Buying a new car, Part 5. The price is not always the price is not always the price. Being a good negotiator is actually a relatively small part of getting the best price on a vehicle. Through research and my experience, I've found that the final selling price is more a function of the vehicle's invoice, length of time with the dealer, and the interest rate on the loan. Invoice: this is the price the dealer pays for the vehicle. From there, holdback, advertising, and cash back incentives are deducted to determine what the dealer actually paid for the vehicle. Auto companies raise and lower the invoice price frequently. One dealer revealed the invoice prices on two identical vehicles. One was received prior to year end and the other was received in January. The invoice price went up over $350 after year end. The amount of time a vehicle has been on the lot effects the actual selling price. Because dealers borrow or floor plan to get inventory on the lot, they will get an initial discount (e.g. 20%) from the auto company's credit division. As time goes on and the vehicle does not sell, the discount begins to disappear and finally goes negative. At this point, the dealer is actually losing money on the vehicle unless they can get someone to buy it at an exorbitant price. Finally, the interest rate the company offers is definitely a way for the dealer to make money and is definitely negotiable. I was offered between 1.9% and 6.49% with a top notch credit rating. Obviously, I was not going to pay 6.49%. Finally, one price or best price dealers may or may not give you the best price. It only means they don't negotiate. In fact, I ended up buying from a best price dealer. The price I got was an unadvertised price $900 below the "best price" on the car's windshield! I didn't have to even ask for it. Because of all of the above factors, I was able to buy the vehicle I wanted (well, even better than I wanted) at a price 17% below MSRP (Consumer Reports indicated the maximum discount I could get would be around 11%). I calculated they sold the car nearly $2500 UNDER their actual cost. This is because the vehicle had been on their lot for more than 3 months. They were either breaking even or losing money on it. As a result, I got a car with more features on it than I even needed for less money than I wanted to pay!
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