Buying a new car is as a big a decision as buying a home. If you do your homework and prepare yourself it should not be difficult. You want to buy your new car with confidence. Once you know which car you want to buy or lease, you need to know what is a good deal, recognizing what a good deal is, is key before signing on the dotted line.
Understanding the in and outs of New Car pricing in Canada
M.S.R.P- This is the manufacturer's suggested retail price, often found in the window of a car when shopping around, which is the preferred price dealers would like you to pay. With that being said you can still find a dealer that will sell under MSRP. However, dealers will hold off on this when they have a car that is in high demand and have a limited supply from the manufacturer.
Dealer Invoice Pricing- Once a car is delivered to a dealer, the manufacturer sends an invoice immediately which is usually paid from a prearranged line of credit. From that day onwards the dealer will pay interest charges on these vehicles.
Holdback- After a vehicle is sold, the manufacturer will help the dealer by subsidizing the interest charges and marketing/advertising expenses. The dealer will not consider this when negotiating a new car deal as it ranges from 2% to 2.5% of the invoice amount.
Maximum dealer margin/profit- It is the difference between the invoice price and the M.S.R.P. This amount is usually used when the dealer is negotiating a deal.
Dealer and Buyer Goals- It's the dealer goal to sell the vehicle as close to the M.S.R.P and your goal is to get as close to the dealer invoiced price.
Actual dealer margin profit-This amount is based on the final negotiated price between you and the dealer. Before any sales and overhead expenses, it is the dealer's actual profit/margin.
Dealer overhead and bottom line profit- This is the amount that you're left with once the sales rep and the sales manager's salaries along with the commissions and bonuses have been covered. The remainder then goes to the dealership to pay all other expenses, with the final balance being the net profit to the dealer.
Factory-to- consumer incentives-Manufacturers will offer the consumer incentives when they are trying to encourage sales. They may offer finance/leasing rates as low as 0% or sometimes cash back. The key word is "OR" as the dealer rarely offers both incentives.
Factory-to-dealer incentives- This can be a great advantage to you as the dealer may allow you to buy/lease a vehicle for less than the dealer invoice price. The manufacturer usually give dealers incentives such as marketing credits, factory cash, dealer cash, dealer bonuses, invoice credits etc. to motivate the dealer to sell more cars. This is commonly referred to as "secret or hidden rebates".
So, when shopping around for a new car, bear in mind, all the attributes that can make or break a good car deal.
Via: Simple tips when buying a new car
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