Some call it overwhelming, some exciting, but truth be told there is nothing like shopping for a new car. That is until you get to the car lot and get a real idea of the wide range of choices. Let’s consider the true cost of a new car.
Sticker Shock — It’s Negotiable
The manufacturer suggested retail price (MSRP) is listed on every new vehicle’s window along with pricing quotes for each bell and whistle. The MSRP is simply the car manufacturer’s suggestion of sale price. In some cases, with negotiation, you can get a lower price. It is reflective of the costs put into the manufacturing of the car. Want to calculate the retail price of the car you’re interested in for a leg up in the negotiation process? There are too many hidden fees to truly get an exact cost. However considering Invoice price, Holdback and Factory-to-dealer incentives you can get a better idea of the cost to the dealer.
Ask for a copy of the dealer invoice. Off the bat ignore the destination fee since it is not an arbitrary mark up. Dealer hold back or hidden profit is on average 1-3% of the MSRP listing. On a $30,00 car the Holdback is $900. It is important that you understand that if you bought the car at invoice pricing that cost would be covered by the manufacturer to the dealer.
If you take the dealer incentive, holdback profit from the invoice pricing you will have the true cost to the dealer. It won’t be easy but in any case happy negotiating.
Ownership Costs – Definite Costs
Owning a car has much more to do with purchasing it. The purchasing is the easy part. When buying a new car people seldom think of costs that are hard wired into ownership. Costs like:
1. The length and cost of your loan,
2. How many miles you expect to drive per year (which contributes to normal wear and tear),
3. Whether you are financing or leasing,
4. How your credit score affects your overall price,
5. How much of a down payment you have
6. Taxes and fees
7. The cost of automobile insurance
8. Maintenance costs (These vary based on vehicle upkeep, miles traveled, accidents and incidents, etc.)
9. Fuel costs (vary with market trends)