Save Money When Buying a New Vehicle: What You Need to Know

A new vehicle is likely to be the one of the most expensive purchases you'll ever make, so it can really pay to learn a few tricks before heading to the dealership. Here's what you need to know.

Do Your Homework

Savvy car shoppers go to the dealership prepared. You can save big with just a few hours of online research.

Before you set foot in the dealership, know exactly what you are looking for and have a general idea of how much you are willing to spend. You will also want to know the vehicle's Base Price as well as the options (and their costs) that are most important to you. You will also want to know the following:

MSRP
Make sure you know the vehicle's Manufacturer Suggested Retail Price (MSRP), also known as the "sticker price" or "list price." The MSRP is basically the market value of the car. It generally does not include registration, taxes, freight or destination charges, or other fees that the dealer may add to your negotiated price.

The Invoice Price
The invoice price or "factory invoice price" is (in theory) what the dealer paid the vehicle manufacturer. Most cars are sold below MSRP and some even below invoice price.

Why would a dealer sell below the factory invoice price? The stated invoice price often isn't the amount the dealer actually paid. A dealer may get a variety of different discounts and incentives that can make their actual price lower than the "factory invoice price."

While the factory invoice price may not be what a particular dealer paid for the car, the invoice price is the same for all the dealerships, so it's important to know the invoice price so can determine who is giving you the best deal.

Estimated Market Price.
A quick Internet search may also provide you with a car's Estimated Market Price (EMP). The EMP is available for a limited number of makes and models and is the estimated price that people are actually paying for the car, based on actual sales made at dealerships.

You need to also pay attention to extra add-ons that may contribute to a higher price tag. Make sure you want or need the extras that you will be paying for. And if the dealership doesn't have a vehicle with the combination of extra features you need, shop around or wait for the vehicle that's right for you.

Shop Around

Don't go to just one dealership and settle. Make sure you have plenty of time to see the prices and available inventory at other dealerships. When you know what other dealerships can currently offer you, you have a great bargaining tool.

Armed with this knowledge, you are ready to negotiate prices. And keep this in mind: Automotive.com reports that a full 25 percent to 45 percent of customers have successfully purchased cars below the factory invoice price (sometimes by thousands of dollars.)

Your down payment is also going to be a big help in your negotiations. If you can use cash as a down payment, it can give you another bargaining chip. If you have a vehicle to trade, you will definitely need to get an idea of its worth before you haggle the trade. And don't settle on this point, either. If the dealer isn't offering you enough for your trade, consider selling that old car yourself and pocketing the cash.

Use everything possible to get the upper hand over the dealer. Remember, as the buyer, you are in control and run the deal. Do not let the salesperson badger you. Know your numbers and stick to your demands.

It's important to not tell the salesperson what you are willing to spend until you get locked into negotiations. Then let them know that you have a certain amount you will spend and if they can't negotiate a deal, you will need to do business elsewhere.

The bottom line: If a dealer wants your business, he'll work very hard to get it. That means you have power. As long as you keep that power, you should be able to save money when buying your new car.