Car Buying Articles
New Car Pricing and Deal Making — Ask Edmunds.com
Answers to Real Questions About Car Values and Good Deals
Here at Edmunds, there's nothing we like more than talking about cars. That's why they call us the car people. So if you're shopping for a car and finding yourself frustrated or confused or just needing a second opinion, talk to us. Our Live Advice team is here seven days a week, ready to answer any questions you may have.
What's it worth? That's the age-old question when it comes to cars. And the age-old answer, naturally, is that a car is worth whatever someone is willing to pay for it. Of course, that answer may not be too helpful if you're about to list your car for sale or sit down with a car salesman to negotiate a deal. At these times, you're looking for a specific figure.
That's why we invented True Market Value®, or TMV® for short. TMV is our estimate of what others are paying for a particular vehicle in a particular area. Check out "How to Use TMV" to learn more about it.
Still, as simple as we've tried to make it, new car pricing remains a sensitive and complex subject, and so it comes up regularly in the car shopping questions we see. Here are a few recent examples, along with our replies.
How To Negotiate With TMV
A student and first-time car buyer writes, "I am interested in purchasing a used 2003 Acura RSX with a sticker price of $7,990 and a True Market Value right now of $7,688. I would like to pay a final price of no more than $8,300 (including tax, registration, etc.) meaning that the price I would pay for the car would be $7,400, almost $300 lower than the True Market Value. Is almost $300 lower than the TMV of a car reasonable? Also, what is a good starting point for negotiating?"
First of all, we're glad to see that you've done your homework, having already calculated the Acura's TMV price plus the likely taxes and fees — not to mention that you're shopping for an RSX, a car our editors deemed "one of our favorite sport hatchbacks" in their review.
Since TMV is basically the average price that people are paying for a car, some buyers are paying more than TMV, while others are paying less. So it's certainly possible that you could purchase the car for $300 below its TMV price. Whether that's reasonable, though, is something that the seller will ultimately have to decide.
Fortunately, you have some influence here. This is the art of negotiating. Edmunds.com Senior Consumer Advice Editor Philip Reed interviewed the owner of a well-regarded car-buying service in Los Angeles to see what negotiation secrets he could glean and came away with several important tips.
The most important of these is to know where you want to end up before you start the negotiation process. Being the model student that you are, you already have that goal in mind: $7,400 for the car and no more than $8,300 total, including all taxes, fees, etc. This is also known as the "out the door" price.
Most sellers are expecting at least a little back-and-forth over price, so your next step is to make an offer slightly lower than your goal — 5-10 percent is a pretty good rule of thumb. Be careful not to make an offer so low that the dealer simply dismisses you as a low-baller, though.
To simplify things, you might also consider negotiating solely around the "out the door" price that you already have in mind. This can streamline the whole process for you since you only have to keep a single figure in mind the whole time. Plus, it helps to prevent any "surprise" fees from appearing as you're wrapping up the paperwork.
So, in your scenario, an offer of $8,000 "out the door" would probably be a good place to begin. It's a nice, round number that's not quite 5 percent less than your target. And, in much the same way that the car's sticker price of $7,990 is more inviting than it would be at $8,000, starting your offer with an eight and not a seven is a subtle signal to the salesperson that a deal may be within striking distance.
Whether you negotiate in person or online, you should expect several back-and-forth exchanges, possibly over a day or more, to zero in on your desired price. You'll know you're close when you can offer to "meet halfway" between your last offer and the salesperson's latest and then hit or beat your target.
If all goes well, you'll get the car you want at the price you want, and maybe even have just enough cash left over to fill up the tank on your way home.
A Good Price vs. a Good Deal
Sometimes, even if you've found the car you want at an apparently good price, it can be hard to convince yourself that you're getting a good deal.
Case in point was this query to our Live Advice team: "I am looking into purchasing a 2013 Dodge Dart. The dealer is offering 1 percent below invoice price plus the $750 rebate from Dodge. Is this a good deal? I am thinking it is too good to be true because it is almost too easy."
We checked TMV prices for the Dart and found that most are selling at a few hundred dollars above the invoice price (approximately what the dealership paid the factory for the car), so this does sound like a very good offer. But is it a good deal? That's a more complicated question.
Remember that the sales price you agree to is usually only one piece of the entire deal. Most new-car shoppers will also find themselves negotiating the value of a trade-in as well as their financing terms, plus any other fees or add-ons that may arise as they finalize everything with the dealership's finance manager, sometimes known as the F&I guy.
If you aren't paying close attention at each step along the way, the great price you negotiated on the car can be undermined by poor terms elsewhere in the deal. So, while you are definitely off to a great start, here are a few tips for ensuring that you leave the dealership completely satisfied.
Double-check the incentives: You already determined that Dodge is offering $750 in customer cash for the Dart, but there are a few other incentives as well that you may qualify for, including a $1,000 "conquest" bonus for current VW drivers who opt to buy a Dart. Check our Incentives and Rebates pages for complete details.
Think about financing: If you are financing the purchase, get pre-approved for the loan through a bank or credit union. That way, you know exactly where you stand creditwise before you begin negotiating the deal. Plus, you may find that the dealer will offer to beat the rate that you've been offered elsewhere. For more help, see "Avoiding Credit Hassles at the Dealership."
Look at your trade-in options: If you are trading in your old car, make sure you calculate its TMV before you accept an offer from the dealership. You can print out the TMV page and bring it with you to the dealership, or calculate it on the fly using one of our mobile apps. If you get a low-ball offer for your old car, consider selling your car yourself for more money.
Remember the fees and taxes: Know ahead of time what to expect in terms of taxes, fees and other charges. Some of these vary by state, but you can stay on top of them all by referring to our guide, "What Fees Should You Pay?"
Watch the extras: Keep the deal as simple as possible by avoiding extended warranties and other dealer add-ons, like paint protection or theft recovery systems. While these may sound like cheap insurance for your brand-new car, they usually have high markups that erode your overall deal, especially if you end up financing their cost over the life of a car loan. Plus, you can purchase most such items later if you decide that you really want them.
Following these basic steps should lead you not only to a great price for the Dart but to a good overall deal as well.
More Questions About Car Pricing and Values
If you have questions about how much to pay for a car or how to make sure you're getting a great deal, check out all of our Car Buying Tips. Or, if you're in a rush, skip to our Deals of the Month, hand-selected by our analysts as the best new car bargains in the marketplace right now.
And, of course, you can always ask the car people on the Edmunds Live Advice team. We'd love to hear from you.