New Car Pricing

How to Handle the Hidden Costs of a New Car and Buy below Invoice


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Most people know that the costs of buying a new car include the finance charges and the actual cost of the vehicle. They may also be aware of some of the other costs, but might not connect them to the car buying experience. There are a number of additions to the cost of new car sales, no matter where you purchase the car. This article will address these “hidden” costs of buying a new car.

Registration Fees

This is one of those costs that everyone knows about, but don’t normally attach to the car buying process. In most states, the registration fees charged by the state are determined by the price of the vehicle and the amount of taxes paid on the vehicle. These are fixed by your state and are non-negotiable. Some states require first time vehicle registration to be done by the new car dealerships.

Emissions Certification Fees

There are still a few states that don’t require emissions certification, but most states require testing and certification that the vehicle meets state and federal guidelines for emissions. This is another non-negotiable fee.

Sales Tax

This is one of those constants that were mentioned a century or so ago. These taxes are broken down into two or sometimes three categories:

  • State taxes
  • City taxes
  • Other local sales taxes.
  • Some states will also add a luxury tax to sales of new cars.

Insurance

Everybody knows they have to have it. But very few people actually add this to the costs of buying a new car. How much this will be depends on a variety of factors:

  • The car
  • The driving record of the buyer
  • Where the driver lives
  • Expected yearly mileage
  • The age of the driver

Documentation

This fee covers the costs of preparing all the documents for the sale of the car. This fee can sometimes be successfully contested.

Dealer Prep

This is a hidden cost added by new car dealerships to help them recoup the costs of getting the car ready to sell after delivery. This includes having the car inspected by a mechanic and then fully detailed in the body shop.This fee is one which you can actually contest, since the manufacturer typically reimburses the dealership for preparation.

Delivery

Delivery is the fee added to the costs of buying a new car by the dealership to help them recoup the money they have to pay the transport company to deliver their cars. This is sometimes called destination charges. You may be able to have this fee removed from the final price.

Dealer Installed Equipment

These are options. The dealer may try and tell you that since they’re already there, you have to pay for them, but you don’t. You can tell the salesperson or manager that you want a car that doesn’t have these options installed. This is your right. That’s why they’re called options and not standard equipment.

These 8 fees mentioned here are not all inclusive. It’s important that before you start negotiating final prices, that you find out what the dealer charged fees are going to be and which ones you can successfully contest.

By taking advantage of the tools available online, you can purchase a new car below invoice with little haggling necessary. Buying a car for below invoice is easier than you may think, as the combination of manufacturer-to-dealer incentives and the need for dealerships to meet sales goals can put you in a great position to negotiate. The first step to buying cars for cheap is to narrow down your selected vehicles by completing research online. As you begin to narrow down your choices, it is important to get price quotes so you may ensure that these vehicles fit within your budget. After you request your initial price quotes, you can make use of these tips to buy a car for cheap.

Now that you know the specific costs, it’s time to learn how the tricks of buying below invoice.

Know All about Dealer Invoice and Holdback

After requesting your initial price quotes, complete some research on the invoice price of each of your vehicles of interest. The invoice price is the bottom-line price that the dealer has paid the manufacturer for the vehicle or the net amount the dealership has financed through a floorplan lender to purchase the vehicle for inventory. It is important to understand that this invoice amount is the net cost of the vehicle before any additional deductions from the manufacturer. The dealership's true cost to own the vehicle may actually be lower by way of holdback that is paid from the manufacturer to the dealership to offset expenses related to salaries, facilities maintenance and the like. While the exact amount of holdback on each individual vehicle is difficult to calculate, you will find that the holdback is manufacturer dependent and that it normally varies from 3% to 5% of the invoice price of the vehicle. While it is often to difficult to get a dealership to negotiate into their holdback money, they will routinely do so if it helps close a sale.

Know the Right Time to Purchase a Vehicle

Buying cars for cheap is also easier if you contact a dealership near the end of the month. Let the dealership know that you are requesting multiple quotes for same vehicle, and that you are hoping to get your quote as far below invoice as possible. This will let the dealership know you have done your research, and it will also give them an expectation of what they must do to earn your business by the end of the month. As your price quotes begin to filter in, compare them. Make sure that the price quotes are for comparably equipped vehicles. Once you confirm that the price quotes are for similar vehicles, determine how far below invoice each of your quotes are. You may find that the range from high to low is significant. Remember that you do not need to select any of these quotes, so if your target price is not met, you can use quotes as a point from which to start negotiations, or you may simply choose to wait until market conditions and pricing are more in the buyer's favor. You can use these tips on a monthly basis until you find a quote that meets your needs. With the need for dealerships to sell large volumes of vehicles to earn bonuses, you will eventually find a dealership that will honor your offer.

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