Modern Vespa

Just interested in how this works. In the UK (and Europe, AFAIK) we pay the price listed to get the car on the road. Basically it is an OTR price and includes tax (VAT), delivery and annual licencing (plate) costs. Of course, one can negotiate with the dealer on these costs; discounts are available and run around 20% on a BMW, 15% on a VW etc... However, all published prices MUST be the price actually paid to get the car on the road.

I am confused by the US terminology. MSRP, Invoice price, destination charge, taxes. So what happens? Do you negotiate on MSRP, then add delivery, tax and other sundry charges?

Is this a good way to price things? I'm just interested that's all.

Way back in the seventies, buying a car was the same over here in the UK. There were lots of "hidden" charges. Special Car Tax, VAT, Road Fund Licence were all added to the original price. One of the advantages of joining the EEC (now EU) was the advertised price had to be the price you paid. I suppose the same goes for prices in the shops. In the US you have to add the sales tax; in Europe it is all there.

We often comment on "cheaper" prices in the US, but our tax is included in these prices, yours perhaps isn't...

Hey Doug,

Mostly, and this is changing, you go to the dealer and negotiate the MSRP. You then pay state sales tax based on the MSRP, at least in KY, where I live. The license fees vary by state, and the dealer prep and destination charges are pretty much negotiable. Many dealers now offer maintenance plans, some quite generous, but they usually expect full MSRP for that. The scam is usually add-on extended warranties, which are not often cost effective, and accessories, which can be quite expensive, especially on US made cars. All this is for new cars, bought at a dealer. Dealers also offer leasing options, with an initial payment and a milage limit. The bottom line is that it really pays to do a lot of research, and be prepared to walk away. My brother is a much better negotiator than I am, and so is my wife.

Warren

Ah.... Add ons! I suppose that is where dealers now make their money here in the UK. They add paintwork protection (which is a scam) at inflated prices. They also offer GAP (guaranteed asset protection) which is an insurance policy ON an insurance policy - also at grossly inflated prices. I always avoid these and get grumpy looking glares from car salesmen.

I normally do good online research. I am in the process of buying a little runabout and explored all avenues. Test drove a car in a local dealer and then got VERY close to the very best online price. The best price online would have involved a hotel stay, a flight, fuel and a car ferry, so any local dealer coming close to the online price minus these costs was going to get my business.

In my younger days, I would have considered this a fun adventure. Nowadays, it's all about less hassle!

GAP is a great concept. I purchased mine at the financial instution for $5.00/mo and not the dealer.

I have a friend who's motor home was stollen. The gap between the value of the coach and the balance of the loan was $50,000 after the insurance company paid.... He double checks to make sure he isn't upside down in a loan without GAP coverage ( In his example he also adds that he was inside out on that loan ).

Doug

You also mentioned "invoice price", which is the price on the invoice to the dealer. However, while dealers appear to "pay" the invoice price, they get promotional funds, rebates and incentive payments based on quantity of vehicles sold, so the actual cost of the car to the dealer is actually lower than the "invoice price". However, it's a slick sales pitch to show the invoice and tell the buyer that they are being offered the car at "invoice price", making them think the dealer is foregoing a profit to make the sale.

Doug,

Buying a car has a lot to do with location. You should also note, sales taxes vary state to state (in addition to licensing). In some places, there are also local city and/or county taxes added on to the cost of a vehicle. Oregon, Montana and New Hampshire are the cheapest.

It's not illegal to purchase a car in another state and bring it to your home state. However, your home state will still hit you up for taxes when you register the vehicle so the benefit is reduced.

Getting the best deal has changed a lot (as wmak noted). It used to be saturation of dealers that helped lower places. If you go to an area of a city where a lot of dealers are selling, they would offer more competitive pricing. However, with the Internet, you can do some pre-shopping to get a good idea of what you can pay for a vehicle here.

Car dealers here also float a lot of extra costs at the time of purchase. Things like destination charges, undercoating, extended warranties are all add-ons that you can work to negotiate in and out of the cost of the car. This all part of trying to squeeze every last dime out of you.

I lived in Europe for several years and the biggest difference you will note is the massive selection and delivery times. You can walk onto a lot here and in an hour or two, be out the door with your new car. Financing is easier here and for the most part, very affordable.

The best way to shop for a car today is to decide on the make, model and budget for your vehicle. Begin by shopping online and get your financing in order prior to visiting the dealer. Once you have found the car you want, go in ready to purchase with a price in mind that you think is fair and then knock another 20% off of that as a starting point.

I like to shop at the end of the month as most dealerships are on a sales quota and eager to move cars at that time. I also know that I am ready to walk off the lot whenever I don't get what I want. I am not married to the specific car I want to buy. If it's not the right price, I just leave and go look somewhere else (again, like wmak notes)!

