Get the best deal on your new car without negotiating at the dealership
Is the negotiation process keeping you from getting the car of your dreams?
You aren’t alone.
Accenture surveyed over 10,000 people on the subject and found that 75% of them would prefer to conduct the entire car-buying process online, including home delivery of the vehicle.
Of 4,002 consumers recently polled by Autotrader, only 17 said they like the car-buying process just like it is. According to this group, negotiating price presents a special brand of anxiety:
Consumers indicate that they would like to see a big change in the way they go about negotiating the deal structure. Of those who liked the idea of online deal building, over half, 56 percent, want the ability to start the negotiation on their own terms—preferably online—and 45 percent would like to remain anonymous until they lock in the deal structure.
Making the process of settling on a final price more transparent is a common request.
Here’s how to get the best price without entering into a negotiation minefield at the dealership:
Choose the exact new vehicle make and model you want, with the options you are looking for. It’s good to be specific so you can get the best possible representation of the dealer’s Invoice Cost.
Go to the CarCostCanada website to get the Invoice Cost of that exact vehicle. There is a small fee for the report, but it is a correct portrayal of the Dealer Invoice Price Report. You’ll also get information about any cash incentives and rebates, special lease or financing rates, and a referral to a new car dealer. Be aware that you may get a call from a dealership about the car you look up at CarCostCanada. When that happens, you can choose to schedule a test drive with that dealership, or
take your report to the dealership of your choice.
Get the advertised price from the dealership you’d like to work with. You can ask for it through the referral or call around for a price.
The difference between the dealer’s Invoice Cost and the retail price advertised at the dealership is the approximate gross profit. This gives you a reliable place to start when deciding how much you’d like to pay for your new car.
When you are in the dealership, if they don’t already know, tell the salesperson you have their Invoice Cost from CarCostCanada. Be sure to bring that information with you.
Let the sales person know what you think is a fair mark-up.
Here’s your behind-the-scenes insight
Getting the price from CarCostCanada is just one part of deciding on an agreeable and fair price for your new vehicle. Understanding some of what goes on at the dealership will help you get as close to the price you want as possible.
Some dealerships include additional fees in the price. Others do not.
Be sure to ask your salesperson if their dealership includes fees like these in their price:
3M Protection film
Nitrogen in tires
Wheel lock nuts, etc.
While some dealerships roll fees into their prices, others add them onto the bill of sale after the negotiation. This can have a profound effect on their profit and how much room for movement there is in the final price.
Canadian dealerships receive some of the smallest kickbacks from manufacturers in the world.
If your cousin in New Jersey could talk their dealership down to $3,000 below the “bottom line price” on a new truck, it may be because dealerships in the U.S. receive big cash payouts from manufacturers for each unit they sell. In Canada, those payouts are small in comparison.
Certain brands mark up their new vehicles more than other brands.
If you can negotiate $10,000 of wiggle-room on a new Ford truck, that may seem like a huge win. The truth is that some brands simply mark up their vehicles more. Very few industries understand marketing better than the automobile industry. If a certain car-buying demographic likes to negotiate price, the manufacturer will build in room to move. By comparison, you’ll never be able to get a $10,000 discount on a new Honda Civic. The markup is just too small on that brand.
Car dealerships don’t make the majority of their profit on new car sales.
Getting you as a long-term customer is the ultimate goal. Profit is made in service, protection packages, extended warranties, and sales of pre-owned vehicles. Depending on the situation, dealerships will sometimes reduce their profit significantly just to gain your long-term business.
Markup amounts vary within brands according to trim levels and packages.
It would be impossible to guess at the dealer’s actual invoice amount without using a tool like CarCostCanada. Information found during a normal online Google search will turn up outdated numbers and expired promotions and varies between provinces.
How to decide on a “fair profit” amount
So, how does one decide what amount is a fair profit? Of course, the dealership exists to make a profit. Salespeople come to work every day and spend their time and energy so they can make a good living.
In Canada, the pay structure of an average car salesperson is based on commission. The amount of commission is based on the profit off each individual vehicle sale.
The salesperson makes about 25% of the profit for each vehicle they send out the door. For example, if there is $2,000 profit in a deal, the salesperson would make about $500. At a dealership with a fair amount of traffic, an average salesperson will sell 8 to 10 cars each month. This leaves them with a $60,000 per year income if they do not take vacations.
Understanding how car pricing works, how dealerships make money, and how salespeople make a living is important to the car buying process for the consumer. Negotiating a “fair” price is a huge struggle for most people. Buying a new car is a large financial decision and there is a lot of pressure attached to the situation.
Keep in mind that reputable dealerships prefer a transparent transaction. They want you to feel like you got a great deal on the car you really want. Showing that you have spent time researching the vehicle, are serious about making a purchase, and that you care about coming to a fair price will help the transaction go faster, as well.
If you are willing to arm yourself with facts and conduct a bit of research on your own, you can walk into the situation with confidence that you’ll get the best deal possible on the car of your dreams.