You’re no pushover.
Before you started shopping for a car, you went to the Internet, or the auto club or your credit union, and got the invoice price, theoretically what the dealer paid for the car.
Now you’re ready to go in and negotiate with the dealer, right?
Not so fast.
Have you calculated the manufacturer’s holdback? Checked for manufacturer-to-dealer incentives? Advertising co-op fees?
“The general consumer really has to have some auto-industry knowledge to determine what the actual invoice price is,” says Mike Gorun, president of CarSmart.com.
“Just pulling a pricing report and seeing the cost of the car is not enough. That is the cost of the vehicle, but there are additional fees out there.”
Those fees and credits are:
– Holdback, dealer-financing costs that are subsidized by the manufacturer in an amount typically equal to 2 to 3 percent of the sticker. That means, with most brands, the dealer can sell at “invoice” and still make $400 to $600.
– Rebates, factory cash to the consumer. Incentives are more mysterious: Unadvertised factory cash to the dealer, which he may or may not disclose.
– Ad fees, charged by dealer associations in some areas as part of the cost of doing business.
“Internet customers can get a distorted view of our costs and the value of their trade,” said Misty Sandberg, a fleet-sales manager at Browning Oldsmobile Mitsubishi Mazda in Cerritos, Calif.
“When customers call, they are $1,000 off what they think the invoice to be.”
Sandberg adds that consumer sites that suggest that holdback can be deducted from the invoice price are setting the customers up for a battle at the dealer.
“To let a customer think they can even negotiate holdback is pretty reckless. It puts the customer on the wrong foot as soon as they walk in the door,” Sandberg said.
Edmunds.com, an independent consumer site, pioneered a new tool that may help cut through the pricing confusion and the time spent negotiating with the dealer.
“Historically people have used invoice pricing and holdback as a weapon to go in and do battle with the dealer. It’s been sort of a crude instrument,” said Jeremy Anwyl, chief operating officer of Edmund’s.
After coming to Edmund’s, Anwyl, a longtime auto-marketing consultant, got together with his statisticians and created True Market Value, based on the supply of each new model and sales prices.
Anwyl believes this number more closely approximates a fair market price for consumer and dealer than does invoice price.
For instance, last year, Edmund’s Fair Market Value for a Honda Accord LX V-6, a mass-produced sedan, was $20,197, about $670 over invoice. Fair Market Value for an Acura 3.2 CL coupe, a hot luxury coupe (also built by Honda), was $27,299, nearly $1,800 over invoice.
“What we are trying to do is create a better expectation among consumers. We’ve found that it’s shockingly accurate. It’s a pretty good indicator of what cars are selling for,” Anwyl said.
That’s borne out by many consumers who have reported back to Edmund’s after shopping for a car based on True Market Value.
“I could haggle with a clue,” wrote in Joe Grubb of San Francisco, who bought an Acura TL at a Northern California dealer.
But even True Market Value isn’t foolproof.
The number doesn’t include rebates to the consumers, and if a dealer incentive is regional the value may not be accurate.
Anwyl also doesn’t believe consumers should be paying more than manufacturer’s suggested retail price. So the True Market Value of Chrysler’s PT Cruiser, which California dealers are selling for $1,000 to $10,000 over sticker, is listed on Edmund’s as MSRP.
“The reason we cap True Market Value at sticker, particularly for volume cars like the PT Cruiser, is that in two or three months the supply will catch up with demand, and they will be selling at discounts. Do you want immediate gratification or want to wait a few months and get a discount?” Anwyl asks.
One trend that has been created by sites such as Edmund’s and CarSmart is that some manufacturers are moving toward secret incentives such as marketing subsidies, retroactive sales bonuses and other hard-to-track reimbursements.
