5 Tips for Buying New

Guy buying a new car

There are several things that you should beware when buying a new car. The following tips can help you navigate the processes and avoid extra expenses.

Tip #1 – Never Pay More Than MSRP. The first rule of buying a new car is to never agree to pay more than the manufacturer's suggested retail price (MSRP). In fact your goal should be to pay substantially less. The way to avoid paying MSRP is to simply walk away if the dealer insists on charging more.

Your goal should be to pay as close to “Dealer Invoice” as possible.

Tip #2 – Don’t Confuse Dealer Invoice with Dealer Cost. People often mistake the "dealer invoice" price for the actual "dealer cost." Dealer cost is how much the dealer really pays the auto maker. The dealers cost is normally lower than dealer invoice due to dealer holdbacks and other incentives.

A dealer holdback is a percentage of the vehicle cost which is rebated by the manufacturer to the dealer.

Tip #3 – Check the Current Dealer Incentives Before You Shop. Dealer incentives come from the manufacturer and are designed to encourage new car dealers to sell certain models – to stimulate business or reduce excess manufacturer inventory. It is your responsibility to learn about available dealer incentives; the dealer is not required to tell the buyer about them. The dealer may or may not pass part of the dealer incentive money to customers. Dealer incentives include rebates, low interest rates, leases and other marketing support.

Tip #4 – Take Advantage of Rebates. Auto makers often offer factory rebates – cash back to the customer after buying a new car model. You can find out about current manufacturer rebates on the web.

The dealer will normally offer to give you immediate credit for the money by reducing the purchase price by the amount of the rebate or apply it to the down payment. This is normally not a problem, but be sure to review the paperwork carefully to make sure the closer gives you credit for the rebate.

You may also choose to have the rebate check sent directly to you and keep it out of the price negotiations altogether.

Manufacturer rebates and other dealer incentives come and go quickly, so you need to keep up on the offers and be prepared to act when quickly when the right deal comes along.

View current incentives and rebates for specific manufacturers at Edmunds.com.

Tip #5 – Avoid Head Games and Remember You can ALWAYS Walk Away. Many high-pressure salespeople will try to catch you with your own words and make you feel responsible for making a deal. For example, if you tell the salesperson that you may be willing to buy if they had a model with a roof rack, they are likely to find a way to put a roof rack on a car and use your own words against you to pressure you to sign a deal. Remember you can ALWAYS walk away. Until you sign the closing documents you have no obligation to play the game.

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