Negotiating Price Reduction for a Brand New Car: Factors and Strategies
Whether a dealership would agree to lower the price of a brand new car by 1000 or 2000 depends on several factors including the dealership's inventory and sales goals, the car's demand, and the current season. This article will explore these factors and provide tips on negotiating a better deal.
Inventory and Demand
The supply and demand of a new car significantly impact a dealership's willingness to negotiate. If the car is in high demand or part of a limited supply, the dealership may be less willing to lower the price. On the other hand, if they have excess inventory or the model is being replaced by a newer version, they might be more open to reducing the price.
Sales Goals
Dealerships often have monthly sales targets, and their willingness to negotiate is closely tied to how close they are to meeting those goals. If they are close to hitting their targets, they may be more willing to offer a discount to close the sale. Conversely, if they are far from their targets, they may be less flexible with pricing.
Timing and Sales Events
The timing of your purchase can also influence the dealership's willingness to negotiate. End-of-month or end-of-year sales events typically offer better deals as dealerships aim to clear out inventory. This is a critical time to take advantage of the sales, as dealerships are often more willing to offer significant discounts to move their stock.
Negotiation Skills and Preparation
Your negotiation skills play a significant role in securing a better deal. A well-prepared buyer is more likely to succeed in negotiating a reduction in price. Researching the car model, its value, and similar models in the market can give you a strong position in the negotiation. Additionally, being familiar with the dealership's practices and being persistent in your requests can make all the difference.
Dealership Incentives and Cash Sales
It's important to note that dealerships do not view cash sales as superior to financing sales. In fact, they typically prefer financing because it allows them to earn additional profit from financial products like extended warranties, GAP coverage, insurance, and dealer reserves. Dealers generally use these products to increase their back-end profit, which is why they are reluctant to offer significant discounts to buyers who insist on paying cash.
Understanding the Car Price
To get a better idea of the price you should be looking for, it's essential to research the invoice amount, holdback percentage, and any published incentives for the car model in question. The invoice amount is the price the dealer pays for the car, and the holdback percentage is the portion of the MSRP (Manufacturer's Suggested Retail Price) that the dealer gets as a profit. If there are incentives, these will reduce the net price for the dealer.
For example, if the invoice is $16,500, the holdback is 300 dollars, and there is a $500 incentive, the actual amount the dealer pays is $15,700 (16,500 - 300 - 500). This is the price point you should focus on when negotiating, as dealers actually sell the car below the retail MSRP.
For further information, visit the example dealer website or contact your local dealership directly for more details.