those guides. Yeah, it seems silly to me to think that way. I want to buy a car. They want to sell a car. It's mutually beneficial to work together on coming up with something fair(They make a profit and I don't pay more than I should).
However, much like the MSRP and invoice generally being the same, I'd imagine the asking price will generally be the same. Negotiating this way would lead me from dealer to dealer moving down from each last proposition, right? The "knowledge" is based on the relatively arbitrary "Asking Price" each dealer would give me.
This, in the end, leads me to negotiating down to something I'm willing to pay versus them up to something they're willing to receive. I already know that the price I'm willing to pay is totally doable, but the price I'd like to pay is another story.
I'm planning to make the purchase within the next week or two, so I'll keep checking and updating the status of my venture.
And thanks very much for the reply. I hadn't considered starting with this method. My thoughts were to negotiate up from lower range at a single dealership, then negotiate down speaking with others.