With car sales slowing from years of record highs, carmakers are ramping up incentive: cash rebates or low-interest-rate financing. But getting the lowest price possible still requires some smart tactics.
Negotiate. Assuming you aren’t shopping for a hot model, you can probably haggle with the dealer until you get close to the “invoice” price, or what a manufacturer charges the dealer for the car. The invoice price may be as little as 1% below sticker for a popular mass-market vehicle, or as much as 6% for a luxury model.
Dealers receive bonuses and other incentives from manufacturers to hit sales targets, enabling them to sell a car at invoice or slightly above and still make a slim profit. (Be sure to negotiate the price before any rebates or other incentives are factored in.) And remember that dealers make most of their profits from service, accessories, extended warranties and sales of used vehicles—pretty much everything except the sale of new cars.
Cars that sit on dealers’ lots for months are more likely to sell at or below invoice than a coveted model in short supply. Buicks recently sat for an average 149 days, making them the second-slowest-selling cars on the market, according to Kelley Blue Book. By contrast, Audis and Subarus sell the fastest—they’re gone after just 40 days, giving dealers much less incentive to bend on the price. You’ll also save if you buy the outgoing model, once the new model hits dealers’ lots.
Check the resale value.
Saving a few bucks up front may be less valuable than picking a car with strong resale value. Cars depreciate at an average rate of 15% a year, says Eric Lyman, vice president of industry insights at TrueCar. One positive factor if you buy a sedan, he adds, is that resale values should start to improve over the next few years as supply tapers off in the used-car market (while SUVs proliferate, potentially hurting their resale values). Resale values and other costs of ownership can be found on kbb.com.
Stripped-down models without any options (the kind you see at rental agencies) aren’t very appealing to car dealers, but it’s unlikely you’ll get much extra for a car with every option and high-tech doodad tacked on, says Karl Brauer, executive publisher of Kelley Blue Book and kbb.com. “Everyone wants air-conditioning, power windows and Bluetooth, but not necessarily a sunroof and rear heated seats,” Brauer says. Go for a Goldilocks car: a well-equipped model, not too basic and not fully loaded.
Be wary of an all-new model.
Try to buy a car one year after a full redesign or launch of an all-new model. Or buy a “mid-cycle refresh”—a car that has been revised and updated by the manufacturer about three to four years after it first came out. All-new or fully redesigned models tend to have kinks that need to be ironed out, so waiting a year is usually a good idea. And a model refresh usually includes significant improvements. In both cases, these cars should hold a bit more resale value than the outgoing model, says Brauer.
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