There are a LOT of cars here in the US and getting a good deal, used or new, is really about leveraging the market to your advantage. I can tell you that driving 50 or 100 miles for a good deal is sometimes worth it because the result could save you hundreds if not thousands.

Mike

You can always make an "all in" (all inclusive) offer for any car at a dealership, because they can run it through a calculator to instantly see what you are really offering for the car without the extras. That is the way most new cars have been sold here for a while now.

Cheers and good luck,
Bob

I don't think Doug is looking to buy a car in the US, but he has hit upon a major difference between Europe and the US. Final pricing is much more opaque in the US. In both regions, there is a "bottom line" that the dealer has to observe.

Here in Europe, there is just the stated price of the car as VAT, prep and delivery are included in the MSRP. Registration and road tax, of course, are extra.

In the US, the dealer can let you think he's giving you a break on "dealer prep" or "destination charges", which are shown on the sticker, but it's the the net, net, net that he is holding the line on. So, "give away" the $250 in dealer prep and drop the price $1,000 rather than $1,250 from MSRP and the customer thinks he got something for free.

As to "shopping at the end of the month", that only works if the dealership hasn't made a quota yet, and your purchase will push him over a threshhold. I knew a dealership that delayed closing sales for a few days into the next incentive period if he had made the present one and the customer was willing to wait to "get the car fully prepared". Maybe throw in a free undercoat as a cover story.

Add ons are a totally different ball game, and much the same in Europe as the US.

In the US, there are basically 55 or so different manners in which licensing of a driver and motor vehicle is done.
Here, the cost of a vehicle to a dealer is made public, so it is easy for the consumer who wishes to, to actually find out what invoice is. A lot of dealers will use their own creativity to produce this document. Admin, or Doc fees vary from dealer to dealer and state to state, and different laws cover motorcycles than cover most other motor vehicles.
There is something called holdback that goes to the dealer, but this usually goes toward the flooring, or finance charges the dealer pays for all the cars sitting on the lot until they find new homes.
There are states that prohibit you from buying cars in other states and licensing them there if they have less than a certain amount of miles.
It's a crazy business, and easily confusing to someone who is used to a single national way of doing things.

A lot depends on the popularity and availability of the vehicle. If the dealer has a shitload of that model in stock, you will be able to negotiate a better price. On the other hand, if the vehicle is in very short supply, you will pay sticker and in some cases, sticker plus.

Back in 1979, I ordered a new Toyota 4X4 Sport Truck when they first came out. My choices were red, blue, black, yellow or white. I wanted blue. There were none in stock and the dealer had a waiting list. When a truck came in, it was offered to the first on the list at full sticker plus freight, prep, state fees, title and temporary registration.

After a while, a red one came in. The dealer called me and told me I was first for it. The price was a bit higher than what I had budgeted for because it came with a factory CB installed. If I turned it down, I might not get one because it was late August. I didn't have much of a choice. I took it, loved it, and put 236,000 miles on it before I sold it to neighbor kid in 1987.

Out in California, the dealers were adding on a thousand dollars to the sticker because they could.

In Texas typically you negotiate based on MSRP and installed options, aka "sticker price" that you will see on an information sheet usually taped to the window of the car. It will tell you MSRP, what option package from the maker and what options the dealer has already added to the vehicle. In addition there will always be tax and registration which can vary significantly between states. I bought two vehicles (motorcycle and Subaru) out of the state of Texas then subsequently registered them in Texas this summer. In both cases I paid the sales tax for Texas to the dealer and received a "tax receipt" when title was issued in the state I bought the vehicle at. I took those plus the VIN inspection and proof of insurance to my local tax office to register them. Cost me $7 for the VIN plus a fee of $74 and $147 respectively for registration.

With a trade-in I negotiate based on an "out the door" price since I don't really care how they get whatever that number is whether it is higher trade in value, lower sales price or "waiving" some dealer/transportation fees.

Extended warranty and other options may well be offered after the price has been agreed on so if your bottom line includes those items make sure you bring them up before agree on the price. In my case I added Subaru windshield protection because the iSight camera my husband wanted requires special window glass that is butt expensive so one replacement would more than pay for the insurance coverage. Since that car will be driven between Houston and Breckenridge the odds are pretty high that there will be windshield replacements.

BTW there are some dealers that don't negotiate pricing particularly CarMax though they will try to sell you extended warranty and maintenance programs, etc.

If I recall correctly you're moving to Texas so this maybe more than academic interest.

Has anyone used Costco to buy at their pre-negotiated price? Am curious about the effectiveness of it and to eliminate the hassle of negotiations.

I knew what the Costco price was for the Subaru and we used it as the purchase "base" but really that was for their internal account since it doesn't take into account trade-in or whatever.

It's like the AAA or Consumer Reports systems, and gives you a fair deal. But even then you still have to settle on a number for your trade, if you have one.

