So, you have found the car that you want to buy. You have it all optioned out and ready to go. What is the next step?
If you remember, we were using the 2007 Honda Civic 4 door in the EX trim level, automatic transmission and no navigation as an example. To see all these parameters put together online, check out this link to Edmunds.com. But just in case that link decides to disappear, lets look at some actual numbers from this page.
The National Base Price for the 2007 Honda Civic EX 4dr Sedan (1.8L 4cyl 5A) is $19,510 for MSRP and $17,955 for invoice. MSRP is the price you see on the window sticker when you walk into the dealer; that is the price that a lot of people pay, but you won’t! Invoice is supposedly what the dealership paid the manufacturer for the car, but most of the time they paid less than that too. Many people just go to the dealer, see the sticker, and pay the price. But you don’t have to do that, and as a general rule you can negotiate your price to somewhere between the invoice price and the MSRP price. There are exceptions to this rule of course, with this year’s hot car model that is marked up or incentives that lower the price even more than invoice, but for this discussion we will stick to the basics….pay somewhere between invoice and MSRP, and both you and the dealer will be happy. Of course, the closer you get to the invoice price, the happier you will be.
So once we have the invoice and MSRP price, now we have to add any options we want to the car. These also have MSRP and invoice prices which will affect the final price you pay. On the options page, you can select what you would like your car to have. Normally, most cars have TONS of options to pick from, but not this Honda. It has one….the paint color. Since you already picked the model – 4 door, automatic, EX w/o navigation, the only thing left to pick is your color. Honda makes it easy…other companies don’t. So be careful when adding options, and always check if they are available in option packages so that you can combine a few, saving a little cash at the same time. Once you have picked your color, you will end up at the page that has the final numbers on it. At Edmunds.com, they give you the following numbers after adding the destination charge, which every dealer on earth charges you. For the Honda, it is $595.
MSRP: $20,105 Invoice: $18,550 TMV: $20,021
TMV price is what Edmunds calls “True Market Value”, which is shorthand for “what other people might be paying for this car in your neighborhood”. Keep in mind these prices are for my neighborhood, so yours might vary slightly. You can see that the TMV is somewhere between the MSRP and the invoice, which is where you want to be when buying. Honda’s tend to get close to the MSRP because A. they are great cars and B. everyone wants one and C. it is a lot of car for the money. My brother bought a new Civic last year and paid about $500 less than MSRP, which ended up being a good deal.
Ok…so now we have our numbers. For this car we want to pay somewhere between the two dollar amounts. Here comes the fun part. Find 3 different Honda dealers within driving distance of your house. Once you have found three dealerships, find the sales manager’s name and email address or fax number on each dealerships website. You are going to send an email or fax to each sales manager letting them know that you are shopping for this particular car, you are sending your proposal to three different dealerships, and whomever can offer the best price is who you will buy the car from. Trust me, it works. I did this for our last 3 cars and only once did I not get a reply from a dealer. We all hate shopping for cars and this makes the purchase and negotiations a lot easier.
On Friday I will post an example of the email/fax you can send out to the dealerships, along with some tips you can use when they reply to you. In the meantime, be sure to find the car you want, get the MSRP, invoice and TMV prices for that car, and check back in on Friday for How To Pay Your Price On Your Next New Car Purchase – Part Four.