There are more than enough commuting options available in Denver, but most of its workforce prefer to drive. No wonder many workers are buying their own vehicles. If you are a Denver worker about to purchase your very first ride, there is something you should know: vehicles found on the lot don’t have just one price. Read on to learn about the two types of prices every car has, and learn about the price you should focus on when negotiating with the salesman.
One Car, Two Prices
Every vehicle on the dealer’s lot has two prices: the sticker price and the invoice price.
Sticker Price: The sticker price is actually the Manufacturer’s Suggested Retail Price (MSRP). It is just called the sticker price because it is the number indicated on the sticker found on the car’s window. It is also the price advertised in newspapers and other media. This is the price the dealer wants buyers to pay for the vehicle. However, in some cases, customers pay higher than the sticker price. This happens when cars are new in the market or when demand is higher than supply.
Invoice Price: This is the figure found on the invoice that manufacturers send to dealerships. This price is roughly what the dealer paid for the vehicle. Note that the invoice price is not exactly the real cost of acquiring the car from the auto maker. There is such a thing as dealer holdback, or a percentage of the invoice price or sticker price that is awarded to dealers for selling a car. It is usually 2 to 3 percent of the amount the customer pays for the vehicle.
Negotiating the Right Price
So between the two prices, which should you discuss with the car salesman when you are ready to buy the vehicle? Neither.
In the past, car buyers were encouraged to negotiate the invoice price. They were urged to request to see the invoice price and start bargaining above it. By doing this, the buyer gets a good price by letting the dealer get slightly more than what it paid for the automobile. This used to be a good strategy, but not anymore. Many dealers have since padded their invoice prices with holdbacks and other fees to make the buyers think they are getting a low price.
In order to really get a good price, what you should focus on in your discussion with the salesman is the ‘out-the-door’ cost, or the amount you need to write on the check to bring home the vehicle. Out the door cost is inclusive of the price of the car as well as all other fees necessary to close the deal. These include fees for taxes, title and licensing. You should insist on the out-the-door cost rather than haggle over the invoice or MSRP because it already includes all extras. Because you ask for all the specifics upfront, you will not be surprised by hidden costs.
So when you head on over to the dealership to buy a car, just ask the salesman about the out-the-door cost. Seal the deal only when the salesman gives you a specific and reasonable figure. If he gives a vague response or informs you that he cannot compute this figure when you ask, take it as your cue to walk away and find another dealer.