I was never convinced that Costco was getting me the best deal... but I did purchase a car using TrueCar, and it was seamless. I even negotiated another $300 off the TrueCar price. I know Edmunds also provides a similar service.

I can tell you that once I "lock in" the price (you're still not obligated to buy anything) my phone rang almost immediately. There was a small difference in price between dealers, which was a difference in their "documentation fee". The sales guys are still a bit slimy, but I had the general price nailed down. Looking back on it, I would have skipped a couple of small dealer "add-on" options, like a cargo net, but the car was for my daughter... we'll see if she ever uses the net.

It was indeed the opacity of pricing that I was commenting on Al. Registration and road tax are actually not extra over here. It is law here that they are included in the advertised price. (This applies to cars, though, not PTWs).

The average person in the UK apparently will often pay the list price. Most don't realise that there are absolutely massive discounts available should you know where to look. One of our car magazines (a trashy one called What Car?) lists RRP and an expect-to-pay "Target Price". With a little bit of investigation, I have always find that these discounts can almost always be bettered and frequently doubled.

TrueCar, Costco and Sam's Club all had the same price for Subaru Legacy when I was looking before buying the one ended up with.

I believe that dealers are forced to take a certain number of dull as ditchwater cars with their supply of highly desirable vehicles. You'll see them advertising "white sale" for all the plain white dogs they have. It gives you a lot of leverage if you find such a car that is not really a bad car and that fits your needs just fine.

For new cars, that information sheet is required by federal law and must be on a window of the car until the buyer takes possession of the car. No "usually" about it.

The internet and online price shopping have fundamentally changed
the auto market for new car purchases. Even slight internet research
really informs you of the "In the Ball Park" price for a car.

Additionally, the unbelievable interest rates (If your credit is good)
have really narrow pricing. The last two Honda vehicles I purchased
new were at 0% and .9% interest on payments.

DougL, you are right. Statistical figures in the USA indicated 70%
of consumers pay the Dealer asked price. There is still wiggle
room to get a sweeter deal - but it has narrowed.

Some car dealers in my area have went to "One Low Price for
Everyone". That marketing campaign may mean "The Same
High Price for Everyone" - but it has made dealers compete
more for customers.

Maybe I don't miss the old Bull Sheet price negotiating. My
father was a Automotive Dealer Service Dept Mgr. When I was
young, I would wash new cars for delivery on Saturdays. I
would sit and laugh with the salesman over their crazy sales
stories. All the above posts are true, salesmen would up sell
extras and go nuts at month end.

Bob Copeland
Minnesota

The "usually" referred to the location. I've seen them inside the vehicle on the rear shelf as opposed to posted on the window. They are similar ones I've seen on used cars as well with mileage instead of MSRP.

Federal Law requires that the manufacturer affiix the window sticker (Monroney Label) to the glass of a new vehicle and it is to be removed only by the purchaser.

Any car that has had the sticker removed is a used car. OEM stickers are not taped on. They are affixed with an adhesive.

In Louisiana a car doesn't become used until it registered.

For the auto buyer in the US there are at least three areas of negotiation.
1) the selling price of the new car your buying or leasing.
2) the selling price of the car you are trading
3) the selling price of the financing (if any)
4) selling price of added services such as extended warranties and special service plans.

If you want the best price on a new car check the Maroney Label and make sure that the dealer you are buying from is the one listed on the label. A vehicle with another dealers name is known as a foreign vehicle. All back end money (with the big three) goes to the original dealer of record and will not be available for negotiations to a dealer who has received it in a "trade" from another dealer.

If you are not afraid to walk away from a car deal, without getting ticked off, you are more likely to get the best deal.

One of my jobs, was being an accountant for a Chevy dealer....It's called holdback money around here......Some dealerships pocket the holdback that was traded, some give the salesman's his share of the holdback to him, on the dealer trade......The holdback money doesn't disappear on a dealer trade. The money stays with the dealer for the traded car.
Extended warranties; life and disablement insurance, are the two biggest ripoff's in the business....I have seen warranty companies take in all policy cash, then a year or two later, go bankrupt....Also, why would you buy life insurance at a car dealer??? Big markup's!
The big new thing in the Auto business, is the internet pricing, where you can get quotes from different dealers.....When you get 4 or 5 dealers quoting you a car, you know you are getting the best price...and the sales people get no commissions on the deal...Some dealerships are doing away with commission salespeople....
There are other discounts that are available, like recent grads, military, and the GM Mastercard, where you earn money on your card card purchases, and certain times of the year they round it off, to $500, to the most I seen, $5500, on certain models....
The best time of the year to buy, auto show time, when they give out the biggest rebates.
Trade-in's is where they can up that price they give you, and give you a lower discount on the new car, it's OTD price, is what you want to see.....Dealers make money on used cars, and service, not new cars...so they will want to make at least $3000 profit on your trade-in....most trade-ins, are given a
auction price value, but the dealer doesn't show you that!