Every so often, a car dealer must genuinely sell some new cars at dealer cost (or even below cost) just to get rid of them. The sales staff won’t say, but some new cars can be negotiated down to rock-bottom cost in order for them to move inventory. Is there a way to know which new cars on the lot could be a steal for the buyer?
If a car is so undesired to be a ‘steal’ it probably will also have low value when you try to sell it.
Usually the previous year model, the demo’s and some cars that have higher miles than average (for a brand new car) get sold for less. Also, if there is body damage (minor). For the regular costumer, the only practical one is the previous year’s model. So, this November you can start e-mailing the dealers for the 2013’s (on the ones that the 2014 is out), and see if they come down on the price. I tried this with a Toyota dealer and got no good deals.
Step one find a car that is old and sitting on the dealer’s lot. The dealer doesn’t have to disclose how long they have a vehicle, but each car has a sticker with the mfg date on the door jam. The sticker gives the month and year of manufacture. Compare the dates and you can find an “old” car compared to others on the lot. If you can live with the color and equipment you can go to negotiate a sale price.
The markup MSRP minus the dealer invoice differs car model to car model. In general a high volume car that sells more units has a lower markup per vehicle. Fancy and high priced luxury cars have a higher markup. A Honda Civic might be closer to 15% and a Caddy Escalade more like 25%. There is online research you can do to find the “dealer invoice” number. If you can’t find it take 25% off the MSRP and start the negotiating there.
The problem is that the original sticker price will be reduced by addtional “factory rebates” for a slow selling model. A good example was the Hyundai Elantra Touring, a square box practical hatchback that did not go over with typical Hyundai buyers. I could have bought one “below sticker”, as they say, and almost $5000 less than the newer model of the Elantra Hatchback sold side by side. Financially a great deal, but my wife did not like the styling and she did not need all that room in the back. The Touring model has now been discontinued, at least in North America.
Consumer Reports and other buying assistance agencies can arrive at the factory cost, but can’t arrive at all those additonal incentives.
I used to work in the marketing department for a seasonal recreation equipment company, and my job was to forecast production and track sales by region to minimize year end leftover inventory which we still owned through the floor financing plan. The best deal on a large outboard motor was the end of the season and winter boat show time when new models arrived and “non-currents” were sold at a deep discount.
In short, in most cases the dealer actually does not own the cars on the lot; they are still owned by the factory, and put on the dealer’s lot with a “floor planning” (low cost financing) arrangement. Although the dealer has an incentive to sell the cars, the factory has as well. At the end of the model year the leftovers are deep discounted since they now have depreciated a full year.
In many other cases, the maker over-produces and uses deep discounts to move the inventory, This was the favorite trick of the Detroit 3 before the bankruptcies. They discoverded you can’ t sell at a loss and make it up on volume.
In Japan the inventory is very small, just some demonstrators and show models. The lean production methods and high real estate costs there means that you test the car, order it and 2-3 weeks later you get the exact model you want.
I look for cars that are priced near the invoice price shown on web sites like Edmunds, and then look for rebates or dealer incentives. The next step is negotiations. I don’t mind leaving a few hundred on the table for the salesman. If I believe I’m getting a good price on a car I want, I’ll buy it even though I might get another $200 off by going to another 4 dealers over the next two weeks.
I think this would be depending on what type of car, and what time of year it is. Of course demand is also a key factor. I hear around November dealers are looking to clear inventory for the next model year. Also cars that may not have sold well or maybe too much stock for a model could lead the dealer to want to dump it. For me, when I shop I know what price I want to pay for a car and I go dealer to dealer until I find one that I like and who wants to deal. As soon as the salesman says he has to ask his manager and then start a “back-and forth” negotiation, I am out of the door. I am a one-shot shopper. "Mr/Mrs. Salesperson, ask your manager if they will take $X for this car. Yes or no. I have my financing already. Will you take this bottom line price and shake on it? If yes, I buy. If they start the strategy of playing with numbers - ADIOS!
The buying public is anything but practical. Fashion and status trump utility for many and the monthly payment determines whether a vehicle is affordable, not the price. The cerebral automobile shopper must deal with a marketing model based on dealing with the usual shopper. Hype, hoopla, lots of shuffling of papers and a salesman fighting “for you” with his boss.
Great deals are great for the seller. Cars for dealer costs as stated are usually cars that aren’t selling. I was once charged extra for a “green” car vs a white car. I don’t think it costs more, just what the market would bear. You seldom know as factory rebates are often unknown to buyer. The buyer can say it’s their cost when in reality, it’s their cost before they received a discount. You’ll never known any more sometimes but the MSRP. Besides, the dealer seldom makes a killing on the actual price of the car. He is just waiting for your finance charges, unnecessary add ons and service charges. That’s where a dealer makes the profit. It’s the factory that realizes the most from he sales. Dealers seldom make a real killing on new car sales except for rare exceptions.
They get you going (later) not coming (during the actual sale).
Dealerships apparently realize a great deal more profit from used car sales than from new car sales. The manufacturers all have fields full of hoops to jump through and creeks to ford that a dealership can hopefully deal with to get a lucrative year end settlement based on the “big picture.” I have dealt with dealerships and found that their system is often a puzzle involving taking money out of one pocket and putting it into another pocket and calling it profit one day and loss the next.
If you look at the trade in price they give vs the price of used cars along with the prices of used cars taken off lease, the gazintas are all in their favor. New cars reap their benefits come service time where more then 60% of new car buyers have them serviced by the dealer they bought it from…60k, $500 check ups and where literally, all they do is change fluids and look for more items to charge you for.
If every car was sold the way that you want them to be sold, there wouldn’t be any cars sold to those who want to be sold to. :>))
At the moment, as the economy gets moving again, car dealers (the ones that are still in business) have no reason to sell cars below cost…You might find a new 2012 model car, usually a base model, unpopular model, and get an exceptional deal on it…But it’s still a year-old car, it’s value diminished just by sitting on the lot for so long…
To find the real truth will probably require a building full of accountants and lawyers along with a truckload of court hearing briefs.