Insights

As new car prices continue to rise, consumers are paying closer attention to the sticker price at the dealer's showroom. Unfortunately, the information provided is not always as clear as most of us would prefer.

One of the problems is that different option packages can cause major differences in pricing on vehicles that are the same in every other way. That's why you need to understand what you're reading – to ensure you are getting a fair deal and a good price on your new car.

Dealer invoice

The "Dealer Invoice" number tells you what the dealer reports to have paid for the car. Keep in mind that this price does not include any rebates the manufacturer might have offered the dealer or "holdback" incentives manufacturers provide to dealers for actually selling a vehicle. When you include those two items, the dealer's out-of-pocket cost might be thousands less than the Dealer Invoice price.

Depending on the popularity of the vehicle, the dealer's inventory levels and the time of year, the dealership may be more or less inclined to sell below or hold firm to their invoice price. The bottom line is that you should not take for granted that "Dealer Invoice" is the starting point for sales negotiations.

Options and add-ons

For the most part, the least expensive version of a new car is the no-frills version with no bells and whistles. Extras add extra costs to the vehicle. Options installed at the factory can make the car more attractive to own and drive. However, they can also add significant dollars to the sale price of the car and your monthly payment.

Sometimes, vehicle options are bundled into packages. An SUV, for instance, might have an off-road package or an entertainment package. These things add value to the vehicle and increase the price tag quite a bit. Since options are part of the car when it arrives at the dealership, there usually isn’t much negotiating room as to whether they are part of the vehicle or not. The dealer might be willing to be more flexible in what he charges you for those enhancements.

Add-ons are similar to options, but they are added at the dealership and not by the manufacturer. They include things like pinstripes, undercoating, fabric protection, extended warranties and VIN etching. Some of these items may not be worth the costs for the rewards you get in return. Do your homework before paying extra for these types of offerings or negotiate to try to get them for free if they are something you want.

Incentives and rebates

These are the hidden goodies you want to know about if you are comparing prices. Be aware that some of them may already be reflected in the bottom line price of the car window sticker.

In fact, some dealerships advertise available discounts, incentives and rebates, but they don't state these discounts are already factored into the advertised price of the car. This same advertised price may also appear on the car window sticker. Make sure you ask if the bottom line on the window sticker already reflects any discounts.

Other things you need to know

There are other bits and pieces of information on the window sticker that are simply useful to know. These include things like the engine specs, estimated fuel economy ratings, and even your estimated yearly fuel costs.

Buying a car does not have to be a huge hassle – especially if you know the make, model and options you want before walking into the dealer. Do your research regarding the prices in your area for similar vehicles and packages and walk into the dealer with a price in mind.

If the dealership will not match your number, be prepared to move on to the next one. While it might take some homework and serious shopping, the odds are in your favor that you will eventually find the right combination of costs, options and add-ons for a price that fits your budget.

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This content is not intended to provide legal, tax, accounting, financial or investment advice or indicate the suitability of any product or service for your unique circumstances. You are encouraged to consult with a qualified legal, tax, accounting, financial or investment professional based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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