Negotiating your way to your dream car


For most, a car is the biggest purchase in their lives aside from buying a house. The trouble is, many people become blindsided by the sexy gleam of their future car and overlook details that may save them more than a few bucks.

In addition, these rocky economic times make it hard to predict the car market. Last year, we saw sales drop 21.2 percent to 10.4 million cars, the fewest number of cars sold since 1982.

Take a look at WSJ’s graph of car and light truck sales in 2008 and 2009.

As you can see from the chart, 2009 was a fantastic year to buy a new car. But what does that mean for 2010? Car manufacturers are producing fewer 2010 models and the automobile market is slowly recovering. Here are a few tips to bear in mind on your next purchase.

When to buy a car?

The best time to buy a car is at the end of the month or quarter, according to That’s when the dealer has to fill a certain quota so they’ll be more likely to offer you a good deal.

A good time to make a purchase is when no one else is buying a car. January is traditionally the lowest sales month of the year so those who live in snowy areas usually put off buying a car till spring, says.

Don’t let on about financing

Dealers profit off financing, so if they think you will finance with them, they may offer a lower price. Do not let them know you are not financing with them. Kellogg Professor Hal Ersner-Hershfield says 28 percent of the profit are made in the F&I office.

What is an MSRP?

MSRP stands for manufacturer’s suggested retail price, and it’s the price that the manufacterers recommend the retailers to sell the car at. MSRP tends to be very inflated, so it might be a good idea to negotiate against the dealer invoice prices.

You can check out invoice prices for free at Web sites such as,, or

Do it in the office

“Negotiate away from the car in the office, when it’s not so emotional,” Ersner-Hershfield says.

Bogus add-ons Ersner-Hershfield recommends to watch out for:

  • ADM or additional dealer markup: It inflates MSRP more and is an artificial buffer for negotiations.
  • Dealership advertising fees: Comes in all forms of acronyms. Some examples include FDAF and TDA. Pay no more than $250 for this.
  • Adding VIN to dashboard: It costs $300 to do it at a dealership and $20 to buy an etching kit at an auto store to do it yourself.
  • Dealer floor plan interest: The factory has already paid this as part of the dealer holdback, so don’t let them collect it again. Read more on holdbacks and how to deal with them here.
  • Extended warranty: It’s usually marked up by 100 percent. If you do buy it, negotiate the price.

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